Michael Egholm - President & CEO:

Good day and welcome to the Standard BioTools, Inc., First Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Graziano, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to the Standard BioTools first quarter 2025 earnings conference call. Leading the call today is Michael Egholm, President and Chief Executive Officer; and Alex Kim, Chief Financial Officer. At the close of market today, Standard BioTools released its financial results for the quarter ended March 31st, 2025. During this call, we will review our results and provide an update on our financial and operational performance, 2025 outlook, market trends, and strategic initiatives. During the call, we'll make forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, our outlook for 2025 and future financial results, market trends and opportunities, the impacts of tariffs and funding pressures, 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 expectations. For information regarding other related risks, see the risk factors section of the company's annual report on Form 10-K filed with the SEC on March 11, 2025, and in the company's other filings with the SEC. 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 an appendix to today's presentation slide. Please note that management will be referring to a slide presentation, including updated supplemental financial information within the webcast today. Following prepared remarks, we will host a Q&A session. Today's slide presentation, along with a replay of the webcast, will be available on the investor's section of our website. I would like to now turn the call over to Michael Egholm, President and CEO of Standard BioTools.

Thank you, John. Good afternoon, everyone, and welcome to Standard BioTools' first quarter 2025 earnings call. Joining me today is Alex Kim, our Chief Financial Officer. Before we begin, I want to thank our customers, employees, and investors. Your support is what fuels our work and drives our mission to set a new standard in life sciences, empower researchers, accelerate in discovery, all while delivering long-term value to our shareholders. Standard BioTools delivered a solid first quarter with results on plan and in line despite a choppy operating backdrop. Execution continues to improve as we build rigor across the organization, guided by lean principles through our Standard BioTools Business System or just SBS. As operators, we're staying grounded in fundamentals, focusing on what we can control, managing with precision, and driving toward profitability. Before diving into the details, it's worth stepping back for a moment. While the broader environment remains dynamic, we're navigating it from a position of strength with a diversified portfolio, a disciplined operating model, healthy balance sheet, and a team that's getting sharper quarter after quarter as forecast accuracy improves and consistency in how we run the business grows. We are particularly pleased with our strategic foothold in proteomics and a series of recent high-impact product launches. Last week at the American Association of Cancer Research's annual meeting, or AACR, we announced a new SomaScan offering that will pair well with the highly anticipated distributed NGS-based Illumina partner solution. Together, these advancements expand our reach and push the boundaries of what's possible in translational and clinical research. From the outside, the macro backdrop may still cloud the picture, but inside we're strong. Our diversified business and life sciences allows us to operate multiple levels to navigate the waters, including a patient and disciplined M&A strategy, which is…

Thank you, Michael. And thank you all for joining our call today. I will walk us through our financial results in more detail and provide some additional context for the quarter. Please refer to today's press release and the appendix to our earnings deck for more information, including a reconciliation of GAAP to non-GAAP measures that I will be discussing here. Also note, we are no longer breaking out our financial results into proteomics and genomics. This reflects our evolving nature of our business where what we have previously labeled genomics, principally our microfluidics-based integrated fluidic circuits, or IFC chips, is increasingly being applied across proteomics, sample preparation, and liquid handling applications. We now view our overall business as offering a portfolio of multi-omic tools designed to provide customers with the best solution based on the problem they are trying to solve. We do not operate our day-to-day business as two segments. And with our integration activities and operational synergies being realized, we are seeing more and more leverage of our resources across our product lines, including manufacturing, research and development, and sales and marketing. As a result, we believe it's more meaningful to look at our financials as one operating segment. We will, however, continue to break out sales into consumables, instruments, lab services, and field services. So let's start with revenue on slide 12. Our first quarter revenue came in at $40.8 million. That's down 10% year over year and in line with our expectations. As Michael noted, we had a strong first quarter last year as we entered 2024 with an elevated backlog, the majority of which related to our SomaScan lab services business. Breaking revenue down further, consumables revenue was $14.5 million in the first quarter, down 16% compared to 2024. This was attributed to lower…

Thanks, Alex. We thank you all for your continued support as we navigate these dynamic end markets. We look forward to seeing many of you at upcoming conferences and stay tuned for details on our upcoming Proteomics Roundtable Series where we'll dive deeper into the science, strategy and exciting opportunities ahead. And now, I hand the call back to the operator for Q&A.

