Quanterix Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 17, 2025

There are 9 speakers on the call.

Operator

Thank you for standing by. My name is Kathleen, and I will be your conference operator today.

Speaker 1

At this time, I

Operator

would like to welcome everyone to the Quantrics Corporation Fourth Quarter twenty twenty four Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. And now, I would like to turn the call over to Joshua Yang, Head of Investor Relations.

Operator

Please go ahead.

Speaker 2

Thank you and good afternoon. With me on today's call are Masood Talu, Quanterix's President and CEO and Vandana Sriram, Quanterix's Chief Financial Officer. Today's call is being recorded and a replay of the call will be available on the Investors section of our website. During the course of today's presentation, we will make forward looking statements within the meaning of The U. S.

Speaker 2

Private Securities Litigation Reform Act. These forward looking statements are based on management's beliefs and assumptions as of today, 03/17/2025. We may not actually achieve the plans, intentions or expectations disclosed in our forward looking statements. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. To supplement our financial statements presented on a GAAP basis, we have provided certain non GAAP financial measures.

Speaker 2

These non GAAP measures are used to evaluate our operating performance in a manner that allows for meaningful period to period comparison and analysis of trends in our business and our competitors. We believe that such measures are important in comparing current results with other period results and assessing our operating performance within our industry. Non GAAP financial information presented herein should be considered in conjunction with and not as a substitute for the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these non GAAP measures to their most directly comparable GAAP financial measures set forth in the presentation posted on our website and in our earnings release issued today. Finally, any percentage changes we discuss will be on a year over year basis unless otherwise noted.

Speaker 2

Now, I'd like to turn over the call to Masood Talu.

Speaker 3

Masood? Thank you, Joshua. I'm pleased to report that Quanterix delivered our seventh consecutive quarter of double digit revenue growth, driven by robust demand for Samoa sensitivity. In a capital constrained environment, this performance is a testament to past investments we've made in focusing our business model on multiple vertical markets and recurring revenues. I am pleased with our team's operational performance in the quarter.

Speaker 3

We achieved revenue of $35,200,000 and our top line grew 11% driven by capacity expansion in our Accelerator Lab, which grew 22% in the quarter. Additionally, our investments in developing testing infrastructure for Alzheimer's disease is just starting as we generated $2,700,000 of partner enabled revenue in Q4. Our approach to growth has been disciplined, while improving margin and core operating costs. Our non GAAP gross margin of 57.7% in the fourth quarter represented an increase of 300 basis points over the previous year, driven primarily by higher price and improved operating efficiency. Our cash usage declined by 31% to $4,400,000 in the fourth quarter.

Speaker 3

Vandana will elaborate more on these results later in the call. Taking a step back, I want to talk about how our investments are driving strong returns in the business and how our team's disciplined operating execution is helping us outpace peers. Over the past two years, we generated a revenue CAGR of 14%, while increasing our recurring revenues from 65% to 80%. We've expanded margins from 35% to over 54% today. We've reduced our cash burn by nearly half, all the while continuing to invest in R and D to position the company for future periods of high growth.

Speaker 3

With this foundation in place, we're in an excellent position to execute our three year strategy. Number one, Grow Menu. We're extending our leadership position in neurology while developing assays tailored for new market. We launched 20 new assays in 2024, including 13 in neurology addressing therapeutic areas such as multiple sclerosis, Parkinson's disease and traumatic brain injury. We also launched ultra sensitive multiplex panels for therapeutic development of key immunology related disorders such as obesity, arthritis and neuro inflammation.

Speaker 3

Two, expanding into adjacencies both organically and inorganically. We're expanding into immunology and oncology market with our SIMO one platform and our recently announced merger agreement to acquire Acoia Biotech, which will strengthen and accelerate this effort. I'll talk more about Acoia in a few minutes. In 2024, we made progress on our SAM-one platform, which we expect to launch at the end of twenty twenty five and will further extend our business in immunology. Through SAM-one, we will increase complexity and sensitivity beyond our current platforms further extending our lead position.

Speaker 3

Assays on this platform will include code match technology, which are optically encoded barcodes on proprietary emission beads that will allow us to grow Plex while maintaining high specificity across the assay in an efficient workflow with results in less than three hour. Finally, number three, translating into diagnostics. We're focused on building the leading global diagnostic testing infrastructure for Alzheimer's disease. We added 12 partners to our network last year and are working to expand this year with 10 new hospitals and reference labs already in active test validation. In 2024, we launched LUCEND AD Complete, a multi marker algorithmic test that combines five biomarkers.

