Standard BioTools Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

Key Takeaways

  • CEO announced CFO Jeff Black will depart by August 31 and Sean McKay named Chief Business Officer while Alex Kim steps in as Interim CFO.
  • SBI accelerated its €80,000,000 cost reduction target to year-end 2024, having realized €60 M so far, and remains on track for breakeven adjusted EBITDA by 2026.
  • Second-quarter revenue fell 23% pro forma, prompting a full-year 2024 revenue guidance cut to €170–175 M due to SomaScan service project delays and sluggish instrument sales.
  • SomaScan’s proprietary proteomics platform is set to expand via a partnership with Illumina for H1 2025 commercial release on NovaSeq and launch of lower-plex reagents to diversify its customer base.
  • With nearly €400 M in cash, SBI has ample liquidity to fund strategic M&A, support its multi-omics solutions growth strategy, and maintain disciplined share repurchase activities.
AI Generated. May Contain Errors.
Earnings Conference Call
Standard BioTools Q2 2024
00:00 / 00:00

There are 7 speakers on the call.

Operator

Please note this event is being recorded. I would now like to turn the conference over to David Holmes of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to Standard BioTools' Q2 2024 Earnings Conference Call. Leading the call today is Michael Egholm, President and Chief Executive Officer and Jeff Black, Chief Financial Officer. At the close of market today, Standard Bio Tools released its financial results for the quarter ended June 30, 2024. During this call, we will review our results and provide an update on our financial and operational performance, 2024 outlook, market trends and strategic initiatives.

Speaker 1

During the call, we will make forward looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, our outlook for 2024 and future financial results, market trends and opportunities, our expectations related to the combined operations with SomaLogic, including potential synergies and our business outlook for the combined company. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. The forward looking statements on this call are based on information currently available to us, and we disclaim any obligation to update these statements except as may be required by law. During the call, we will also present some financial information on a non GAAP basis. We believe these non GAAP financial measures are useful in evaluating our core performance and as a baseline for assessing the future earnings potential of the company.

Speaker 1

We use these non GAAP measures in our own evaluation of continuing operating performance. We encourage you to carefully consider our results on a GAAP and non GAAP basis. The reconciliation between non GAAP measures and their GAAP equivalents are provided in the tables accompanying today's press release and as an appendix to today's presentation slides. Please note that management will be referring to a slide presentation, including updated supplemental financial information within the webcast today. Following prepared remarks, we will host a Q and A session.

Speaker 1

Today's presentation will be available on the website as well as the webcast on the Investor Relations section of the website. I would now like to turn the call over to Michael Egholm, President and CEO of Standard BioTools. Michael?

Speaker 2

Thank you, David, and good afternoon, everyone. We appreciate you joining us today. Before we discuss our quarterly results, I want first to touch on the leadership news we announced this afternoon. As you saw from our announcement today, Jeff Black has accepted an opportunity in another public company located closer to home and family. Jeff helped us build a strong finance function with talented and capable leaders that position us well for seamless transition.

Speaker 2

We appreciate Jeff's contributions, his decision and wish him all the best. He will remain with SBI through August 31 to ensure a smooth transition of his responsibilities. We have started a search for permanent successor and we're fortunate to already have a deep Standup Bio Tools will take on the Interim CFO role and will continue to lead strategic planning and integration of acquisitions. We also recently appointed Sean McKay as our new Chief Business Officer, who now assumes responsibility for strategic business development, product management, marketing and Investor Relations functions. With that, let's discuss our results.

Speaker 2

Our team's focus on cost structure and early integration of Simulogic has accelerated synergy realization in the quarter and we are now pulling forward the $80,000,000 cost reduction target to the end of 2024, a year ahead of plan, keeping us on track to achieve breakeven adjusted EBITDA for the full year 2026. The strong operational execution was offset by weaker than anticipated second quarter revenue as Somoscan Services experienced contract delays and instrument revenue was down year over year. While the latter is largely attributed to headwinds from the ongoing industry wide restricted capital purchasing environment as peers have reported combined with the service business variability discussed, we are revising our revenue guidance to 170,000,000 to 175,000,000 euros for the full year 2024. We're confident that industry issues are transitory and some encouraging signs are emerging in particular markets. Further, our operating system SBS has become deeply embedded in the new businesses focused on delivering improved forecasting, shortened sales cycles and in time expand the product offerings to enable a more diversified customer base.

