Standard BioTools Inc.

Good day and welcome to the Standard BioTools, Inc. First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Graziano, Vice President of Investor Relations. Please go ahead.

John Graziano Thank you, operator, and good afternoon, everyone. Welcome to the Standard BioTools first quarter 2025 earnings conference call. Leading the call today is Michael Egholm, 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 March 31st, 2025. During this 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, the impacts of tariffs and funding pressures, 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. For information regarding other related risks, see the risk factors section of the company's annual report on Form 10-K filed with the SEC on March 11, 2025, and in the company's other filings with the SEC. 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 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 slides Slide presentation along with the replay of the webcast will be available on the investors section of our website. I would like to now turn the call over to Michael Egholm, President and CEO of Standard Biotools. Thank you, John.

Good afternoon, everyone, and welcome to Standard Biotools' first quarter 2025 earnings call. Joining me today is Alex Kim, our Chief Financial Officer. Before we begin, I want to thank our customers, employees, and investors. Your support is what fuels our work and drives our mission to set a new standard in life sciences, empower researchers, accelerate in discovery, all while delivering long-term value to our shareholders. Stand-by tools delivered a solid first quarter with results unplanned and in line despite a choppy operating backdrop. Execution continues to improve as we build rigor across the organization guided by lean principles through our standard BioTools business system or just SPS. As operators, we're staying grounded in fundamentals, focusing on what we can control, managing with precision, and driving toward profitability. Before diving into the details, it's worth stepping back for a moment. While the broader environment remains dynamic, we're navigating it from a position of strength. With a diversified portfolio, a disciplined operating model, healthy balance sheet, and a team that's getting sharper quarter after quarter as forecast accuracy improves and consistency in how we run the business grows. We are particularly pleased with our strategic foothold in proteomics, and a series of recent high-impact product launches. Last week at the American Association of Cancer Research's annual meeting, or AACR, we announced a new SomaScan offering that will pair well with the highly anticipated distributed NGS-based Illumina partner solution. Together, these advancements expand our reach and push the boundaries of what's possible in translational and clinical research. From the outside, the macro backdrop may still cloud the picture, but inside we're strong. Our diversified business and life sciences allows us to operate multiple levels to navigate the waters, including a patient and disciplined M&A strategy, which is benefiting from a growing number of compelling assets and opportunities. With that, let's turn to the numbers. In Q1, while not growth, we executed to plan and delivered 40.8 million in revenue. This was down 10% year-over-year as the market got worse against last year's Q1, and we had elevated backlog to start 2024. Despite this, and not enough to wave the all-clear flag, we have seen encouraging traction in capital expenditures which strengthen our instrument business, which is also helped by a favorable year-over-year comp. Consumables and service revenue, which represents larger portions of the mix, particularly in the Americas, was softer than usual and still exhibits variability quarter to quarter. That said, when you zoom out at multi-quarter trend, you see a pattern of improving precision, sharpened commercial execution, and more consistency. which gives us confidence in the direction we are heading. While headwinds remain, and in some cases with NIA budgets and tariffs concerns intensified, our diversification continues to serve us well. International markets and biofarm engagement remain more resilient, and we're seeing continued traction across those segments. The impact is reflected in our previously announced guidance, which assumes a mid-teens percentage decline in America's academic revenue of roughly high single-digit million dollars at the midpoint. On the impact of new tariff measures, while they have added a layer of complexity and disruption to global trade, are from our perspective manageable. While not material to near-term financials, including the top line, we are actively accessing the operational impact and working across teams to mitigate risk and maintain flexibility. In some cases, we are passing costs through to customers. In others, we are absorbing it, but selectively. If fully absorbed, we estimate the impact on gross margin and adjusted EBITDA would be in the low single-digit millions within the bounds of our current outlook and consistent with what we communicated during our last quarterly update. Specifically, Products manufactured in Canada and shipped to the USA falls under the US MCA and are currently excluded from tariffs. Products made in Singapore and shipped to the US, primarily our biomark instruments and IFC consumables, are now subject to a 10% tariff. SomaScan kits made in the U.S. and shipped to authorized sites in China, an area of growth, though a smaller portion of the revenue today, are subject to significant tariffs. For the full year, there is no change to our prior guidance. We continue to expect full-year 2025 revenue in the range of $165 million to $175 million. We're taking a measured approach, modeling persistent headwinds though anticipating back house seasonality. With $261 million in cash and equivalents on the balance sheet and no material debt, we remain well capitalized and disciplined in our resource allocation. Our healthy cash position is a key asset and differentiator in this environment, and we intend to protect it accordingly. Our eyes remain fixed on reaching adjusted EBITDA positive in 2026 all while closely monitoring the backdrop in which we operate today. Being well capitalized is only part of the story, and we're taking decisive steps to streamline operations, reduce costs, and reinforce our operating leverage. Non-GAAP OPEX improved 22% year-over-year, operating laws improved 45%, and adjusted EBITDA improved 29%. Those results are the output of hard choices made early and implemented swiftly. In January, as previously announced, we executed an additional 10 million in cost reduction on top of the 80 million operationalized in 2024, primarily focused on long-horizon R&D projects, moves that enable us today to stay nimble without compromising near-term priorities. We're leaner, more agile, and structurally advantaged as we move through 2025. What's making this level of discipline possible and sustainable is SBS. It's how we run the business. It