Speaker 3

It's available today as a laboratory developed test and we're pleased to report that we're making great progress working in our prospective trials with plans to submit our package this year to the FDA under our breakthrough designation. As I discussed earlier, the importance of making strategic investments into growth and driving high recurring revenues in the business have yielded strong results for Quanterix over the past two years. Now I'll spend a few minutes on how our proposed acquisition of Acoya meets this objective. We are confident we'll deliver attractive long term returns to shareholders for three core reasons. One, expanded addressable market.

Speaker 3

Two, actionable synergies. And three, enhanced scale. Through this combination, we're expanding Quanterix's research addressable market from $1,000,000,000 to $5,000,000,000 and our diagnostic TAM from $10,000,000,000 to $15,000,000,000 By combining Quanterix, a number one player in ultra sensitive detection of proteins in blood with Acoya number one in biomarker detections and tissue, we will uniquely position the company to speed up market development of new tissue and liquid biopsies, which we believe will eventually surpass the market size all other diagnostic tests combined. Second, we have a clear line of sight achieving the synergies we projected. With regard to revenue synergies, starting immediately upon closing, Aquoia will offer their neurobio solutions to our over 1,000 instrument installed base and we will provide our oncology solutions to Acoia's thirteen hundred instrument installed base.

Speaker 3

Much of our team, including myself, are intimately familiar with Acoia's platform and its capabilities and we have owned their instrument for several years. This coupled with our own organic program of seven zero one gives us tremendous confidence we'll be able to hit the ground running on our cross selling opportunities. There's also a considerable customer overlap between our companies. We share the same top pharma customers and generally speaking half of our teams visit the same customer. We're very much focused on recurring revenues.

Speaker 3

We executed this at Quanterix and intend to apply the same playbook to the combined company. With regard to cost synergies, 100 percent of our $40,000,000 operating synergies will be run rate by 2026. We'll expect $5,000,000 per quarter in the first twelve months and we'll achieve $10,000,000 per quarter by the end of twenty twenty six. Finally, there's a lot of low hanging fruit on the SG and A side we can go after relatively quickly. Both companies are located in Boston, use identical antibody regions and similar operating infrastructures, which further de risks footprint consolidation.

Speaker 3

Third, we're accelerating scale and profitability. By combining with Acoya, we expect to generate positive free cash flow in 2026, '1 year faster than we would as a standalone company. The transaction creates a new path for us to grow from a company with approximately $250,000,000 in revenue this year to one with $1,000,000,000 in revenues with EBIT margins of fifteen percent five years post close. This goal reflects the contribution of diagnostics revenues from Macoia and Quanterix as well as meaningful contribution of revenue from our new SemaOne platform. I want to conclude by saying a few words about current market conditions.

Speaker 3

While there are some degree of market volatility, our view is that good research in important chronic conditions will continue to be supported by private and public sectors alike. Investments we've made in our business model across multiple markets, namely research, pharma and diagnostics using a combination of products and services continues to uniquely position the company for growth and a path to profitability, while we make investments in high growth markets for future cycles of value creation. These efforts have delivered over the last two years and we expect them to continue. Vandana will provide more detail on our financial performance.

Speaker 1

Thank you, Masood, and good afternoon. I will now go over our performance for the fourth quarter, full year results and provide our guidance for 2025. As Masood described, in the fourth quarter, we continued our record of double digit growth and margin expansion as compared to the prior year. Total revenue for the fourth quarter of twenty twenty four was $35,200,000 an increase of 11% compared to the prior year. Accelerator Lab revenue was $8,600,000 an increase of 22% driven by strength in testing services for clinical trials and custom assay development.

Speaker 1

As disclosed earlier, our Lilly collaboration agreement was completed in the third quarter. Consumable revenue was $17,400,000 flat with the previous year as customers continue to transition to Advantage Plus assays. The Advantage Plus transition is approximately 50% complete and we are on track to have all customers converted to Advantage Plus consumables by mid-twenty twenty five. Instrument revenue was $3,100,000 down 7% but up 29% sequentially. We placed 18 instruments in the quarter, up five instruments from the prior quarter.

