Bionano Genomics - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $6.733M, up sequentially vs Q1 2025 and above Wall Street consensus; non-GAAP and GAAP gross margin expanded to 52%, a notable step-up from 46% in Q1 and 42% in Q4, driven by cost reductions and manufacturing improvements.
• EPS beat consensus as losses narrowed; management reiterated FY’25 revenue guidance ($26–$30M) and initiated Q3 revenue guidance ($6.7–$7.2M); new OGM installations guidance was raised to 20–25 for FY’25.
• Strategic pivot to “routine users” is showing traction: flowcells sold rose 17% YoY to 7,233, consumables and software revenues increased 16% YoY, and non-GAAP operating expense fell 53% YoY to $8.834M.
• Catalysts: margin above 50%, raised install guidance, second Category I CPT code for constitutional genetic disorders, and VIA/Solve/Stratys Compute upgrades enabling AI-driven workflows and higher utilization.

What Went Well and What Went Wrong

• What Went Well

  • Gross margin hit 52% (GAAP and non-GAAP), reflecting improved manufacturing costs and cost discipline; management expects margins to remain around current levels near term.
  • Routine-user focus drove utilization: 7,233 flowcells (+17% YoY), consumables/software revenue +16% YoY; installed base at 378 (+4% YoY) despite taking back eight rentals.
  • Strategic progress: second Category I CPT code established for constitutional genetic disorders (effective Jan 1, 2026), supporting reimbursement and broader clinical adoption; VIA 7.2 adds AI-driven workflow for constitutional disorders.
  • Quote: “Bionano has become a digital pathology company… One critical component… is AI driven software, such as our VIA software.”

• What Went Wrong

  • Total revenue declined 13% YoY due to discontinued clinical services ($0.7M prior-year) and lower instrument revenue ($1.4M vs $2.3M prior-year) under the strategy shift.
  • Installed base declined by one sequentially (to 378) as eight reagent-rental systems were returned after evaluation, highlighting sensitivity of research-oriented placements to funding constraints.
  • Continued net loss of $(6.857)M, although markedly improved YoY; instrument sales decelerated as mix shifts away from new placements toward consumables/software.

Transcript

Speaker 1

Good day and welcome to the Bionano Genomics 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 Gora from Investor Relations. Please go ahead.

Speaker 0

Thank you, and good afternoon, everyone. Welcome to the Bionano Genomics second quarter 2025 financial results conference call. Leading the call today is Dr. Erik Holmlin, CEO and Principal Financial Officer of Bionano Genomics, and he is joined by Mark Adamczak, Bionano Genomics' Vice President of Accounting and Principal Accounting Officer. After market close today, Bionano Genomics 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 Genomics' press release and Bionano Genomics' reports filed with the SEC.

These forward-looking statements are based on information available to Bionano Genomics today, August 14th, 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 conference call will also be available online on the company's Investor Relations page. With that, I will turn the call over to Erik.

Speaker 4

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 VS software routinely in cytogenetics 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 Genomics has become a digital pathology company.

While there are many branches and subspecialties of pathology, our solutions concentrate primarily on cytogenetics and molecular pathology, and 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 transformation and consolidation in the future is AI-driven software, such as our VS software. VS streamlines the visualization, interpretation, annotation, and reporting of variants in a format that is easy for clinical researchers to use. VS is best in class for OGM analysis and widely accepted as a gold standard for CNV analysis from microarrays and sequencing. Some labs running long-read sequencing have shared their excitement about using VS for their data analysis as well, which is particularly encouraging. Our mission is to make our technology and workflows easy for customers to use. While we still have a lot of work to do, we have made tremendous progress and see substantial opportunity to advance this area of digital pathology both now and in the future.

With that overview, I'd like to shift gears and talk about our current strategy, where we are concentrated on driving utilization of our solution within a subset of our OGM and VS user base. We call these users routine users. These customers tend to have an established flow of samples to run on our systems, and we believe this group will drive most of our revenue and profit growth in the near term. Our strategy to address them has four pillars, which form the basis of how we execute. First, we support and sustain the installed base of routine OGM and VS software users. Second, we drive utilization through adoption of VS software across the routine OGM user base and facilitate their menu expansion. Third, we build support needed for optical genome mapping reimbursement and inclusion in medical society guidelines and recommendations.