Speaker 2

SomaScan and its proprietary aptimate technology is a leading proteomics platform with tremendous upside. And we're excited to be partnering with Illumina on their full commercial release in the first half of twenty twenty five, enabling the Somascan assay on ILLUMIN's NovaSeq platform, which has an installed base of around 2,200 instruments. Most importantly, we remain committed to hit breakeven adjusted EBITDA for the full year 2026. We're well capitalized with nearly €400,000,000 in cash to execute on our strategic vision of building a scaled, profitable multiomics solution life science business. At Stena BioTools, we're grounded in the reality that the life science technology and service industry is highly fragmented, filled with small enabling solutions and brilliant technologies, but in desperate need of operational scale and the commercial and manufacturing expertise to achieve that.

Speaker 2

This is a perfect set of strategic M and A, which is central to our strategy and an area we continue to be active. In fact, we believe the current market dynamic is creating opportunities for us to accelerate our consolidation thesis to drive additional scale, diversification and shareholder value. In summary, long term outlook and we will stay the course on our vision to become a leading diversified life science leader with the best in class technology platform and several differentiated growth vectors and a team of operators that understand what it takes to execute in any environment. Turning to our quarterly performance and highlights. Revenue on a reported basis grew 57% in the first half of twenty twenty four and thirty four percent in the second quarter.

Speaker 2

On a performed combined basis, revenue declined 11% in the first half and 23% in the second quarter. Our lower than expected revenue results were driven primarily by 2 factors. First, we experienced project delays for SomaScan Assay Services, largely by select customers in the EMEA region. We are encouraged, however, by an early third quarter uptick in key pharma account activity, provide us an early optimism for potential improvement in this segment as we move through the second half of the year. Instrument revenues was down year over year, but we saw a 40% sequential improvement compared to the Q1 of 2024.

Speaker 2

While we experienced continued economic pressure purchasing cycles in the Q2, largely consistent with what we saw in the Q1, when encouraged by this sequential increase in placements in the Q2. As stated above, we are seeing sales cycle extend across the portfolio. The opportunities remain available just on an elongated timeline. Against this challenging backdrop, we continue to deliver on an operating cost reduction. On a pro form a combined basis in the first half of twenty twenty four, we reduced our non GAAP operating expenses by more than $30,000,000 or 27% over the first half of 'twenty three and delivered another reduction in adjusted EBITDA loss for the quarter.

Speaker 2

And we have already operationalized $60,000,000 of our $80,000,000 target cost synergies, which we expect will be fully reflected in our full year run rate entering 2020 5. Turning to sales mix in the Q2, instruments accounted for 19% of revenue, consumables and kits were 40%, instrument support services 17% and soma scan services 21%. While our soma scan service revenues remains concentrated and susceptible to quarterly variability, we are working hard to diversify our customer base, which will help to mitigate this. We are also expanding our near and medium term growth drivers of this business with more distributed solutions to complement our service business, chiefly through our partnership with Illumina. In addition, we are exploring new models to selling Somascan, both with a lower plex more cost effective model and single somamir reagents.

Speaker 2

For the single somamir reagents, productization is underway with the goal to launch a minimal viable product this fall. Furthermore, we continue to lean into our strategy to deploy our multiomics as a service offering, which will leverage our Somascan and Cytov combined technology platforms and future platforms developed and acquired for offerings to expand our lab services business, providing customers premium data with clinical solution support. This white glove customer experience will further extend to it the complementarity of lab technologies and where they can best be applied. It's a natural extension of our existing offerings and provides a quicker path to technology adoption while avoiding some of the capital budget constraints currently facing the broader biopharma market. As we look to the next several quarters and beyond, we're incredibly well equipped to execute.

Speaker 2

1st, we have assembled what we believe to be the most comprehensive podiumomics platform in the industry with multiple revenue drivers and a platform to expand and complement those sources of revenue, both organically and inorganically. 2nd, we have an experienced leadership team committed to our continuous improvement initiative with a track record of driving growth, expanding gross margins and reducing operating costs. And finally, our healthy balance sheet provides both runway and firepower to execute our long term growth and strategic initiatives. We ended the 2nd quarter with over $396,000,000 in gas, which we see as a significant competitive advantage in a highly constrained capital environment for our sector. And with that, I'll now turn the call over to Jeff.

