Greetings. Welcome to the Champions Oncology Second Quarter Fiscal Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Ronnie Morris, CEO. You may begin.

Good afternoon. I am Ronnie Morris, CEO of Champions Oncology. Joining me today is David Miller, our Chief Financial Officer. Thank you for joining us for our quarterly earnings call. Before I begin, I will remind you that we'll be making forward-looking statements during today's call and that actual results could differ materially from what is described in those statements. Additional information on factors that could cause results to differ is available on our Forms 10-Q and Form 10-K. A reconciliation of non-GAAP financial measures that may be discussed during the call to GAAP financial measures is available in the earnings release. Overall, our second quarter's results were mixed as we continue to navigate through some of the challenges we've been highlighting over the past several quarters. Our financial results were weaker than we have been accustomed to delivering. However, there were several positive foundational developments in our core business that have us well positioned for the future. As we have discussed in the past, approximately 1 year ago, we encountered business headwinds on multiple fronts. The economic environment specifically in our sector turned markedly negative which impacted our customers, and ultimately, Champions Oncology. As our customer's R&D budgets were reduced, we encountered longer sales cycles and fewer studies signed. Additionally, customers had a much higher propensity to cancel all or part of the study they had recently signed. The resulting lower net bookings was the precursor to the anticipated revenue decline we are currently experiencing. Additionally, in conjunction with the external factors, we identified some operational issues that led to slower revenue conversion, creating further downward pressure on our operating results. I remain optimistic that we have made significant progress towards reversing these trends and we see a light at the end of the tunnel as positive trends are…

Thanks, Ronnie. Our full results on Form 10-Q will be filed with the SEC on or before December 15th. Our second quarter revenue was $11.6 million, a decline of 19% from the second quarter of fiscal 2023. As we've been guiding over the last several quarters, the challenges encountered last year, specifically the customer cancellations, led to a decline in prior quarter net bookings and would lead to lower revenue in the first half 2024. We believe Q2 was the low point and a gradual improvement will follow over the coming quarters. On a GAAP basis, our loss for the second quarter of 2024 was approximately $2 million compared to a gain of $8,000 in the prior year. Included in the $2 million loss were noncash expenses of stock comp and depreciation totaling approximately $600,000. Excluding these noncash items, our adjusted EBITDA loss was approximately $1.4 million for the quarter compared to an adjusted EBITDA profit of $686,000 in the year ago period. Turning the focus to our cash based results. The total cost of sales was $6.6 million compared to $7.2 million in our second quarter last year, a decline of 9%. The decrease relative to the same period last year was primarily due to a reduction in outsourced lab services and supply expenses. Despite the decline in cost of sales as a result of our lower top line revenue, our gross margin for the quarter was 43% compared to 49% for the same period last year. Our margins should begin to improve over the coming quarters as our revenue expands and we leverage against the fixed cost component of cost of sales along with our variable cost increasing at a slower pace. For the quarter, R&D expense was approximately $2.5 million compared to $2.6 million in the year…

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Matt Hewitt with Craig-Hallum.

This is Jack on for Matt. As you commented in your prepared remarks, you spoke to elevated cancellations. Is this broad-based or is there one or two large cancellations that represented the delta? And then how are things looking so far this quarter? We're hearing from others in the industry that the rate of cancellations are declining, we're curious if that's consistent to what you're hearing? And then I have a follow-up as well.

Yes. So I would say that it's pretty much a broad-based effect that started a couple of quarters ago that's washing out now. And we don't see it from necessarily one or two customers. We saw it as a kind of a broad-based industry-wide exercise with just a lot of cancellations. Your second question was what again? Sorry. Remind me of your second question.

How are things looking so far this quarter? We're just hearing from others in the industry that the rate of cancellations are declining, but we're curious if that's consistent with what you're hearing?

Yes. Totally consistent with what we're seeing. The cancellations have come back down to what we call our historical norms, the way it was before. I would say it started about a year or maybe a little over a year ago. So we are seeing that. We're seeing the bookings remain consistently strong with cancellations coming down, which gives us the optimism that we think things are going to get back to the way they were and back to normal profitability and growth in the short-term.

And then for my follow-up, a lot of pharma and biotech companies are in a midst of budget planning. What are you hearing from them as far as expectations for next year and how do you think that will impact your business?

Yes. So we're hearing some mixed feelings. I think we're generally optimistic. Certainly a lot of the larger pharmaceutical companies as opposed to some of the smaller biotech companies, we feel very confident that their budgets are healthy and we've been in discussions with them about planning for next year. So, I think it's a mixed bag still. I don't think we're back to the way things were a couple of years ago where there was a tremendous amount of investment in biotech. But I don't think it's as bad as it was 1 year, 1.5 year ago where nobody knew what to do and everyone was hoarding cash and was worried about where they're going to be able to raise money and holding on to budgets really tightly. So I think we're better than we were. I don't think we're back to the way things were a couple of years ago but there are certainly different strategies. One of our strategies is to focus more on the large pharma and who I think have more visibility into their R&D budgets than some of the smaller biotechs.

[Operator Instructions] Okay. We have no further questions in queue. I'd now like to turn the call back over to management for closing remarks.

Thank you everybody for joining us for our quarterly call. Clearly not the quarter we expected. Certainly the quarter we expected a quarter ago but certainly not something that we have generally expected over the last couple of years with a lot of growth. We're looking forward based on all the information that we see in front of us to getting back to the continued growth. We're excited about the drug development effort and the subsidiary that we have carved out. In terms of that endeavor we're also excited about some of our newer service lines including clinical biomarkers and our ex vivo platform. So a lot of promising news to come and we look forward to updating everybody on our next quarterly call in a couple of months. Thank you everybody for joining. Bye.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.