Thank you. [Operator Instructions] And our first question today will come from Dan Brennan of TD Cowen. Please go ahead.

Hey, good afternoon, guys. This is Kyle on for Dan. Thanks for taking the questions. I wanted to start on the reiterated guide. You said nothing's really changed in your view in terms of the weighting of revenue this year, more back half-weighted. Understanding you guys don't guide quarterly, but I think the street's looking for revenue down a bit, cure of acute on one of the easiest comps of the year next quarter. That being said, I guess, how should we think about the percentage split between first half, second half?

I’ll let Alex answer that one. And good to hear, Kyle.

Thanks, Kyle. We're not being overly specific on that, but as we look at our internal funnel, we do see some larger projects that'll hit in the back half of the year. So it's less the seasonality that you might've seen in the past, but more driven by our funnel metrics.

Got it. And maybe on the instrument demand this year first quarter instrument number looks pretty good relative to our model, at least. Anything you can share on the funnel? Did you see any pull forward in the first quarter, maybe? How are you seeing your overall sales funnel going forward?

We're encouraged by the growth in our funnel, primarily in the Hyperion XTi, but also some traction on our other instruments. And it's really all the good work we did last year in a difficult CapEx environment. So we saw some opening up at the markets at the end of the year, and so we carried that momentum into Q1. On the instrument side, it's always a little bit hard to say whether it's a pull forward or not, but I can't think of any that was pulled forward here due to tariffs or other things. It may impact consumables a little bit, but again, not materially. And again, just in this tough environment, we continue just to focus on our control. Last year when CapEx was tough, we kept focusing on just building the funnel, and we're now seeing some good traction, but not declaring victory yet.

Maybe if I can just sneak in one more here on the M&A side. Earlier this year, you targeted the 4-6 deals between this year and 2026. Clearly, there have been many changes in the market since you initially laid out that goal, and on the call, it sounds like you guys have a pretty good funnel. Has anything changed in regards to your pipeline and the potential timing of any deals? Thank you.

Strategic M&A is part of our founding thesis. It remains a core part of the strategy in here. Alex and I, now four years into this adventure here, remain ever more convinced that there's a need for consolidating in this space, and I think we have positioned ourselves, and we've proven ourselves here. The market needs integration. We built the funnel here over the last few years, and what we're seeing now, of course, with the macro and the funding environment and VC investment, it definitely offers an increased number of opportunities that are actionable now at improved valuation in our point of view. Having said that, I want to remind everybody that we are highly disciplined. We recognize that our healthy cash position, the key asset, differentiates on this environment, and so we intend to go after that set number of acquisitions here over the next 18 months, but the bar is high.

Got it. Thanks, guys.

Our next question today will come from Matt Stanton of Jefferies. Please go ahead.

Hey, thanks. Maybe one just on U.S. academic and government. You kind of baked a 15% or mid-teens decline on the 4Q call. I think when we caught up then, you had said you hadn't seen any kind of noticeable change in demand patterns at that time. Now that we've had a bit more time pass and obviously the news flow there has remained dynamic, but just any more color kind of on how U.S. academic progressed through 1Q and any color on how it's trended here into 2Q? And then within that mid-teens decline for the year you had baked in prior, any more color, just a finer point in terms of what that bakes in consumables and service versus the instrument piece there? Thank you.

