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DATE
Thursday, March 12, 2026 at 4:30 p.m. ET
CALL PARTICIPANTS
- Chief Executive Officer — Robert Brainin
- Chief Financial Officer — David Miller
TAKEAWAYS
- Total Revenue -- $16.6 million, a decrease of approximately 3% from the prior period, attributed to the absence of recognized data revenue.
- Core Study Revenue -- Reached a record $16.6 million, up roughly 32% year over year, reflecting strong customer demand and successful conversion of pre-booked projects.
- Data Revenue -- No data revenue recognized, compared to $4.5 million a year ago, directly causing the overall revenue decline.
- Adjusted EBITDA -- $575,000, marking the third consecutive quarter of positive results; GAAP loss from operations was approximately $275,000 in the period.
- Gross Margin -- 47%, down from 61% in the prior period, largely explained by over $2 million in outsourced lab work linked to radiolabeling workflows; prior-year margin benefited from higher-margin data license revenue.
- Operating Expenses -- $7.2 million, an increase from $5.3 million year over year, with management citing higher research and development, sales and marketing, and general and administrative spending tied to strategic investments.
- Net Cash Used in Operating Activities -- $1.4 million, mainly due to working capital changes and a decrease in deferred revenue timing.
- Cash Position -- $7.1 million at quarter-end, with no debt, and within management's projected range.
- Data Business Momentum -- Management noted closing a "6-figure data deal" in the quarter, with associated revenue expected to be recognized in the following quarter, and continued progress on previously announced large data deals.
- Corellia Funding -- Ongoing efforts to secure external financing for the Corellia subsidiary, with no specific timeline disclosed; future Corellia funding may allow redeployment of EBITDA into other growth initiatives.
- Outsourced Costs Impact -- Over $2 million in outsourced lab expenses for radiolabeling impacted gross margin; management expects margin improvement as this work is brought in-house.
- Full-Year Outlook -- Company stated it remains on track for full year revenue growth and full year positive adjusted EBITDA, while continuing investment in its data platform and the Corellia subsidiary.
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RISKS
- Gross margin fell significantly to 47%, with management noting dependence on bringing outsourced radiolabeling in-house to recover margin levels.
- Absence of data revenue in the current quarter drove the overall revenue decline; management highlighted data revenue variability in this stage of platform development.
- Ongoing investments in R&D and commercial expansion are elevating operating expenses, which are not yet resulting in corresponding revenue growth from new platforms.
SUMMARY
Champions Oncology (CSBR 1.57%) reported a second consecutive quarter of record study revenue, supported by robust customer pipelines and backlog conversion. The company did not recognize any data revenue this quarter, which management described as the principal reason for the reported year-over-year topline decline. Operating cash flow was negative $1.4 million, driven primarily by timing-related changes in working capital and deferred revenue. Corellia, the wholly owned discovery subsidiary, continues to seek external funding, with the timing of such funding still uncertain.
- The data business closed a "6-figure" deal to be recognized in the next quarter, indicating new commercial traction not yet reflected in reported results.
- Management stressed that study revenue was elevated in part by completion timing, which they expect will normalize, potentially affecting revenue run rate in the near term.
- Gross margin comparisons to the prior year were negatively affected by mix shift away from high-margin data license revenue and toward lower-margin, outsourced workflows.
- External funding for Corellia remains under negotiation, with management reiterating that ongoing investments could shift depending on timing and outcome of these discussions.
INDUSTRY GLOSSARY
- PDX Bank: A collection of patient-derived xenograft tumor models used to support oncology drug research and translational studies.
- Radiolabeling workflows: Laboratory procedures involving incorporation of radioactive isotopes into molecules for imaging or tracing in research studies.
- Corellia: Champions Oncology's wholly owned subsidiary focused on target discovery in oncology.
Full Conference Call Transcript
Robert Brainin: Good afternoon, and thank you for joining us for our third quarter fiscal 2026 earnings call. I'm Rob Brainin, CEO of Champions Oncology, and 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, and additional information can be found in our filings with the SEC. Before I walk through the quarter, let me briefly highlight 3 key takeaways. First, we delivered another quarter of strong operational performance, including record services revenue and our third consecutive quarter of positive adjusted EBITDA.
