Bionano Genomics Inc. (NASDAQ:BNGO) reported a decline in its third-quarter revenue, down 35% year-over-year to $6.1 million, mainly due to a decrease in clinical services. The company's CEO, Dr. Erik Holmlin, led the earnings call, announcing significant cost reductions and a strategic shift towards enhancing cash efficiency and consumables growth.
Despite the revenue dip, Bionano saw a 22% increase in the installed base of its optical genome mapping (OGM) systems. The company is also focusing on the adoption of its VIA software and anticipates the full rollout of the Ionic sample prep system in 2024.
Key Takeaways
- Bionano's revenue decreased to $6.1 million in Q3, a 35% year-over-year decline.
- Non-GAAP operating expenses were reduced by 49% to $16.1 million.
- The installed base of OGM systems grew to 368, a 22% increase year-over-year.
- Q4 revenue is projected to be between $6 million and $7 million, with full-year revenue estimated at $28 million to $30 million.
- The company plans to reduce headcount to below 100 by early 2025.
- Bionano raised $10 million from a registered direct offering and expects potential additional proceeds from Series A and B warrants.
- The Ionic sample prep system's full rollout is anticipated in 2024, targeting high-volume customers.
Company Outlook
- Bionano expects Q4 2024 revenues to range from $6 million to $7 million.
- Full-year revenue for 2024 is estimated to be between $28 million and $30 million.
- The installed base of OGM systems is projected to reach 370 to 380 units by the end of 2024.
- The company aims to enhance adoption of its VIA software and anticipates growth in consumables revenue in 2025.
Bearish Highlights
- There was a $500,000 write-off for aged receivables from discontinued clinical services.
- Decreased valuation of spare parts and inventory, resulting in lower GAAP and non-GAAP margins.
- Slower growth anticipated due to expense reductions and prioritization of cash preservation over rapid expansion.
Bullish Highlights
- The company raised $13 million from offerings in July and October, with potential additional proceeds from warrants.
- Significant growth potential among 150 targeted high-volume customers for the Ionic sample prep system.
- COGS reductions expected from transitioning to lower-cost manufacturers and improving operational efficiencies.
- Optimism regarding the growth of consumables in 2025, driven by reimbursement initiatives and routine usage by existing customers.
Misses
- Revenue declined significantly due to a 29% decrease linked to discontinued clinical services.
- Delays in capital equipment purchases have impacted Q4 guidance.
Q&A Highlights
- Dr. Holmlin discussed the strategy focusing on the adoption of VIA software to enhance workflow efficiency.
- Despite delays in capital equipment sales, the company is optimistic about the growth of consumables and flow cell revenues.
- Bionano is adjusting its go-to-market strategy to improve margins through consumables while being cautious about capital equipment sales.
- The company faced a $500,000 write-down from discontinued clinical services, which may lead to further financial adjustments.
Bionano Genomics Inc. is navigating a period of transition, focusing on software adoption and efficiency improvements to drive future growth in consumables. The company's strategic shift away from rapid expansion towards profitability and cash preservation reflects a cautious approach in a challenging economic environment. With the upcoming rollout of the Ionic sample prep system and ongoing demand for the new Stratys system, Bionano remains optimistic about its prospects, especially in high-capacity labs. However, the impact of discontinued clinical services and a decline in new system sales poses challenges that the company is working to address in its future plans.
InvestingPro Insights
Bionano Genomics Inc. (BNGO) is facing significant challenges, as reflected in both its recent earnings report and the latest InvestingPro data. The company's market capitalization has shrunk to just $23.37 million, underscoring the steep decline in investor confidence. This aligns with the company's reported revenue decrease and strategic shift towards cash efficiency.
InvestingPro data reveals that BNGO's revenue for the last twelve months as of Q2 2024 stood at $36.58 million, with a growth rate of 16.08%. However, this growth is overshadowed by a concerning quarterly revenue decline of 10.29% in Q2 2024, which corroborates the company's reported 35% year-over-year revenue drop in Q3.
The company's financial health appears precarious, as highlighted by two critical InvestingPro Tips. Firstly, BNGO is "Quickly burning through cash," which explains the company's focus on cost reductions and cash preservation mentioned in the earnings call. Secondly, the stock price movements are "quite volatile," reflecting the market's uncertainty about the company's future prospects.
