NanoString Technologies Releases Operating Results for Second Quarter of 2023

August 3, 2023

– Record Q2 Revenue of $44.2 Million, 37% Year on Year Growth and Above Upper End of Q2 Guidance Range –

- Retained More than $35 Million in CosMx Instrument Order Backlog at the End of Q2 -

NanoString Technologies, Inc. (NASDAQ:NSTG), a leading provider of life science tools for discovery and translational research, today reported financial results for the second quarter ended June 30, 2023.

“Strong growth in our spatial biology business and continued durability in our nCounter business helped us generate record revenue during the second quarter,” said Brad Gray, President and CEO of NanoString. “We expect to continue to benefit from substantial CosMx instrument order backlog through the back half of the year and into 2024, providing visibility into revenue growth and anticipated reductions in our working capital requirements, cash burn and operating loss.”

Second Quarter Financial Highlights

  • Total revenue of $44.2 million
  • Spatial biology revenue of $23.3 million
  • nCounter® revenue, inclusive of all service and other revenue, of $20.9 million
  • Cash, cash equivalents and short-term investments balance of $117.6 million as of June 30, 2023

Spatial Biology

  • Accelerated CosMx shipments during Q2, resulting in Q2 spatial biology instrument revenue growth of 188% year-over-year
  • Successfully defended substantial CosMx instrument order book, fulfilling or retaining approximately 97% of cumulative orders as of June 30, 2023
  • Captured new orders for spatial biology instruments at a rate exceeding the Q1 pace, and retained more than $35 million in CosMx instrument order backlog as of June 30, 2023
  • Recorded spatial biology consumables revenue growth of 44% year-over-year, and approximately $85,000 of annualized pull-through, driven by a steady GeoMx consumables pull-through over a larger installed base supplemented by growing shipments of CosMx consumables
  • Partnered with Owkin and world-leading cancer research institutions and announced the launch of Multi Omic Spatial Atlas in Cancer (MOSAIC) at the American Society of Clinical Oncology’s annual meeting. MOSAIC is a project designed to revolutionize cancer research and unlock potential new breakthrough treatments through the use of spatial omics, which can leverage AI to help reveal the location and molecular activity of tumor and immune cells by providing a spatial atlas of cancer cells
  • Partnered with Acrobat Genomics and the Illumina Accelerator to collaborate with Stanford Medicine to discover new drug targets for gene editing-based therapeutics using GeoMx Digital Spatial Profiler (DSP) technology
  • Grew total spatial biology system installed base to approximately 445 systems, an increase of approximately 41% year-over-year
  • Total peer-reviewed publications featuring our spatial biology platforms were approximately 280 as of June 30, 2023, representing an increase of approximately 150 publications in the last 12 months

nCounter

  • Recorded nCounter consumables revenue growth of approximately 8% year-over-year and approximately $46,000 of annualized pull-through
  • Total installed base of our nCounter platforms of approximately 1,135, an increase of approximately 5% year-over-year
  • Total peer-reviewed publications featuring nCounter were approximately 7,075 as of June 30, 2023, representing an increase of approximately 1,275 publications in the last 12 months

Guidance

Management reiterated its full year guidance, which remains as follows:

  • Total revenue of $175 to $185 million
    • Spatial biology revenue of $100 to $105 million
    • nCounter revenue, inclusive of all service and other revenue, of $75 to $80 million
  • Adjusted EBITDA loss of $65 to $75 million

Financial Results

We have elected to present selected non-GAAP, or adjusted, financial measures, including Adjusted EBITDA. These adjusted financial measures are calculated excluding certain items that may make it more challenging to compare our GAAP operating results across periods. Such items may include stock-based compensation, depreciation and amortization, or one-time charges such as transaction related fees and expenses or restructuring charges and severance costs. A reconciliation of adjusted financial measures to the nearest comparable GAAP financial measure can be found in the tables at the end of this press release.

