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spk10: with a significant global opportunity to deliver therapies to patients, and we remain very optimistic about the medium to long-term growth for MaxSight. With that, I will now turn the call over to DJ to discuss our financial results. DJ?
spk14: Thanks, Doug. Hello, everyone. I'm very excited to have joined the MaxSight team. I appreciate the opportunity to support our mission for having the next generation of cell-based therapies. During my short time with the company, I I continue to be impressed by the quality of our team at all levels in the organization. It is an honor to work with all of them as we support our partners as they develop innovative therapies for patients who need them most. I will now discuss MaxSight's financial results for the first quarter. Total revenue in the first quarter of 2023 was $8.6 million compared to $11.6 million in the first quarter of 2022, representing a 26% decline. In the first quarter, we reported core revenue of 7.8 million compared to 9.6 million in the comparable prior year quarter, representing a 19% decline. This includes revenue from cell therapy companies of 6 million, which declined 19% year-over-year, and revenue from drug discovery customers of 1.8 million, which declined 17% year-over-year. The year-over-year decrease in revenues were driven by an unusually strong first half of 2022, which did not see our typical seasonality and was strongly impacted by the purchasing patterns of late stage pre-approval programs and laboratories coming back to near full capacity following COVID-19 related disruptions. As discussed on last quarter's call, we expect about 40% of 2023 core revenue to occur in the first half of this year, consistent with our historical experience outside of last year's less typical seasonality. We recognize 0.8 million of SPL program-related revenue in the first quarter of 2023, compared to 2 million in the first quarter of 2022. We will not be able to discuss further details on our SPL program-related revenue or our partners' progress due to confidentiality agreements. Moving down the P&L, gross margin was 88% in the first quarter of 2023, compared to 91% in the first quarter of the prior year. Margins were influenced by highly variable milestone revenues as well as a mix of products and customer types, and we saw those effects in the first quarter. Total operating expenses for the first quarter of 2023 were $20.8 million compared to $14.7 million in the first quarter of 2022. The overall increase in operating expenses was primarily driven by increases in R&D, sales and marketing, headcount, and strategic consulting expenses. as the company continues to invest in the expansion of commercial sales and marketing, as well as in business and corporate development and innovation and product offerings for long-term growth. We finished the first quarter with combined total cash and cash equivalents and short-term investments of $224.7 million as of March 31, 2023, and, of course, no debt. Moving to our updated full-year 2023 guidance, We now expect total revenue for 2023 to grow between 8% and 12% compared to 2022, including core revenue growth of between 5% and 10%, and SPL program-related revenue expectations remaining unchanged at approximately $6 million for the year. Our updated guidance incorporates the challenging macro environment and the timing of purchasing patterns from our customers and partners, which Doug discussed. As we have discussed previously, the timing of partnership revenue is predicated on our customers' clinical and regulatory progress and therefore is fundamentally more difficult to predict than core revenues. Our program-related revenue expectation is a risk-adjusted forecast achievable under various potential outcomes across our 20 announced partnerships and their planned clinical progress. As I mentioned, we continue to expect a back-half weighted seasonality split of roughly 40 to 60% first half and second half core revenues in 2023, which would be consistent with our historical experience before 2022. And finally, I want to note our strong financial position as we expect to end this year with approximately $200 million in cash, cash equivalents and short-term investments and no debt. Our cash position allows us to focus on realizing the long-term potential of our business model. Let me close by saying that overall, we are confident in our updated 2023 revenue outlook and we believe that our modest cash burn and debt-free balance sheet will support our future plans for profitable growth. Now we'll turn the call back over to Doug.
spk10: Thank you, DJ. In summary, we're optimistic about the long-term outlook of MaxLight and the depth of our partnership pipeline. We're committed to strengthening our opportunity to lead the industry as the premier cell engineering platform technology, supporting the development of advanced cell-based therapeutics for patients who may not otherwise have treatment options. As always, we thank our MaxSight team, as well as our board, suppliers, investors, partners, and the amazing industry that we have the honor of serving to enable the development and commercialization of therapies for patients and their families. With that, I will turn the call back over to the operator for the Q&A. Operator?
spk03: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.
spk02: Our first question comes from Julie Simmers with PanMoorGordon.
spk03: Your line is open.
spk05: Thank you. Good evening. And just a couple of quick questions on the split between cell therapy and drug discovery. whether there is any difference in the guidance as far as sort of the effects of this flow down on the two separate divisions. Clearly one's more capital and one's more recurring in its revenue.
spk14: So we take a look at our revenue expectations across the entire business and developed our projection based on that. I think some of these sectors are going to be, some of the subsectors are hit more than others. Obviously, we're very comfortable with what's happening with our SPL partners. People are focused very heavily on their late-stage programs, and as capital is constrained a little bit within the industry, people are focusing on their product one or product two in the pipeline. So I think in terms of how we thought about this reduction in guidance, it's as a result of looking at the business across you know, all of our opportunities, and I hesitate to break it down further.
