Champions Oncology, Inc. Q4 2026 Earnings Call

Good day everyone, welcome to the Champions Oncology fourth quarter fiscal year 2026 earnings call. At this time, all participants are placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star one to enter the question queue at any time, we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Rob Brannan, CEO of Champions Oncology. Sir, the floor is yours.

Thank you. Good afternoon, thank you for joining our fiscal 2026 year-end earnings call. I'm Rob Brannan, CEO of Champions Oncology, I'm joined today by our CFO, David Miller. Before we begin, I'll remind everyone that today's remarks may include forward-looking statements. Actual results may differ materially, you can find more information in our filings with the SEC. I'd like to begin by referring back to what I said shortly after stepping into this role in late August 2025.

I said that we would build on the progress the company had made over recent years, stay focused on positive adjusted EBITDA for the year, at the same time, keep investing in our two growth vectors, data and Corellia AI, with the returns on those investments coming in later quarters and years, as well as continuing to invest in our TOS business, especially around growth areas like the radioligand platform. I'm pleased to say our execution against that plan held up well. In fiscal 2026, we delivered record annual revenue and met our commitment to full-year positive adjusted EBITDA, including positive adjusted EBITDA in each of the four quarters on its own, the first time that has happened since fiscal 2022, driven by real strength in our core services business.

Our data business did not repeat its fiscal 2025 revenue, the comparison is less telling than it looks, I'll come back to why later in my remarks. We invested across the organization to build for the next phase of growth. That combination produced a record top line as well as positive adjusted EBITDA, alongside a GAAP net loss that reflects those deliberate investments. Our Translational Oncology Solutions business had its strongest year in the company's history. Services revenue grew to a record $58.7 million, up approximately 12% over the prior year, as previously booked studies converted well and our PDX bank continued to differentiate us in a market where model quality and characterization matter more every year.

I want to thank our operations team again, who delivered that growth without material additions to headcount, which is the operating leverage we've been describing starting to show up in the numbers. As we've said before, quarterly results can vary, primarily due to the timing of study completions, so we evaluate the business on an annual basis. After this year's strong conversion, we'd expect services growth to moderate to a more normalized pace in the near term. The underlying demand environment is healthy, and our focus is on continuing to expand bookings and the future pipeline of work. In terms of data, the year-over-year comparison does not tell the complete story. Data license revenue was approximately $800,000 for fiscal 2026, compared to $4.7 million in fiscal 2025, and that prior year figure reflected one large transaction that did not recur.

The fourth quarter in particular did not include meaningful data revenue. Some of what we had expected to recognize in Q4, including revenue tied to the larger agreement we've discussed previously, shifted into the first quarter of fiscal 2027, a reminder that the timing and size of individual data transactions can result in meaningful quarter-to-quarter fluctuations in revenue. What I'd point to is the direction rather than any single quarter. We expanded our fiscal 2026 customer base through a series of smaller licensing agreements while continuing to pursue larger strategic licensing opportunities, growing from a very small customer base in fiscal 2025 to a much larger one in fiscal 2026. Our pipeline has also grown, both in the number of opportunities and the size of potential transactions, and customer engagement continues to build around the value of combining our deeply characterized models with clinically relevant data.

In short, we made meaningful progress in broadening our customer base while continuing to pursue larger strategic licensing opportunities, and we continued investing in the data platform to support its future growth and scalability. This is also where our services and our data come together. Our work in PDX models is a form of predictive modeling. The same predictive capability that has always powered our studies becomes far more powerful when it sits on top of a deeply characterized data set and is used in conjunction with modern machine learning and AI. That combination is what lets us move from predicting the result of one study at a time toward helping partners identify signatures, select the right patients, and design better trials from the data itself.

It's still early for this business, and I expect revenue to continue to fluctuate in the near term, but the strategic logic behind it and the long-term opportunity as AI becomes more central to drug discovery only gets stronger. Turning to Corellia, our wholly owned therapeutic subsidiary, we remain encouraged. The data we continue to generate is compelling, and our external conversations with both venture capital groups and potential pharmaceutical partners have reinforced our confidence in the science and the commercial opportunity. As I've mentioned before, our fiscal 2027 budget assumes we have Corellia funded for the full year. If we're successful in securing external funding, either by closing an outside round or through a licensing partnership, the investment currently flowing into that business would be redeployed towards other growth initiatives, particularly data, or put to the bottom line.