These insights are particularly relevant given Bionano's strategic pivot and the challenges outlined in the earnings report. The company's efforts to reduce operating expenses and focus on high-volume customers for the Ionic sample prep system are likely responses to these financial pressures.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further context to Bionano's current situation and future outlook. These additional insights could be valuable for understanding the full scope of challenges and opportunities facing the company.
Full transcript - Bionano Genomics Inc (BNGO) Q3 2024:
Operator: Good day, and welcome to the Bionano Third 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: Thank you, operator, and good afternoon, everyone. Welcome to the Bionano third quarter 2024 financial results conference call. Leading the call today is Dr. Erik Holmlin, CEO and Principal Financial (NASDAQ:PFG) Officer of Bionano. And he is joined by Mark Adamchak, Bionano's Vice President of Accounting and Principal Accounting Officer. After market today, Bionano issued a press release announcing its financial results for the third quarter 2024. A copy of the release can be found on the Investor Relations page of the company's website. Bionano expects to file its Form 10-Q no later than 530 p.m. Eastern time tomorrow, November 14th. Certain statements made during this conference call may be forward-looking statements, including statements about Bionano's revenue outlook, 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 a number of risks and factors, some of which are 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, November 13, 2024, and the company assumes no obligation to update statements as circumstances change. In addition, to supplement Bionano's financial results reported in accordance with US 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, have no standardized meeting prescribed by GAAP, and are not prepared under any comprehensive set of accounting rules or principles. An audio recording and webcast replay for today's conference call will be available online on the company's Investor Relations page. With that, I would like to turn the call over to Eric. Please go ahead.
Erik Holmlin: Thank you, David, and good afternoon, everyone. I'm pleased to provide you all with an update on the third quarter of 2024, as well as a report on our ongoing efforts to position Bionano to be more cash efficient while still driving the advancement of optical genome mapping for routine use in cytogenetics as well as our software business. In May of 2023, we began to systematically lower operating expenses and cash burn by reducing headcount, then discontinuing non-core products and services, scaling back certain development initiatives, and shifting our strategic focus toward driving utilization of consumables across our customers who use or plan to use optical genome mapping on a routine basis, which is a group we estimate to be about 150 customers. Since then, our headcount has come down from around 426 employees in May of 2023 to 125 as of September 30th, 2024, which we further expect to come down to less than 100 employees entering 2025. In September of 2024, to further reduce expenses and cash burn, we implemented a shift in the go-to-market strategy that went away from heavy spending on growth of the OGM installed base in any geography to a focus on conserving cash and concentrating on those customers who use their Saphyr and Stratys systems routinely in cytogenomics. We estimate that during the six to seven trailing quarters, we have reduced non-GAAP operating expenses by approximately $100 million on an annualized basis and reduced the cash needed to reach profitability substantially. The transition in operating and go-to-market strategies is not without challenges. The results in this quarter reflect the transition the operation is undergoing, which is resulting in several one-time charges that affect the P&L and the balance sheet. Overall, these are transitory non-cash charges that we don't anticipate seeing again at this magnitude. Although this transition is not without its challenges, we are learning how to operate within a streamlined team and pleased to see the signs of stability across the business, including a return to growth in consumable sales, in particular in connection with sales of OGM consumables to customers using it routinely as a replacement for karyotyping and FISH, especially in analysis of hematological malignancies, constitutional genetic diseases, and for analysis in bioprocessing applications, such as cell and gene therapy. Now, changing the slide and taking a look at key results for the third quarter, revenue was $6.1 million, which importantly comprises $6.6 million in sales of core products and softwares, which is in line with our pre-announcement, but is then offset by $500,000 because of a write-down of age receivables that is tied to our discontinued clinical services product. Q3 2024 overall represents a 35% year-over-year decrease compared to the same period of 2023. But keep in mind that this decrease includes a 29% reduction in revenues tied to the discontinued clinical services products alone. The remaining 6% decrease is driven by the shift away from instrument sales, both in the China market, as previously discussed, but also as a result of some system sales in other regions that were delayed relative to our expectations. The OGM installed base grew to 368 systems during the quarter, which represents a net increase of 67 systems during the last year and 22% growth over the installed base of 301 systems at the end of the third quarter of 2023. Overall, the rate of the increase of installed base is slowing, and that is a direct result of our shift in go-to-market strategy and cost-saving initiatives. We sold 7,835 flow cells in Q3 2024, which represents a 27% increase from the 6,176 flow cells sold in the same period last year. Looking into the results a bit more, we view this as a key metric as we drive increased utilization from the existing customers who are running optical