spk05: Thank you. And then just on sort of the cost side of things, the fact you're taking down the top line, does that change the investment plans at all in terms of the scale-up of sales and marketing or R&D, or are you expecting that to continue at a similar rate as one rate has now?
spk14: So we said last time that we thought we'd have $200 million at the end of the year. We still are saying that, even though that the revenue expectations are being moderated. So we're being mindful of costs. However, we're continuing to invest in our business, and we're not going to let, you know, what we consider, you know, temporary, you know, market conditions, you know, take away from our long-term strategy.
spk01: Excellent. Thank you very much.
spk02: One moment for our next question. Our next question comes from Dan Harris with Stiefel.
spk03: Your line is open.
spk09: Thanks for the questions. Doug or DJ on the Outlook here, can you just maybe clarify for us how much of what you're doing is due to lower instrument purchase expectations versus lower utilizations of the installed systems? And then how much of what you're doing is also due to sort of an explicit forecast from your customers or what you're hearing from your customers versus more of just an assumption that things will be tough and a naturally more prudent outlook on the space, just given the industry headwinds that we're talking about?
spk14: I think it's a combination of factors. We're very close to our customers and potential customers with our sales team and our field applications team. So a lot of this is direct feedback that's sort of factoring into our thinking. In terms of where we see this, again, we're not going to break this out in terms of where we see the softness in the markets. We feel very good about the book of business in front of us, and we're optimistic about executing against the goals we set for ourselves. But again, we're not going to break it out in fine detail in terms of instrument sales versus PAs and things like that. In terms of our people, where we have installed base, are we seeing softness and I think people are very excited to be working with MaxSight, but people are scaling back on where they're making capital investments right now, and there's been just a general slowdown in capital being deployed in this space, and that's why we're just moderating our expectations for the year.
spk09: Okay. I'm not trying to beat a dead horse. I think most people can understand the placement dynamic and why instruments going out the door might be doing so at a lower clip, but by our math, the utilization came way, way in this quarter. um and you have a business that is hard for people to sort of dig into and understand just given the nature of it so is there anything that you can offer us when it comes to the usage of the systems by those that have them that give you comfort that this is a temporary thing and that you know maybe there is something going on in one corner that's not going on in the other quarter because you know again there's there's not a lot to work with in general when you're modeling this company and right now it does seem to be particularly in flux thanks
spk10: Yeah, Dan, it's Doug. So I think one area I do want to focus in on is our SPL partners, and they continue to progress their programs through the clinic and toward commercialization. We're not seeing any weakness in that part of the business, frankly. That continues to be very, very strong for us, both in placements and in utilization.
spk14: I also want to point out that... First off, Q1 was sort of inconsistent with management's expectations. We do recognize that, you know, year over year, this quarter doesn't, it isn't as strong as last year's Q1. I think there was a lot of things that went into that, you know, people coming back again after COVID-related disruptions, you know, people, you know, laboratories sort of getting back out and ordering and things like that. So this is a little bit of a drop from first quarter of last year. but it met our expectations and we don't really believe that there's any real read-through for the rest of the year beyond what we're guiding here now.
spk02: Okay, thank you. One moment for our next question.
spk03: Our next question comes from Jacob Johnson with Stevens.
spk06: Your line is... Hey, good afternoon. This is Hannah on for Jacob. Thanks for taking the question. In your investor presentation, you highlighted the potential for 50 total SPL pre-commercial milestone events over the next three years. How many of these are 2023 events, or are these more weighted towards 2025?
spk10: I think that's a three-year total, Hannah. And I think when we talked at the last quarterly meeting, We guided towards $6 million in milestone revenues, and we're still sticking by that. We've built that plan from really the bottom up. We've looked at a number of different scenarios, and we feel really comfortable with that $6 million number.
spk04: Thanks. I'll leave it there.
spk02: One moment for our next question.
spk03: Our next question comes from Stephen Ma with TD Cowan. You're on.
spk13: Oh, great. Thanks for taking the questions. Maybe just to dig in a little bit more on the guide revision, and I'm not sure if you guys disclosed this or not, but could you give us a sense for the customer breakdown that you have? You know, how, you know, just rough and tough, you know, how many are small or emerging biotechs versus medium size versus large pharma? And if you can't give that breakdown, On the guide revision, you mentioned it was impacted by customer feedback. Was that customer feedback across the board, across your whole customer base, or was it weighted to one particular demographic?