(dollars in thousands)

Three Months Ended June 30,

 

GAAP

 

Non-GAAP

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue

$

44,157

 

 

$

32,219

 

 

$

44,157

 

 

$

32,219

 

Cost of revenue

 

29,757

 

 

 

15,852

 

 

 

27,168

 

 

 

14,756

 

Gross margin

 

33

%

 

 

51

%

 

 

38

%

 

 

54

%

Research and development

 

18,214

 

 

 

17,346

 

 

 

14,428

 

 

 

14,474

 

Selling, general and administrative

 

39,076

 

 

 

36,112

 

 

 

29,260

 

 

 

30,224

 

Adjusted EBITDA

 

N / A

 

 

 

N / A

 

 

$

(26,699

)

 

$

(27,235

)

 

 

 

 

 

 

 

 

Non-operating expense, net

 

(778

)

 

 

(2,148

)

 

 

(778

)

 

 

(2,148

)

Net loss

$

(43,668

)

 

$

(39,239

)

 

$

(27,477

)

 

$

(29,383

)

 

Six Months Ended June 30,

 

GAAP

 

Non-GAAP

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue

$

79,962

 

 

$

63,299

 

 

$

79,962

 

 

$

63,299

 

Cost of revenue

 

52,628

 

 

 

30,630

 

 

 

47,720

 

 

 

28,545

 

Gross margin

 

34

%

 

 

52

%

 

 

40

%

 

 

55

%

Research and development

 

34,332

 

 

 

34,763

 

 

 

27,083

 

 

 

29,430

 

Selling, general and administrative

 

76,442

 

 

 

72,467

 

 

 

59,022

 

 

 

59,621

 

Adjusted EBITDA

 

N / A

 

 

 

N / A

 

 

$

(53,863

)

 

$

(54,297

)

 

 

 

 

 

 

 

 

Non-operating expense, net

 

(1,466

)

 

 

(4,178

)

 

 

(1,466

)

 

 

(4,178

)

Net loss

$

(84,906

)

 

$

(78,739

)

 

$

(55,329

)

 

$

(58,475

)

Supplemental Information

As a supplement to the table above, we have posted to the investor relations section of our website, at https://investors.nanostring.com/financials/quarterly-results/default.aspx, supplemental financial data that include our adjusted financial measures as compared to the nearest comparable GAAP financial measures, for the second quarter of 2023 and the six months ended June 30, 2023, and for each quarter of and the full year of 2022.

Conference Call

Management will host a conference call today beginning at 1:30 pm PT / 4:30 pm ET to discuss these results and answer questions. Investors and other interested parties can register for the call in advance by visiting https://conferencingportals.com/event/mNtwpnVU. Following registration, an email confirmation will be sent including dial-in details and unique conference call codes for entry. Registration is open throughout the call, but to ensure connection for the full call, registration in advance is recommended. The link to the webcast and audio replay will be made available at the Investor Relations website: www.nanostring.com. A replay of the call will be available beginning August 3, 2023 at 7:30pm ET through midnight ET on August 17, 2023. To access the replay, dial (800) 770-2030 or (647) 362-9199 and reference Conference ID: 72369. The webcast will also be available on our website for one year following the completion of the call.

Non-GAAP, or Adjusted, Financial Information

We believe that the presentation of non-GAAP, or adjusted, financial information provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. Reconciliation of adjusted financial measures to the most directly comparable financial result as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of adjusted guidance measures, including Adjusted EBITDA, to corresponding GAAP measures is not available without unreasonable effort due to the uncertainty regarding certain expenses that may be incurred in the future, and we are also unable to predict the probable significance of such adjusted guidance measures. Accordingly, in reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, we have not provided a reconciliation for adjusted guidance measures provided in this press release. For further information regarding why we believe that these adjusted measures provide useful information to investors, the specific manner in which management uses these measures and some of the limitations associated with the use of these measures, please refer to “Notes Regarding Non-GAAP Financial Information” at the end of this press release.