Fourth, we focus on improving profitability and scalability with lowering costs and driving higher volumes. Now, taking a closer look at our results in the second quarter, where we have made excellent progress against this new strategy, total revenue for the second quarter was $6.7 million, a decrease of 13% when compared to the second quarter of 2024, which included $700,000 in revenues from discontinued services, which do not contribute to our second quarter 2025 revenues. When adjusting for these discontinued clinical services, the revenue decrease was 5% year over year. We sold 7,233 flow cells in the second quarter of 2025. This amount reflects a 17% increase compared to the same period last year.

We're extremely pleased to see this double-digit growth in flow cell sales year over year, and we believe it's a strong indicator for our efforts towards driving utilization within this routine customer group, routine use customer group. Non-GAAP gross margin for the second quarter of 2025 was 52%, which is significantly higher than the 35% non-GAAP gross margin reported a year ago. Second quarter 2025 non-GAAP operating expenses were $8.8 million compared to $18.8 million in the second quarter of 2024, which reflects a 53% reduction year over year. We installed seven new optical genome mapping systems in the quarter and brought back eight for a net decrease of one in the install base to 378 systems installed. That reflects an increase of 4% over the 363 systems installed as of June 30, 2024. In the first half of 2025 through June 30, we have installed 16 new systems.

We ended the quarter with $27.4 million in cash, cash equivalents, and available for sale securities, of which $11 million was subject to certain restrictions. The fundamental thesis of our current strategy is that we can support a committed group of routine users who repeatedly purchase and use our consumables and software at higher rates overall. When taking a closer look at two metrics, the number of flow cells sold and revenues for consumables and software combined, we can see support for this idea. Flow cells, as we reported, grew 17% in the quarter compared to last year. We can look deeper into that number by removing the number of flow cells sold to new customers in the second quarter of 2024 and 2025. In so doing, the number of flow cells sold to the remaining existing customers grew by 14%.

Growth for flow cells sold to the existing customers in the first half of 2025 compared to the first half of 2024 overall has grown by 7%. We believe these data suggest that existing customers are using the product and repurchasing it at higher volumes. We intend to continue our efforts to expand this growth. For recurring routine use revenue, we looked at the combination of consumables and software sales, which grew 16% year over year in the second quarter of 2025 and 8% year over year for the first half of 2025. As a percentage of the total product mix, consumables and software revenue increased from 55% in the second quarter of 2024 to 73% in the second quarter of this year, and from 57% in the first half of 2024 to 77% in the first half of 2025.

We believe this shift is driven by growth in utilization, as well as a reduction in new instrument sales, both of which are key elements to our strategy. Moving down the P&L, we are also focused on operating efficiently to reduce costs and improve our gross margins to make the business more profitable. We have made noticeable progress reducing our non-GAAP operating expenses really since the first half of 2023. In fact, we have taken out over $100 million of annual non-GAAP operating expense and materially reduced headcount over that period by more than 300 people since the second quarter of 2023. In the first half of this year, non-GAAP operating expense was roughly flat at $8.5 million for Q1 and $8.8 million for Q2, with Q2 representing a 53% year-over-year reduction.

Turning to non-GAAP gross margin, cost reduction, along with improvements to our product manufacturing costs, have enabled margin expansion from 23% back in the first quarter of 2023 steadily to 52% this quarter. It's the first time that we're reporting a margin in this range for this product mix. We expect to see continued margin expansion over time, but expect to remain around the current levels for the near term. Importantly, these improvements in cost and margin are strong indicators that we are improving our financial profile. Turning now to a few key milestones in the quarter, which we believe are tied to our strategy and will enable our customers to more easily adopt and increase their use of OGM. We released an incredibly powerful update to our software suite and compute solutions with VS 7.2, Solve 3.8.3, and updates to the software that enable our GPU-based Stratus Compute platform.