spk10: As I did mention, we're very strong in the SPL partner, Steve. Thanks for the question. What we're hearing, so we have a pretty, well, for a small company, we have a pretty good number of people in the field field application scientists and salespeople who are in the field every day. And so we're getting that feedback from them collectively. We're monitoring this basically on a daily basis. We're looking at macro numbers. And frankly, I think we may be seeing some stuff that haven't yet showed up in some of the macro numbers. So I still think that there's kind of across the board some belt tightening. I think that you're seeing situation where, you know, larger dollar amounts, capital items are getting a little bit more scrutinized. In some cases, we're seeing companies establish higher levels of authority to approve certain capital purchases. So I think that the, you know, the dwell time, the cycle time is being a little bit elongated as well, and just basically across the board.
spk13: Okay, that's helpful. And I can sneak one last question in. I appreciate you guys are guiding to $200 million of cash at year end, but given that cash, the capital markets outlook, and generally reduced valuations, how should we think about your M&A appetite? And could you give us a sense of what an ideal target would be for you guys? Would it be like a technology bolt-on or any color would be helpful?
spk10: What is it? Yeah, it's very active. We have a lot of fencing going on right now in the marketplace. We've identified a handful of opportunities for the company. As I mentioned before, these aren't going to be, I'll call them commodity bolt-ons. They're going to be more, we've identified a handful of problems. I've talked about process analytic technologies. I've talked about some other adjacent technologies to our our platform, which we think would be very attractive for adding into the portfolio. But again, it's going to be driven by issues facing the industry. And I think that we continue to believe that those issues are product characterization and the ability to adequately identify product potency. Those are two main areas that we're taking a hard look at. And anything we can do to accelerate the manufacturing time and provide more consistent manufacturer for these cell therapy drugs.
spk13: Great. Thank you.
spk02: One moment for our next question.
spk03: Our next question comes from Matt LaRue with William Blair. Your line is open.
spk07: Hi. This is Ashley Madeline Mullen on for Matt. Just thinking about some of the pressures you've talked about with longer capital equipment purchase cycles, more approvals needed, things like that. Are you seeing the discussion of some of your clients moving into SPL, SPL partnerships or SPL agreements taking longer by any because of that? Or do you think that's impacting people moving sort of through your process at all or taking a longer time there?
spk10: We're seeing a lot of really good. Thanks. Thanks for the question. We're seeing really good progress in the SPL partners. We have something that's really important for these companies to move forward. We've just signed two deals this year already. And we expect to keep the pace we've historically had, which is somewhere between three and five deals. So we're not seeing any major slowdown of those deals. And typically these companies are driving toward value generating events and moving something to the clinic is clearly a value generating event in this environment.
spk07: Great, thank you. And then sort of piggybacking off of that, Thinking about your Rockville facility, can you talk about where you see utilization trending this year? And I know in the past you've said it has the ability to support multiple commercial products when fully scaled. What would you consider like a utilization level that would be considered fully scaled?
spk10: Good question. So, what we have told – what we have talked about is that we built out our manufacturing here. I don't think we really have a capacity in terms of instrument manufacturing. And we've also dramatically increased our manufacturing for disposables. We also continue to make major investments in automation. Automation will translate into more flexibility and more capacity. So we're monitoring our partners' progress. We're monitoring their potential commercial success. And we're staying well ahead of that. And frankly, we can make those automation investments well ahead of the demands of the partners. So we feel very comfortable. We have the capacity to support all of our SPL partners as they move into commercialization.
spk08: Great. Thank you.
spk02: One moment for our next question. Our next question comes from Mark Massaro with BTIG. Your line is open.
spk15: Hey, guys. This is Vivian on for Mark. Thanks for taking the questions.
spk16: So maybe one for DJ. I guess I was curious on the decision to keep the SPL revenue guidance at $6 million. I would have thought that that revenue would tend to be a little more lumpy as opposed to the core business. So I guess could you just walk us through what's giving you confidence there? And in the past, I think you guys have talked about, you know, some degree of inclusion of approval milestone revenue. So just curious if you're able to break out what that contribution might be. Thanks.
spk14: Sure. Thanks for the question. So, you know, our expectations regarding milestone revenues remain unchanged at $6 million for the year. And the way we think about that is we've got 20 SPLs. We're modeling out multiple scenarios that helps us generate a number that we can get comfortable with. I can assure you it's probably not a normal distribution curve. We're just looking at it many different ways, what the year could look like. And when we do that, the number that they that came out of that process on our last call was six million and it's still six million now. And certainly we do think about some of the later stage milestones being a component of that, but with or without that, there are many different ways and many different combinations of potential payments that get us to six billion. But it is lumpy and something tells me the number will hopefully center around six million so that we look smart, but I think it's probably not gonna be that number exactly.
spk16: Okay, perfect. Understood. And then just a quick one. How should we think about gross margin cadence from here? Just given the step down in the guide, I think I also heard you talk about, you know, more targeted investments. So just any comments you have there.
