Good day and welcome to the Standard BioTools Inc Third Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. After today’s presentation, There will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over David Holmes of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to Standard BioTools' third quarter 2024 earnings conference call. Leading the call today is Michael Egholm, President and Chief Executive Officer and Alex Kim, Chief Operating Officer and interim-Chief Financial Officer. At the close of market today, Standard BioTools released its financial results for the quarter ended September 30, 2024. During the call, we will review our results and provide an update on our financial and operational performance, 2024 outlook, market trends and strategic initiatives. During the call, we will be making forward-looking statements about events and circumstances that have not yet occurred, including plans and projections of our business, our outlook for 2024 and future financial results, market trends and opportunities 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 circumstances. 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 appendix to today's presentation slides. Please note that management will be referring to a slide presentation including updated supplement financial information within the webcast today. Following prepared remarks, we will host a question-and-answer session. Today's slide presentation along with the replay of the webcast, will be available on the investor section of our website. I would now like to turn the call over to Michael Egholm, President and CEO of Standard BioTools. Michael.

Thank you, David, and good afternoon, everyone. We appreciate you joining us today. Before we discuss our quarterly results, I want to welcome Alex Kim to the call who is acting CFO and will be covering our financial performance for the third quarter 2024. Alex has been with Standard BioTool since its inception, instrumental to its founding and fundamental to its growth as a co-founder, Chief Operating Officer, Alex brings to the CFO role, a deep understanding of our business and seasoned operational acumen home from a decade at Danaher. In addition, Sean Mackay, our Chief Business Officer, who now heads our organic and inorganic growth efforts is joining the call and will be available to answer questions. With that, let's discuss our results of which I'll be speaking to pro-forma numbers. In the third quarter, we deliver $45 million in revenue, sequentially up 21% from last quarter, but down 5% year-over-year, and $128 million in revenue year to date, which is down 9% versus 2023. From last quarter to this one, the industry backdrop remains challenged with customer budgets for CapEx equipment tight and purchasing behaviors conservative. Operating in a dynamic environment like this one requires deep operational discipline and continuous focus on improvement. Against these metrics the team delivered. We met our adjusted revenue targets and accelerated operational efficiency. Our team is now three quarters into the SomaLogic integration and a full year ahead on cost reduction, having already operationalized and expected $80 million synergies. While the savings are expected to be fully realized in 2025, we have already seen a 24% year-over-year reduction in non-GAAP operating expenses year to date, and a 50% improvement in adjusted EBITDA in the quarter. Our operating system, Standard BioTools business system adjusted SBS has become deeply embedded in the new businesses.…

Thank you Michael, and thank you all for joining our call today. I'm honored to be representing Standard BioTools on this call as an acting CFO. As Michael said, I've been with the company since the inception and I've been happy to jump into the role as CFO, bringing my knowledge and experience as a business leader and operator to the finance function. I will take us through our financial results in more detail and provide additional context. I want to remind you that on an as reported basis, our third quarter and year-to-date 2024 results include the combined operations of Standard BioTools and SomaLogic since the close of the merger on January 5th of this year, while the same periods in 2023 include the financial results of the legacy Standard BioTools business only. Therefore, for comparative purposes, we think it's much more meaningful to look at the results of both businesses combined. And so as I speak to our Q3 financial results, my commentary will focus on the performer combined results of operations for both Standard BioTools and SomaLogic for 2023 and 2024. Please do refer to today's press release and the appendix to our investor deck for more information, including a reconciliation of GAAP to non-GAAP measures that I will be discussing here. Starting with revenue on Slide 9. Our third quarter came in at $45 million down 5% year-over-year and year-to-date revenue was $128 million down 9% year-over-year. Sequentially, our third quarter revenue increased 21% versus the second quarter. Breaking revenue down further, consumables revenue was $14 million in the third quarter, up 13% year-over-year, and $45 million year-to-date, up 21% compared to 2023. Our consumables growth particularly benefited from continued expansion in our SomaScan authorized sites and the Illumina Early Access program. As we've discussed in…

Thanks, Alex. We thank you all for your continued support as we navigate these tough end markets. We look forward to seeing many of you at the UBS Global Healthcare Conference on November 12th in Ranchers Palace, California and at the Jeff London Hill Cap Conference on November 19. And now I hand the call back to Wyatt for Q&A. Wyatt?

[Operator Instructions] And the first question comes from Dan Brennan with TD Cowen.

This is [Kyle] on for Dan. I was just wondering to start, if maybe you could quantify what percent of assay services revenue in 3Q was timing based? Is there a way you can quantify that?

What we had said before. As we had talked about before, our SomaScan services have historically relied on a few large customers like five or so. And as Alex pointed out, outside that we see -- outside those we see double-digit growth in the SomaScan asset services, which see as an encouraging sign. We had favorable timing in Q3, an unfavorable in Q2, 30 year for those five large customers, we have a hefty headwind on the order of $15 million to $20 million as we shared before. So it's really encouraging to see that the broadening of the SomaScan as a service businesses. And then just remind everyone it is, these large projects are highly dependent on getting the PO and then getting the samples and getting it all run. So the quarter-to-quarter timing can push numbers one way or another, but if take a step back, we like where this business is headed.

And then maybe just on the guide, you reiterate your guide $170 million to $175 million for the year. The midpoint of that I think for Q4 implies maybe flat to a little bit down Q-over-Q. Are you expecting any year end budget flush or anything, any year end spending dynamics that are any different from what you saw in 3Q?

