On December 16, 2019 Champions Oncology, Inc. (Nasdaq: CSBR), engaged in an end-to-end range of research and development technology solutions and services to improve the development and use of oncology drugs, reported its financial results for the second fiscal quarter ended October 31, 2019 (Press release, Champions Oncology, DEC 16, 2019, View Source [SID1234552393]).

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Second Quarter and Recent Business Highlights:

Quarterly revenue of $7.6 million, an increase of 14% year-over-year

Reported income of $546,000, excluding stock-based compensation and depreciation

Achieved record quarterly bookings

Formed strategic partnership to expand our ex-vivo platform and services

Ronnie Morris, CEO of Champions, commented, "Our second quarter results were strong with revenue easily surpassing $7 million and a return to profitability."

Morris added, "We’re excited about our recently formed strategic partnership with PhenoVista Biosciences which will enhance the capabilities of our successful ex-vivo platform. Combined with our growing pipeline of opportunities in GCLP flow cytometry services, we continue to broaden our capabilities beyond our core PDX offerings, solidifying our position as a leader in end-to-end translational oncology solutions."

David Miller, CFO of Champions added, "As predicted, our revenue rebounded off of first quarter levels, rising to $7.6 million, resulting in 14% year over year quarterly growth. Additionally, we anticipate to continue our quarterly profitability trend for the remainder of the year."

Second Fiscal Quarter Financial Results

For the second quarter of fiscal 2020, revenue increased 13.9% to $7.6 million compared to $6.7 million for the second quarter of fiscal 2019. The increase in revenue is due to increased sales, both in number and size of studies. Additionally, our enhancements in products and study designs provided Pharma the tools to conduct more extensive and complex testing. Total costs and operating expenses for the second quarter of fiscal 2020 were $7.3 million compared to $6.4 million for the second quarter of fiscal 2018, an increase of $916,000 or 14.3%.

Exhibit 99.1

For the second quarter of fiscal 2020, Champions reported income from operations of $291,000, including $77,000 in stock-based compensation and $178,000 in depreciation expenses, an increase of $16,000 compared to the income from operations of $275,000, inclusive of $88,000 in stock-based compensation and $151,000 depreciation expenses, in the second quarter of fiscal 2018. Excluding stock-based compensation and depreciation, Champions reported income from operations of $546,000 for the second quarter of fiscal 2020 compared to income from operations, excluding stock-based compensation and depreciation, of $480,000 in the second quarter of fiscal 2018 an increase of $66,000.

Cost of oncology solutions was $3.9 million for the three-months ended October 31, 2019, an increase of $430,000, or 12.5% compared to $3.5 million for the three-months ended October 31, 2018. For the three- months ended October 31, 2019, gross margin was 49.1% compared to 48.4% for the three-months ended October 31, 2018. The increase in cost of oncology services for the three-month period was mainly due to an increase in salary and lab supply expenses. The increase is generally in line with the expected contribution based on the increase in revenue and study volume.

Research and development expense was $1.3 million for the three-months ended October 31, 2019, an increase of $148,000, or 12.4%, compared to $1.2 million for the three-months ended October 31, 2018. The increase is due to the increase in salary and lab supply expenses related to new product development and platform testing. Sales and marketing expense for the three-months ended October 31, 2019 was $977,000, an increase of $237,000, or 32.0%, compared to $740,000 for the three-months ended October 31, 2018. The increase was mainly due to the annualized quarterly accrual of commissions and expansion of the sales force. General and administrative expense was $1.1 million for the three-months ended October 31, 2019 compared to $1.0 million for the three-months ended October 31, 2018, an increase of $101,000 or 9.8%. The increase was mainly due to an increase in salary, stock-based compensation and depreciation expenses offset by a reduction in recruiting costs.

Net cash generated from operating activities was $360,000 for the three-months ended October 31, 2019 compared to $214,000 for the same period last year. The increase in cash flow from operations is primarily due to the improvement in financial operating results.
The Company ended the quarter with $2.8 million of cash and reiterated its position that it does not intend to raise capital to fund operations.