Speaker 3

Thank you, Michael, and thank you all for joining us today. First, I want to say a few words about my decision to leave Center Bio Tools. Since I started the company almost 15 months ago, we've set an incredibly strong foundation for transformation. We're only just getting started. It's been a tremendous opportunity to be the CFO here working alongside Michael and the rest of our talented ELT team.

Speaker 3

I remain a steadfast believer in Michael, the team and the SBI vision. I didn't take the decision lightly, but ultimately decided this new opportunity is the right move for me at this point in my career. It's an industry I know well located closer to my home and my family. There's never a great time for a move like this, but I'm firmly committed to making the transition a success. Alex and I have been aligned in lockstep since my first day here and our finance and IT organization is second to none.

Speaker 3

The leaders are hand selected and the most capable team I know to continue the great work we started together. Now turning to our results. And as a reminder, our second quarter and first half twenty twenty four results on an as reported basis include the combined operations of Standard BioTools and Somalogic since the close of our merger January 5 this year, while the same periods in 2023 include the financial results of Standard Bio Tools legacy business only. And so for comparative purposes, we think it's more meaningful to look at the combined operations for both businesses. So my commentary today will focus on the pro form a combined results of operations for Standard Bio Tools and Somalogic for both 2023 2024.

Speaker 3

Please refer to today's press release and the appendix to our investor deck for more information, including a reconciliation of GAAP the non GAAP measures I'll be discussing here. So starting with revenue in the 2nd quarter, pro form a combined revenue was just over $37,000,000 down 23% and just over $83,000,000 down 11% for the first half of the year. This is as we continue to navigate lingering headwinds from a challenging macroeconomic environment and timing of orders from large pharma accounts. As Michael mentioned, 2nd quarter revenue was predominantly impacted by our soma scan assay services, where we saw a number of customer projects extend past the Q2, approximately $9,000,000 of the $11,000,000 decrease in our 2nd quarter revenue was attributed to our assay services business. Product revenue was just over $22,000,000 in the 2nd quarter, down 10% compared to 223 dollars and just under $46,000,000 in the first half, up 6% compared to 2023.

Speaker 3

This is driven by the traction we're seeing in our soma scan assay kits and related businesses or business with continued expansion in our authorized sites and related pull through as well as our Illumina early access program. Instruments and consumables was $16,000,000 in the second quarter, down 27% $31,000,000 in the first half of twenty twenty four, down 20%. We continue to navigate a macro environment that is constrained customer funding cycles and has extended sales cycles. We're seeing this impact on our instrument orders with a correlated impact on consumables, but we're encouraged by the sequential uptick we saw in instrument places and revenue growth compared to the Q1. Service revenue was down $14,000,000 in the 2nd quarter, 37% down versus 2023 $36,000,000 in the first half, down about 25%.

Speaker 3

And as mentioned, the biggest driver of this decline was the soma scan related business, contributed about $8,000,000 in revenue for the 2nd quarter, down 50% and just over $23,000,000 in the first half of the year, down about 35%. But as Michael mentioned, we are encouraged by the early Q3 uptick in sample delivery from key pharma accounts. We expect that to continue to improve as we move through the back half of the year. Instrument support services contributed over $6,000,000 in revenue in the 2nd quarter, 9% decrease over 2023 $13,000,000 in the first half of twenty twenty four, roughly flat with 2023. And like our consumables, this revenue source is highly correlated with time.

Speaker 3

Turning quickly to our segment revenue. Proteomics business as a whole today represents 75% to 80% of our revenue. This segment includes our flow cytometry, imaging instruments, consumables and instrument support services as well as our soma scan assay services and kits business is more prone to variability from customer purchasing cycles in our genomic segment. It was down 27% for the quarter and 12% for the first half of twenty twenty four, but we expect proteomics to be our highest growth segment over the long term. Genomics was down 6% in the second quarter and in the first half of twenty twenty four.

Speaker 3

That's in line with expectations as we continue to manage the business through its planned transition, focusing on OEM and key strategic customer accounts. We've rightsized the OpEx over the past 2 years and we're now driving the Genomics segment to a positive contribution margin targeting mid single digits, but profitable revenue growth over the long term. Moving to our operating performance, starting with gross margin. Our non GAAP gross margin on a pro form a combined basis was 45% in the 2nd quarter versus 53% in 2023 51% for the first half of twenty twenty four compared to 53% in the same period last year. In the second quarter, we did see headwinds of around 2 50 basis points from lower capacity utilization related to our lower soma scan assay services volumes and over 300 basis points impact from strategic decisions to replace or upgrade instruments in the field.