genome mapping routinely. Sales of flow cells in the second quarter of 2024 relative to Q2 2023 were flat. And so we believe this return to growth we're seeing in this quarter is an important sign that our focus on growing utilization within this current installed base is working. Going on to the next slide, some of the key highlights in other areas of the business include publications that keep growing. With 83 publications in the third quarter, the total publications grew by 12% compared to the same period in 2023. The total number of clinical research subjects covered in publications year to date has grown by 82% from the same period in 2023. We believe publications in the overall critical mass of published data to be a reflection of not only the ongoing expansion and utilization of optical genome mapping, but potentially a leading indicator for increases in adoption and utilization going forward as global acceptance increases based on the proof sources in the scientific literature. Our clinical studies program is focused on advancing our trial and hematological malignancies and supporting continuing publication and presentation of data. The programs are being led by key sites that participated in the creation of the trials and enables them to continue without as much of a cost burden on Bionano. In fact, related to the Heme trial, in a preliminary readout from the arm of this trial looking at the impact and health economic -- the decision impact and health economic impact of OGM versus traditional methods, Dr. Michael Phillips from Harvard Medical (TASE:PMCN) School presented some interim results at the Cancer Genomics Consortium meeting in St. Louis last August. The data showed in those results that optical genome mapping detected pathogenic findings in 42% of cases that were otherwise negative when they were evaluated by the current standard of care testing. And OGM results yielded a turnaround time of just four days at a lower cost compared to karyotyping alone and clearly lower than the standard combination of karyotyping and FISH. Initiatives in support of reimbursement of optical genome mapping by insurance companies and other third-party payers are progressing. As we previously reported, a category 1 CPT code was established by the American Medical Association in June of this year with the descriptor of cytogenomic genome-wide analysis for hematologic malignancies to evaluate structural variations and copy number variations using optical genome mapping. Now, newly established codes are sent annually from the AMA to the Center for Medicare and Medicaid Services, or CMS, for pricing and listing on the clinical lab fee schedule for the following year. Preliminary prices for new codes were published September 25, 2024, and we expect the final pricing to be established by the end of November or early December this year, which means that beginning in January of 2025, labs will be able to use, to bill for their use of optical genome mapping using this new code, which is 81195. Now we have continued to ship commercial production units of the Stratys system, and we are continuing to see good demand for Stratis system in our focus geographies of Europe, US, Canada, and Israel. Customers are working through the differences between Saphyr and Stratys, and we're learning how to support the Stratys system effectively, which is the way it works when a completely new instrument, consumable and computational system enters the market. Even though our commercial shift places less of an emphasis on growing the installed base, we are focused on expanding utilization amongst routine users with higher sample volume, and customers recognize that Stratys addresses their higher throughput needs. Regarding key financial metrics, the third quarter 2024 GAAP operating expense was $35.5 million and non-GAAP operating expense was $16.1 million, which reflect decreases of 69% and 49%, respectively, from the third quarter of 2023. Operating cash burn in the quarter was approximately $14 million, a 46% reduction compared to the approximately $26 million in the prior year and a 33% reduction compared to the approximately $21 million in the second quarter of 2024. These results are really important as they reflect the success of our ongoing efforts to reduce expenses and cash burn. We expect operating expense to reduce further into 2025 as a result of actions taken in September of 2024. Our cash and cash equivalents and available-for-sale securities as of September 30th, 2024, were $23.4 million, of which $11.4 million was subject to certain restrictions. Now GAAP gross margin for the third quarter was actually negative 139% compared to 30% during the third quarter of 2023, and non-GAAP gross margin was 26% compared to 32% in the same quarter last year. This large negative GAAP gross margin was driven by $9.8 million in one-time charges that are flowing through cost of goods sold and related to the fact that we have shifted our focus away from driving systems into the field and we therefore no longer value the spare parts and other inventory items that we had previously in inventory at the same level. We've also taken charges for some rented systems in the field that remain installed but have not kept up with their committed reagent purchase levels. So both GAAP and non-GAAP margin were impacted by also the $500,000 write-off in revenues related to aged receivables from clinical services. On the next slide, we summarize some of the financing activity in the third quarter and subsequently we have completed two registered direct offerings and raised capital with our ATM. In July, we completed a registered direct offering with upfront gross proceeds to the company of $10 million and a concurrent placement of clinical milestone linked Series A and Series B warrants. The warrants have potential additional gross proceeds of up to $20 million upon the cash exercise at an exercise price of $0.57 per share. The Series A and Series B warrants are subject to stockholder approval, and we will be convening a special meeting of stockholders on November 27, 