Greetings. Welcome to the Champions Oncology First Quarter Fiscal Year 2025 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, Chief Executive Officer. 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 are 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. I will start by pointing out that our prepared comments for today will be relatively brief, as we just recently provided our fiscal year-end results and company update six weeks ago. On our year-end call, I provided an update on the difficulties we encountered last year, which led to disappointing financial results compared to our historical performance. I indicated that these challenges stem from a combination of external and internal factors. Externally, the weakness and retraction in the biotech sector, including tightness in the capital markets negatively affected our customers' R&D budgets, resulting in fewer biotech signing studies as well as a decrease in our average study size. This led to a decrease in our bookings growth and revenue. Internally, we were hampered by operational issues that led to cost inefficiencies and delays in revenue recognition, putting pressure on our bottom line. On a more positive note, I highlighted that we ended the year strongly with significant trend reversals beginning to emerge. Improvements in our operations began to take hold and some of the external pressures appear to be easing. The reversal was supported by our Q4 revenue in excess of $14 million and an adjusted quarterly profit.…

Thanks, Ronnie. Our full results on Form 10-Q will be filed with the SEC by Monday, September 16. Our first quarter revenue was $14.1 million, an increase of 12% from the first quarter of 2024. As highlighted on our year-end call and reiterated by Ronnie, the financial turnaround began last quarter and continued with our second consecutive quarter of revenue in excess of $14 million. On a GAAP basis, our income from operations for the first quarter of 2025 was $1.3 million, compared to a loss of $2.6 million in the prior year. Included in the income of $1.3 million were non-cash expenses of stock comp and depreciation, totaling approximately $700,000. Excluding these non-cash items, our adjusted EBITDA was $2 million for the quarter, compared to an adjusted loss of $1.7 million in the year-ago period. Turning the focus to our cash-based results, total cost of sales was $7 million, compared to $7.5 million in our first quarter last year, a decline of 6%. The decline was primarily due to operational efficiencies implemented, which had a dual effect of reducing the amount of repeat work and the associated costs while increasing our revenue conversion. Due to the decrease in cost of sales while increasing revenue by $1.5 million, our gross margin for the quarter improved to 50%, compared to 40% for the same period last year. Our margins will fluctuate over the next few quarters with some expected volatility in revenue and cost of sales, but over the long-term, with the stabilization in our costs, we anticipate delivering margins in excess of 50% as our revenue grows. For the quarter, R&D expense was approximately $1.5 million, compared to $2.8 million in the year-ago period, a decline of $1.3 million. We have a renewed emphasis on our bottom line results, and…

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. Please proceed.

Good afternoon and thank you for taking the questions and congratulations on the strong quarter. Maybe first up, I'd love it if you could provide a little bit of color on what you're hearing from customers. I think you noted that the funding environment has gotten a little bit better. But what are you hearing from customers? And even if you could delineate that between the smaller, midsize customers versus larger customers, there's been some – I don't want to say concern, but some comments here recently regarding the larger customers' reprioritization of pipelines, those types of things. I'm just curious what you're hearing?

Hey. Matt, thanks. Yes, so I don't know that we have a scientific answer for that, but I'll give you kind of our gestalt and some anecdotes. We feel that it's still not the way it was, let's say, a couple of years ago, but it's better than it was a year-ago. So it's improving. To the degree it's improving, it's hard to really tell you. I would say that from our experiences, it's still tight in the small biotech world, whereas in the midsized to the larger pharma they are definitely cutting back, but they have budget, and they are continuing to do work. So for our services, the preclinical services, using our unique and first-in-class PDX bank, I think that's a place where they need to continue to spend. So from our perspective, it's definitely getting better, but it's not where it was, let's say, a couple of years ago, and we think it will get there. It might just take another year or so.

Okay. That's much appreciated. Last quarter, you noted that the conversion rates were improving. Cancellation rates were down. Did that trend continue here into the first quarter?

Yes. Yes. We've seen that both of those things are happening. Our revenue is converting better and as a result of our cancellations being down as well. So those are two really positive aspects to the first quarter as well as the fourth quarter that we had talked about. So things are definitely moving in the right trend – right direction.

That's great. And maybe one last one, and I'll hop back in the queue. But on Monday afternoon, the BIOSECURE Act was passed in the House, now it moves on to the Senate. I'm just curious, do you guys compete against one or more of the entities listed in that bill? And if so, would their being blocked in the – here in the U.S. market, would that create an opportunity for you to pick up some share? Thank you.

Yes. So I think for a long time, certain companies have stayed away from working with some of those groups. I think it probably will help us. I don't know to what extent, but I think it probably will help us because certainly, some of those companies, to a certain extent, we compete with. So...

Got it. Well, that's great news. Thank you.

Thanks, Matt.

[Operator Instructions] Okay. We currently have no questions in queue. I'd like to turn it back to management. [Operator Instructions]

Hello.

Just polling for questions.

Sure. No problem.

Okay. I'd like to turn the floor back to management for any closing remarks.

Great. Well, thank you, everybody, for joining us for our quarterly earnings call. We certainly are excited to continue the positive trend, getting back to profitability and the growth. We are excited about how we deliver our results, the quality, our teams, the work we do – the important work we do with our pharmaceutical and the biotech partners and customers. And we look forward to updating everybody in a couple of months to our continued progress. So everyone, have a good evening, and thank you for joining us.

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