They have all been released in a first wave to select customers, and we expect a broad commercial release later this year. In fact, installations have begun. Amongst key features, VS 7.2 now offers the same transformative AI-driven workflow users have adopted for hematologic malignancies to the workflow for analysis of constitutional genetic disorders, which we believe can be a game changer for analysis of these conditions. Solve updates and expands its database substantially and improved the accuracy of structural variant detection, while updates to the Stratus Compute are expected to double its capacity for weekly analysis of cancer samples. We are making the OGM workflow easier with these advancements. Now, in building the support needed for OGM reimbursement, we believe a growing number of publications illustrating the utility of optical genome mapping and cytogenetics and the number of clinical research genomes published are positive leading indicators.

The second quarter of 2025 had the highest number of publications of any quarter in the history of optical genome mapping, and the optical genome mapping community has now surpassed 10,000 published clinical research genomes, which is an incredible milestone. These publications provide the support for new customers to adopt, existing customers to expand applications, and for third parties to support OGM in reimbursement. This June, in fact, the editorial board of the American Medical Association established a second Category 1 CPT code for OGM, this one for use of OGM in evaluation of constitutional genetic disorders, which is yet another incredible milestone for our community. We believe this CPT code may pave the way for even more routine use of optical genome mapping and cytogenetics as part of this digital pathology strategy. To wrap up, I would like to provide our outlook for the remainder of the year.

We are reiterating our full-year revenue guidance of $26 to $30 million. We expect Q3 revenues to be in the range of $6.7 to $7.2 million. Given the 16 new OGM systems installed already in the first half of the year, we are raising our expectations for new OGM installations in 2025 to be in the range of 20 to 25 compared to the prior range of 15 to 20. DeeDee, please go ahead and open the line for questions.

Speaker 1

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from Jason McCarthy of Maxim Group. Your line is open.

Speaker 3

Hey, guys, this is Michael Okunewitch on the line for Jason. Thank you so much for taking my questions today and congrats on the great progress.

Speaker 4

Thanks, Michael.

Speaker 3

I wanted to ask, with regards to VS, how universal is the use of VS software among the OGM users? Is it fairly one-to-one over there, or are there some opportunities to expand VS use among your existing OGM base?

Speaker 4

The answer is, when we look at, you know, across the whole install base of OGM systems, VS is, you know, probably installed in less than, you know, maybe around a third of them. When we look at our routine use customers, that adoption rate is much higher. There still remains the opportunity to drive that adoption. That is something that we see can enable us to expand utilization. Even amongst the sites that have adopted it, you know, they haven't all put it into their own routine use. That's a big focus for us from a training perspective. We think that these new updates are going to help by introducing this workflow for constitutional genetic disorders. I think, you know, the answer is that adoption is plentiful amongst the customers that we're really focused on right now in this routine use regime.

There remains a significant opportunity to install it at more sites and to increase the utilization amongst all of those sites.

Speaker 3

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

Speaker 4

I think the answer is yes. 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. That's a significant portion of the business. We do believe that those customers who are using VS for non-OGM applications can expand their relationship with the company and become OGM users. 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. It's not a one-for-one where you would expect to see direct adoption, but it certainly is an opportunity. I think really, VS performs incredibly well for these applications. It's a way for the Bionano name to be present at institutions.

Speaker 3

All right. Thank you. Just one last one from me, and I'll hop back into the queue. You did mention that the newest iteration of VS does include an AI component. What role does AI play in the VS software?

Speaker 4

You know, when you think about what happens in this workflow, I think you have probably worked on some of these projects. You know, when variants are identified, it's possible that they have been seen before, and so there are publications associated with them. Similarly, there may be other labs that are looking for variants of this type. 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. 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.

Speaker 3

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

Speaker 4

Thank you, Michael.

Speaker 1

Thank you. Our next question comes from Yee Chen of H.C. Wainwright & Company. Your line is open.

