Bionano Genomics - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 revenue was $8.16M, up 34% q/q but down 24% y/y; GAAP gross margin expanded to 42% vs 23% y/y, reflecting cost reductions and mix shift away from discontinued services.
• Revenue beat Wall Street consensus ($6.20M) by ~32%, driven by core OGM and VIA software momentum across priority customers and geographies; EPS actual was not disclosed in the press release.
• Management reiterated a streamlined focus on routine-use customers (118 customers accounting for >80% of consumables revenue) and highlighted VIA-driven utilization as a key lever; 2025 revenue guidance set at $29–$32M and Q1 2025 at $6.2–$6.3M.
• Liquidity actions (debenture amendment deferring payments, lowering conversion price; equity raises) extended cash runway into Q1 2026; catalysts include CPT Category I code effective 1/1/2025 for hematologic malignancies use of OGM.

What Went Well and What Went Wrong

What Went Well

• Strong beat versus consensus: Q4 revenue $8.16M vs consensus $6.20M; non-GAAP and GAAP gross margin at 42% in Q4, up sharply y/y (24% and 23% respectively in Q4 2023).
• Strategic refocus delivering operating leverage: GAAP OpEx fell to $15.4M from $27.4M y/y; non-GAAP OpEx down to $10.6M from $26.6M y/y, reflecting headcount reduction and lower contingent consideration.
• Management quote underscoring cost discipline: “Altogether we have reduced the annualized cost of operating the business by approximately $100 million” and “we believe we have cash runway into 2026”.

What Went Wrong

• Revenue still down y/y (-24%), reflecting the cessation of clinical services ($2.0M in Q4’23 to $0 in Q4’24) and prior instrument softness; FY24 revenue ($30.8M) below prior FY24 guidance ($36–$40M).
• Ongoing dilution/financing risks: Amendment lowered debenture conversion price to $0.27 and included issuance of 5.0M shares; additional registered direct offering closed in Oct 2024.
• Margin volatility persists: Q3 2024 GAAP gross margin was -139% due to impairment/disposal charges; management is not guiding margin given expected variability.

Transcript

Operator (participant)

Good day, and welcome to the Bionano fourth quarter 2024 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 (VP of Investor Relations)

Thank you, Operator, and good afternoon, everyone. Welcome to the Bionano fourth quarter 2024 financial results conference call. Leading the call today is Dr. Erik Holmlin, CEO and Principal Financial Officer of Bionano, and he is joined by Marc Adamczyk, Bionano's Vice President of Accounting and Principal Accounting Officer. After market close today, Bionano issued a press release announcing its financial results for the fourth quarter 2024. 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, including statements about Bionano's revenue outlook, margins, profitability, cash runway, cost savings initiatives, and commercialization and product plans. Such 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 several factors, including risks 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, March 31st, 2025, and the company assumes no obligation to update statements as circumstances change. In addition, to supplement Bionano's financial results reported in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, the company reports certain non-GAAP financial measures. A description of these non-GAAP financial measures, as well as a reconciliation to the nearest GAAP financial measures, 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.

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP, and have no standardized meaning prescribed by GAAP, and are not prepared under any comprehensive set of accounting rules or principles. An audio recording and webcast replay from today's conference call will also be available online on the company's investor relations page. With that, I'll turn the call over to you, Erik.

Erik Holmlin (President and CEO)

Thank you, David, and good afternoon, everyone. I'm pleased to provide you with an update on the fourth quarter of 2024, as well as the full year 2024. While we continue to find ourselves in unprecedented times in our industry, our core business, based on sales of instruments, consumables, software, and optical genome mapping services, is progressing well. I'd like to start off by taking everyone through our results for the quarter. Total revenue for the fourth quarter of 2024 was $8.2 million, a decrease of 24% compared to the fourth quarter of 2023, which included $2 million from discontinued clinical services compared to no revenues from such clinical services in Q4 2024. GAAP gross margin for the fourth quarter of 2024 was 42%, which is significantly higher than the 23% GAAP gross margin reported in the fourth quarter of 2023.