About NanoString Technologies, Inc.

NanoString Technologies, a leader in spatial biology, offers an ecosystem of innovative discovery and translational research solutions, empowering our customers to map the universe of biology. The GeoMx® Digital Spatial Profiler is a flexible and consistent solution combining the power of whole tissue imaging with gene expression and protein data for spatial whole transcriptomics and proteomics. The CosMx™ Spatial Molecular Imager is a single-cell imaging platform powered by spatial multiomics enabling researchers to map single cells in their native environments to extract deep biological insights and novel discoveries from one experiment. The AtoMx™ Spatial Informatics Platform is a cloud-based informatics solution with advanced analytics and global collaboration capabilities, enabling powerful spatial biology insights anytime, anywhere. At the foundation of our research tools is our nCounter® Analysis System, which offers a secure way to easily profile the expression of hundreds of genes, proteins, miRNAs, or copy number variations, simultaneously with high sensitivity and precision. For more information, visit www.nanostring.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding expectations for demand for our products and growth in our business, future revenue growth, future operating results, future cash flows, the impact of new and potential products and technology, the growth trajectory of our nCounter, and spatial biology franchises, our estimated 2023 operating results and our anticipated GAAP and non-GAAP operating results. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include market acceptance of our products; delays or denials of regulatory approvals or clearances for products or applications; the extent and duration of adverse conditions in the general domestic and global economic markets; the effects of ongoing litigation; the impact of competition; the impact of expanded sales, marketing, product development and clinical activities on operating expenses; delays or other unforeseen problems with respect to manufacturing and product development; as well as the other risks set forth in our filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. NanoString Technologies disclaims any obligation to update these forward-looking statements.

The NanoString logo, NanoString, NanoString Technologies, GeoMx, CosMx, AtoMx and nCounter are trademarks or registered trademarks of NanoString Technologies, Inc., in the United States and/or other countries.

NANOSTRING TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

Instruments

$

17,629

 

 

$

9,538

 

 

$

28,999

 

 

$

18,641

 

Consumables

 

21,257

 

 

 

17,847

 

 

 

41,033

 

 

 

35,315

 

Services and other

 

5,271

 

 

 

4,834

 

 

 

9,930

 

 

 

9,343

 

Total revenue

 

44,157

 

 

 

32,219

 

 

 

79,962

 

 

 

63,299

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of revenue

 

29,757

 

 

 

15,852

 

 

 

52,628

 

 

 

30,630

 

Research and development

 

18,214

 

 

 

17,346

 

 

 

34,332

 

 

 

34,763

 

Selling, general and administrative

 

39,076

 

 

 

36,112

 

 

 

76,442

 

 

 

72,467

 

Total costs and expenses (a) (b)

 

87,047

 

 

 

69,310

 

 

 

163,402

 

 

 

137,860

 

Loss from operations

 

(42,890

)

 

 

(37,091

)

 

 

(83,440

)

 

 

(74,561

)

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

1,527

 

 

 

406

 

 

 

2,812

 

 

 

557

 

Interest expense

 

(1,889

)

 

 

(1,880

)

 

 

(3,780

)

 

 

(3,763

)

Other income expense, net

 

(211

)

 

 

(490

)

 

 

(218

)

 

 

(707

)

Total other expense, net

 

(573

)

 

 

(1,964

)

 

 

(1,186

)

 

 

(3,913

)

Net loss before provision for income taxes

 

(43,463

)

 

 

(39,055

)

 

 

(84,626

)

 

 

(78,474

)

Provision for income taxes

 

(205

)

 

 

(184

)

 

 

(280

)

 

 

(265

)

Net loss

$

(43,668

)

 

$

(39,239

)

 

$

(84,906

)

 

$

(78,739

)

Net loss per share, basic and diluted

$

(0.92

)

 

$

(0.85

)

 

$

(1.80

)

 

$

(1.70

)

Weighted average shares used in computing basic and diluted net loss per share

 

47,365

 

 

 

46,427

 

 

 

47,151

 

 

 

46,201

 

 

 

 

 

 

 

 

 

(a) Includes $8.4 million and $6.5 million of stock-based compensation expense for the three-month period ended June 30, 2023, and 2022, respectively, and $16.1 million and $14.1 million for the six months ended June 30, 2023, and 2022, respectively.