Second, while quarterly revenue can fluctuate in our business, we remain on track for full year revenue growth and full year positive adjusted EBITDA while continuing to invest in both our data platform and our discovery therapeutics subsidiary. And third, we're beginning to see early momentum in our data business, including new deals closed during the quarter and additional revenue expected in the fourth quarter. Overall, we're pleased with the progress we're making as we scale the core services business while booting the longer-term growth opportunities in data and drug discovery. Turning to the quarter in more detail.
We delivered another quarter of record services revenue, underscoring the strength of our core translational oncology services platform and the resilience of our customer relationships. Our PDX Bank remains a true differentiator in the market. And as customer budgets stabilize, we continue to see bookings convert into revenue. I also want to thank our operations team who delivered this growth without material additions to headcount. That reflects the operating leverage in our model and our ability to expand margins as we scale. As we've said repeatedly, this is a somewhat lumpy business. Quarterly revenue can fluctuate depending on the timing of study progression and completion.
During the quarter, we saw strong conversion of previously booked work, including some backlog from prior quarters, which benefited revenue in the period. Looking ahead, we would expect revenue to normalize somewhat as studies move through their various stages. That said, the underlying demand for our services remains healthy, and our focus continues to be on expanding the pipeline of future work through increased commercial engagement. This quarter, despite strong services performance, our year-over-year revenue showed a slight decline due to the large data deal we closed in the third quarter last year. Importantly, our services revenue came close to fully offsetting that comparison.
Stepping back from the quarter-to-quarter noise, which is why we manage the business on an annual basis, we remain on track for full year revenue growth and full year positive adjusted EBITDA. all while continuing to invest in both our data business and Corellia without dilution of Champions' shares. That balance, growth and investment, coupled with disciplined focus on the bottom line is central to how we're managing the company. While EBITDA remains somewhat suppressed in the near term as we continue investing in these growth drivers, we expect the payoff from those investments to begin showing up in fiscal 2027 with more meaningful acceleration in fiscal 2028, which brings me to an update on our data business.
Although we did not recognize data revenue in the third quarter, we are beginning to see tangible signs of momentum in our data business. During the quarter, we closed a 6-figure data deal that we expect to recognize in Q4. We're beginning to see traction with smaller transactions, which is important in building a broader and more diversified data business customer base with the potential to lead to larger deals in the future with those customers. And we continue to progress the large data deal we originally announced in Q3 of fiscal '25 with incremental revenue expected from that deal in the fourth quarter. While I need to reiterate that this is still early, these developments are encouraging.
Customer engagement remains strong, and we are spending significant time and strategic discussions with partners who recognize the value of combining deep biological annotation with clinically relevant tumor models. The opportunity here remains substantial, and we are building it deliberately and thoughtfully. Turning to Corellia, our wholly owned target discovery subsidiary. We continue to generate attractive data that is being well received by potential venture capital funding partners and licensing counterparts. The feedback we're receiving is positive, and we believe the science is compelling. As we've communicated previously, we have included the funding of Corellia in our initial fiscal 2027 budgeting assumptions.
However, if we're successful in closing an external funding round, the EBITDA currently being invested in that business would be redeployed toward other growth initiatives, particularly in data and/or flow through to the bottom line. I know a common question is the expected timing of funding for Corellia. At this point, I do not have a specific estimate as to when an external financing may occur. These processes take time, particularly in the current biotech funding environment. What I can say is that the discussions are ongoing, engagement remains quite active and the underlying data being generated on an ongoing basis continues to strengthen the investment case.
Stepping back, Champions today is a stronger, more diversified company than it was 2 years ago. We have a differentiated and deeply characterized tumor bank that anchors our services platform, a growing radiopharmaceutical capability that enhances our competitive positioning, a data platform that is beginning to generate commercial traction and has significant long-term potential and a therapeutic subsidiary with scientific validation and external interest, where we believe we will soon be positioned to capture some of the return for the investments we have made. These growth vectors are separate but interrelated and our objective remains to maximize shareholder value across all 3 while maintaining disciplined capital allocation.