Non-GAAP gross margin for Q4 2024 was also 42% compared to 24% for the fourth quarter of 2023. Fourth quarter 2024 GAAP operating expense was $15.4 million compared to $27.4 million in the fourth quarter of 2023. The year-over-year decrease was primarily due to a decrease in the fair value of contingent consideration of Purigen milestones and, importantly, reduced headcount-related expense attributed to the cost savings initiatives that have been outlined in our Q2 2023 and Q3 2023 earnings releases. Fourth quarter 2024 non-GAAP operating expense was $10.6 million compared to $26.6 million in the fourth quarter of 2023. Cash, cash equivalents, and available for sale securities as of December 31st, 2024, were $20.9 million, of which $11.4 million was subject to certain restrictions. We raised net proceeds of $3.6 million from ATM sales during the fourth quarter of 2024.

Additionally, we modified the terms of our senior secured convertible debentures, among other things, which deferred the $1 million December 2024 amortization payment and reduced the monthly payments from January 2025 to July 2025 by 50%. We completed a $10 million registered direct offering in January 2025, along with raising net proceeds of $3.2 million through ATM sales during the first quarter of 2025. We now believe our cash runway extends into the first quarter of 2026. Product revenues, instruments, consumables, and software for the full year was $27 million, an increase of 1% compared to $26.7 million in 2023, despite a reduction in instrument sales of nearly $2 million. Consumables sales were $12.8 million, an increase of 14% from $11.2 million in 2023, and software sales for the full year were $6.2 million, an increase of 11% from $5.6 million in 2023.

Sales in the Americas region were up 9% in 2024, and sales in the Europe, Middle East, and Africa region were up 10% in 2024 compared to 2023. We sold 30,307 nanochannel array flow cells during 2024, including 8,058 in the fourth quarter, which represents a 15% increase over the 26,444 flow cells sold in the full year of 2023, and an increase of 1% over the 7,980 flow cells sold in the fourth quarter of 2023. Full year 2024 GAAP gross margin was 1%, which is down from 26% in 2023, but that was after a series of one-time non-cash adjustments. Non-GAAP gross margin for the full year of 2024 was 35%, which is up from 28% in 2023. Finally, full year 2024 GAAP operating expense was $104.4 million, and non-GAAP operating expense for the full year of 2024 was $68.9 million.

The tremendous progress across the business absolutely reflects the heroic and stellar efforts of our associates, whom we affectionately call Transformers, for the impact they are making around the world. They have our most heartfelt and sincere thanks for these incredible contributions. I would like to use the remainder of the call to discuss the plan going forward. We believe that along with other companies in the life sciences and tools industry, we are in a period of recalibration in how the market will embrace novel technologies like ours for medical research. Keep in mind our major economic engine is optical genome mapping, or OGM for short. OGM is used to transform the cytogenetic workflow in four key areas: hematologic malignancies, constitutional genetic disorders, solid tumors, and cell and gene therapy.

Applications of optical genome mapping and solid tumors are emerging and relatively novel to our list, but publications from users are demonstrating the utility, and so we now see them as a key driver alongside the other three going forward. Now, in September of 2024, we implemented a shift in our go-to-market strategy that moved away from the relatively heavy spending on growing the optical genome mapping installed base through customer acquisition toward a focus on conserving cash and concentrating on those customers who use their Saphyr and Stratus systems routinely in cytogenomics.

This strategy has four key pillars, which are to support and sustain the installed base of these routine optical genome mapping, and importantly, VIA software users, to drive utilization and increase it through the adoption of VIA software across our routine optical genome mapping user sites, which we believe will facilitate menu expansion, to continue building the support needed for optical genome mapping reimbursement and inclusion in medical society recommendations and guidelines, and to improve profitability and scalability with lowering costs and increasing sales volumes. The first pillar is critical. What we see is consistent growth of consumable sales, even as our focus has turned away from aggressively adding new customers and new instruments. The reason for this pattern is that a core group of users, approximately 118 customers, account for more than 80% of consumables purchases and growth that we've seen over the previous two years.