2024 in connection with the warrants. In October, we raised $3 million in gross proceeds in another registered direct offering, this one with Series C and Series D warrants that could add an additional $6 million in gross proceeds upon exercise -- at an exercise price of $0.30 per share. The October warrants are also subject to shareholder approval. Moving on to the next slide, and looking ahead to the fourth quarter and remainder of the year, our focus is very clear. We're driving the adoption of VIA software for analysis of optical genome mapping across routine use sites as we believe adoption and utilization of VIA enables customers to expand utilization and therefore purchase more consumables. We are leveraging this existing customer base and installed base to increase utilization and, importantly, add new assays to their menu, so additional applications of optical genome mapping beyond what they have initially been running. We are maintaining our focus on driving the initiatives for optical genome mapping reimbursement. We talked about the CPT code, which was established and pricing is underway, but we have also sought coverage determinations from Medicare administrative contractors such as MolDX. And we are working to improve the gross margin profile by reducing the cost of goods sold, and our efforts to increase sample pull-through will also improve gross margin. With regard to guidance for the fourth quarter and full year, we expect Q4 revenues to be in the range of $6 million to $7 million. We expect the OGM installed base to reach 370 to 380 systems, and our full year revenues based on the Q4 guidance would then be in the range of $28 million to $30 million. We understand that we may be seeing slower growth in the adoption and expansion of OGM as a result of these expense reductions, but we believe that cash preservation and reaching profitability are more important targets than growth at any cost. So in closing, our results this quarter reflect improving momentum for optical genome mapping utilization with the growth in flow cells sold, despite overall revenues, which have come in a little bit lighter than expected. Our disciplined approach to reducing operating expenses and cash burn has been challenging, but it's necessary to preserve the value of optical genome mapping that's being brought to labs around the world and impacting their clients who they're using it for. I'm very proud of our team's determination, grit, and perseverance as we prepare for these new opportunities and challenges in the future. And with that, operator, please open up the line for questions.
Operator: [Operator Instructions] And the first question will be coming from Sung Ji Nam of Scotiabank (TSX:BNS). Your line is open.
Sung Ji Nam: Hi, thanks for taking the questions. Eric, I'm sorry if I missed it, but did you guys update on the status of the Ionic sample prep system? Is that still slated for launch later this year? I'm just kind of curious kind of what the early feedback is.
Erik Holmlin: We didn’t update -- I didn't specifically update and we've seen amazing data. In fact, at ASHG earlier this month, some of the beta users gave talks about the progress. We don't expect the rollout, like, the full commercial rollout yet this year, and would anticipate that being into next year, but nevertheless, the program is progressing and demand is high for that system.
Sung Ji Nam: Got it. And then just great to see the target accounts, there's significant room for growth there. Could you maybe talk about kind of what's the growth potential for that -- for the 150 customers that you are targeting could be? And also curious, these are -- I think you mentioned they're higher volume users historically speaking. And curious, kind of, at what capacity they're currently running, do you expect more of the growth to come from additional instrument placements or through just continued increase in utilization, if you could just provide more color there.
Erik Holmlin: Yeah, sure. So, the 150, and this is a rough estimate, but that number comprises, I think, two groups, groups which are already in routine use and what we would call a well-established or maybe a mature user. Mature implies that they're not still growing and that -- I don't want to imply that here. But it includes users that are familiar with the system up and running, fully trained and running on a routine basis. And it includes a group of users that are going in that direction, working hard to validate an assay, an initial assay, and ramping up for live production scale use. And so that's roughly 150 in total. And what I want to say directionally is that this group accounts for the vast majority of the consumables that are purchased, probably 80-or-so-percent of consumables revenues. And so while we don't break out their specific, like, revenue per system per se, I think you can kind of connect the dots there and 80% of what we've reported across this roughly 150 systems. Now it's still pretty skewed between those that are running routinely and still those that are getting there, but I think that's where they're at currently. And we see the significant potential for them to grow because almost every lab, not every single one, but almost every lab that's counted in the 150 is running one single indication. There are a handful that have run, that have validated multiple, but that's the minority, certainly less than 25. And so as they add additional indications, their consumables need will grow and therefore consumables purchases and revenues will grow. Typically, not always, but typically they pick their highest volume indication first and go for that. And so, I think that as they add additional indications, revenues will grow, but it's not like they're going to double overnight, but there's the potential for consumable revenues to expand significantly. And I think on average you'll see labs running probably two to three to four indications. We have certainly anecdotal examples of that. And it's going to be a combination of hematological malignancies and constitutional genetic diseases.