spk14: So just as a reminder in terms of how the gross margin is determined, you know, we've got, you know, different things, different types of revenue, one of which is milestone revenue. And so the lumpiness in that also sort of contributes to the lumpiness or the, you know, the the fluctuations, both in the milestone revenue as well as the mix of instruments, et cetera. But we feel very good about our margins. We've got margins in the high 80s, and we think it's going to continue to be at that level.
spk15: Great. Awesome. Thanks for taking the question.
spk03: Thank you. Ladies and gentlemen, this does conclude the Q&A portion of today's conference. I'd like to turn the call back over to Doug for any closing remarks.
spk10: Well, thanks, Operator, and thanks, everyone, for joining today's call. And, you know, this is our first quarter 2023 earnings call, and I'd like to thank DJ for joining the team and, you know, supporting the great work we're doing and look forward to providing an update on the second quarter later this year. So thank you all very much.
spk03: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
spk08: Goodbye. you Thank you. Bye. you Thank you.
spk02: Good day and thank you for standing by.
spk03: Welcome to the MaxSight First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today. Sean Menargas, please go ahead.
spk02: Good afternoon, everyone.
spk11: My name is Sean Menargas, and I'm the head of investor relations here at MaxSight. Thank you all for participating in today's conference call. On the call from MaxSight, we have Doug Dorfler, President and Chief Executive Officer, sir, and Douglas Sworsky, Chief Financial Officer. Earlier today, MACSA released financial results for the first quarter and in March 31, 2023. A copy of the press release is available on the company's website. Before we begin, I need to read the following statement. Statements or comments made during this call may be forward-looking statements within the meeting of federal securities laws. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in any forward-looking statements due to a variety of factors which are discussed in detail in our SEC filings. The company undertakes no obligation to publicly update any forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Doug.
spk10: Thank you, Sean. Good afternoon, everyone, and thank you for joining MacSite's first quarter 2023 earnings call. I will begin with a discussion of our business and operational highlights during the quarter, followed by a detailed financial review from Douglas Swirsky, known as DJ at MacSite, our recently appointed CFO. We will then open the call for questions. I would like to start off by extending a warm welcome to DJ, who joined MacSite's leadership team as our chief financial officer in March. He is a seasoned financial leader with over two decades of experience in the healthcare sector. He brings financial, strategic, and operational expertise across multiple life science companies, including NASDAQ-listed public organizations. We look forward to the pivotal role he will play in MaxSight's continued growth as an industry-leading cell engineering company. I also thank Ron Holtz, who served as our interim CFO for the past year, as well as MaxSight's CFO from 2005 to September 2020, for his dedication and contributions to MaxSight. Ron is supporting DJ's transition to CFO as he moves into a new role as EVP of administration for the company. MaxSight began 2023 with the first quarter financial results were in line with our expectations. Although given some of the challenges in the cell therapy industry that I will discuss, we have determined that it is appropriate to lower our revenue expectations for the remainder of the year. DJ will talk more about this in his results. Despite those challenges, I remain extremely excited about the prospects for MaxSight's platform as the premier cell engineering technology for the industry, enabling the development of a growing set of advanced cell-based therapeutics, and I am confident in our team's ability to deliver against our long-term strategic plan. You'll note that our first quarter revenues, including our core business revenues, are down from the same quarter last year. As discussed on last quarter's call, we are expecting a return to more typical seasonality in our financial performance in 2023 than we had in 2022. It's important to note that in the first half of 2022, laboratories came back to near full capacity following COVID-19-related disruptions, which resulted in elevated spending on instruments and PAs in that six-month period and has created a more difficult year-over-year comparison for the first half of 2023. With regard to PA purchasing among customers with advanced clinical programs, we believe some purchases were accelerated into 2022 in anticipation of potential product approvals, which is resulting in lower levels of PA purchases in 2023. Outside of our core business, we generated $800,000 in milestone revenue during the first quarter. Our partners continue to make progress in their development programs, with several progressing into and through clinical development over the course of the year. As discussed on last quarter's call, 2023 shows signs of being a challenging year for the industry. In the face of a challenging capital markets environment, companies are prioritizing pipeline assets for research and development, which is having some impact on timing of projects in 2023, especially for smaller cell therapy biotech companies with late-stage preclinical and early-stage clinical programs. We also have seen numerous restructurings and expense-cutting measures being undertaken at cell therapy companies in recent months, including several such announcements coming within our