These customers are primarily in the United States, Canada, Europe, and Israel, and this group tends to use optical genome mapping routinely as an alternative to traditional cytogenetic methods, meaning they have a steady flow of samples to run that is not solely dependent on grant or project funding. These routine users are where we concentrate our efforts, which is more cost-effective for us, and on average, they generate a higher rate of revenues per customer compared to others that are not in that routine use group. We expect this routine use group to grow over time and to expand its use of optical genome mapping consumables and therefore be the primary driver of the expansion of the menu of applications of optical genome mapping to promote revenue growth.

We have an ability to encourage this growth by enabling the customers to use our VIA software, which streamlines their workflows and increases their capacity to run more samples. VIA software is used by 133 customers for analysis of non-OGM data types and provides a significant source of revenues. VIA has now been installed at over 160 OGM customers, which is up from just 40 at the end of 2023. This expansion in VIA installations creates the opportunity for us to get them proficient in using VIA, which we believe will increase their productivity and potentially be a source of consumables revenue growth on a per-site basis. Now, to continue building the support needed for optical genome mapping reimbursement and drive inclusion in medical society recommendations and guidelines, we need to remain active in encouraging and supporting, where possible, the publication of OGM data.

Publications have continued to increase impressively, including 19% growth in 2024 of total publications and 39% growth of publications in combined clinical research and cell and gene therapy. We have also seen an ongoing increase in published clinical research genomes, which we believe reflects the expanding adoption and use of OGM and, in turn, has the potential to influence people and agencies responsible for reimbursement and guidelines showing this critical mass of adoption and utilization. We have already seen what we believe is a benefit to these publications with the decision by the American Medical Association to establish a Category I CPT code for OGM use in hematologic malignancies. This CPT code became effective on January 1st of this year, and to our knowledge, it's being used. Lastly, our focus must remain on a disciplined approach to keep costs down.

We have been successful in reducing costs and maintaining the momentum in the business, and we are seeing benefits in another key area, which is our gross margin. Over the past eight quarters, we have seen non-GAAP gross margin increase from 22% in the first quarter of 2023 to 42% in the fourth quarter of 2024. We do expect ongoing volatility in margin going forward, and for that reason, we won't be providing guidance on margin at this time, but we are encouraged with what we are seeing. To wrap up, I would like to provide our outlook on 2025. With our key strategic pillars as the underpinning of our streamlined business focus, we expect full year revenues for 2025 to be in the range of $29 million-$32 million.

First quarter revenues for 2025 are expected to be in the range of $6.2 million-$6.3 million, and we expect to install 15-20 new optical genome mapping systems, primarily at routine use sites, including at existing customer sites, as well as adding new customers that fit into this routine use group. With that, Operator, please go ahead and open the line for questions.

Operator (participant)

Thank you. If you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, please press star 11 again. We also ask that you wait for your name and company to be announced before you proceed with your question. One moment while we compile the Q&A roster. Our first question for the day will be coming from Sung Ji Nam of Scotiabank. Your line is open.

Sung Ji Nam (Managing Director and Senior Equity Research Analyst)

Hi. Thanks for taking the question. Erik, in terms of guidance, based on kind of what you guys are providing, it kind of implies flattish growth year over year. Obviously, you talked about the strategic prioritizations that the company has gone under. Would you have a sense of kind of what the core revenue growth is contemplated in terms of your guidance for 2025?

Erik Holmlin (President and CEO)

Yeah. It's all core now. So $29.1 million core going to $29 million-$32 million.

Sung Ji Nam (Managing Director and Senior Equity Research Analyst)

Okay. Got it. And then just curious about whether there are Saphyr trade-ins taking place as well, or just as we look at the install base, should we expect continued placements of Stratus? Just trying to understand kind of what the net-net install base could look like.