Sung Ji Nam: Got it, that's super helpful. And then just lastly for me, just on your COGS, are there still big levers that you can pull there from manufacturing efficiency side of things, or is it largely kind of overhead absorption from here on out, just from the volume growth? Thank you.
Erik Holmlin: Yeah, sure. No, it's both. So, there are cost reductions that we can realize by transitioning in the foundries that we work with to produce some of the critical components of the chip consumable. And so those will be lower cost providers. There is a volume component to that, but those will be lower cost providers overall. So that'll just reduce the materials cost. A lot of the reduction in headcount is combined with a consolidation of facilities and so forth. So there are going to be some reduction in overhead costs that are not necessarily variable or volume based. And then of course there will be the variable component so that overhead that remains will be spread over more and more units. And so I think we have quite a lot of factors in play in connection with the reduction of the cost of goods sold. And so we see a lot of room for margin to improve. And these are initiatives we've been working on for a while in terms of like foundries and stuff like that. So, we expect them to take hold in the near future.
Sung Ji Nam: Great. Appreciate it.
Erik Holmlin: Thank you, Sung Ji.
Operator: Thank you, and one moment for the next question. Our next question will be coming from the line of Jeff Cohen of Laden -- I'm sorry, Ladenburg Thalmann. Your line is open.
Destiny Hance: Hi, thank you for taking our questions. This is Destiny on for Jeff. I wanted to quickly start with just a couple P&L related questions. I'm curious, this is kind of a two-parter. I'm curious to know what you see the growth rate for the consumables being moving into 2025 and do you think it could be greater than typically expected that you are expecting based on the fact that CPT code will come into effect. So you'll kind of have all that -- what's the word I'm looking for? You'll have all that momentum from your sales force focusing on that as well as the CPT code. So I guess how are you looking at consumable growth going forward?
Erik Holmlin: So, I'm gonna speak just generally about what is reasonable to expect, and I want to fall short of giving any specific guidance, but there are a couple of elements that would drive an acceleration in growth. Number one is the CPT code and other initiatives related to reimbursement, which would enable customers who are currently running samples but using a different methodology to switch without a negative economic impact in their lab, right? So the reimbursement initiatives across the board, whether that's in the US where CPT code and coverage determinations come into effect or outside the United States where there are other initiatives that play a role. Reimbursement will help labs transition away from the standard of care and use optical genome mapping in more first line. That's number one. Number two is something that I mentioned in response to a question that Sung Ji asked, and that is really within the breakdown of this universe of routine using customers, many of them are ambitious about their plans for routine use but have not actually crossed over into that threshold. So there's nothing wrong and this is the norm, this is the sort of standard trajectory that they undertake, right? So they bring the system in, the system gets installed, they get trained, they begin to sort of explore its scope and limitations and then they make a decision about what -- how they're going to use it. And so there are quite a number of systems that are in that stage and as they progress through and become routine users, then they will start buying consumables at a higher rate. So it's really about existing installed systems switching over from onboarding to routine use and becoming kind of what we call a mature site. And so that would cause consumables growth. Those things are going to be our focus going forward. The other lever is something which is perhaps a little bit more subtle. It's connected to this idea of menu expansion, but it's really as more and more users adopt the VIA software for optical genome mapping, that streamlines their workflow and effectively increases their capacity and enables them to run more samples. And so menu expansion, VIA adoption, these are big factors that will drive utilization consumables revenue. And so when we look at our plan, our plan is for these consumables to continue to grow and accelerate in growth in the future.
Destiny Hance: Okay, got it. Thank you for that detail. I appreciate it. And I guess last one for me. I'll take the rest offline. I know you mentioned some delays, delays that impacted your top line this quarter. Is that something that was just a timing issue and it will be reflected in Q4? And is it baked into that guidance or is that one of the things that maybe pushed off a little bit longer?