customer base. Within this environment, we are also seeing increased hesitancy and therefore extended timelines for capital investments from our customers. We felt the impact of that macro environment impacting the timing of instruments and PA purchases as 2023 has progressed, increasing the caution we discussed in March and as DJ will describe in more detail. Despite those evolving headwinds, in the near term, our opportunity pipeline remains healthy and our confidence in the value our offerings remain strong for the longer term. Cell therapy companies continue to move toward non-viral approaches and or focus and invest in more complex engineered cell therapies, including multiple molecules and editing formats across a variety of disease types that play to the strengths of our platform. Our customers are narrowing and focusing their investments, but we do not see weakness in our core clinical SBL partners as they continue to focus development on their lead aspects. As a reminder, most of MagSight's partner programs are tied to the partner's lead and or second clinical program asset, where investment is continuing and progress through the clinic remains well-funded. Importantly, even in this challenging near-term environment, our non-SBL customers continue to progress toward SBL partnerships. We have signed two partnerships so far in 2023, and we anticipate continued momentum toward announcing more this year. In January, we announced a partnership with Cadmiran Bio to support its CAR-NK cell therapy programs to treat a variety of solid tumor types. Just last week, we were excited to announce a partnership with Walking Fish Therapeutics to support its innovative B-cell platform. The partnership with Walking Fish further expands our SBL program portfolio into B-cells and rare diseases. Additionally, this partnership expands the application of the MaxLight platform as Walking Fish is developing an innovative B-cell platform to serve as in vivo protein factories that produce the deficient enzyme in Fabry disease. The addition to Camerion Bio and Walking Fish Therapeutics bring the total number of our partnerships to 20, and with continued high-level engagement with potential partners, we remain confident in MaxLight's position as a partner of choice to cell and gene innovators. We look forward to a potentially first commercially approved product enabled by our platform, Vertex and CRISPR's Exacell program, which recently announced completion of the rolling biologics license application, BLA, to the U.S. Food and Drug Administration for sickle cell disease and trius fusion-dependent beta thalassemia with request for priority review. This application approval would be the first non-viral engineered cell therapy product granted by the FDA and would further validate the utility of MaxSight's platform technology as the premier enabler of non-viral cell therapies. So far in 2023, we continue to position ourselves strongly with targeted investments to support our future growth as well as our customers' and partners' success. We are focusing on growing our commercial teams implementing automation and our recently expanded manufacturing capabilities, enhancing our process development capabilities, and ongoing product and technology development. In addition, we continue to make investments in our applications lab, which will enhance our ability to support next-generation cell therapy innovators. We believe these are the right investments to ensure long-term success for MaxSight and the cell therapy sector. Late last year, we took key steps to formalize our approach to environmental, social, and governance disclosures. Earlier this week, we issued our inaugural ESG report, which can be found on our investor relations website. In this report, we highlight our ongoing efforts in all areas of ESG, including our Value for Patients Initiative, launched in 2021, which establishes our efforts to better understand the differential challenges that discrete patient populations face. In the time since launching this initiative, we are developing an understanding of the potential social, racial, economic, and bioethical challenges relating to developing gene and cell therapies. We have taken these findings and partnered with key opinion leaders to proactively participate in efforts that support the novel treatments we enable as they move toward reaching the patients who need them the most. We are pleased to share this first ESG report with our shareholders and to share our commitment to understanding, managing, and monitoring our businesses' support for sustainability, our responsibilities as a corporate citizen, and our role in creating value for patient communities more broadly. In summary, we expect a more challenging operating environment in 2023, which will impact the timing of our customers' development programs and capital investments. However, we see these developments as short-term, in the therapeutic space with great promise over the long term. Importantly, we continue to have confidence in the value our enablement provides to our industry and in the strength of our SPL partnerships and pipeline opportunities, which remains as robust as ever. We have made critical strategic investments positioning MaxSight to execute on long-term goals. We are honored to support our partners and believe we remain the partner of choice for non-viral cell engineering technology to support critical programs to development commercialization. The cell and gene therapy industry is in the early innings of a significant global opportunity to deliver therapies to patients, and we remain very optimistic about the medium to long-term growth for MaxSight. With that, I will now turn the call over to D.J. to discuss our financial results. D.J.? Thanks, Doug.