Hey, Matt. Good to hear you. We were surgical in how we called it out at our last earnings call, and that's the sort of high-level guidance that we made. Just want to remind everybody that we were coming into the year expecting healthy growth in the Americas. So the 15% is still what our mid-teens is still what we're seeing. We've seen, because we've been advised by some institutions that had committed to buying instruments this year that they don't know if they'll be able to do it. We've seen some delay in consumables orders. Whether those are permanent, we don't know. And we've seen at the recent AACR conference a number of customers from academia could not travel because they were basically curbing all non-essential expenditures. So the sort of broad impact of less fund in U.S. academia definitely holds. I think we've sort of pegged it about right from where we're sitting now, and therefore we're maintaining the guidance. Sorry, I forgot the little piece on instruments. So we've seen some of the instruments we ship here were in U.S. academia, typically with private funding. We obviously hope NIH budget will be released and funding will come through for the various grants, for all the good stuff we have in the pipeline or funnel, I should say.

Okay, great. And then moving on to the new products, I had a handful of new launches last week. Just to focus on the single SOMAmer reagents, any kind of early feedback or demand now that you get those out the door? Can you just remind us on the commercial model there how much of the existing SOMA menu will be available for the single SOMAmers? And then any workflows or customers you expect this to resonate strongly with? Thanks.

Yeah, so we were in what we call like an early access, a minimal viable products up until now. Now we have made it fully available. We are initially addressing a couple of applications. One is as more and more users, resources will use SomaScan. They will find a number of, identify a number of proteins, a very large number as I just referenced in my script. And one of the first things you will want to do is to do a pull down with those and then analyze by mass spec, confirming post-translation modification, et cetera. So we see that as one avenue. And then we believe there is a broader reagent market where antibodies are really limited, where we have 11,000 fully synthetic monoclonal reagents binding to human proteins. We believe that's a valuable tool set and we believe it's a very nice complement to the antibody market. As for how we're going about it, it's a new capability. We have not sold individual reagents before. So I would not have high expectations in the short term, but in the long term as we're figuring out how to sell this, we see this as a fairly significant opportunity.

[Operator Instructions] Our next question will come from Paul Knight of KeyBank. Please go ahead.

Michael, are you expecting the Illumina partnership to generate significant revenue in 2025?

Hey, Paul. We're very excited about the upcoming launch here, as we talked about at JPM at our last earnest call with the mounting evidence that we are uniquely positioned to clinical research and insights, most recently at AACR, that you can see now Illumina making this available to thousands of labs with sequences. We're cautious for ‘25, but long-term see this as a very strong value driver. Illumina is responsible for the sales, marketing, and support, and we have all the faith in the world that they will do a brilliant job. And this is new for them, and this always takes longer than one wants. But the outlook is really bright for the technology. Maybe, Alex, you can just comment on what's baked into our ‘25 assumptions there.

Yeah, maybe just to remind you, in ‘24, we had some good revenue from Illumina that came through for development, to support their development, as well as their early access customers. So year over year, it'll be moderate growth on top of that, but not for many of the reasons Michael mentioned, not a significant growth overall. And that is baked into our current guidance. And as Michael mentioned, 26 and beyond, we expect to begin to see strong traction and strong growth there.

Okay. And then of course, I know academics are challenging, but can you talk about what you're seeing within the biopharmaceutical customer set? It does seem like we started the year with a more visible spending trend there. Are you seeing a better market condition for the major biopharma part of the market?

Good traction in pharma here in Q1, and have not seen a change from that as I'm sitting here today. Our numbers get a little bit obscured by our historical dependence on a few large customers. As I said in the script, it's becoming ever less so, but it still leads to quarter-to-quarter variation. So underneath that, we're actually seeing a healthy growth and funnel beyond those accounts and in our authorized sites.

Okay. And then last is the $10 million cost action in early January. Should we think about an improved outlook for EBITDA loss this year?

The action was late January, $10 million annualized, and so, yes, you will see that flow through our approach. As Michael has said many times, is continuous improvement, and so you'll see us continue to improve our adjusted EBITDA.

Ladies and gentlemen, at this time, we will conclude our question-and-answer session; and also conclude the Standard BioTools conference call. Thank you for attending today's presentation, and you may now disconnect your lines.