We don't, but it would be really nice if it came, so we do build in a little bit of an uptick on instruments here in Q4, but we're not relying on a market recovery or new budgets becoming available. Anything to add to that, Alex?

I think that was a good summary. We continue to actively work our funnel and we feel comfortable where our funnel is at to hit the guidance that we've shared with you here. As we've mentioned before, any quarter can be impacted as an instrument and or a large service project may shift from one quarter or another. But we have a funnel that we feel comfortable with the guide that we've provided.

And the next question comes from Matt Stanton with Jefferies.

Maybe to pick up there on the instrument side, you know, clearly kind of their main week for you guys in the broader industry. Can you talk a little bit more about if you're starting to see any green shoots or final improvement, when could we start to see maybe demand improve, not just easy comps. And you called out China, can you just unpack a bit more what's going on over there in China and when we could potentially see things improve over there? Is it really tied to stimulus dollars starting to flow?

And like if you just sort of zoom out a little bit, instruments have down year-to-date 28% versus last year where we were up 46%. And I think, so largely in line with our peers, we are selling high cost instruments that still work in niches. So we are in a tough environment here, as Alex alluded to our funnels are a building, which we see as an encouraging sign. And for specifically for China, our team are talking about it, looking a little better but we don't expect it to flow through in Q4. Hopefully it will be a tailwind in 2025. Historically, up until the last quarter, China has been a bright spot for us and we're certainly looking forward to China growth coming back and then may maybe on green shoots. We are seeing VC money flowing into biotech again, and we are beginning to see more leads being generated there but it is not translated into dollars to us yet. So cautious optimism, I would characterize it as.

That's helpful. And then maybe one on the cost side, a lot of really good progress there. You called out in your script kind of certain growth areas within multi-omics the launch of single Soma or mix as a service. Some of the items, you talked on the strategy update back in May. So can you talk a little bit more about the areas you're investing in, some of those launches and I think on the single Soma launch you talked about kind of a limited launch and then a broader launch later. So any finer point you can talk about just in terms of rolling that product out or customers you'll be targeting, what you tend to consider a successful launch if we look out 12 to 18 months from now.

Yes, so we are taking out $80 million now, and I want to thank my team for doing all the heavy lifting here. So we're really, really well set up with significantly reduced cash burn. We are protecting our growth in like our growth investments and we are protecting investments in sales and marketing as a backdrop. And so to that end we launched the individual SOMA on what we call a minimal viable product, but it's minimal viable product because we have not shipped individual reagents before for revenue. So as a whole infrastructure that's set up and there's limited support for the number of applications that you can use them for. And then we do not have an E based site that eventually will be there -- where will be click on a protein and then get the individual SOMAmers, and to that end, it's limited in that we are rolled it out to all our existing customers, and then we will do a broader launch. Yet when we have have fixed all that infrastructure, and again, we are still investing heavily in ID, because we believe in for our technologies. There's a long runway ahead.

Then maybe understanding the backdrop remains pretty fluid out there. I mean, if you start to think about ‘25, back half of this year, you're kind of at $45 million a quarter. Call it, if you annualize that we're at $180 million, any kind of directional commentary you willing to provide? As we start to think about ‘25, obviously instruments have easy comps, you have Illumina ramping. We think about a kinda $180 million base and some growth that, but any finer point you're willing to put on that as we start to dial in our models for next year.

I'll let Alex handle that one.

Yes. Not at this time. We're not providing guidance on 2025 yet. Our focus is very much on Q4 and closing out this year strong. We'll come back to you in the future with our updated view and on 2025 later.

Yes, I'll just say like, so our -- we really, our guidance of $170 million to $175 million, it remains a challenging environment and then on top of a business where you can get a big order that can sway one way or the order. As for ‘25, we are -- as you have heard repeatedly, we're very encouraged by our relationship with Illumina, which we think in the long-term we get access to a much, much broader customer base. We believe we have the best solution out there. It's the only solution so far that can scale with precision, currently 10,000 proteins. So long-term, really good. I've been doing this for 30 years and rollouts always and the adoption of new workflows always take longer than you want. I wouldn't owe index on the Illumina launch or impact on next year for the out years. We're certainly expecting healthy growth.

[Operator Instructions] Our next question comes from Paul Knight with KeyBanc.

Hi, this is [Lucas] on for Paul Knight at KeyBanc. It sounds like you recognized revenue from some of those projects that got pushed out last quarter. Would you say that all of that work is behind you now or are there some delayed projects that'll actually get recognized still here in Q4?

Yes. The way I I would characterize it is we had favorable timing this year as we said in the script and unfavorable timing last year. It's not a matter of recognition per se as I said from our top five customers we have a $15 million, $20 million headwind year-over-year, not because they're not spending on the committed to the technology. It's just we had a very favorable 2023. So that's the backdrop. What I would point to as we also talked about in the script, is we have rigorous application of SBS now across the organization. And so we have much better visibility to when these large projects where we get the PO and when we can get the samples and when we can get them, get them run.

I guess turning over to the instrument side of the equation, obviously you saw weakness in China, but what were you seeing in markets outside of China?

We are doing well in the Americas, the rest of Asia, like particular Japan and Korea, it's been a tough backdrop for a long time, sort of macroeconomics and in Europe we just installed a new leader there and we'll focus on rebuilding the funnels there.

This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.