Standard BioTools Inc.

Good day, everyone, and welcome to Standard BioTools' fourth quarter and full year 2024 financial results conference call. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, John Graziano from Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Standard BioTools' fourth quarter and full year 2024 earnings conference call. Leading the call today is Michael Eggholm, President and Chief Executive Officer, and Alex Kim, Chief Financial Officer. At the close of market today, Standard BioTools released its financial results for the quarter ended in year December 31st, 2024. During the call, we will review our results and provide an update on our financial and operational performance, 2025 outlook, market trends, and strategic initiatives. During the call, we'll make forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, our outlook for 2025 and future financial results, market trends and opportunities, and our expectations related to the combined operations with Somalogic, including potential synergies and our business outlook for the combined company. These statements are subject to substantial risks and uncertainties, that may cause actual events or results to differ materially from current expectations. The forward-looking statements on this call are based on information currently available to us, and we disclaim any obligation to update these statements except as they may be required by law. During the call, we will also present some financial information on a non-GAAP basis. We believe these non-GAAP financial measures are useful in evaluating our core performance and as a baseline for assessing the future earnings potential of the company. We use these non-GAAP measures in our own evaluation of continuing operating performance. We encourage you to carefully consider our results on a GAAP and non-GAAP basis. The reconciliation between non-GAAP measures and their GAAP equivalents are provided in the tables accompanying today's press release and as an appendix to today's presentation slides. Please note that management will be referring to a slide presentation including updated supplemental financial information within the webcast today. Following prepared remarks, we will host a Q&A session. Today's slide presentation, along with a replay of the webcast, will be available on the investor section of our website. I would now like to turn the call over to Michael Egholm, President and CEO of Standard BioTools. Michael Egholm, President and CEO of Standard BioTools Thank you, John.

Good afternoon, everyone, and welcome to Standard BioTools' fourth quarter and full year 2024 earnings call. Joining me today is Alex Kim, our Chief Financial Officer. Before we dive in, I want to thank our customers, employees, and investors for their continued support. It's what drives us forward and fuels our mission to set the new standard in life science tools industry to empower researchers and accelerate discovery while rewarding all of our stakeholders. 2024 was all about hard work, execution, and transformation. We closed the year at the top end of our revised range, demonstrating our team's commitment to deliver in a dynamic environment. We successfully merged two businesses under one roof, powered by Standard BioTools Business System, or just SBS. We exceeded cost synergy targets, improved our processes, and delivered better products and higher quality to our customers. Phase one was just a start and we're far from done. Now comes phase two, driving the commercial flywheel, evolving our product mix and expanding into key markets organically and inorganically, all while constantly applying SBS to further enhance efficiency as we drive towards profitability. With that, let's discuss our result, which I'll be speaking to performer numbers. In the fourth quarter, we delivered 46.7 million in revenue and 175.1 million for the full year, representing a 9% year-over-year decline for each period. Performance for the quarter and full year was impacted by continued softness in instrument and services as CapEx constraints and cautious spending in biopharma and academia offset strong growth in consumables. Stiff headwinds persist, but we are actively working to drive top-line performance through commercial execution, market diversification, and expanded customer engagement. Although the year-over-year revenue declined, our fourth quarter performance landed in line with mid-year expectations, reflecting improved forecasting and disciplined execution. Looking ahead, we anticipate 2025 organic revenue between $165 million and $175 million, which is approximately a 3% decline at the midpoint of the range. This is a measured forecast and accounts for only modest optimism for a gradual market recovery. It remains a tough policy backdrop with several known unknowns that we're not willing to call at this moment. Still, we're well positioned for a return to growth, and our outlook takes a measured approach that will allow us to maintain leverage against the top line forecast as we move through seasonality and gain momentum to boost performance towards the second half. Importantly, we are still on a path to adjusted EBITDA break even in 2026. While improved market conditions and return to growth will be helpful, we have a plan and option to improve our profitability and we will be disciplined stewards of our cash should the current environment persist. More importantly, We have the balance sheet strength, nearly 300 million in cash, to execute our strategic plan, bring us to cash flow positive, and fund future bolt-on acquisition. We recognize that macro challenges are top of mind and creating a lot of anxiety and uncertainty in the market. While it's one of the most unique times in my decades of being in life sciences, I'll provide my perspective on three critical areas. First, the potential reduction in NIH spending. Our direct NIH exposure remains limited at less than 10% of revenue, while