Good day, and welcome to the Bionano Second Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelly Gura from Investor Relations.

Thank you, and good afternoon, everyone. Welcome to the Bionano Second Quarter 2025 Financial Results Conference Call. Leading the call today is Dr. Erik Holmlin, CEO and Principal Financial Officer of Bionano. And he is joined by Mark Adamchak, Bionano's Vice President of Accounting and Principal Accounting Officer. After market closed today, Bionano issued a press release announcing its financial results for the second quarter of 2025. A copy of the release can be found on the Investor Relations page of the company's website. Certain statements made during this conference call may be forward-looking statements. Actual results may differ materially from such statements due to several factors and risks, some of which are identified in Bionano's press release and Bionano's reports filed with the SEC. These forward-looking statements are based on information available to Bionano today, August 14, 2025, and the company assumes no obligation to update statements as circumstances change. During our call, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release and slide deck. An audio recording and webcast replay for today's call will also be available online on the company's Investor Relations page. With that, I will turn the call over to Erik.

Thank you, Kelly, and good afternoon, everyone. The second quarter of 2025 was solid. Today, in addition to discussing our quarterly results, we want to highlight several signs that we believe indicate the strategic shift we implemented in September of 2024, moving our focus from heavy spending on customer acquisition associated with new instrument placements toward those customers who use our optical genome mapping or OGM products and our VIA software, routinely insider genetics, is having a positive impact on our business. I would like to start off by discussing the broader markets where our opportunities lie. In general, our focus is on bringing solutions to pathology, which is the broad field that investigates disease, including its causes, developments and effects. In fact, Bionano has become a digital pathology company. While there are many branches and subspecialties of pathology, our solutions concentrate primarily on cytogenetics and molecular pathology, we can see an opportunity to expand into clinical and anatomic pathology over time. Clinically, these branches of pathology -- globally, these branches of pathology currently rely on multiple technology platforms to function. The mainstay in cytogenetics, for example, is karyotyping. It's the standard for first-line analysis in hematologic cancers in nearly every country around the world, and it hasn't changed in the past 50 years. Other techniques such as FISH and microarrays are similarly antiquated and limited. Optical genome mapping consolidates these workflows and the fusion analysis from molecular pathology into one digital workflow. Sequencing is also impacting pathology with multiple workflows already adapted to sequencing, and techniques like single cell spatial and protein analysis showing promise for standardized sequencing readout that may eventually reach clinical scale. It's possible to imagine a large consolidation across molecular, anatomic and clinical pathology into sequencing as well. One critical component that will underpin this…

[Operator Instructions] Our first question comes from Jason McCarthy of the Maxim Group.

This is Michael Okunewitch on the line for Jason. Congrats on the great progress. So I guess I wanted to ask with regards to VIA, how universal is the use of VIA software among the OGM users? Is it fairly one-to-one over there? Or are there some opportunities to expand VIA use among your existing OGM base?

So the answer is, when we look at -- across the whole installed base of OGM systems, VIA is probably installed in less than -- maybe around 1/3 of them. But when we look at our routine-use customers, that adoption rate is much higher. There still remains the opportunity to drive that adoption. And so that is something that we see can enable us to expand utilization. And even amongst the sites that have adopted it, they haven't all put it into their own routine use. And so that's a big focus for us from a training perspective, and we think that these new updates are going to help by introducing this workflow for constitutional genetic disorders. So I think the answer is that adoption is plentiful amongst the customers that we're really focused on right now in this routine-use regime, but there remains a significant opportunity to install it at more sites and to increase the utilization amongst all of those sites.

Are you putting any effort towards marketing VIA in non-OGM users? You mentioned there are a couple of people out there using VIA for applications like long-read sequencing. And do those customers represent an opportunity for cross-selling to place OGM units without the high acquisition cost of going out and finding completely new users?