brings a mindset of continuous improvement to everything we do and accountability to every part of the organization. Nowhere is that more evident than in our integration of Summer Logic. A year ago, it was an obscure diamond, complex, underleveraged, and overlooked. but we saw what others could not. In just over 12 months, we applied to SBS, took out over $80 million in costs, and got the fundamentals right. We leveraged several high-impact head-to-head studies to reposition the technology and drive interest, ramped activity with leading biobanks, improved manufacturing, launched new products, and importantly, reengaged our key partner, Illuminav. This is a platform now positioned to win in large-scale population studies and drive translational and clinical research. That turnaround didn't happen by chance. It happened because we applied the SBS flywheel and moved with precision. The momentum is building around this uniquely powerful platform, high-plex, high-precision, and now backed by a more focused organization and data. The science speaks for itself. Somascan is unlocking entirely new possibilities in disease research and drug development like never before. With unmet scale and precision that legacy antibody-based technologies simply cannot match, we're seeing growing traction across pharma, biobanks, and large-scale population studies. And importantly, the data keep reinforcing the value and differentiation of the platform. Our deep partnership with Illumina is a critical part of this strategy, extending SomaScan's reach to thousands of sequencing labs worldwide and will bring high throughput proteomics to more researchers than ever before. This momentum was on full display at AACR, where roughly 90 posters and presentations featured our solutions, underscoring the breadth and utility of the entire proteomics portfolio and its growing role in translational and clinical research. A couple of examples stood out. In a prostate cancer analysis conducted by the multicenter EPIC study, Somascan 7K identified over 50 protein markers, including PSA, and many previously unknown markers, while in a comparable analysis, the nearest competitor found just one known biomarker. demonstrating SomaScan's best-in-class coverage and ability to uncover both known and novel biomarkers that have the potential to assess prostate cancer risk up to decades in advance of cancer diagnosis. More is really more in proteomics. In another study by Daito Shanko and AstraZeneca that stemmed from multiple Phase II and Phase III clinical trials, Soma scans showed the potential to predict and monitor serious lung complications from cancer treatment. In this case, most commonly antibody drug conjugates or ADCs detecting early warning signs up to 60 days before symptoms appear and helping assess patient risk before treatment begins. At AACR, we also introduced three new offerings spanning consumables, instruments, and services. single soma reagents, the CyTOF XT Pro, a higher throughput flow system with Part 11 compliant software for clinical trial researchers, and the SomaScan 3.7K Select assay. Collectively, they complement our category-leading 11K assay, and the Select 3.7K assay offers more usable content at higher precision than the nearest affinity proteomics competitors highest throughput offering, and improved economics. Purpose-built for translational clinical research and aligned with our mission to help pharma make better drugs fast. Turning to our products, our revenue mix for the quarter remained balanced across the portfolio, with consumables at 35%, instruments 19%, and lab and field services at 30% and 13%, respectively. We saw growth globally from our instrument business while consumables and lab were soft, in part due to project timing and funding uncertainty in the Americas. Consumables, positioned at the top of our product pyramid, were down mid-teens year over year and down low single digits sequentially with the largest impact and flow. To help close that gap, we recently launched the XC, the sites of XT Pro, a faster automated system purpose-built to drive pull-through. Early signals from the field have been encouraging. SumoScan authorized sites, which have become a steady contributor to the consumables line, were down modestly year-on-year due to order timing in the U.S., though experiencing increased activity internationally, particularly in APAC. Looking ahead, we expect additional lift as our distributed solution with Illumina comes online. Consumables remain a strategic priority, high margin, recurring, and essential to our model long-term. Instruments were a bright spot with double-digit year-over-year growth led by continued demand for our Hyperion XTI spatial imaging systems. These are high throughput, high performance systems, and importantly, each placement builds installed-based leverage for future consumable food troops. Spatial proteomics, where the Hyperion XTI plays, was named 2024 Nature Method of the Year, a strong endorsement from the scientific community, and we're beginning to see that recognition translate into market adoption. Services were down mid-teams year over year, driven primarily by a decline in lab services Beyond the elevated backlog referenced earlier, SomaScan remains concentrated in a handful of large accounts. While less so today, timing and variability is still expected and impacts quarterly performance. U.S. academia also weighed on volume this quarter, though partially offset by increased pharma project activity and modest growth ex-U.S. Big picture, we're focused on making high-precision proteomics more accessible As we expand distributed offerings through authorized sites and the Illumina partnership, we expect broader adoption and more consistent utilization of our service offering. This is a long-term growth market with solid fundamentals, and we believe we are well-positioned to scale with it. At Stand-Up Our Tools, we are building a durable, diversified life science tools platform grounded in operations and strategic consolidation. Our mission is to overcome the scale and profitability bottlenecks that have long held this sector back, to be the partner of choice for customers and innovators alike. And we're doing it with intention. A portfolio increasingly weighted toward high-margin consumables, disciplined capital deployment, and a flywheel that compounds value over time. With valuations under pressure, and innovation accelerating, we are seeing real opportunities to continue to expand. Strategically, we are pursuing a highly disciplined approach focused on diverse technologies with line-aside commercialization and value creation, a strong margin profile, and clear integration synergies. Every deal runs through the SPS playbook where we strip out inefficiencies, optimize operations, and scale with speed. The bar remains high, but the pipeline is full, and the opportunity set is compelling. We're playing the long game, and we're doing it with a team of proven operators, a clear strategy, and the resources to execute. With that, I'll turn the call over to Alex.