Speaker 1

Other sales of $6,000,000 include approximately $1,400,000 of license revenue related to advancing our partner network in Alzheimer's disease diagnostics. For the quarter, we reported $2,700,000 of revenue from our diagnostics partners. Shifting to the rest of the P and L for the fourth quarter, GAAP gross profit and margin were $22,200,000 and 63% respectively, up $2,800,000 and approximately 150 basis points compared to the prior year. Non GAAP gross profit was $20,300,000 and non GAAP gross margin was 57.7%, up approximately 300 basis points respectively compared to the fourth quarter of twenty twenty three. This strong gross margin performance was driven by favorable product mix, strong output and improved inventory management.

Speaker 1

GAAP operating expenses for the quarter were $36,900,000 up $3,900,000 and non GAAP operating expenses were $35,100,000 up $4,200,000 over last year. Included in operating expenses is approximately $2,700,000 of costs related to our ongoing M and A transaction as well as the cost of the restatement of our financial. Cash usage for the quarter was $4,400,000 down $2,000,000 from last year. For the full year 2024, we reported revenue of $137,400,000 an increase of 12%. This performance was driven by our Accelerator business which increased 37% to $38,000,000 Consumable revenue grew 8% to $69,300,000 while instrument revenue totaled $10,500,000 a decrease of 33 percent.

Speaker 1

Other revenue totaled $19,700,000 an increase of 32%. In terms of revenue stratification, our customer mix for the year was approximately 50 fourforty six between pharma and academia. Within pharma, sales to diagnostics partners totaled $6,000,000 for the year. From a geographic perspective, our revenue growth was led by North America, which grew 17%. Europe grew 11% and the Asia Pacific region was down 6% for the full year.

Speaker 1

Full year GAAP gross profit increased to $83,100,000 up $8,900,000 and GAAP gross margin was down 20 basis points year over year. Non GAAP gross profit increased to $75,000,000 also up $8,900,000 and non GAAP gross margin expanded 60 basis points to 54.6%. We ended the fourth quarter of twenty twenty four with $291,700,000 of cash, cash equivalents, marketable securities and restricted cash. Cash usage for the year was $32,000,000 up $15,000,000 from the prior year. This included approximately $16,000,000 of investment in SIMO1 and Diagnostics, which is consistent with our plan of investing up to $20,000,000 in these initiatives in 2024.

Speaker 1

We are making an update to the non GAAP financial measures that we report on a quarterly basis. As we add acquisitions to our portfolio, we are adding adjusted EBITDA and adjusted EBITDA margin as new metrics. Please refer to our earnings release and Page 13 of the accompanying presentation for a definition of these metrics. Our adjusted EBITDA was negative $23,600,000 in 2024 as compared to negative $19,000,000 in 2023. As noted before, this included $16,000,000 of investment in SIMO1 and Alzheimer's Diagnostics, up $7,000,000 from the prior year.

Speaker 1

Excluding these investments, we've made real progress towards our goal of achieving profitability through tight execution in our core business, which is allowing us to continue to make these strategic investments. Turning now to guidance for the full year 2025. We currently expect to report revenues in a range of $140,000,000 to $146,000,000 which represents growth of 2% to 6%. This excludes revenue from Lucent Diagnostics testing. Masood touched on some of the market volatility that we're observing in the near term.

Speaker 1

While we have minimal direct exposure to NIH spending, about 20% to 25% of our annual revenues are tied to U. S. Academic customers. We have assumed that revenues related to U. S.

Speaker 1

Academic customers will be down 10% in 2025, representing a year over year headwind of approximately two fifty basis points. Additionally, our Accelerator Lab, which is coming off a two year CAGR of 27%, is expected to have a slower start to 2025 as we see a lower number of large pharma projects in the first half of twenty twenty five. Our Accelerator pipeline remains strong and we expect our Accelerator business will pick up pace in the second half of the year. From a revenue timing perspective, we expect the first half to be flat to slightly down year over year and ramping in the second half. We expect our first quarter revenue to be down 10% to 15% driven by the near term impact of The U.

Speaker 1

S. Academic market and the timing of certain accelerator projects. Moving on to gross margin for the year, we expect GAAP gross margin to be in the range of 59% to 63% and non GAAP gross margin in the range of 53% to 57. And finally, we expect cash usage from our operations to be $35,000,000 to $45,000,000 dollars this includes approximately $30,000,000 of investment in Diagnostics and SmallerOne. In terms of allocating capital to deals, we expect to pay $20,000,000 for the upfront and technical milestones related to emission.

