Bionano Genomics, Inc. (NASDAQ:BNGO) Q4 2023 Earnings Call Transcript
Bionano Genomics, Inc. (NASDAQ:BNGO) Q4 2023 Earnings Call Transcript March 5, 2024
Bionano Genomics, Inc. misses on earnings expectations. Reported EPS is $-0.96 EPS, expectations were $-0.87. Bionano Genomics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the Bionano Fourth Quarter and Full Year 2023 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to David Holmes from Investor Relations. Please go ahead.
David Holmes: Thank you and good afternoon everyone. Welcome to the Bionano fourth quarter and full year 2023 financial results conference call. Leading the call today is Dr. Erik Holmlin, CEO of Bionano. He is joined by Gulsen Kama, CFO of Bionano. After market closed today, Bionano issued a press release announcing its financial results for the fourth quarter and full year 2023. A copy of the release can be found on the Investor Relations page of the company’s website. I would like to remind everyone that certain statements made during the conference call are forward-looking, including statements about Bionano’s strategic and commercialization plans, sales pipeline, future fundraising activities and prospects, cash runway, expected cost savings initiatives and the estimated impact on annualized operating expenses; the timing of expected benefits and such initiatives, expected reductions in headcount; anticipated benefits or improvements to the Stratys, Saphyr and Ionic Purification System and their advantages over current technologies, goals and anticipated milestones for 2024 and achievements of the Elevate growth strategy; our anticipated compound annual growth rate; the size of our ability to access our estimated target markets; the anticipated benefits of recent acquisitions; expectations regarding the timing and the content study results and the anticipated benefits of these studies driving adoption of the Stratys System, Saphyr System and the Ionic Purification System.
Such forward-looking statements are based on current expectations and there can be no assurances that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in Bionano’s press release and Bionano’s reports filing with the SEC. These forward-looking statements are based on information available to Bionano today and the company assumes no obligation to update statements as circumstances change. In addition to supplement Bionano’s financial results reported in accordance with the U.S. Generally Accepted Accounting Principles or GAAP, the company is reporting non-GAAP operating expense. This non-GAAP financial measure is not meant to be considered in isolation or as a substitute to comparable GAAP measures, should be read in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP and has no standardized meaning prescribed by GAAP and is not prepared under any comprehensive set of accounting rules or principles.
A description of non-GAAP operating expense and reconciliation of non-GAAP operating expense to GAAP operating expense are included at the end of the company’s earnings release issued earlier today, which has been posted on the Investor Relations page of the company’s website. An audio recording and webcast replay for today’s conference call will be available online on the Investor Relations page of the company’s website. With that, I will turn the call over to Erik.
Erik Holmlin: Thanks, David. Good afternoon, everyone and thank you for joining us today. Today’s call is an important one for Bionano. We want to cover a lot of ground starting with an update on Q4 and the full year 2023 and then we want to cover the 2024 outlook, including important progress we are making to address our capital structure and cash burn. I would like to first turn the call over to Gulsen to cover the financial results for Q4 and full year 2023. Gulsen?
Gulsen Kama: Thanks, Erik. Consistent with our pre-announcement in January, Q4 revenues were $10.7 million, which is up 30% versus Q4 2022. 2023 revenue totaled $36.1 million, which reflects an increase of 30% over 2022 revenue. Our installed base of optical genome mapping system grew by $25 from the third to the fourth quarter of 2023 for a total of $326 on December 31, 2023 which reflects a 36% increase from year end 2022. We sold 7,980 flowcells in the quarter, which reflects 67% growth over Q4 2022. For the full year, we sold 72% growth in the number of flowcells sold from 2022 to 2023, with a total of 26,444. This growth is important to note as we believe it indicates higher consumables utilization given that consumables growth is outpacing installed base growth by a factor of two.
We expect utilization to increase even more as the higher throughput Stratys System becomes a larger percentage of our total installed base. In October 2023, we have completed an $80 million financing of convertible notes and warrants and we ended the fourth quarter with $102.3 million in cash, cash equivalents and available-for-sale securities, of which $35.5 million were subject to some restrictions. On February 28, 2024, we announced an important restructuring of the convertible notes, which lowered the minimum available liquidity covenant from $50 million to $25 million, lowered the restricted cash covenant from $35 million to $25 million, which can be further reduced as remaining principle is retired, canceled the March partial redemption payments and delayed the April partial redemption payments to April 20; and redeemed $27.7 million in principle, leaving the outstanding debt at $24.3 million.
This restructuring effectively unlocked $30 million, with the potential to free up an additional $25 million as per their principal is retired. Regarding operating expense, GAAP gross margin for the fourth quarter of 2023 was 23%, which is slightly higher than the 22% GAAP gross margin reported for the fourth quarter of 2022. Full year 2023 total gross margin was 26%, up from 21% in full year 2022. Fourth quarter 2023 GAAP operating expense was $27.4 million compared to $39.3 million in the fourth quarter of 2022. The year-over-year decrease was primarily due to a decrease in the fair value of contingent consideration of Purigen milestones and reduced headcount related expense partly attributed to the cost savings initiatives outlined in our Q2 2023 and Q3 2023 earnings releases.
Fourth quarter 2023 non-GAAP operating expense was $27.3 million compared to $30.6 million in the fourth quarter of 2022. Full year 2023 GAAP operating expense was $224.8 million and non-GAAP operating expense was $127.3 million. Full year 2023 non-GAAP operating expense excludes the one-time impairment charge of $77.3 million, $14.5 million in stock-based compensation, and $7.2 million in amortization of intangibles partially offset by a $1.5 million in reductions of contingency based obligations. Since joining Bionano, I have been focused on driving increased discipline to our spending, while we work to extend our cash runway. In October 2023, we announced the cost savings initiative that we believe together with reductions that began in May, will save approximately $33 million annually, including a reduction in headcount of approximately 83 employees and reductions in discretionary spending on various projects.