spk14: Hello, everyone. I'm very excited to have joined the MaxSight team. I appreciate the opportunity to support our mission driving the next generation of cell-based therapies. During my short time with the company, I've continued to be impressed by the quality of our team at all levels in the organization. It is an honor to work with all of them as we support our partners as they develop innovative therapies for patients who need them most. I will now discuss MaxSight's financial results for the first quarter. Total revenue in the first quarter of 2023 was $8.6 million compared to $11.6 million in the first quarter of 2022, representing a 26% decline. In the first quarter, we reported core revenue of $7.8 million compared to $9.6 million in the comparable prior year quarter, representing a 19% decline. This includes revenue from cell therapy companies of $6 million, which declined 19% year over year, and revenue from drug discovery customers of 1.8 million, which declined 17% year-over-year. The year-over-year decrease in revenues were driven by an unusually strong first half of 2022, which did not see our typical seasonality and was strongly impacted by the purchasing patterns of late-stage pre-approval programs and laboratories coming back to near full capacity following COVID-19-related disruptions. As discussed on last quarter's call, we expect about 40% of 2023 core revenue to occur in the first half of this year, consistent with our historical experience outside of last year's less typical seasonality. We recognize 0.8 million of SPL program-related revenue in the first quarter of 2023, compared to 2 million in the first quarter of 2022. We will not be able to discuss further details on our SPL program-related revenue or our partners' progress due to confidentiality agreements. Moving down the P&L, gross margin was 88% in the first quarter of 2023 compared to 91% in the first quarter of the prior year. Margins were influenced by highly variable milestone revenues as well as a mix of products and customer types, and we saw those effects in the first quarter. Total operating expenses for the first quarter of 2023 were $20.8 million compared to $14.7 million in the first quarter of 2022. The overall increase in operating expenses was primarily driven by increases in R&D, sales and marketing, headcount, and strategic consulting expenses, as the company continues to invest in the expansion of commercial sales and marketing, as well as in business and corporate development and innovation and product offerings for long-term growth. We finished the first quarter with combined total cash and cash equivalents and short-term investments of $224.7 million as of March 31, 2023, and, of course, no debt. Moving to our updated full-year 2023 guidance, we now expect total revenue for 2023 to grow between 8% and 12% compared to 2022, including core revenue growth of between 5% and 10%, and SPL program-related revenue expectations remaining unchanged at approximately $6 million for the year. Our updated guidance incorporates the challenging macro environment and the timing of purchasing patterns from our customers and partners, which Doug discussed. As we have discussed previously, the timing of partnership revenue is predicated on our customers' clinical and regulatory progress, and therefore is fundamentally more difficult to predict than core revenues. Our program-related revenue expectation is a risk-adjusted forecast achievable under various potential outcomes across our 20 announced partnerships and their planned clinical progress. As I mentioned, we continue to expect a back-half weighted seasonality split of roughly 40 to 60 percent, first half and second half core revenues in 2023, which would be consistent with our historical experience before 2022. And finally, I want to note our strong financial position as we expect to end this year with approximately $200 million in cash, cash equivalents, and short-term investments, and no debt. Our cash position allows us to focus on realizing the long-term potential of our business model. Let me close by saying that overall, we are confident in our updated 2023 revenue outlook, and we believe that our modest cash burn and debt-free balance sheet will support our future plans for profitable growth. Now we'll turn the call back over to Doug.
spk10: Thank you, DJ. In summary, we're optimistic about the long-term outlook of MaxSight and the depth of our partnership pipeline. We're committed to strengthening our opportunity to lead the industry as the premier cell engineering platform technology, supporting the development of advanced cell-based therapeutics for patients who may not otherwise have treatment options. As always, we thank our MaxSight team, as well as our board, suppliers, investors, partners, and the amazing industry that we have the honor of serving to enable the development and commercialization of therapies for patients and their families. With that, I will turn the call back over to the operator for the Q&A. Operator?
spk03: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.
spk02: Our first question comes from Julie Simmers with Penmore Gordon.
spk03: Your line is open.
spk05: Thank you. Good evening. And just a couple of quick questions on the split between cell therapy and drug discovery and whether there is any difference in the guidance as far as sort of the effects of this load and on the two separate divisions. Clearly one's more capital and one's more recurring in its revenues.
spk14: So we've taken a look at our revenue expectations across the entire business and developed our projection based on that. I think some of these sectors are going to be, some of the subsectors are hit more than others. Obviously, we're very comfortable with what's happening with our SPL partners. People are focused very heavily on their late-stage programs, and as capital is constrained a little bit within the industry, people are focusing on their product one or product two in the pipeline. So I think in terms of how we thought about this reduction in guidance as a result of looking at the business across all of our opportunities. And I hesitate to break it down further.
spk05: Thank you. And then just on sort of the cost side of things, the fact you're taking down the top line, does that change the investment plans at all in terms of the scale up of sales and marketing or R&D? Or are you expecting that to continue at a similar rate as one rate has now?
spk14: So we said last time that we thought we'd have $200 million at the end of the year. We still are saying that, even though that the revenue expectations are being moderated. So we're being mindful of costs. However, we're continuing to invest in our business and we're not going to let, you know, what we consider, you know, temporary, you know, market conditions, you know, take away from our long-term strategy.
spk01: Excellent. Thank you very much.
spk02: One moment for our next question. Our next question comes from Dan Harris with Stiefel.
spk03: Your line is open.