America's academic exposure is approximately a third of our revenue. The situation remains fluid, evolving day by day, but we anticipate that a reduction in NIH funding is likely to impact all academia spend and priorities particularly delaying capital equipment purchases. Our team has done careful analysis and research, which were factored into our guidance, modeling a mid-team's percentage decline in America's academic revenue, equating to roughly a high single-digit million dollars at the midpoint of our range. Second, on the recent U.S. export control interim final rule, we have reviewed the regulations with and have determined it does not apply to our site of products. These systems are designed and manufactured in Canada, composed predominantly of non-US components and shipped directly to China. As such, we assume no impact at the midpoint of our guide. That said, we continue to closely monitor the broader US-China trade dynamics, including potential regulatory shifts that could impact procurement decisions. We remain proactive in managing potential challenges through regulatory engagement and supply chain flexibility. Third, the tariffs. We focus principally on our products made and shipped from Canada to the U.S., where most of our products fall under the United States-Mexico-Canada trade agreement. However, new import tariffs on Canada, ongoing China tariffs, and potential reciprocal measures add complexity to the global trade environment. While we do not expect top-line impact, we are taking targeted countermeasures to minimize any potential effects. When possible, we'll pass costs on to our customers while balancing demand impact. If necessary, if we were to absorb these tariffs, we estimate a low single-digit million-dollar impact to gross margin and adjusted EBITDA. The world is changing, markets are shifting, and policies are evolving, and we continue to monitor developments closely. Most importantly, we remain laser-focused on executing our strategy, protecting our P&L, and precision the business for sustainable long-term growth. In an environment where growth is hard to come by, we remain fully focused on what we can control, driving productivity and cost management across the business. With the integration of Somalogic complete, the benefit of these efforts are becoming increasingly evident. Throughout 2024, we operationalized 80 million in cost synergies a full year ahead of plan strengthening our operating leverage and lowered our overall spend. These actions resulted in a 22% year-over-year reduction in non-GAAP operating expenses while delivering a 33% improvement in adjusted EBITDA in full year 24 versus 23, reinforcing our commitment and willingness to appropriately manage costs absent top-line growth. Earlier this year, and with full awareness of the macro environment, we made the difficult but necessary decision to implement an additional $10 million in cost reductions, primarily in research and development, bringing total operationalized synergies to $90 million over the past 12 months, and further tightening the bell to ensure we stay nimble in an evolving landscape. SBS is central to our success. It's a competitive advantage, and it's applied to everything that we do. I like to call it our not-so-secret weapon. Beyond the profitability metrics highlighted above, the impact on delivery and quality is just as impressive. In Q4, on-time delivery reached an industry-leading 98%, up from 78% in Q4 of 2022. while customer complaints on our main instrument platform declined more than fourfold over the same period. These are leading indicators that reflect our unwavering continuous improvement, commitment, product quality, and customer satisfaction factors that ultimately translate into long-term profitability. At Standard BioTools, we are building a top-tier life science company leveraging consolidation to overcome the sector's innovation bottleneck and inability to scale. Our goal is to become the preferred industry partner to both customers and innovators. We're focused on providing a portfolio of consumables, instruments and services in attractive end markets, which shares a platform that drives quality, performance and profitability for stakeholders and shareholders alike. This brings me to our revenue mix for the year, which had consumables at 34%, instruments at 16%, and lab and field services at 33% and 14% respectively. Consumable strength was more than offset by a reduction in capital equipment spending, as customers remained cautious with their budget, as well as headwind and lab services due to variability in demand from a few select large pharma accounts. Before I go through the rest of the pyramid, I would like to double-click on our SomaScan platform, the crown jewel of our portfolio. For decades, genomics has driven breakthroughs in medicine, and proteomics is the next big health transformation and is the next billion-dollar market opportunity for science research. The genome is important, but it's static, except in cancer. Proteins, the molecules that drive biology, on the other hand, are dynamic, changing as we age, respond to disease, treatment, and our environment. Until now, proteomics research has been held back by legacy antibody-based technologies that simply don't scale. I'm emphasizing this not as a competitive comment per se. It is simply a technological reality. Somascan, on the other hand, is pushing the boundaries of what's possible in proteomics. Using a DNA aptamer-based approach, we already measured 10,000 proteins with unmatched precision, unlocking entirely new possibility for disease research and drug development. The momentum is real, and the data keeps showing it. Just last week, a new preprint came out comparing Somascan to competitor platforms, and the results were clear. As prior studies have shown, SomaScan provides superior proteome coverage and lower technical variability. This cements SomaScan as the most comprehensive, most