Some of those savings were evident in our fourth quarter OpEx. But for timing of employee expenses coming off the books, we expect to see the full benefit of the reductions starting in the first quarter of 2024. Today, Erik and I are announcing that we are implementing new plans that will further reduce expenses. Streamlining operations is possible because of the product launches behind us and addresses the current equity capital environment for tools and diagnostics companies, which is requiring companies to become much more efficient with resources and to reduce cash burn. With this 2024 initiative, our goal will be reducing annualized operating expense by another estimated $35 million to $40 million, including a potential reduction in headcount by an additional 110 to 125 employees, bringing the total number of employees down to approximately 200 from approximately 324 today.
Overall, since May 2023 through the completion of the initiatives announced today, we aim to have reduced headcount by approximately 200 people and reduced annualized operating expenses by about $65 million to $75 million. We expect the savings initiatives we are announcing today to have associated costs. We will provide that information as appropriate once we have more completely finalized the cost associated with these plans. As we streamline our operating structure, we believe we are cementing the path forward now. Our core product development is mostly completed and we are targeting segments of the genome analysis market, where we believe we face no direct competition, seeking to replace the course of classical cytogenetic methods, with a single essay, in contrast to the sequencing and spatial genomics markets, which have become incredibly crowded.
With that, I will turn the call back to Erik to discuss our 2024 anticipated business plans before we take your questions. Erik?
Erik Holmlin: Thanks, Gulsen. 2023 was one of the Bionano’s most successful years ever, with solid revenue growth and achievement of all our publicly stated Elevate milestones. Despite the challenging backdrop from macroeconomic headwinds facing the industry overall, we believe 2023 set the stage for a bright future for OGM and the impact our products can make in healthcare. We believe the evidence is clear. Elevate is working. We saw substantial increase in OGM publications in 2023, with over 5,000 clinical genomes published and the highest recorded quarter-to-date, with 88 publications in the fourth quarter of 2023. OGM studies, including our own clinical studies program, have now moved beyond showing concordance to focusing on demonstrations of the incremental value of OGM over classical methods.
Our product development team has brought two new transformative products to the market which are key to the end-to-end solution for OGM VIA software and the Stratys System. VIA software makes the visualization interpretation and reporting of OGM data incredibly fast, automated and easy to digest. It also enables analysis of chromosomal microarray and next generation sequencing data together with OGM, which is a feature that is totally unique in the market. The Stratys System increases the throughput of OGM data generation by as much as fourfold compared to the Saphyr System and we have a roadmap to further increase that throughput over time. Stratys was released in an early access program in Q4 and demand exceeded our planned supply of 10 systems.
We ended up with orders for 11 early access Stratys Systems, 70% of which went to new customers. We are excited to introduce Stratys Live to the market at the upcoming ACMG meeting in Toronto, March 13 through the 16, including at a pre-conference scientific event hosted by Bionano on March 12, where Stratys users will present their progress and at a reception for conference attendees on March 13. The next component of the streamlined end-to-end solution to come out is isotachophoresis or ITP for OGM on the ionic system, which is currently in pre-commercial evaluation in the field now and we expect ITP for OGM to be released commercially in the second half of this year. Looking ahead to executing Elevate in 2024 with a further streamlined operating structure, we are aiming to limit the impact of downsizing on revenue growth in the core OGM products.
As part of that streamlining, however, we have made the difficult decision to phase out some of our clinical services products that we sell directly to physicians, namely our First Step and Next Step DX products and our Fragile X Test, which are legacy non-OGM tests. In 2023, these products generated around $7 million of the overall $36.1 million in revenues. Therefore, after taking into account discontinued products, we are guiding full year 2024 revenues to be in the range of $37 million to $41 million and first quarter 2024 revenues to be between $8.25 million and $8.75 million. We expect to install between 80 and 100 new optical genome mapping systems in 2024, but we think the net increase to the install base may reflect some Saphyr to Stratys upgrades.
So, we expect the OGM installed base by the end of 2024 to be in the range of 381 to 401 systems. Regarding Next Step’s on the path to OGM reimbursement, Bionano Labs submitted the dossier for local coverage determination coverage policy for heme malignancies from MolDX, Palmetto in the fourth quarter of 2023 and the application was accepted, which is the first step in the process. Bionano Labs is working with other OGM users to seek local coverage determinations from other Medicare Administrative Contractors or MACs in the U.S. In the meantime, customers continue to be successful in obtaining and using PLA codes to get reimbursement for OGM applications. We believe a Category 1 CPT code is a more general solution to reimbursement coding for OGM in the U.S. According to the AMA website and application for a Category 1 CPT code for OGM in the 2024 cycle has been submitted.
The process is confidential and we are not able to confirm if it is one of our users in the U.S. as the applicants’ name is not public information. Widespread utilization of OGM is one criterion that the AMA will use in the evaluation of a CPT code application. And we believe it will be more meaningful if OGM users are able to directly speak to the utility of the workflow. The CPT code application process unfolds over the next few months. And so we’re hopeful of a good outcome towards the end of the second quarter, 2024. In 2024 clinical studies programs will focus mainly on heme malignancies in an effort to support the medical guidelines and reimbursement decisions connected to this application for OGM going forward. We will also maintain efforts to address regulatory requirements, where they represent opportunities to clear the path for adoption.
In closing, I want to emphasize that while we are facing challenges from the situation related to equity capital markets, our core business is healthy. Reducing expenses is a difficult, but important step in addressing our financing overhang. As we continue our mission to transform the way the world sees the genome. With that operator, we are ready to take questions.
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