spk09: Good afternoon, guys. Thanks for the questions. Doug or DJ on the Outlook here, can you just maybe clarify for us how much of what you're doing is due to lower instrument purchase expectations versus lower utilizations of the installed systems? And then how much of what you're doing is also due to sort of an explicit forecast from your customers or what you're hearing from your customers versus more of just an assumption that things will be tough and a naturally more prudent outlook on the space, just given the industry headwinds that we're talking about?
spk14: I think it's a combination of factors. We're very close to our customers and potential customers with our sales team and our field applications team. So a lot of this is direct feedback that's sort of factoring into our thinking. In terms of where we see this, again, we're not going to break this out in terms of where we see the softness in the markets. We feel very good about the book of business in front of us, and we're optimistic about executing against the goals we set for ourselves. But again, we're not going to break it out in fine detail in terms of instrument sales versus PAs and things like that. In terms of our people, where we have installed base, are we seeing softness and I think people are very excited to be working with MaxSight, but people are scaling back on where they're making capital investments right now, and there's been just a general slowdown in capital being deployed in this space, and that's why we're just moderating our expectations for the year.
spk09: Okay. I'm not trying to beat a dead horse. I think most people can understand the placement dynamic and why instruments going out the door might be doing so at a lower clip, but by our math, the utilization came way, way in this quarter. um and you have a business that is hard for people to sort of dig into and understand just given the nature of it so is there anything that you can offer us when it comes to the usage of the systems by those that have them that give you comfort that this is a temporary thing and that you know maybe there is something going on in one corner that's not going on in the other quarter because you know again there's there's not a lot to work with in general when you're modeling this company and right now it does seem to be particularly in flux thanks
spk10: Yeah, Dan, it's Doug. So I think one area I do want to focus in on is our SPL partners, and they continue to progress their programs through the clinic and toward commercialization. We're not seeing any weakness in that part of the business, frankly. That continues to be very, very strong for us, both in placements and in utilization.
spk14: I also want to point out that First off, Q1 was sort of inconsistent with management's expectations. We do recognize that, you know, year over year, this quarter doesn't, it isn't as strong as last year's Q1. I think there was a lot of things that went into that, you know, people coming back again after COVID-related disruptions, you know, people, you know, laboratories sort of getting back out and ordering and things like that. So this is a little bit of a drop from first quarter of last year. but it met our expectations and we don't really believe that there's any real read-through for the rest of the year beyond what we're guiding here now.
spk02: Okay, thank you. One moment for our next question.
spk03: Our next question comes from Jacob Johnson with Stevens.
spk06: Your line is... Hey, good afternoon. This is Hannah on for Jacob. Thanks for taking the question. In your investor presentation, you highlighted the potential for 50 total SPL pre-commercial milestone events over the next three years. How many of these are 2023 events, or are these more weighted towards 2025?
spk10: I think that's a three-year total, Hannah. And I think when we talked at the last quarterly meeting, We guided towards $6 million in milestone revenues, and we're still sticking by that. We've built that plan from really the bottom up. We've looked at a number of different scenarios, and we feel really comfortable with that $6 million number.
spk04: Thanks. I'll leave it there.
spk02: One moment for our next question. Our next question comes from Stephen Ma with TD Cowan.
spk03: You're on.
spk13: Oh, great. Thanks for taking the questions. Maybe just to dig in a little bit more on the guide revision, and I'm not sure if you guys disclosed this or not, but could you give us a sense for the customer breakdown that you have? You know, how, you know, just rough and tough, you know, how many are small or emerging biotechs versus medium size versus large pharma? And if you can't give that breakdown, On the guide revision, you mentioned it was impacted by customer feedback. Was that customer feedback across the board, across your whole customer base, or was it weighted to one particular demographic?
spk10: As I did mention, we're very strong in the SPL partners, Steve. Thanks for the question. What we're hearing, so we have a pretty – well, for a small company, we have a pretty good number of people in the field field application scientists and salespeople who are in the field every day. And so we're getting that feedback from them collectively. We're monitoring this, you know, basically on a daily basis. We're looking at, you know, macro numbers. And frankly, I think we may be seeing some stuff that haven't yet showed up in some of the macro numbers. So I still think that there's kind of across the board some belt tightening. I think that you're seeing situation where, you know, larger dollar amounts, capital items are getting a little bit more scrutinized. In some cases, we're seeing companies establish higher levels of authority to approve certain capital purchases. So, I think that the, you know, the dwell time, the cycle time is being a little bit elongated as well, just basically across the board.
spk13: Okay, that's helpful. And I can sneak one last question in. You know, I appreciate you guys are guiding to $200 million of cash at year end. But, you know, given that cash, you know, the capital markets outlook and generally reduced valuations, you know, how should we think about your M&A appetite? And could you give us a sense of what an ideal target would be for you guys? Would it be like a technology bolt-on or, you know, any color would be helpful?