Speaker 2

Thank you for taking my questions. Your press release mentioned that you brought back eight systems during the quarter and installed seven new systems. I assume the eight systems you brought back are users that are not routine users, correct?

Speaker 4

Yes. We have a reagent rental program, and labs can bring a system on and test it out and evaluate it. 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 the initial application is much more of a research-oriented application. I think in the current environment where there are many constraints around funding, I think that may be one of the effects. We shouldn't think of that as a reduction to the routine use customer pool.

Speaker 2

The new systems you placed in as the second quarter or the coming quarters, they have all gone through the evaluation period too. 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?

Speaker 4

It depends a little bit on the way in which the customer contracts with the company. 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 one year now, these deals that we're doing. There is the potential that they could return it after that year. 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. We have a mixture of these rentals and purchases. Since we're doing fewer deals now, it's kind of interesting. It's about 50/50 purchase versus rental.

It is true that somebody who rents a 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.

Speaker 2

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 % of new systems placed will eventually be returned?

Speaker 4

Yeah, I mean, I think it's a very good question. You know, 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. You know, we're not selling the system to a lab that's going to be doing speculative research. Our expectation is that these systems are not coming back. I mean, I'm sure that it will happen potentially. It's a little bit premature for us to give a return rate amongst this segment of customers. It's not zero. We have taken some back, but it's very close to, it's very close to zero.

Speaker 2

I see. With respect to the second Category 1 CPT code from the American Medical Association, could you tell us how it is different from the first code and how it is going to facilitate the reimbursement going forward?

Speaker 4

Yeah, it's an excellent question. If you think about the digital pathology campaign that we're on to really consolidate cytogenetics onto optical genome mapping, within that effort, you've got two very distinct applications: analysis of samples for hematologic malignancies and analysis of samples for constitutional genetic disorders. 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. 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.

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, 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. Hopefully, let's just say it could potentially drive differences in pricing. We'll want to pay attention to that in the next weeks.

Speaker 2

Got it. Thank you very much.

Speaker 1

Thank you. Our next question comes from Mark Massaro of BTIG. Your line is open.

Speaker 5

Hey, guys. This is Viviane on for Mark. Thanks for taking the questions. I think the instrument placement guidance assumes a slight decel 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. Just how should we be thinking about that? Thanks.

Speaker 4

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, actually getting them installed could spill over into the first quarter of 2026, for example. I think I would say that I feel very confident that we'll sort of, you know, meet this new raised guidance.

Speaker 5

Okay. That's perfect. Just to follow up on the flow cells, 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? Do you have a sense on how long it takes the newer customer group to reach maturity and kind of ramp their utilization there?

Speaker 4

Yeah, really good questions. 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'll be just smooth. 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 training programs on the VS software and other aspects of the workflow in key applications like hematologic malignancies are underway, and this is a big concentration for us. 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, 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. We're probably starting to see that utilization. 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 three months. I think six to nine months is a healthy timeframe 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. It takes some time. Having said that, almost every system that goes out buys consumables up front, and they're churning through a wave of consumables to begin with.

It's like, when do we get them to get them to that point of their first repurchase? I think that that's likely in that six-month timeframe. Maybe six to nine months is a good way to think about it.

Speaker 5

Okay. That's very helpful. Thanks. 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. How are you thinking about strategics or partnerships here?

Speaker 4

I think that there's the cliché answer. Every day between the hours of 9:30 A.M. and 4:00 P.M. Eastern Time, the company is definitively for sale. We're a well-known entity out there, so I would expect that Bionano Genomics is certainly on the radar screen of strategics. We have a variety of discussions that are ongoing all the time. I think what's unique about Bionano Genomics 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, is that Bionano Genomics is pretty far advanced. Even with everything that we've gone through, we're printing a $6.7 million quarter and guiding $6.7 to $7.2 million for the next quarter.

I think $26 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 Genomics 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. We sort of stick to our knitting, if you will.

Speaker 5

Perfect. Thanks so much for the time.

Speaker 4

Thank you, Viviane.

Speaker 1

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

Speaker 4

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.

Speaker 1

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