I think the answer is yes. And let me just be clear, in the quarter and over the course of the year, we do sell a substantial amount of software for non-OGM applications, structural variation, detection, analysis, reporting off of NGS and microarrays. And so that's a significant portion of the business. And we do believe that those customers who are using VIA for non-OGM applications can expand their relationship with the company and become OGM users. And so yes, maybe you could say it's a little bit of a Trojan horse. There are some intricacies about how labs within the pathology universe are constructed and how samples flow. And so it's not a one- for-one where you would expect to see direct adoption, but it certainly is an opportunity. And I think, really, VIA performs incredibly well for these applications. And so it's a way for the Bionano name to be present at institutions.

All right. And then just one last one for me, and I'll hop back into the queue. You did mention that the newest iteration of VIA does include an AI component. So what role does AI play in the VIA software?

When you think about what happens in this workflow, and I think you have probably worked on some of these projects, when variants are identified, it's possible that they have been seen before and so that there are publications associated with them. Similarly, there may be other labs that are looking for variants of this type. And then there are a variety of databases that exist that can score and categorize these variants and help researchers to determine ways in which they want to report these variants. And so this type of analysis of these databases is an example where the computational power that AI brings can accelerate and improve the results that are generated through this analysis.

All right. Thank you for the insightful answers and congrats on the great progress this quarter.

And our next question comes from Yi Chen of H.C. Wainwright & Company.

So your press release mentioned that you brought back 8 systems during the quarter and placed, installed 7 new systems. So I assume the 8 systems you brought back are users that are not routine users, correct?

Yes. We have a reagent rental program, and so labs can bring a system on and test it out and evaluate it. And in the cases of these examples, they went through their rental contract. And at the end, decided that they were not going to move forward. I think that one common theme amongst the majority of the systems that are returned is that they -- the initial application is much more of a research- oriented application. And so I think in the current environment where there are a lot of constraints around funding, I think that, that may be one of the effects, but we shouldn't think of that as a reduction to the routine-use customer pool.

So the new systems you placed in -- as the second quarter or the coming quarters, they have all gone through the -- they have to go through the evaluation period, too. And at the end, they have to determine whether they want to keep the system, or they want to return the system. Is that the right idea?

Well, it depends a little bit on the way in which the customer contracts with the company. So if they rent the instrument, which means they commit to a consumables volume over time, a certain number of consumables purchased per year, they can have it for -- the minimum would be 1 year now, these deals that we're doing. And there is the potential that they could return it after that year. But if they buy the system from us, then they own the system and it's theirs, the question is, whether they choose to utilize it going forward or not. And we have a mixture of these rentals and purchases. And since we're doing fewer deals now, it's kind of interesting, it's about 50-50 purchase versus rental. But it is true that somebody who rents the system does have the option to basically discontinue their rental at the end of the contract period, which I think is quite common in the industry.

Got it. So at this point, I don't know if you can provide a rough estimate as to the return rate among the new systems placed or attrition rate. Like what percentage of new systems placed will eventually be returned?

Yes. I mean I think it's a very good question. And when we look at the new systems that are going in, it's kind of -- it's a little bit premature to talk about the return rate amongst these current adopters because they really reflect this shift in strategy. And so we're not selling the system to a lab that's going to be doing speculative research, and so our expectation is that these systems are not coming back. I mean I'm sure that it will happen potentially, but it's a little bit premature for us to give a return rate amongst this segment of customers. It's not 0. We have taken some back, but it's very close to 0.

I see. And with respect to the second Category I CPT code from AMA, could you tell us, how is it different from the first code? And how is it going to facilitate the reimbursement going forward?

Yes, it's an excellent question. So -- I mean, if you think about the sort of digital pathology campaign that we are on to really consolidate cytogenetics onto optical genome mapping, within that effort, you've got 2 very distinct applications, analysis of samples for hematologic malignancies and analysis of samples for constitutional genetic disorders. And the way that the CPT codes work is that even though the methodology itself is fairly similar, there are differences in the workflows such that it's appropriate to have different codes. And I think that there is a chance for there to be differences in pricing. We don't know what the constitutional genetic condition code will be priced at. We would expect to see the draft pricing probably sometime in September. The hematologic malignancy code was priced at $1,263. We understand that some of our customers have petitioned CMS to increase that price, and so I think that while we would have liked for one code to exist from the very start, now that we've gone through the process, I think it's beneficial to have a code dedicated to each of these major applications because for the reason that somebody might be doing that analysis, it's fairly unique and different. It's a different body of literature that supports it and hopefully, let's just say, could potentially drive differences in pricing. So we'll want to pay attention to that in the next weeks.