spk10: What is it? Yeah, it's very active. We have a lot of fencing going on right now in the marketplace. We've identified a handful of opportunities for the company. As I mentioned before, these aren't going to be, I'll call them commodity bolt-ons. They're going to be more, we've identified a handful of problems. I've talked about process analytic technologies. I've talked about some other adjacent technologies to our you know, our platform, which we think would be very attractive for adding into the portfolio. But again, it's going to be driven by, you know, issues facing the industry. And I think that we continue to believe that those issues are product characterization and the ability to adequately identify product potency. Those are two main areas that we're taking a hard look at. And anything we can do to accelerate the manufacturing time and provide more consistent manufacturer for these cell therapy drugs.
spk13: Great. Thank you.
spk02: One moment for our next question.
spk03: Our next question comes from Matt LaRue with William Blair. Your line is open.
spk07: Hi. This is Ashley Madeline Mullen on for Matt. Just thinking about some of the pressures you've talked about with longer capital equipment purchase cycles, more approvals needed, things like that. Are you seeing the discussion of some of your clients moving into SPL, SPL partnerships or SPL agreements taking longer by any because of that? Or do you think that's impacting people moving sort of through your process at all or taking a longer time there?
spk10: We're seeing a lot of really good. Thanks. Thanks for the question. We're seeing really good progress in the SPL partners. We have something that's really important for these companies to move forward. We've just signed two deals this year already. And we expect to keep the pace we've historically had, which is somewhere between three and five deals. So we're not seeing any major slowdown of those deals. And typically these companies are driving toward value generating events and moving something to the clinic is clearly a value generating event in this environment.
spk07: Great, thank you. And then sort of piggybacking off of that, Thinking about your Rockville facility, can you talk about where you see utilization trending this year? And I know in the past you've said it has the ability to support multiple commercial products when fully scaled. What would you consider, like, a utilization level that would be considered fully scaled?
spk10: Good question. So, what we have told – what we have talked about is that we built out our manufacturing here. I don't think we really have a capacity in terms of instrument manufacturing. And we've also dramatically increased our manufacturing for disposables. We've also are making, continue to make major investments in automation. Automation will translate into more flexibility and more capacity. So, you know, we're monitoring our partners' progress. We're monitoring their potential commercial success. And we're staying well ahead of that. And frankly, we can make those automation investments well ahead of the demands of the partners. So, we feel very comfortable we have the capacity to support all of our SPL partners as they move into commercialization.
spk08: Great. Thank you.
spk02: One moment for our next question. Our next question comes from Mark Massaro with BTIG. Your line is open.
spk15: Hey, guys. This is Vivian on for Mark. Thanks for taking the questions. So maybe one for DJ.
spk16: I guess I was curious on the decision to keep the SPL revenue guidance at $6 million. I would have thought that that revenue would tend to be a little more lumpy as opposed to the core business. So I guess, could you just walk us through what's giving you confidence there? And in the past, I think you guys have talked about, you know, some degree of inclusion of approval milestone revenue. So, just curious if you're able to break out what that contribution might be. Thanks.
spk14: Sure. Thanks for the question. So, you know, our expectations regarding milestone revenues remain unchanged at $6 million for the year. And the way we think about that is we've got, you know, 20 SPLs. We're modeling out multiple scenarios that you know, that helps us generate a number that we can get comfortable with. I can assure you it's probably not a normal distribution curve. We're just looking at it many different ways, how we, you know, what the year could look like. And when we do that, you know, the number that came out of that process, you know, on our last call was $6 million, and it's still $6 million now. And certainly we do think about some of the later stage milestones being a component of that. But, you know, with or without that, there are many different ways and many different combinations of potential payments that get us to $6 million. But it is lumpy. And something tells me the number will hopefully center around $6 million so that we look smart. But I think it's probably not going to be that number exactly.
spk16: Okay, perfect. Understood. And then just a quick one. How should we think about gross margin cadence from here? Just given the step down in the guide, I think I also heard you talk about more targeted investments. So Just any comments you have there.
spk14: So just as a reminder in terms of how the gross margin is determined, we've got different types of revenue, one of which is milestone revenue. And so the lumpiness in that also sort of contributes to the lumpiness or the fluctuations of the milestone revenue as well as the mix of instruments, et cetera. But we feel very good about our margins. We've got margins in the high 80s. and we think it's going to continue to be at that level.
spk15: All right, awesome. Thanks for taking the question.
spk03: Thank you. Ladies and gentlemen, this concludes the Q&A portion of today's conference. I'd like to turn the call back over to Doug for any closing remarks.
spk10: Well, thanks, Operator, and thanks, everyone, for joining today's call. This is our first quarter 2023 earnings call, and I'd like to thank DJ for joining the team and supporting the great work we're doing and look forward to providing an update on the second quarter later this year. So thank you all very much.
spk03: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
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