Quanterix Corporation

Hello, thank you for standing by and welcome to the Quantarix Corporation Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Mike Doyle, the CFL. Please go ahead.

Thanks very much. Good afternoon, everyone, and thanks for joining us today. With me on today's call is Masoud Tolu, President and Chief Executive Officer for Contarex. Before we begin, I would 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. To supplement the company's financial statements presented on a gap basis, The company has provided certain pro forma financial measures. Management uses these pro forma measures to evaluate the company's operating performance in a manner that allows for meaningful period to period comparison and analysis of trends in its business. Management believes that such measures are important in comparing current results with other period results and are useful to investors and financial analysts in assessing the company's operating performance. The pro forma financial information presented here should be considered in conjunction with and not as a substitute for the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these pro forma measures to their most directly comparable GAAP financial measures set forth in the appendix of this presentation. The risks and uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission. I will now turn the call over to Masoud.

Thank you, Mike, and good afternoon, everyone. We're at a unique and transitional moment both at Quanterix and in the broader life science industry. Never before have there been more measurable parameters to assess normal or disease processes in human health. Using new biometric screening, imaging, genomics, and proteomics technologies, this industry is developing more lab parameters to discover and help make decisions in this assessment and diagnosis and treatment of disease. Perhaps even more importantly, industry participants are accelerating our understanding that multi-marker approaches and the data associated with them will create better predictive indication of changes in protein state and expression. Quanterix sits in a key translational space in this continuum. where our ultra-sensitive detection of protein uniquely propels new discoveries and early indications of disease. Alzheimer's is one of those diseases where there is an early symptom-free phase that, if detected, could revolutionize the way we treat patients. An important step in this direction, last week we launched the first PTAL 181 plasma laboratory-developed test for clinical diagnostics and research. This is an early move as we arm researchers and clinicians with new tools to provide insights into poorly understood pathologies and empower therapeutics companies with a growing menu of multiplexed blood-based markers to advance brain health. Now, Quantirx is at a pivotal juncture where operations and ability to scale have not kept up with growth and customer demand for SAMO technology. This has manifested itself into quality challenges that will, in the near term, have impaired our growth rates. Cost to manufacture assays with current processes are not efficient in the long term. Following our strategic review and top-down assessment of our operations, we announced a comprehensive plan whose imperative is to fully realize the potential of Samoa by ensuring the company's technology is built and scaled with operational rigor and excellence. First, we have set in motion an assay redevelopment program with the objective of improving our ability to manufacture and deliver high-quality assays at scale. We anticipate making initial progress this year and expect to complete this program in 23. Second, we have refocused and aligned our capital and resources along three go-forward principles, quality innovation, and positioning Quanterix to unlock the value of translational markets. We have initiated several decisive actions to reallocate resources and capital, eliminating projects and reducing spend on initiatives not related to assay redevelopment and innovative research. These adjustments will put us on a path to accelerate the return to strong growth and put us in a position to achieve positive cash flow. These actions will result in a reduction in force affecting approximately 130 employees across the company's worldwide operations. On to our Q2 results. We reported total revenues of $23.5 million, which represents a 7% decline year-over-year. Revenues were impacted due to reduction in consumable revenue as we addressed asset quality challenges. As shown on slide three, consumables revenue declined year-over-year by 29%. As I discussed, we have initiated critical steps to realign our business so we can focus on improvements required to remediate these challenges. On a pro forma basis, Q2 gross margin was 28.3% versus prior year Q2 pro forma gross margin of 47.5%. Our Q2 gross margin reflects the reallocation of resources mainly headcounts to our ongoing quality-related activities, as well as an adjustment relating to shipping costs to our cost of goods sold. These increases to cost of goods have a corresponding reduction in operating expenses with no overall change to the company's total expenses. Mike will provide additional details in a moment. We believe presentation of pro forma gross margin provides visibility into the progress of our quality process initiatives and their improvement on our cost of quality. Forward looking, we now expect total year 22 revenue to be flat compared to total year 21. On a longer term basis, we expect to return to double digit revenue growth in 2024 when the benefit of our restructuring and business realignment plan are fully realized and to accelerate at a faster pace once new growth categories are unlocked. The difficult but necessary changes to improve our operations and cost structure are far-reaching and will affect approximately 25% of our employees across the company worldwide. We regret the impact of these changes on our departing employees and would like to thank them for their contribution to our company. Moving forward from here, we are committed and focused on executing to achieve our operational market, and growth goals. We are dedicated to advancing our mission of transforming diagnostics of neurodegenerative disease, biomarker research, and discovery. Today, we also announced that Kevin Rothofsky has stepped down as our company's executive chairman and is leaving our board of directors. As we move forward in the next phase of our company's evolution, this is also a natural point in the evolution of our board structure. I would like to thank Kevin for all his efforts in helping Quanterix become a leader in our field. With Kevin's departure, the board has appointed Martin Medeiros to serve as independent non-executive chairman of the board. Martin is deeply familiar with our company and industry, and I look forward to working with him in his new role as we embark on the next phase of our journey. Now, I'll turn it over to Mike to discuss some more financial details.