Erik Holmlin: Well, so, certainly the dynamic is factored into everything that we're guiding for the fourth quarter. It's something that is just related to the sales cycle for capital equipment and in particular capital purchases. So you've been marching along with us for a while and I'm sure you remember that we have kind of two go-to-market models for new adoption. One is to sell labs the system and the other is for them to rent it. And the delays that I spoke about are delays in system purchases. And so what we found was that some key customers had underestimated themselves the time that was going to be required for them to successfully get these purchases approved. And so that's what caused the delay. All of those processes remain ongoing and we see them being completed in the near future and we're hopeful that some of them would happen in this fourth quarter, but we're being conservative about the fact that they may take longer.
Destiny Hance: Okay, got it. So definitely sounds like a timing thing. I lied and I have one more question if I may. I'm wondering if you have any plans to initiate additional studies but more in like a partnership fashion with another company and a larger player? What are your thoughts on that?
Erik Holmlin: Well, I think what Alka Chaubey, the Chief Medical Officer and her team have done with our clinical studies program is, we have -- they have recruited really stellar investigators to sign on and be a part of the studies. And systematically now, we have worked with certain among those principal investigators for them to take over the trials and continued to advance them. But in each of them, as we have reported over the last several quarters, we reached our enrollment goals. So, enrollment has been completed. A lot of data collection has been completed and we are in an analysis phase. And so, we're remaining active, the sites are remaining active. And so those trials will continue. I don't want anybody to think that they are going to be paused as a result of our cost reductions. By handing the leadership over to folks for whom it's not their sole job, you can imagine that that could cause things to move a little bit more slowly, but we would expect them to continue and generate publications and important data that will be helpful in ongoing things like continuing the reimbursement advocacy and then down the road getting optical genome mapping to be included in medical society guidelines and so forth. So the trials will continue. Publications will continue. With regard to kind of the heart of your question about partnerships, we are in partnership with these institutions. And so that's a vehicle. And we do engage with and discuss potential partnerships with different companies and other groups. That's not something that we have a committed program in per se right now. We have a number of commercial relationships with different companies. And so those are drivers of revenues for us, could be something that would result in a trial and we remain opportunistic, but there's no definitive plans for that now.
Destiny Hance: Okay, thank you for taking our questions.
Erik Holmlin: Thank you, Destiny.
Operator: [Operator Instructions] Our next question is coming from Mark Massaro of BTIG. Your line is open.
Mark Massaro: Hey, guys. Thanks for taking the questions. So, I guess, Eric, you placed five systems or net placements in Q3. I think the midpoint of your guidance for Q4 is seven. I recognize you have changed your strategy of focusing on your existing installed base, but that five to seven number is down materially from the 20 that you used to report in prior years. So I just -- I'm curious about the five and the seven. Do you think that those are reasonable? I'm not asking for 2025 guidance, but do you think somewhere in that five range a quarter is a decent place for us to think about 2025?
Erik Holmlin: Yes.
Mark Massaro: Okay.
Erik Holmlin: You needed long answers, but that's a short answer.
Mark Massaro: That's okay. That's helpful. And then as a follow-up to that, is there any way to give us a sense for how the launch of Stratys is going? I'm not sure if you're able to disclose how many you placed of the five in Q3 or how many you've placed year-to-date, but you also talked about how some of the folks that may be looking to convert over are trying to understand how it fits or how it works. So maybe can you talk about things like ease of use or just, I also of course recognize it's higher throughput. Are some labs just kind of evaluating if they need that level of throughput to justify the purchase or are there other factors that are going into how we can think about the rollout of the Stratys?