Erik Holmlin (President and CEO)

Yeah. I want to sort of start working with you and others to undertake a shift in our focus. For the first time, we've actually really dug into this install base, and we're really going to focus on these routine use customers, of which there are 118 exiting 2024. I think over time, we're going to see that group expand. We will, I think, continue to report install base of optical genome mapping systems, but we're not going to guide to it, partly for the reason that you've said, which is that there could be trade-ins. There could be different things happening at customer sites that might be like a net zero. We do not want that to reflect negatively upon us.

We're going to talk about what we expect to install going forward, and we're going to spend a lot more time talking about this routine use customer group, the 118 right now. We hope to get into some metrics like their revenue per customer, which you can already get at that because these customers account for about 80% of consumables revenues. That's right around $10 million spread across 118 customers. You can see that revenue per customer is in that $85,000-$90,000 per customer range. We think that that's the important thing to pay attention to. One last comment in this rather long answer is that another reason not to focus on the number of systems installed at their site is that some customers have brought in systems that they don't use on purpose. They're backup systems.

We do not want to skew the revenue per system. We want to focus on revenue per customer.

Sung Ji Nam (Managing Director and Senior Equity Research Analyst)

That makes sense. Lastly, just on the Stratus Compute, which you launched in collaboration with NVIDIA, just kind of curious what the early feedback has been and also how you expect that to drive continued utilization for your core customers. Thank you.

Erik Holmlin (President and CEO)

Yes. I mean, it is positive for us. I would say that in general, where we are at with Stratus Compute is that it is compatible with the Stratus system, so something that Stratus sites use. Saphyr customers can get comparable performance by using multiple of the Saphyr computes. We have in our pipeline software updates that will be rolled out to the Stratus Compute to really continue to improve its speed.

It's going to be one of these sort of circles that we go through. Customers who are using it, they always want more speed. That's fine. We're going to give them more speed, but then we're going to train them on VIA, and they're going to start running more samples. They're going to need more speed. We hope to have a process of being able to continuously update and advance our software over time to provide those levels of acceleration.

Sung Ji Nam (Managing Director and Senior Equity Research Analyst)

Gotcha. Thank you so much, Erik.

Erik Holmlin (President and CEO)

Welcome, Sung Ji.

Operator (participant)

Thank you. Our next question will be coming from the line of Jason McCarthy of Maxim Group. Your line is open.

Michael Okunewitch (Senior Research Analyst)

Hey, guys. This is Michael Okunewitch on the line for Jason. Thank you so much for taking my question today.

Erik Holmlin (President and CEO)

Hi, Michael.

Michael Okunewitch (Senior Research Analyst)

Yes. Just I guess on the focus with customer acquisition, you did mention you're not looking to aggressively seek customer acquisition now with the expense reduction complete. Are there any areas that you do plan to continue looking at acquiring new customers that may be lower cost of acquisition or higher utilization where they may go right into that 118 group of routine users?

Erik Holmlin (President and CEO)

Yes. I mean, I think that we will see growth of this routine user group to add new customers and that that will happen in our target geographies, certainly in Europe. In the U.S., if you think about it, we've only just gotten started with these routine user sites, and the effectiveness of the CPT code as of January 1st, we believe, has the potential to be a catalyst for sites coming on board. We are prepared. We have the inventory.

We have everything we need to support these sites. Our sort of sales and marketing strategy there is going to be more around leveraging the amazing data that are being published and, of course, the success that these routine use sites are having and are talking about at conferences. We will be adding sites, and we're only going to be adding ones where the customer acquisition cost is acceptable for the investment that both us and the customer make.

Michael Okunewitch (Senior Research Analyst)

All right. Thank you. Just looking at the Category I CPT code, obviously, there's been a goal for a while of good progress. Is that something that's application-specific, or could this be applied across any use of OGM?

Erik Holmlin (President and CEO)

It has some specificity to it. It is specific to the use of optical genome mapping in hematologic malignancies. That is a very, very, very large category. It would not apply, for example, to the use of optical genome mapping for constitutional genetic disorders, for example. What we know is that a lot of sites that are using OGM for that application either have a PLA code, which they use, or they bill for optical genome mapping as a reflex to normal tests that they get by standard of care. That seems to be a reasonably effective path for them. Hopefully, over time, there will be a CPT code for that application as well.