Speaker 3

Excluding the impact of these items, our non GAAP gross margin would have been 51%. And we expect to continue to see improvements as our soma scan revenue volumes recover, replacement upgrade costs decline with some expected headwinds to continue in the second half of twenty twenty four. But encouragingly, we're beginning to see our run rate warranty cost decrease. This is an early indicator that our corrective actions are beginning to have impact on longer term gross margin expansion. So with all that said, we still remain confident in our ability to drive non GAAP gross margins into the mid-60s over time, especially as we move past these transitory headwinds, we grow sales, we drive costs and efficiency improvements across our combined operations.

Speaker 3

Moving to operating expenses, as Michael mentioned, we're pleased to report that we're ahead of plan on our operating expense reduction initiatives. On a combined pro form a basis, our non GAAP OpEx of just under $48,000,000 decreased by about $11,000,000 or 19% in the 2nd quarter, reflecting continued traction on expense reduction that began in the second half of twenty twenty three. For the first half of twenty twenty four, our non GAAP OpEx decreased by about $33,000,000 or 20 or 27 percent. And as seen by the slight uptick in R and D spend for the Q2, we continue to take a thoughtful strategic approach to our cost reduction actions, preserving core R and D investments as necessary. And these reductions are all before we see the full impact from restructuring initiatives that we implemented earlier this year and before the impact of any future cost reductions we plan to operationalize in the second half.

Speaker 3

To date, we've operationalized $60,000,000 in annualized operating expense reductions versus our 2023 jumping off point of 250,000,000 dollars We've now committed to accelerate the remaining $20,000,000 target by the end of the year. So in total, we expect that over $25,000,000 of these savings will actually show up in the P and L in 2024 with the full P and L impact reflected in 2025. Based on these efforts, we're more enthusiastic than ever about the value we expect to generate under our now combined cost structure, leveraging the scale and reach of our diversified portfolio. We remain committed to our adjusted EBITDA breakeven for the full year 2026. We're prepared to manage costs even more aggressively if needed to get there.

Speaker 3

At the same time, we as I said, we continue to maintain focused investments in commercial and R and D pipeline to support long term growth. And finally, cash flow and the balance sheet. We ended the quarter, as Michael said, with about $396,000,000 in cash, cash equivalents, restricted cash and short term investments. As we expected our cash burn, while it sequentially improved over the Q1, was still atypically high in the 2nd quarter due to several merger related and other non operating uses of cash. In the aggregate, during the Q2, we made about $38,000,000 in cash payments for transaction and merger related expenses and share repurchases.

Speaker 3

But excluding the impact of these items, our adjusted operating cash burn was about $28,000,000 representing about a 7% over our pro form a combined burn a year ago, even had a reduced revenue level. So while not at the levels we saw in the 1st and second quarter quarter, we do expect continued cash outlays for merger, integration and restructuring activities. But we're well positioned to fund both these non operating cash needs and to support the combined business, the cash flow breakeven. And as we think about any future M and A, we remain very thoughtful and disciplined about additional strategic M and A when such opportunities arise, including the related use of cash. And then one final update on capital structure initiatives.

Speaker 3

As we previously announced in February, the Board approved a new share program of up to $50,000,000 Through the first half of twenty twenty four, we purchased approximately 15,400,000 shares, about 4% of our common outstanding shares for about $41,000,000 in cash and an average repurchase price of $2.66 per share. As we shared in our Q1 call, while we still have room available under the $50,000,000 authorization, we suspended the buyback plan on May 2. And in summary, we remain responsible stewards of our assets we committed to create long term value for our shareholders. And with that, I'll turn the call back to the operator for Q and A.

Operator

We will now begin the question and answer session. The first question comes from Matt Stanson with Jefferies. Please go ahead.

Speaker 4

Thanks. Maybe first one for Jeff on the guidance cut, so lower by $30,000,000 at the midpoint, 2Q was about $10,000,000 or so below expectations. Can you just talk about the remainder of the bridge on the cut in terms of products for service, proteomics versus genomics? What are you assuming for each of those for the year now? And then talk about visibility or clarity around the step up in the second half.

Speaker 4

I think even on the new guide, it implies kind of a 10% step up in the back half for rabs versus first half. It sounds like maybe early signs on soma skin and 3Q are encouraging, but anything else to help bridge the back half relative to the first half year? Thanks.