On timing, these processes take time, especially in the current biotech funding environment, so I won't put a specific date on it. What I can say is that the discussions are active, the feedback is positive, and the data continues to strengthen the case. In summary, fiscal 2026 was an investment year, and we made those investments deliberately while still delivering positive adjusted EBITDA. That's what positions us for stronger growth and expanding profitability ahead. The onus is on us now to deliver strong fiscal 2027, and we'll be reporting against that in each quarterly update as the year progresses. With that, I'll turn the call over to David to walk through the financials in more detail.

Thank you, Rob, and good afternoon. Before I begin, I'll remind everyone that our full financial results are included in our Form 10-K, which we filed later today with the SEC. I'll also reference certain non-GAAP financial measures with reconciliations included in today's earnings release. Rob has walked through the highlights of the year. I'll take a few minutes to review our financial results and discuss some of the key trends we saw throughout fiscal 2026. Turning first to revenue. Q4 revenue was $13.8 million, an increase of 12% over the prior year quarter, bringing full-year revenue to a record $59.4 million. As Rob discussed, the comparison in our data business was affected by the large licensing transaction completed in fiscal 2025. Even with that headwind, we delivered another year of record revenue driven by 12% growth in our core Study Services business. Turning to profitability. Q4 adjusted EBITDA was $158,000, marking our fourth consecutive quarter of positive adjusted EBITDA.

For the full fiscal year, adjusted EBITDA was $1.6 million. We believe that's an important accomplishment given what we set out to achieve during the year. We continued investing in our data platform and Corellia, expanded our sales and marketing organization, and remained adjusted EBITDA positive throughout the year. Focusing in on margin. Q4 gross margin improved to 51% compared to 41% in the prior year quarter. That improvement reflected continued cost discipline and, importantly, a meaningful reduction in outsourced radiopharmaceutical costs as we've continued transitioning that work in-house. As we've discussed throughout the year, bringing radiopharmaceutical activities in-house has been an important operational initiative for the company, and we're beginning to see those efforts reflected in our financial results.

While there's still work to do, we're encouraged by progress we've made and believe we're moving in the right direction. For the full year, reported gross margin increased to 48% from 46% in the prior year. While that represents a modest improvement, the underlying performance of our core Study Services business improved more significantly than the reported results suggest. Fiscal 2025 benefited from the high level of higher-margin data revenue, while fiscal 2026 included the temporarily outsourced radiopharma costs. Despite those offsetting factors, we improved overall gross margin year-over-year. As we continue realizing the benefits of performing our own radiopharma work, we expect outsourced costs to continue to decline, and we believe which will continue to benefit margins over time. Turning to operating expenses. Q4 expenses remain generally in line with our expectations as we continue developing the business. For the full year, operating expenses increased as planned.

Approximately $3 million of the increase related to the temporary outsourced radiopharma activities and the remainder primarily reflected the continued development of our data platform and the expansion of our sales and marketing organization to support both core research service business and our emerging data offerings. Turning to the balance sheet. We ended the year with $4.9 million cash and no debt. During the year, we continued investing in the business while maintaining a healthy balance sheet, providing us with the financial flexibility to continue executing our strategy. Overall, fiscal 2026 was an important year for Champions Oncology. We delivered record annual revenue, achieved positive adjusted EBITDA in each quarter, strengthened our operating platform, and made meaningful progress on initiatives that we believe position the company well for the future.

As we move through fiscal 2027, our focus remains on executing against our operating plan, continuing to improve profitability, and maintaining the financial discipline that has served us well. We'll continue evaluating opportunities to invest in the business where we believe they can generate attractive long-term returns. With that, we'll open the call for questions.

Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press *1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press *1 on your phone. Please hold while we poll for questions. Thank you. Once again, everyone, if you have any questions or comments, please press star, then one on your phone. Please hold while we poll for questions. Thank you. That concludes our Q&A session. I'll now hand the conference back to our host for closing remarks. Please go ahead. Thank you.

Thank you all again for attending today's call or listening subsequently on the webcast. We're pleased about the progress we're making in the business and look forward to sharing our continued progress in our upcoming quarterly calls. Thank you, and have a wonderful day.

Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.