Michael Okunewitch (Senior Research Analyst)

Thank you. One last one for me, and I'll hop back into the queue. I just wanted to see if you could provide a bit more color on that second pillar you talked about, driving utilization through software adoption. Specifically, just if you could go into the mechanics of how VIA adoption could support increased utilization and what the interplay is there with menu expansion.

Erik Holmlin (President and CEO)

Yeah. VIA automates a number of steps that a user follows to take their post-data generation and even the sort of primary analytical step of generating variant calls. After that step, in a pre-VIA world, it was necessary for a user to essentially manually curate the list of variants by comparing it to what was known in the literature, comparing variants on the list to what medical societies may have recommended for that type of research analysis. In that particular indication, let's say they're working in AML or CML or something of that nature, they'd want to be guided by what's out there in the literature. VIA, for that sort of research, automates that process.

It takes a pretty extensive manual curation process and completely automates it. It not only automates that curation, but then generates a report. After the curation was done manually, there would need to be a process of quite literally copying and then pasting from Excel into a report format, but VIA automates that. Automated curation, automated reporting. I can tell you that there are tens of variants that need to be combed through on virtually every sample. By automating those steps, it means that the labs can get through that much more quickly. If they're going through these samples more quickly, they can run more per unit time. What we know about sites is, let's say they decide to adopt for hematologic malignancy, let's say they're doing AML, which is a very common anchor assay, they have a lot of samples for other indications.

They would love to be able to add additional indications. By streamlining the process, it will give them the capacity that they require.

Michael Okunewitch (Senior Research Analyst)

All right. Thank you. I really appreciate the additional insights there. Thank you very much for taking my question and congrats on all the progress, guys.

Erik Holmlin (President and CEO)

Thank you, Michael.

Operator (participant)

Thank you. Our next question will be coming from the line of Mark Massaro of BTIG. Your line is open.

Vidyun Bais (VP in Equity Research)

Hey, guys. This is Vidyun and I'm from Mark. Thanks for taking the questions. I heard your comments on the shift towards focusing utilization of your existing install base. Could you just share some color on how the strategy is playing out? I heard you on the $85,000-$90,000 revenue per customer metric. I understand it's early days, but do you see room for further expansion there, or do you think you're kind of saturated there? Thanks.

Erik Holmlin (President and CEO)

Sure. Thank you, Vidyun, and thank you for the question. In undertaking this shift and just thinking about all of the metrics that we cited, 9% growth year over year in the Americas, 10% in Europe, 14% in consumables growth overall, this progress took place with kind of a Bionano idiosyncratic backdrop of massive shift in how we were operating as a company. At the end of 2023, December 31st, 2023, I think we reported 344 employees. December 31st, 2024, we reported 100 employees. Over the course of this past year, we had, let's just say, a lot of change happening.

I'm mentioning all of these things because I want to say, despite all of that, consumable sales grew by 14%. When you look at what drove that growth, you can see if you looked at one of the slides that we presented, that growth was in this group of so-called routine users. Those are the ones that we decided to focus on. What we believe is that the strategy has fallen into place effectively and is working. We couldn't be happier with the adoption that we are seeing and the utilization that's happening. Generally speaking, and I don't want to guide, but at least internally, we do believe that there is substantial room across that entire routine use group for that average to go up significantly.

We want to be cautious about talking about how quickly, but it doesn't have to go up by a lot to make a significant dent in the overall profitability for the company, for example. We believe that that is going to happen, and it's kind of what our long-term plans are based on, and it's why we are focused on all of these initiatives in the pillars to really expand utilization at every routine use site.

Vidyun Bais (VP in Equity Research)

Perfect. That's great color. Thanks for that. Maybe just switching gears, just on the reimbursement front, could you share if OGM appeared on the Medicare Clinical Lab fee schedule as planned? Just any other updated timing we should be aware of on the LCD front. Thanks.