Speaker 2

Yes. Hey, Matt. I'll let Jeff answer like a little bit more detail. But let me just sort of grab the horn first here. First of all, with Jeff and I in the room, we have Alex Kim, who will step in as Interim CFO here in a month when Jeff leaves us.

Speaker 2

First off, very excited remain very excited about the SommerScand business. When we took it over, we knew it was heavily concentrated. So what we have seen here is really a year over year tough comp on big customers and then a miss in forecasting not applying our SBS principles here in the Somascap business. And we now have addressed that. So we have a firm grip on the business.

Speaker 2

We're definitely excited on where the business is going with the papers coming out showing the superiority of the platform, the growth we're seeing in the broader customer base and with time the big customers will level out and be a healthy component of the business, but not dominating like this. Jeff, any color you want to add on just the bridge?

Speaker 3

Yes, Matt, we don't we've not broken out the components either by segment or by product line in terms of what the back half looks like. But I think you hit on it as we are seeing encouraging signs of an uptick in some of the large pharma accounts. We're encouraged by the existing pipeline on the instrument side of the business. And so what you'll see is really just a mix of components that will drive that 10% sequential second half versus first half.

Speaker 2

Yes. And maybe just let me pipe in here again. I actually in earlier investor talks, I pointed out that we're so overly dependent on a few big pharma companies. So a project any one quarter can make us look like Harris or whatever the opposite is and indeed we find ourselves here. So it was a known risk.

Speaker 2

The miss on my part was not sooner enough to implement this rigorous SBS forecasting style which we have now. So we have very good visibility to the second half hence the updated guidance.

Speaker 4

Okay. And maybe sticking with that lumpiness on the soma side, I think you expect that kind of high single digit 1,000,000 impact in 2Q from that. Just to be clear, that's kind of timing related revenue and it didn't really go elsewhere. Do you still expect to kind of recoup that over the coming quarters as those handful of projects start to resume or spend in a more earnest way?

Speaker 2

Yes. So maybe sort of back to the big case, I'll make sure to answer the question. Yes. So mostly timing here on the forecasting miss, We are overly reliant on a few big customers. So we have year over year headwinds here.

Speaker 2

It's the nature of the business. We're working very deliberately at diversifying the mix through our authorized sites where we saw a healthy growth. We have Illumina coming online here in the first half of twenty twenty five. It's going well. We're excited about them taking over.

Speaker 2

And then we also as I said here, we are launching a minimum viable product version of individual somamirs all the time will drive to diversify the revenue. But for this quarter here, it's really timing, but tough year over year comps also on the big service contracts.

Speaker 4

Okay. And then just maybe one more, if I can. Taking a step back, you reiterated commitment to adjusted breakeven in 'twenty six pull forward the rest of the cost synergies by a year. How should we be thinking about the top line from here? And any additional color you can provide in terms of the revenue base or growth between now and in 'twenty six?

Speaker 4

I think it's probably unlikely the $300,000,000 from prior, but just can you reiterate the adjusted breakeven? Any more color you can talk about on the revenue or growth side as we think about that in 2026?

Speaker 2

Thanks. Yes. Obviously, the $300,000,000 seems a bigger threat given our call back here. We do and let me be very clear about this. We do see very healthy growth across our proteomics portfolio, which is about 80% of the revenue.

Speaker 2

And even in our genomics portfolio, as our biggest OEM vendor have burned down the inventory and now part of thermal, we also even see an uptick here in the back half and certainly by next year. The way we think of it is that we will be adjusted EBITDA positive no matter the top line. So irrespective of the top line, we will get to EBITDA breakeven in 2026. And so that's how we think about it. And if we hit the higher end of our revenue outlook, no additional actions are acquired, although we'll probably go after it if we And if we hit the lower end, I will have to take out more costs and which I remain committed to.

Speaker 4

Super. Thank you.

Operator

The next question comes from Dan Brennan with TD Cowen. Please go ahead.

Speaker 5

Hey guys, thanks for the questions. Maybe Jeff, obviously, sorry to leave sorry to see you leave, excuse me, good luck with the next endeavor. Anything else you can share just about decision to leave now? I mean, you've been at the helm for 15 months, particularly after kind of a mixed quarter. Just anything else you can kind of share about the decision to part?