Our next question comes from Mark Massaro of BTIG.

This is Vidyun on for Mark. So I think the instrument placing guidance assumes a slight detail in the back half. Should we just think of that as conservatism? I would think that there might be a slight budget flush dynamic in Q4. So just how should we be thinking about that?

I think that, probably, yes, conservatism, right? If you double the first half, you would get 32%. On the other hand, it's probably appropriate to be conservative because even if you get a budget flush and there are orders and so forth, you're actually getting them installed, could spill over into the first quarter of 2026, for example. So I think I would say that I feel very confident that we'll sort of meet this new raised guidance.

Okay. That's perfect. And then just a follow-up on the flowcells. I think you beat us there. I think you alluded to it in the prepared remarks, but could you just discuss one more time what you think drove that? And do you have a sense on how long it takes the newer customer group to reach maturity and kind of ramp their utilization there?

Yes. Really good questions. I mean I think that to be fair to you and to us and to everybody who's following the trajectory here, we expect there to be lumpiness. And the sort of routine-use user base is sizable, but it's not so big that it's not -- it will be just smooth, so we expect there to be some lumpiness. Having said that, we have really focused on supporting customers to make sure that they're up and running and addressing those customers with the highest potential for utilization. Our trading programs on the VIA software and other aspects of the workflow in key applications like hematologic malignancies are underway, and this is a big concentration for us. And so I think that there have been a lot of good execution-oriented actions that we've taken and that those are paying off, and that's why we're seeing that growth. In addition, and sort of transitioning to your question a little bit about the time to get up to speed, we had a pretty substantial number of systems get installed and people get trained towards the end of last year. And so we're probably starting to see that utilization. And I think that the time to a lab getting into a routine-use situation with OGM, it's going to be variable. It's without a doubt a minimum of 3 months, but I think 6 to 9 months is a healthy time frame to be thinking about. There's just a lot of stuff that needs to happen after install that is related to requirements that the lab needs to follow depending on what their desired application is. And so it takes some time. Having said that, almost every system that goes out buys consumables upfront, and so they're churning through a wave of consumables to begin with. And it's like, when do we get them to that point of their first repurchase? Again, I think that, that's likely in that 6-month time frame. Maybe 6 to 9 months is a good way to think about it.

Okay. That's very helpful. If I could just squeeze in one last one, just maybe a higher-level question. There has been some pickup of dealmaking in our space a little more recently. Just how are you thinking about strategics or partnerships here?

Well, look, I mean, I think that there's the cliche answer, every day between the hours of 9:30 and 4 Eastern Time, the company is definitively for sale. And we're a well-known entity out there. And so I would expect that Bionano is certainly on the radar screen of strategics. And we have a variety of discussions that are ongoing all the time. And I think what's unique about Bionano across the space of companies, let's say, that are similarly situated to us. Early commercial stage, maybe feeling some of the constraints and difficulties of the current equity capital markets. I think Bionano is pretty far advanced. So even with everything that we've gone through, we're printing a $6.7 million quarter and guiding $6.7 million to $7.2 million for the next quarter. I think $26 million to $30 million on the top line, 52% gross margin with expenses that are no longer so significant that folks can't see a way to folding Bionano in. Having said that, I think we're very committed to our strategy of this digital pathology transformation. We know it's going to be incredibly valuable and that there's so much upside for our business, so we sort of stick to our knitting, if you will.

Thank you. This concludes our question-and-answer session. I'd like to pass it back to Erik Holmlin for closing remarks.

Okay. Thank you, Deedee, and thank you to everyone who joined. We're very happy with this quarter, and we look forward to updating you on our Q3 conference call. Thank you very much.

This concludes today's conference call. Thank you for participating, and you may now disconnect.