Erik Holmlin (President and CEO)

Yeah. Certainly on time, January 1st, 2025, it's effective. I think that that listing was made public in November of 2024, and the rate was consistent with what CMS initially priced it at. What I would say is that that rate, it's around $1,300. That rate is consistent with some Proprietary Laboratory Analyses or PLA codes for OGM. It's also consistent with PLA codes for constitutional genetic disorders. There are, however, PLA codes for hematologic malignancies that are priced higher. I think that I would say that the effectiveness that happened on January 1st this year is consistent with what preliminary pricing was at. I do believe, and I don't want to set an expectation, but it's not unreasonable to believe that there could be a reconsideration of the price over time. It's my understanding that some customers are seeking that reconsideration.

We have to be cognizant of the fact that these processes, which are happening at CMS, which is part of the U.S. Department of Health and Human Services, are probably undergoing some transition. We do not know the expediency with which these things will happen here in 2025. I would say everything happened as expected, and there is the potential that pricing might increase over time.

Vidyun Bais (VP in Equity Research)

Okay. Great. If I could just squeeze in one more, then I'll hop back in the queue. I think you highlighted heme and solid tumors, rare disease, and a few other applications among your users. Just any particular areas of strength that you're seeing in the routine user group? I think you alluded to some menu expansion as well. Could you just touch on what other applications you're thinking about in the pipeline there? Thanks.

Erik Holmlin (President and CEO)

Yeah. I would say, the answer to your question unequivocally is hematologic malignancies. This is the primary application that sites are adopting OGM for. We have narrowed our target geographies somewhat. Across the globe, within these target geographies, that is the primary pull from customers. The reason for it is that they are reliant upon karyotyping, which has been around for 50 years, and fluorescence in situ hybridization, or FISH, which is a targeted methodology and simply leaves too much information on the table for them to reliably conduct their research and manage the cases that they are looking at. Optical genome mapping is now really a proven alternative to these techniques. We are aware of several sites which have completely walked away from karyotyping and FISH and rely entirely on optical genome mapping. That is, for sure, the primary driver of adoption.

A very healthy second is constitutional genetic disorders. We saw a beautiful paper published recently by the Greenwood Genetic Center, which is really the leading site for many novel technologies and applications in genetic analysis for constitutional genetic disorders. Their publication was on neural tube defects, so-called NTDs. What it really highlighted was that optical genome mapping could just go very far beyond what existing cytogenetic methods could do in terms of identifying likely drivers of that defect, but not only going beyond it, but also complementing very nicely what sequencing does. We see this adoption for constitutional genetic disorders as a good second place. Solid tumor is emerging, but solid tumor, as you know, creates a substantial flow of samples. It is a big economic opportunity for us.

Cell and gene therapy is also just getting started, but pharmaceutical companies are using optical genome mapping to analyze their modified cells or stem cells to look at things like genome integrity and on- and off-target effects that are introduced by the gene editing apparatus. We have a good list of indications or applications that customers would adopt for. We clearly know which is the primary one. Menu expansion exists within each of these groups. Think about cell and gene therapy. You've got stem cells. You've got CRISPR-Cas9. You've got CAR-T. Within constitutional genetic disorders, we talked about the birth defects, but you have intellectual disability, developmental delay, and a variety of applications there, which users can validate one after the other. Across hematologic malignancies, you've got leukemias, lymphomas, myelomas, and then solid tumors, lung, colon, breast, prostate, etc.

That's how we see menu expansion progressing within each of these application areas.

Vidyun Bais (VP in Equity Research)

Okay. Perfect. Thanks so much for taking the questions, Erik.

Erik Holmlin (President and CEO)

Thank you, Vidyun.

Operator (participant)

Thank you. That does conclude today's Q&A session. I would like to go ahead and turn the call back over to Erik for closing remarks. Please go ahead.

Erik Holmlin (President and CEO)

Okay. Thank you, Lisa, and thank you to everyone who joined and for following along. We look forward to updating you in the not too distant future on our progress in the first quarter here in 2025. Thank you very much.

Operator (participant)

This ends today's conference call. Thank you for joining. You may now disconnect.