(b) Includes $3.9 million and $2.0 million of depreciation and amortization expense for the three-month period ended June 30, 2023 and 2022, respectively and $7.4 million and $3.5 million for the six months ended June 30, 2023, and 2022, and respectively.

 

NANOSTRING TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

June 30,

 

December 31,

 

 

2023

 

 

 

2022

Assets

(Unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

114,305

 

 

$

112,250

Restricted cash and equivalents

 

625

 

 

 

898

Short-term investments

 

3,297

 

 

 

84,282

Accounts receivable, net

 

42,982

 

 

 

31,506

Inventory, net

 

48,849

 

 

 

43,273

Prepaid expenses and other

 

11,387

 

 

 

14,565

Total current assets

 

221,445

 

 

 

286,774

Property and equipment, net

 

47,939

 

 

 

44,457

Operating lease right-of-use assets

 

15,458

 

 

 

17,581

Other assets

 

4,148

 

 

 

4,600

Total assets

$

288,990

 

 

$

353,412

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

20,868

 

 

$

16,619

Accrued liabilities

 

8,649

 

 

 

7,884

Accrued compensation and other employee benefits

 

13,110

 

 

 

17,494

Customer deposits

 

2,079

 

 

 

1,757

Deferred revenue and other liabilities, current portion

 

12,287

 

 

 

9,588

Operating lease liabilities, current portion

 

5,440

 

 

 

5,518

Total current liabilities

 

62,433

 

 

 

58,860

Deferred revenue and other liabilities, net of current portion

 

4,836

 

 

 

3,754

Long-term debt, net

 

227,379

 

 

 

226,622

Operating lease liabilities, net of current portion

 

15,803

 

 

 

18,362

Total liabilities

 

310,451

 

 

 

307,598

Total stockholders’ equity (deficit)

 

(21,461

)

 

 

45,814

Total liabilities and stockholders’ equity (deficit)

$

288,990

 

 

$

353,412

Notes Regarding Non-GAAP Financial Information. In addition to our results reported in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe certain non-GAAP, or adjusted, measures are useful in evaluating our operating performance. We use adjusted financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that adjusted financial measures, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, adjusted financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In particular, other companies, including companies in our industry, may calculate similarly titled non-GAAP or adjusted measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our adjusted financial measures as tools for comparison. A reconciliation is provided below for adjusted financial measures to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP, or adjusted, financial measures as analytical tools. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these adjusted financial measures to their most directly comparable U.S. GAAP financial measure, and not to rely on any single financial measure to evaluate our business.

Expenses excluded from non-GAAP, or adjusted, cost of revenue, gross margin, research and development expense and selling, general and administrative expense and net loss. We exclude stock-based compensation expense and depreciation and amortization expense, which are non-cash expenses, from certain of our adjusted financial measures because we believe that excluding such items provides meaningful supplemental information regarding operational performance. We exclude certain expenses related to cloud computing arrangement implementation expenses, litigation expenses, and other business development expenses from certain of our adjusted financial measures because such expenses have no direct correlation to the continuing operation of our business as such expenses are non-recurring or non-operating in nature, and therefore we believe excluding these items provides meaningful supplemental information regarding operational performance.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure defined as GAAP net loss adjusted for stock-based compensation expense, depreciation and amortization, net interest expense, net other expense, provision for income tax and other special items as determined by management, including certain expenses related to cloud computing arrangement implementation expenses, litigation expenses, and other business development expenses.

