Greetings. Welcome to the Champions Oncology Third Quarter Fiscal Year 2024 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Ronnie Morris, CEO of Champions Oncology. 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're 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, we experienced a challenging third quarter with less than stellar results as we continue to navigate through the challenges we've been highlighting over the course of the year. However, I will reiterate that we see positive developments emerging that will translate to improving results over the coming quarters. As we have discussed on previous calls, the challenges began in October of 2022, when the economic environment, specifically in the biotech sector turned markedly negative. Our customers reduced their R&D budgets in real time, which led to fewer studies ordered and increasing cancellations and longer sales cycles. In addition, the study sizes were smaller than we were accustomed to, which is a trend that has continued. All of these factors resulted in lower net bookings and ultimately lower quarterly revenue. Along with the external factors, we identified some operational issues that led to slower revenue conversion, putting additional downward pressure on our top line and operating results. We have made significant progress towards reversing these trends and the metrics we use to measure operational efficiencies and success have made significant headway over the last several months. Cancellations have receded back to historical levels. Our business development strategy is taking…

Thanks, Ronnie. Our full results on Form 10-Q will be filed with the SEC on or before March 18. Our third quarter revenue was $12 million, a decline of 6% from the third quarter of fiscal 2023. As we've been guiding on our calls throughout the year, the challenges encountered last year, specifically the customer cancellations led to a reduction in convertible bookings and would ultimately lead to lower revenue in 2024. We believe last quarter, our Q2 was the revenue low point and the expectation remains that we'll see gradual improvement over the coming quarters beginning with this quarter, Q3, which was approximately 4% higher sequentially. On a GAAP basis, our loss for the third quarter of 2024 was approximately $2.6 million compared to $2.5 million in the prior year. Included in the $2.6 million loss were non-cash expenses of stock comp and depreciation totaling approximately $900,000. Excluding these non-cash items, our adjusted EBITDA loss was approximately $1.7 million for the quarter compared to an adjusted EBITDA loss of $1.6 million in the year ago period. Turning the focus to our cash-based results. The total cost of sales was $7.8 million compared to $7.5 million in our third quarter last year, an increase of 4%. The increase relative to the same period last year was primarily due to an increase in mouse costs. These costs rose due to some operational inefficiencies, which are being corrected. This should lead to lower mouse costs as a percentage of revenue in the coming quarters. As a result of our lower top line revenue and higher cost of sales, our gross margin dipped to 35% for the quarter compared to 41% for the same period last year. Our margins should begin to improve over the coming quarters as our revenue expands, leveraging against…

[Operator Instructions] Your first question for today is from Matt Hewitt with Craig-Hallum.

This is Jack on for Matt. A couple of questions. When do you expect the press release? It looks like that hasn't been published yet. And then for a follow-up, coming out of what have you been hearing from customers regarding budgets and their pipelines? Are they feeling a bit more comfortable with their balance sheets and willing to reengage from an investment standpoint?

So I'll take the first one, and I'll let Ronnie take the second one. Yes, I'm not sure why there was a delay in the press release. I actually got an e-mail confirmation just while we're on the call. It was sent out as per usual. And I know it didn't hit at 4:00 p.m. as it was scheduled. There's no other reason other than some technical issue on the press release side, not on our end.

And in terms of the -- in terms of what we're seeing out there, there's certainly been a loosening up of the R&D budgets in the pipelines. Certainly, there's been a lot more activity in the last couple of months than there were almost all last year. We're -- as I think I mentioned in my comments, we anticipated this coming down the pike and we're working really hard to work more closely with some of the larger pharmaceutical companies and partners that we have. We are starting to see more of the biotechs starting to have more funds and starting to talk about doing more studies. But I think it's still a little bit early for us to know exactly if -- how far back things have come. So certainly looking better than it was, let's say, a year ago, but how far it's going to come to where it was a couple of years ago, I just don't know yet.

And if I could squeeze in one more question regarding Corellia AI. Can you just give a progress update on that? How much do you think you've invested in the business during Q3? And then given the environment, does it make sense to maybe put it down the side burner until we see further improvement?

Yes, go ahead.

It was about $900,000. And again, there is some overlap between Champions and obviously, Corellia, but about $900,000 was in the current quarter. And certainly, Ronnie can take the -- in terms of the strategic planning for the future.

And in terms of the Corellia investment, we definitely are lowering our investment substantially for both Q4 and Q1 going forward. We are -- we believe, getting close to getting investments or out-licensing deals for some of the assets, so we think in short order. So the answer to your question is number one, we are taking that into account and we are reducing our spend significantly. And two, we are excited and hopefully getting outside funding in short order to take the pressure off of Champions to continue to grow the exciting platform.

[Operator Instructions] We've reached the end of the question-and-answer session, and I will now turn the call over to Ronnie for closing remarks.

Thank you. So thank you, everybody for joining our quarterly earnings call. As I think we've mentioned, it was somewhat of a disappointing quarter from financial perspective, but we do feel very confident going forward both looking at our bookings and our efficiencies and our operational excellence and the customer feedback that we are going to start to have quarters where we have good revenue, higher base of revenue, decreased costs and profitability. So we are excited to continue to update you for Q4 and for next year's guidance as well over the summertime. So we look forward to that update and have a good evening.

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