Speaker 1

We will also incur costs related to the Acoya acquisition, which we will identify separately as those costs are incurred. We also reiterate our prior comments around achieving REO cash flow breakeven in the $170,000,000 to $190,000,000 revenue range, excluding Diagnostics investment. With expected investments of $15,000,000 to $20,000,000 annually on Diagnostics, we expect that Quanterix will achieve cash flow breakeven in 2027 or 2028. The integration of Apria and the realization of $40,000,000 of synergies expedites that timeframe to 2026. I will now turn it back over to Masood.

Speaker 3

Thank you, Vandana. Over the past two years, Ponterix has demonstrated strong operational performance, building the base. We are executing a three year strategic plan centered around menu, adjacencies and diagnostics that will expand the adoption of our ultra sensitive SIMO platform significantly growing our addressable market. And in doing so, we have outlined an accelerated path to scale and profitability. Operator, let's start the questions.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Matt Sykes of Goldman Sachs. Please go ahead.

Speaker 4

Thank you. And thanks for taking my questions this afternoon. Maybe my first question, you outlined sort of the impact to NIH and academic government, which I understand. I guess, I'm just wondering in terms of the cadence over the year, given the guide you had for Q1 is pretty steep and it seems reliant upon some of these large pharma contracts coming back in the second half in Accelerated Lab. I guess one, why were they delayed in the first half?

Speaker 4

Is it a timing issue? Is it demand issue? And two, what gives you confidence they'll come back in the second half to meet that full year guide?

Speaker 3

Yes. Hey, Matt. So, yes, I think when you look at Accelerator, first, you have to take a look at the strong performance over the last year. Accelerator grew for us 30%, thirty seven % year on year, strong two year CAGR as well. So it's certainly performed for Quanterix.

Speaker 3

When you look at some of the increasing size of projects that we got towards the back half of '24, this became we're talking about projects in the $1,000,000 range and it became partly a timing issue where we're expecting to see some of these larger projects materialize more on the back half. We still have high confidence in what we're seeing with Accelerator. The diversity of customers that we see in the pipeline is even better than last year and the word is getting out there that we can deliver excellent results without in a CapEx constrained environment. So overall, those are the reasons that give us a more bullish view that Accelerated continues to deliver for Quanterix.

Speaker 4

Got it. Thank you for that, Masoud. And then just as my follow-up, you mentioned, I think it was 10 hospitals and labs that you've got in the validation phase right now. Are those sort of signed contracts that you've got or those could those slip into further quarters? And if not, like when do you expect those to be contributing to revenue over the course of this year?

Speaker 3

Yes. We expect, of the we have 10 in validation. Some of them are actively in contract phase and some of them are waiting for validation to be complete before we sign some of these contracts. So we expect some of this to contribute to some 25 revenue over the period, but we haven't provided any sort of breakdown as to how many will provide revenue in Q1 versus Q2 or subsequent quarters. But I can say that the pipeline looks great.

Speaker 3

Folks are signing up to use the Quanterix test because of the high sensitivity. We provide a result for all patients, not a subset of patients based on our sensitivity. And the multiplex test has garnered a lot of excitement. So I think we have 10 right now that are validating and I would be surprised if we did an increase that number as we had throughout the rest of the year. Got it.

Speaker 3

Thank you.

Operator

Your next question comes from the line of Kyle Mixon of Canaccord. Please go ahead.

Speaker 5

Hey guys, thanks for the questions.

Speaker 3

I would love

Speaker 5

to just ask about the merger. So stock has dropped significantly since the announcement, presumably due to the significant spend around the deal, maybe some of the NIH and macro stuff as well. What's the company's response to that? Like what are investors missing? And then how has the board's view of the merger changed at all?

Speaker 5

And what are the reaction?

Speaker 3

Hi, Kyle. Yes, so two things. One, clearly we're in an A H pressured environment and I think majority of the pressure you see on Quanterix or other companies is exactly, hey, tools are indexed to academia and there tends to be or looks like some paralysis in the market on spending in academia. And I think that's what you're seeing across the board versus sentiment on the deal. We're very excited about the deal.