The following tables reflect the reconciliation between GAAP and non-GAAP measures (in thousands).

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net loss - GAAP

$

(43,668

)

 

$

(39,239

)

 

$

(84,906

)

 

$

(78,739

)

Stock-based compensation

 

8,436

 

 

 

6,458

 

 

 

16,062

 

 

 

14,125

 

Depreciation and amortization

 

3,906

 

 

 

1,961

 

 

 

7,442

 

 

 

3,504

 

Interest expense, net

 

362

 

 

 

1,474

 

 

 

968

 

 

 

3,206

 

Other expense, net

 

211

 

 

 

490

 

 

 

218

 

 

 

707

 

Provision for income taxes

 

205

 

 

 

184

 

 

 

280

 

 

 

265

 

Other business development expense

 

 

 

 

44

 

 

 

 

 

 

393

 

Litigation expense

 

3,696

 

 

 

1,237

 

 

 

5,767

 

 

 

1,930

 

Cloud computing arrangement implementation expense

 

153

 

 

 

156

 

 

 

306

 

 

 

312

 

Adjusted EBITDA - non-GAAP

 

(26,699

)

 

 

(27,235

)

 

 

(53,863

)

 

 

(54,297

)

Non-operating expense, net

 

(778

)

 

 

(2,148

)

 

 

(1,466

)

 

 

(4,178

)

Net loss - non-GAAP

$

(27,477

)

 

$

(29,383

)

 

$

(55,329

)

 

$

(58,475

)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

GAAP Cost of revenue

$

29,757

 

 

$

15,852

 

 

$

52,628

 

 

$

30,630

 

Stock-based compensation

 

(821

)

 

 

(699

)

 

 

(1,613

)

 

 

(1,275

)

Depreciation and amortization

 

(1,768

)

 

 

(397

)

 

 

(3,295

)

 

 

(810

)

Non-GAAP Cost of revenue

$

27,168

 

 

$

14,756

 

 

$

47,720

 

 

$

28,545

 

 

 

 

 

 

 

 

 

GAAP Gross margin

 

33

%

 

 

51

%

 

 

34

%

 

 

52

%

Non-GAAP Gross margin

 

38

%

 

 

54

%

 

 

40

%

 

 

55

%

 

 

 

 

 

 

 

 

GAAP Research and development

$

18,214

 

 

$

17,346

 

 

$

34,332

 

 

$

34,763

 

Stock-based compensation

 

(2,127

)

 

 

(1,818

)

 

 

(4,089

)

 

 

(3,561

)

Depreciation and amortization

 

(1,659

)

 

 

(1,054

)

 

 

(3,160

)

 

 

(1,772

)

Non-GAAP Research and development

$

14,428

 

 

$

14,474

 

 

$

27,083

 

 

$

29,430

 

 

 

 

 

 

 

 

 

GAAP Selling, general and administrative

$

39,076

 

 

$

36,112

 

 

$

76,442

 

 

$

72,467

 

Stock-based compensation

 

(5,488

)

 

 

(3,941

)

 

 

(10,360

)

 

 

(9,289

)

Depreciation and amortization

 

(479

)

 

 

(510

)

 

 

(987

)

 

 

(922

)

Other business development activities

 

 

 

 

(44

)

 

 

 

 

 

(393

)

Litigation expense

 

(3,696

)

 

 

(1,237

)

 

 

(5,767

)

 

 

(1,930

)

Cloud computing arrangements implementation expense

 

(153

)

 

 

(156

)

 

 

(306

)

 

 

(312

)

Non-GAAP Selling, general and administrative

$

29,260

 

 

$

30,224

 

 

$

59,022

 

 

$

59,621

 

 

Doug Farrell
Vice President, Investor Relations & Corporate Communications
dfarrell@nanostring.com
Phone: 206-602-1768

Source: NanoString Technologies, Inc.