precise, and most scalable platform for plasma proteomics. To unlock its potential, we had to match SomaScan's scientific scale with commercial heft and a detection system able to scale outside a few labs. This is why we partnered with Illumina, the leading NGS provider, integrating our DNA-based aptamer technology with Illumina's 2000-plus NovaSeq installed base. Strategically, our respective capabilities are highly complementary, and we came together to develop a product that will be a game-changer. bringing distributed high-throughput proteomics to more researchers and commercial users than ever before. Just as NGS revolutionized genomics, we believe this marks an inflection point for proteomics, making large-scale protein analysis accessible and actionable at unprecedented levels, enabling far more insight into human disease. We're on track to launch in the first half of this year, and momentum is building. We're seeing real-world validation in collaboration with Illumina, DecoGenetics, and a pharma consortium inclusive of GSK, J&J, and Novartis. We are analyzing 50,000 samples from the UK biobank, generating one of the largest high-quality proteomics data set ever assembled. Meanwhile, Novo Nordisk recently showcased SomaScan's potential in nature medicine, uncovering new insights into GLP-1 drugs, not just confirming the metabolic and cardiovascular benefits, but also revealing the potential for smaller and faster clinical trials. These are tangible examples of how high-precision, large-scale proteomics is transforming biomedical research, and this is just the beginning in demonstrating that we are here to help pharma make better drugs faster. This momentum is fueling broader commercial adoption with consumables leading the way. Consumables remain our most attractive product category, delivering double-digit growth in the fourth quarter and for the full year. This performance was driven by expansion of SomaScan authorized sites, Illumina early access program, and elevated demand from our Fluidics OEM partner. In this environment, consumables continue to be a bright spot, providing consistent high-margin growth, reinforcing its position at the top of the product pyramid and a key strategic focus moving forward. Turning to our instruments, revenue declined 25% in Q4 and 27% for the year, with the biggest impact coming from our higher-priced mass cytometry instruments. While the instruments market remains challenged we're actively working with customers to adapt to shifting purchasing behaviors and budget constraint. Our Omix as a service offering is a great example of this and an effort we're doubling down on. It leverages our full suite of solutions to deliver white glove premium lab services to prospective customers This helps customer overcome capital budget constraints currently facing the broader biofarm market while accelerating adoption of our products while adding to our assay lab services revenue stream. Service revenue was down mid-teens year-over-year in the fourth quarter and full years, driven primarily by SomaScan services, which remains constrained to a few large customers. We're working hard to diversify our customer base to help mitigate this, and we're encouraged by the consolidated momentum, by the continued momentum. Revenue beyond our top five accounts grew double digits year over year, a strong signal of a broadening adoption. As we roll out additional solutions to democratize access to this technology, we believe utilization will continue to expand significantly. positioning us as a leader in the larger proteomics market that commands a healthy mid-team CAGRS for years to come. It's an exciting portfolio. We are well-positioned to capitalize on the transition from genomics to proteomics, as I just described, in addition to the SomaScan traction spatial proteomics, where our IMC product line including the Hyperion XTI, plays a role, was named 2024 Nature Methods of the Year, a strong validation from the scientific community. Beyond our current portfolio, strategic M&A is part of our founding thesis and remains a core part of our strategy. The market needs consolidation and we approach it with exceptional discipline as we look to identify and integrate high-value assets onto our platform. The current market, with all of its operational hurdles, presents a unique window for us. Valuations are down, funding is tight, but innovation hasn't slowed. If anything, it's accelerating. This is exactly where we thrive and it's bringing more quality opportunities our way at the attractive valuation. A prime example is our recent acquisition of Syngenex, a strategic bolt-on that enhances our SomaScan service business with antibody profiling. Looking ahead, we have a robust pipeline with four to six strategic transactions targeted over the next two years. We're looking for de-risk technologies, not science projects, with a clear path to commercialization, good margin potential, and exposure to attractive end market. With this market correction, we're seeing tremendous opportunity, but it's one that requires a mindful approach. We're stepping carefully, evaluating each opportunity rigorously, and moving only on deals that align with our strategic and financial goals. To wrap things up, we have a proven leadership team committed to continuous improvement with a track record of driving growth, expanding markets while reducing costs. We made significant progress over the past few years, merging two businesses, repositioned the portfolio and driving operational efficiencies. Through execution guided by SBS, we built a stronger, leaner and more resilient enterprise. But our work is far from done and we are diving headfirst into phase two, focused on scaling the business, diversifying end markets and shifting towards higher margin consumables while staying strategically active and delivering long-term shareholder value. With that, I'll turn the call over to Alex. Alex, go ahead.