Speaker 3

This is a value creating opportunity for the company. I think you look at the Equoia, two words, I would say reoccurring revenues. When we looked at a couple of years ago, all tissue and spatial platforms, Equoia was number one, has the highest throughput instrument platform, largest footprint. And when you're looking at an environment where there's capital constraint, you have to go to recurring revenue as we have in our consumable base at Quanterix, as you have in services. So we put these two together and we see a real opportunity that one and one is four and not two.

Speaker 3

And that's why we think that this is the right thing for the company and the timing is going to be something that we're going to be able to not only combine and synergize, but it's going to be accelerating for us from a scale and profitability standpoint. All right, got it.

Speaker 5

Thanks for that. And then for you, Rufanta, it sounded like the diode out Maybelline revenue in 2024 was $6,000,000 for the year. Could you just confirm then how that trended throughout the year? And then is that the DX revenue tier, I guess, partners, is that included in the $25,000,000 guidance as it stands today or is that kind of incremental?

Speaker 1

Yes, I can take that. Yes, confirming that $6,000,000 is the revenue that we generated from our diagnostics enablement partners, We started to call that out from the second quarter onwards and we've had a steady cadence of anywhere between $1,000,000 to $2,500,000 each quarter through 2024. That is the sales to diagnostics partners is incorporated in our guide and we would expect similar revenue amounts as we start to add additional partners. What's not in our guide is direct testing on the Lucent side, which again as the market evolves we'll provide more information on.

Speaker 5

Awesome. And on a related note, could you talk about the Samoa One launch and how that could impact the results by end market? And again, like the cadence of you guys, academic kind of clears up a little bit?

Speaker 3

Yes. So we expect SIMO1 to launch towards the end of the year in 2025. So not a super large contributor, but very excited about how this expands the addressable market specifically around immunology. And so Carl, we've been talking about this platform in our view that with our ultra sensitive ability to detect these protein biomarkers in blood, We're now 70 plus percent in neurology and we want to expand the applicability of this platform to immunology and oncology. That grows our addressable market and by adding additional plaque, Ocimelo one, we're going to be able to unlock, some additional market opportunity.

Speaker 3

So super excited about the platform. We should have more information on launch dates and additional specifications as we head towards the back half. And, yes, I think this is a super critical time for Clontarex and important as we really expand Samoa, not just to specialty neuro labs, but to all labs.

Speaker 1

Yes. And from a guidance perspective, we expect the instrument to launch towards the end of the year. So the contribution for 2025 is relatively modest, but as we look to 2026 and beyond, we see this as a key growth driver.

Operator

Your next question comes from the line of Pareet Souda of Leerink Partners. Please go ahead.

Speaker 6

Yes. Hi, guys. Couple of questions here. Maybe, Masood, would love to understand, I mean, you're guiding more than $12,000,000 below the street number, which one could argue was already lowered from the NIH IDC impact and other concerns in the market. Given the uncertainty in the market, could you elaborate how are you thinking about the 2Q and 3Q recovery?

Speaker 6

Because a lot of that is still uncertain across the sector. You still have a sizable academic exposure. So just how do you get confidence on that to get to the $140,000,000 to $146,000,000 guide for the year?

Speaker 3

Yes. So first, I would take a look at Quantairex's performance

Speaker 5

over

Speaker 3

the last year. In a difficult capital environment, Quantairex continues to find ways to grow. And what we did was last year, we invested in our accelerator capacity. That accelerator grew 37% for us. We ended up with double digit growth as we reported for full year at 24%.

Speaker 3

I don't think there was another tools player that grew at all last year. And so, Quanterix definitely grew double digits and that was great success. This year, I think that you look at sort of growth, we're going to continue to grow. I think what you're seeing in the guide is that there's a lot of confusion and some paralysis in the academic market. I want to point out that we think it's just that, paralysis.

Speaker 3

If you sort of look at NAH and the cuts to indirect, folks don't use indirect budget to buy our platforms or systems, that's direct budget. And so ultimately, I think this is more of a transient thing. I don't think where our exposure long term is going to be something that is going to affect us. But that being said, there is some sort of paralysis whenever there's indecision and bureaucratic systems that are making decisions. So we do have baked all of the academic pressure into the guide for the year.