Year-to-Date Financial Results

For the first six months of fiscal 2020, revenue increased 11.2% to $14.4 million, as compared to $12.9 million for the first six months of fiscal 2019. For the first six months of fiscal 2020, total operating expenses increased 20.7% to $14.7 million, as compared to $12.2 million for the first six months of fiscal 2019. The increase in revenue is due to increased sales, both in number and size of studies, and expanding our customer base. Additionally, we’ve introduced product enhancements, providing our Pharma customers the ability for more extensive study designs and testing.

For the first six months of fiscal 2020, Champions reported a loss from operations of $323,000, which includes $208,000 in stock-based compensation and $360,000 in depreciation, a decrease of $1.1 million or 142.7%, compared to income from operations of $757,000, inclusive of $171,000 in stock-based compensation and $269,000 depreciation, for the first six months of fiscal 2019. Excluding stock-based compensation and depreciation, Champions reported operating income of $245,000 for the first six months of fiscal 2020 compared to income of $480,000 in the same period last year.

Exhibit 99.1

Cost of oncology solutions was $7.6 million for the first six months of fiscal 2020 compared to $6.5 million for the first six months of fiscal 2019, an increase of $1.1 million or 16.8%. Gross margin was 46.9% for the first six months of fiscal 2020 compared to 49.4% for the first six months of fiscal 2019. The increase in cost of oncology services for the six-month period was mainly due to an increase in salary, mice, and lab supply expenses. Gross margin varies based on timing differences between expense and revenue recognition and was impacted by the increase in costs on growing study volume in advance of revenue recognition.

Research and development expense was $2.6 million for the first six months of fiscal 2020 an increase of $362,000, or 15.9% compared to $2.3 million for the first six months of fiscal 2019. The increase is due to increased salary and lab supply expenses related to new product development and platform testing. Sales and marketing expense for the first six months of fiscal 2020 was $1.8 million, an increase of $588,000, or 46.7% compared to $1.3 million for the first six months of fiscal 2019. The increase was mainly due to the annualized quarterly accrual of commissions and expansion of the sales force. General and administrative expense was $2.6 million for the first six months of fiscal 2020, an increase of $473,000 or 22.7% compared to $2.1 million for the first six months of fiscal 2019. The increase for the six-month period was mainly due to an increase in salary, professional fees, and stock-based compensation and depreciation expenses offset by a reduction in recruiting costs.

Net cash provided by operations was $81,000 for the first six months of fiscal 2020 compared to net
provided by operations of $400,000 in 2019, a decrease of $319,000 or 80%.

Conference Call Information:

The Company will host a conference call today at 4:30 p.m. EST (1:30 p.m. PST) to discuss its second quarter financial results. To participate in the call, please call 844-369-8770 (domestic) or 862-298-0840 (international) ten minutes ahead of the call and give the verbal reference "Champions Oncology."

Full details of the Company’s financial results will be available Monday, December 16, 2019 in the Company’s Form 10-Q at www.championsoncology.com.

* Non-GAAP Financial Information

See the attached Reconciliation of GAAP net (loss) income to Non-GAAP net (loss) income for an explanation of the amounts excluded to arrive at Non-GAAP net (loss) income and related Non-GAAP (loss) earnings per share amounts for the nine months ended October 31, 2019 and 2018. Non-GAAP financial measures provide investors and management with supplemental measures of operating performance and trends that facilitate comparisons between periods before and after certain items that would not otherwise be apparent on a GAAP basis. Certain unusual or non-recurring items that management does not believe affect the Company’s basic operations do not meet the GAAP definition of unusual or non-recurring items. Non-GAAP net (loss) income and Non-GAAP (loss) earnings per share are not, and should not, be viewed as a substitute for similar GAAP items. Champions’ defines Non-GAAP dilutive (loss) earnings per share amounts as Non-GAAP net (loss) earnings divided by the weighted average number of diluted shares outstanding. Champions’ definition of Non-GAAP net (loss) earnings and Non-GAAP diluted (loss) earnings per share may differ from similarly named measures used by other companies.