Importantly, we are demonstrating that we can invest in the future while maintaining positive adjusted EBITDA today. That combination is critical. As we move through the fourth quarter, our focus remains on execution, delivering strong service performance, advancing data opportunities, progressing Corellia discussions and finishing the fiscal year with positive adjusted EBITDA and annual growth. Looking ahead, we believe the investments we are making today in these value drivers position Champions to deliver stronger growth and expanding profitability in the years ahead. With that, I'll turn the call over to David to walk through the financial results in more detail.
David Miller: Thank you, Rob, and good afternoon, everyone. Before I dive in, just a quick reminder that our full results will be filed on Form 10-Q with the SEC before March 17. And as always, I'll reference certain non-GAAP metrics with reconciliations to GAAP included in our earnings release. Total revenue for the quarter was $16.6 million compared to $17 million in the prior year period, a decrease of approximately 3%. However, the mix of revenue this quarter is important to understand. Our core study revenue reached a record $16.6 million compared to $12.6 million in the year ago period, representing growth of approximately 32%. This performance reflects strong study execution and conversion of previously booked work during the quarter.
We did not recognize any data revenue from our nascent data platform this quarter compared to $4.5 million in the prior year period, which accounts for the overall year-over-year revenue decline. As we have discussed previously, data revenue will vary from quarter-to-quarter at this stage of the platform development. We anticipate it will become a more meaningful and regular contributor to our results over time. It is also worth noting that study revenue in the quarter benefited in part from strong study completion timing, which will normalize in the near term before continuing to grow as bookings expand. As a result, quarterly revenue can fluctuate as studies move through different phases of execution.
Taken together, this revenue performance and continued operating discipline supported our third consecutive quarter of positive adjusted EBITDA coming in at $575,000, while our GAAP loss from operations for the quarter was approximately $275,000. Importantly, on a year-to-date basis, we remain on track to achieve full year positive adjusted EBITDA. Turning to margins. Cost of sales for the quarter was $8.8 million compared to $6.6 million in the prior year period, resulting in a gross margin of 47% compared to 61% last year. It's important to highlight that more than $2 million of cost of sales in the quarter was attributable to outsourced laboratory work primarily related to radiolabeling workflows.
As we continue bringing this work in-house, we expect these costs to decline and margins to improve. At current revenue levels, had this work been performed internally, our gross margin would have been in excess of 50%. It is also worth noting that prior year margins benefited from the data license transaction recognized in that period. Operating expenses for the quarter were $7.2 million compared to $5.3 million in the prior year period. The increase reflects investments aligned with our strategic priorities. Research and development expenses increased as we invested in sequencing and related activities to support the continued development of our data platform.
Sales and marketing expenses increased as we expanded both our data business development team and our commercial POS team supporting both platforms. And G&A expense increased primarily due to leadership transitions and investments in IT infrastructure. While these investments increased operating expenses in the near term, they are intended to support future revenue growth and operating leverage. Turning to cash flows. Net cash used in operating activities for the quarter was $1.4 million, primarily driven by changes in working capital, including a decrease in deferred revenue related to the timing of billings during the quarter. We ended the quarter with $7.1 million in cash and no debt, and our cash balance remains within our projected range for the quarter.
Looking ahead, our focus remains on consistent execution, driving revenue growth, improving both gross and operating margins and continuing to invest in the strategic capabilities that support our long-term growth. As we are now in our fourth and final quarter of fiscal year 2026, our next earnings call will be in July. With that, we'll open the call for questions.
Operator: [Operator Instructions] And there were no questions currently from the lines. I will now hand the call back to Rob Brainin for closing remarks.
Robert Brainin: Yes. Thank you all for listening in today. Like we said, we're pleased with the progress we're making. Look forward to sharing with you another update in July to give you an update on that continued progress. Have a wonderful day.
Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