Speaker 3

If academic funding is unlocked earlier, that'd be an upside to what we're reporting. If some of the indirect budget cuts were moved to direct, which is where folks use our folks use that's the budget people use to buy our systems, That would be upside to what we're looking at here in the guide. Capital improvement would be upside and obviously in what we're reporting it doesn't include any sort of DX testing ramp.

Speaker 6

Okay. That's helpful. And then maybe let me ask it a different way. I mean, this is really the number one question here. And I think it's even more relevant today than early January when you announced the deal.

Speaker 6

I appreciate the TAM estimates that you were putting out, but a lot has happened in the tools since January '10 when you announced this deal, not just macro uncertainty and IHIDC cuts. There have been significant material impact across the sector in valuations. So just given all of that backdrop and the uncertainty which you're already citing in your own guidance now, which is lowered versus the Street, I guess simply put, why do you continue to value Ocoya the same as you did in early January? We really appreciate more on that. Thank you.

Speaker 3

Yes, Puneet. So one as I mentioned earlier, we look at not we make long term value decisions, not on short term swings and market demand. We believe in the short, mid and long term the market for Aquaeos products and particularly the interface with our Samoa products are going to deliver compounded returns. Going back to the three key reasons why we think this makes sense. As you alluded, we're increasing our addressable market by combining us number one in blood with AQUOIA, number one in tissue.

Speaker 3

We think that that's going to unlock additional markets for us and get our platform and our systems in additional labs. Second, this $40,000,000 in cost synergies, we talked in the prepared remarks that this is largely derisked. There'll be operational and run rate by 2026. And then finally, scale and profitability. The transaction is creating a new path for us.

Speaker 3

We're going from a company that's going to be in the sub $1,000,000,000 range and we have a goal to get to $1,000,000,000 range five years post close. So by and profitability is a key point of that scale and profitability. We'll be able to get cash flow positive in 2026, earlier than we would had we not done the transaction. So you look at the value creation opportunity here, and you pull up the aperture and you look at the whole opportunity and you say this is a value creating event for the company, for investors and ultimately for customers. So we continue to be enthusiastic and look forward to closing and bringing the two companies together.

Operator

Your next question comes from the line of Dan Brennan of TD Cowen. Your line is now open. Great. Thanks for the questions. Maybe just on

Speaker 7

the first quarter guide, sorry, can you I don't know if you mentioned it, but in terms of the revenue decline that you're baking in, can you just unpack kind of what you're assuming for the academic and government customer base? And I know you talked a little bit about Accelerator, but just kind of wondering if you can kind of walk through a little bit like what's implied in 1Q for that particular customer base?

Speaker 1

Sure, Dan. I'll take this. So it's really the two factors that you mentioned. On the academic side, just like everybody else, we're seeing a lack of decision making and some of the paralysis that Masood mentioned. So with that in mind, we've taken our Q1 academic number down quite substantially.

Speaker 1

And then in addition to that, on the Accelerator side, as you know, we don't have the Lilly collaboration agreement anymore. That's about a headwind of 1,500,000.0 on a year over year basis. But we also have a handful of large ticket pharma projects that are not going to hit in the first quarter, but are scheduled for later in the year. So those are the two things that we've baked into the guide.

Speaker 7

Got it. Maybe just on the Equator transaction, just walk us through again what needs to happen on the closing process? And then just a follow-up, Masood, I know there's been a few questions asked, but there's some pushback in the market about the Acoia value while combined you're very confident in kind of a path forward for an attractive revenue and synergy target. But how would you contest kind of the valuation that you're describing to Acoya?

Speaker 3

Hey, Dan, you cut off on your last question. Can you repeat that?

Operator

Yes. Sorry, I was just wondering kind of the closing process

Speaker 7

from here? And then secondarily, in terms of the valuation that's being ascribed to Acoya, there's some pushback in the market that you're rewarding them too much given their debt and burn, just kind of wondering how you would answer that?

Speaker 3

Yes. Dan, you cut off again, but I think I got the scope of your question. Please let me know if I miss anything. So one, we're planning on closing in Q2. And so both Acoya and Quanterix will have a shareholder vote.

