Quanterix Corporation

everyone, and thanks for joining us today. With me on today's call is Masoud Toulou, President and CEO of Quantarix. Before we begin, I'd like to remind you about a few things. The call will be recorded and will be available on the Investor Resources section of our website. Today's call will contain forward-looking statements that are based on management's beliefs and assumptions and on information available as of the date of this call. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The risks and uncertainties that we face are described in our most recent filing with the Securities and Exchange Commission. With that, I will turn the call over to Masoud.

Thanks, Mike, and good morning. Before we start, I'd like to thank Kevin and the board for their support in this new chapter at Quanterix. Kevin's dedication and passion for this company and its impact on healthcare goals are shared, and I look forward to working with him, the board, our employees, and customers. You know, since I joined Quanterix last year and transitioned to this new role two weeks ago, What has been very clear to me is that our ultra sensitive single molecule array, Samoa, technology is being used every day to see, detect, and measure proteins in a way that's unparalleled. But it's how we effectively deploy this technology that counts. This includes unlocking new biomarkers, playing a key role in breakthrough research, and ultimately developing tests that will have a significant impact on the human condition. Last quarter, we reported total revenues of $29.6 million, which represents a 9% growth year over year. And as previously stated, we're on track to achieve revenues between $122 and $134 million, with higher growth rates on the back half of the year. Our growth was driven by strong performance in our consumable segment, which grew 28% year over year. Excluding our 22 Lilly collaboration, that growth was partially offset by instrument and accelerator decline, driven by strong demand in 2021 for pandemic testing in our laboratories. We realized the benefits of our collaboration with Eli Lilly which is a partnership that Quanterix has been working towards for several years and provided $2.7 million in revenue during the quarter. As a reminder, this multifaceted agreement provides Quanterix access to Lilly's PTAO 217 antibody technology from year-term Samoa-based research products and services and future in vitro diagnostic applications. It also establishes a framework for collaboration that we expect will drive continued growth as well as revolutionize the diagnosis and treatment of Alzheimer's disease. Our adjusted gross margin of 49.3 declined by approximately 1,000 basis points compared to last year. As part of our transformation and scale with quality focus, we are implementing several new processes, one of which is around inventory management. which did have an impact on margins this quarter. These new process changes will be an important foundation for future performance. Operating expenses were approximately $32.7 million compared to $26.1 million in Q1-21 due to personnel increases and lab expansion to take on several new projects. In terms of cash, we spent approximately $22.1 million to support our operations and additional factors that Mike will discuss. Looking at our revenue growth by geography, we continue to have very strong presence in North America, where we grew 18%. Our year-over-year growth in Asia was driven primarily by lack of activity in 21 due to COVID, and a reduction in the EU was due to strong prior COVID-related demands for pandemic testing in our labs. We maintained a roughly even split between revenue earned from pharma, CRO clients, and academic clients during the first quarter. Publication pull-through continues to grow. Our Samoa technology was highlighted in a record 151 new publications in the first quarter of 22, bringing total Samoa-specific inclusions to over 1,700 since its inception in 2006. Eighty-two percent of our first quarter revenue stemmed from neuro-related offerings, up 77 percent compared to prior year period, driven by strong adoption of Quantirix's neurocapabilities, strong demand for our PTAL181, and neuromultiplex assays. Now, I'd love to spend some time highlighting a few of our exciting operational and business developments that we announced this quarter. starting with receipt of our breakthrough designation from the FDA for our Samoa Neurofilament Light Chain, or NFL plasma test, which followed our announcement last year for the same designation on our PTAL 181 test. Using our technology, researchers from Basel were able to quantitatively measure NFL in human serum and plasma, which when used in conjunction with clinical imaging, helped to identify relapsing-remitting multiple sclerosis patients who are at risk at low or higher risk for relapse within four years. This could therefore be useful in tailoring the therapeutic approach to more effectively treat the disease. If approved, the Samoa NFL test could help the MS community by offering a more effective detection method. You know, it's really important to achieve this, but I want to caution that developing these IBD tests takes time, and we don't expect any near-term revenue impacts from regulated products. One of the limitations of the NFL biomarker test was establishing a baseline that corrected for age and body mass. As people age, their NFL levels increase. This study looked at over 10,000 samples from over 5,000 subjects to establish a baseline and give us a better understanding of NFL in identifying individuals with brain health concerns. The database established by this study was published in The Lancet and is an important milestone for our Samoa NFL test. Quanterix's Samoa technology also enabled the completion of multiple other high-profile studies, the results of which were published during the quarter. Through a recent study from the Harvard School of Public Health, Samoa technology was instrumental in detecting NFL protein at ultra-level levels to reveal a high prevalence of Epstein-Barr virus associated with MS. This evidence suggests that EBV is the leading cause of MS, a truly revolutionary finding for the entire MS community. We're thrilled Samoa was a key part of this discovery. Now, I'm going to turn it over to Mike to discuss some more financial details. Mike?

Thanks, Masoud. I'm going to provide some additional financial details about our first quarter 2022 performance. And for your reference, for those following on the call, it will be slide number eight. As Massoud noted, our total revenue in the first quarter of 2022 was $29.6 million, a 9% increase versus the first quarter of 2021 revenue, which included approximately $2.3 million of revenue from our non-recurring and now completed RADx awards. We had product revenue in the first quarter of $20.7 million, an increase of 13% versus the first quarter of 2021. Within product revenue, consumer revenue once again had solid growth, increasing 28% in the first quarter versus the prior year, driven by our strong demand for PTAL 181 and our neuromultiflex assays. First quarter 2022 service revenue increased 37% versus the prior year first quarter to $8.8 million. Included within services revenue is $2.7 million recognized during the first quarter of 2022, from our collaboration with Eli Lilly announced during our Q4 2021 release. We feel comfortable the customer's activity has returned to pre-COVID levels. However, potential spread of new variants could force renewed lockdowns. In addition, global uncertainty with rising inflation and the war in Ukraine continues to have the potential to impact our performance. Our Q1 2022 gross margin was 49.3%. compared to 60.1 percent in the first quarter of 2021. There are a few factors that drove this change. Our recent growth has highlighted inefficiencies in our inventory management processes. In response, we made a change in the way we estimate and reserve for excess and obsolete product. This change looks at 12 months activity versus three months and should result in a more accurate assessment of the NO reserves. The initial impact of this change materially affected our results for this quarter. Due to higher inventory balances, we also instituted a longer early quarter shutdown in Q1 of 2022 as compared to Q1 of 2021 to perform our annual physical inventory count, which impacted productivity. We've made a number of process changes to how we manage inventory that will allow us to scale with quality and improve margins going forward. Our operating expenses totaled $32.7 million in the first quarter of 2022, an increase of $6.6 million versus operating expenses in the first quarter of 2021. Major expense drivers were volume-related activity, personnel increases, outside services, and laboratory expansion as we scale the organization and invest in process improvements. During the first quarter of 2022, our cash balance decreased by $22.1 million, Ending unrestricted cash balance was $374.3 million at March 31, 2022, and basic weighted average shares outstanding for EPS totaled $36.9 million for the first quarter 2022 period. Cash outflow from operations was $22.1 million driven by higher operating expenses, primarily driven by headcount increases, timing of vendor payments, and capex. With $10 per share in cash and no debt, our balance sheet is in excellent shape and we're well positioned with adequate resources to pursue our strategic objectives. Overall, we're pleased with the first quarter performance and the progress made on our strategic priorities and remain committed to delivering solid remainder of the year 2022 results in line with expectations. With that, I'll turn it back to Massoud.