Erik Holmlin: Yes, so the rollout is going well. Let me speak about the demand side of it. It's significant And I think a part of that is that labs want, recognize the need for the higher throughput. But, labs also want to take advantage of some of the other workflow advantages that Stratys has, one of which is, like, we call it jump the queue, so you could have a random access and introduce a stat sample and it could be processed without waiting for the batch to finish. So, these are some features that Stratys has that Saphyr doesn't, and so those are also attractive to labs. But I think overall the demand and interest in Stratys is related to the higher throughput because labs see optical genome mapping as becoming actually standard. When we look at something like, analysis of FSHD, facioscapulohumeral dystrophy, which is a constitutional genetic disorder, that is the global standard. Optical genome mapping is the global standard in analysis for that particular application. And so, there's definitely an increasing understanding that optical genome mapping is going to become standard, and so people are seeking to adopt Stratys because of the higher throughput. With regard to your question about the quantities, we don't break that out yet. But it's significant numbers. I mean, compared to the early days of Saphyr going out, I mean, we've well-eclipsed entire annual -- initial annual output of or uptake of Saphyr. So it's meaningful and significant. Now, when we talk about the Stratys system getting adopted and implemented at lab sites, I guess we have kind of like two camps, one which is completely new to Stratys. They don't have a Saphyr and then labs that have Saphyr. So labs that have Saphyr, what they need to do, especially if they're routine users, is really do a cross comparison to evaluate Stratys and bring it on site. And that is something that they're working through. So when I say that they're looking at the similarities and differences between Saphyr and Stratys, it's really that side by side comparison. And there are similarities and differences, no doubt. And so, we see that as being a component of the overall validation. Also, I think 11 systems across 10 sites were early access systems, pre-commercial systems, and those systems have had some hardware components replaced as we've transitioned into the full commercial release. And so, there's definitely a process of working through the newness and novelty of the instrument. And one thing I will mention about Stratys is that it's a completely brand new consumable, which we believe over time is going to really improve the overall utilization and workflow. It's a component of the higher throughput, but it's new the way that customers use it, the way that they load their sample onto it. It's new to us as well, and so there is a learning curve in connection with that consumable. So we're in the early days of Stratys. It's going well, demand is high, and people are coming to it for the right reasons, the higher throughput and the overall benefits in the workflow.
Mark Massaro: Okay, that's helpful. And then I wanted to ask about the guidance, the reduction of the guidance here again. Maybe can you walk me through some of the components. I understand that if you place fewer systems, there will be fewer, less capital equipment revenue realized in the quarter, if that makes sense. I just wanted to ask about the other line items and the other product categories. In Q3, you had really solid 27% growth in flow cells. I'm just curious how we should think about the rest of the business. And as we think about 2025, are you confident that you can generate growth in flow cells and consumables?
Erik Holmlin: So, yeah, let's sort of walk through the stuff. Starting with the consumables, I mean, I think, we've had a good track record of consumables growth, the sort of flatness that we saw in the second quarter was anomalous. The return to growth, 27%, is solid. What we're optimistic about and what we do feel confident about is that consumables utilization and therefore revenues will continue to grow. I think we've got to be cautious about quantifying that growth too precisely. A driver of growth of flow cells sold in past quarters has been some of the new purchases. So when somebody buys a new system or rents a new system, they get consumables with it up front. And so as we lower the number of new systems that are going out, that contribution will be lower. And so we've got to be careful about it. And so will the growth and utilization amongst the existing install base make up for that? That would be the question. But we remain confident that OGM consumables revenues will continue to grow and that's really a principal revenue growth driver into 2025. When we talk about what's moving around with guidance, it's really adjusting to the change in go-to-market, but also digesting this discontinuation of these clinical services products. So we had about a $500,000 write-down associated with aged receivables. They're tied to those discontinued services products and they remain about, I would say, $500,000 or so in receivables on the books. And so we'll have to see how those are treated in some of the future quarters. And so there's the possibility of additional write-downs. I want to kind of give you some awareness of that. We've tried to factor that into guidance. So, there's some ambiguity there. We just have to work through it as we start to work through the fourth quarter results. But sort of digesting that discontinuation has been having its impact on the top line, perhaps in some unexpected ways. And then, yes, the shift away from capital equipment sales, that has an impact on revenues. Having said that, these new instruments, unless we're selling them to labs that are highly strategic and going to use at a really high rate, or labs that have reached the capacity of their Saphyr system and therefore wanted Stratys, but are otherwise experts in OGM, like, those are the customers that we want to focus on now importantly. But if we're selling them to any lab that just wants to buy OGM, that turns out to be very expensive for us and a little bit counterproductive. So, the top line may suffer as a result of that, but cash out the door goes down. We're hopeful that consumables' revenues goes up and that will drive higher margins. So it will be better business for Bionano going forward.
Mark Massaro: Okay. That's all very helpful. Thank you.
Operator: Thank you. And that does conclude today's Q&A session. I would like to turn the call back over to Erik Holmlin for closing remarks. Please go ahead.
Erik Holmlin: Great. Thank you, Lisa, and thank you to everybody who joined the call today. And we look forward to updating you on our future progress. Thank you very much.
Operator: Thank you all for joining today's conference call. This is the conclusion of the call. You may now disconnect.
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