Speaker 3

And then at that point, we expect after the shareholder vote, a successful shareholder vote, we began working towards many of the $40,000,000 in operating synergies that we sold out. On the value, we continue to believe that if you look at precedent transactions, that based on where Acoya is that this was an attractive opportunity to both our shareholders and Acoya shareholders. On the larger opportunity, I think one key important point to recognize in sort of this year in this environment, it comes down to reoccurring revenues. Quantairex has developed a core focus and competency on two things: increasing recurring revenues through assays and services. When you look at Acoya and the work the team has done, they have the highest throughput system and largest footprint in the market.

Speaker 3

So in a capital constrained environment or an environment where there continues to be instrument pressure, you want to focus on those reoccurring revenues. We have a model that's worked. We plan on taking that model and deploying it to the combined company. And when we do that and when we achieve the $40,000,000 plus cost synergies, when we pull in our run rate to cash flow positive in 2026, we're growing, we have a faster path to profitability and that's a value creator for our combined shareholder base. So I think when you look at sort of point in time, I think you had a question on valuation.

Speaker 3

If we looked at point in time valuation in our business and what we do, that'd be fairly shortsighted. We can't make decisions on one month or two month swings or value windows. Otherwise, we'd be a trading company. We're generating value in developing a high growth company, and we're excited about this transaction.

Operator

And your next question comes from the line of Dong Ji Nam of Scotiabank. Please go ahead.

Speaker 8

Hi. Thanks for taking the questions. I just have a few clarification questions. Just on SIMO1, you touched on the market opportunity in immunology. I was wondering if you think that the existing SIMO IHC users could potentially adopt SIMO I as well or do you think this will potentially replace some of the SIMO I installed base kind of trigger a replacement cycle of some sort?

Speaker 3

Yes. That's a great question. What our focus, Sung Ji, has been on SAMOA one is that, as I said earlier, SAMOA in all labs, not just specialty neuro labs. So with SUMO one, and we've been very focused from an assay perspective on expanding into immunology and oncology applications. So day one of our product launch, you're going to see immunology menu.

Speaker 3

We're going to be expanding our addressable market by going after new customers in our immunology base, going after both research, large pharma and accelerator projects that need higher plex, they need greater sensitivity and they need fast turnaround time. And so our focus has been this additional market versus a replacement cycle of the existing base. We believe that our existing base will continue based on the system that we currently have to deliver in neurology. And then there might be some overlap of some of our neuro customers needing some additional sensitivity for some of their applications. But it's largely the immunology and oncology where a plex of more than four has been asked of us and we plan on delivering.

Speaker 8

Got you. Great. What's your underlying assumption in terms of OUS or ex U. S. Growth for the company this year?

Speaker 8

Last quarter, I think you touched on also the UltraDx and NPA approval in China and things like that. So kind of curious what you guys are seeing outside of The U. S, in Europe and Asia pack in general? Thank you.

Speaker 1

Yes. Outside of The U. S, our expectation is basically low double digit to high single digit growth. We normally don't pair out Asia versus Europe separately, but our expectation would be all of those markets would grow somewhat aligned with what we expected in 2024. Against that, the headwind really is the decline in The U.

Speaker 1

S. Academic market and some of The U. S. Pharma projects that have the timing slip that we talked about in Accelerator.

Speaker 8

Got you. And then if I could squeeze one more in. You talked about kind of the paralysis you're seeing in the academic segment in The U. S. I just wanted to clarify, are you actually seeing are there anecdotes kind of that you're seeing on the ground or these kind of the assumptions based on what's happening in the macro environment?

Speaker 3

Yes. What we're seeing, Sung Ji, is more some confusion in the academic market on budgets, on timing, on hiring, on capital purchases. And obviously, there are some days you hear that things are moving forward and some days it's a couple of steps back. It's just a lot of confusion. We're seeing some of this with our own customers.

Speaker 3

We're seeing it with other customers in the broader market. But I just want to reemphasize that this is, we think, transient and longer term. Quanterix has a very strong and tested model around accelerator, where we're going to continue our high value projects in clinical studies with pharma, additional clinical trial work that we expect will ramp more in the back half of the year. And in the academic side, we think that because we're more direct as opposed to the indirect, there could be scenarios where additional funding goes to chronic disease areas and Quanterix would be a beneficiary of that. So overall, I do think that this is transient based on some of the conversations we're having and Quanterix is well positioned for continuing to grow as a company.

Operator

That's all the allotted questions we have for today. Thank you everyone for joining. You may now disconnect.

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Earnings Conference Call
Quanterix Q4 2024
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