Speaker 3

Yes, Dan. Absolutely a personal decision, right? Returning to an industry I know well, to with working with people that I've worked with in the past much closer to family and home. There's never a great time for these types of decisions. It's just the right decision for me at this point in my career.

Speaker 3

No disagreements with the management team. I remain a loyal shareholder who believes in the vision. I think it's I'm proud of the fact that I was able to come in and really rebuild a finance organization that will now flourish under Alex. We're greatly aligned in our strategic and operational views. And we have an incredibly strong team under me that's going to carry it on.

Speaker 3

So, wouldn't read into it at all other than just a very personal decision at an inopportune time for the company.

Speaker 5

Got it. Thank you for that. And then maybe back to the question, I know that was asked just earlier. Michael, you kind of addressed it a little bit with the rigorous kind of forecasting processes now in place, but stock is going to be down a fair amount. I assumed just on the miss and just departure.

Speaker 5

So you have the opportunity to really reset the guide and get it to a point that people investors really feel good that it's pretty much derisked. Can you speak a little bit more to like what the any components? I know you guys don't guide by components. Anything else you can share about how you guys arrived at the new number and kind of what you've kind of assumed in terms of the spending environment or anything like that that will give people confidence?

Speaker 2

No, no. Thanks. That's definitely instituted a tight process now on the somerscan side, like following the projects from signing of the contract to sample receipt, which is remarkably difficult, non trivial that piece, but rigorous daily visual management in place. So the updated guidance is what we have visibility today. To answer your questions, we this is done in with the backdrop of a contained pharma spending environment both on projects and on instruments.

Speaker 2

Should the market recover here the second half, I'll be the happiest man on earth here. But we're not assuming that for this piece. On the instrument side here, we keep building funnel. This was sort of before my team should be equally busy whether people are buying instruments or not. If we're not selling instruments, we're building the funnel.

Speaker 2

And then maybe just the other growth vectors we are really leaning into now, it's not a big impact here in the second half, but next year we actually expect it to be another growth driver is this Ohmics as a service where we lean into the fact that Sumo Logic built a very, very nicely fully end to end integrated service organization. We're adding CyTOF with our other technologies. We're thinking of adding to what now will be sort of come a leading blood profiling business where we are going to go and lead with service sales instead of instrument sales. And that's what we're working through now both selling instruments and service, but really different customers, different solutions. And we expect that that will lead to higher growth in the future.

Speaker 2

Not a huge impact the second half, but will be a tailwind for sure on second half revenue, but not strong enough.

Speaker 5

Got it. And maybe one final one. Just like instruments and consumables, obviously, you were in a tough CapEx environment. Anything you could speak to about the relative trends in the quarter and how they came in and kind of how you're thinking about the back half of those?

Speaker 2

Yes. So the consumables spend is or the consumable revenue, if you include the authorized sites in it, the way I look at it, we actually have flat year over year. We should have been increasing. So but any one contract will can push it. So I wouldn't over index on what is a flat number.

Speaker 2

It's also still very early in the XTi launch, the Hyperion XTi, the imaging platform, which will drive a lot of future consumable revenue because of its much higher throughput. And then all the fixing we had to do on our sites of XT float business, but we really believe we're on the other side of a number of issues we had to work through. And eventually, our customers will step up the consumable pull through. But a $1,000,000 pharma contract even on consumables here, we can move it from 1 quarter to another. And you may recall, we actually had very we had a very good Q2 last year.

Speaker 2

So it's also tough year over year. So I would not over index on it.

Speaker 5

Got it. Okay. All right, guys. Thank you very much.

Operator

The next question comes from Paul Knight with KeyBanc. Please go ahead.

Speaker 6

Hi, Michael. What was genomics in the quarter in terms of revenue? And I think you're calling out a pickup sequentially in the second half. But is that a growing business in future years? First question.

Speaker 2

Yes. No. So we last year or like when we took over what was fluidigm, we did surgery on the cost structure, changed the strategy rapidly. And so it's down almost at 6% in the first half year of the year. And that's as and it's sort of what we call a managed decline as we're bleeding off well, people that are moving to NGS like long term trend.

Speaker 2

I've been talking about that I think the last 3 or 4 earnings calls. We're going to be through that 12, 18 months. So this is sort of the headwind. The tailwind here is that our OEM now partners, we have OLink and NextGen Diagnostics as partners and are working additional relationship are picking up. Plus we found a couple of nice niches that are actually experiencing healthy growth.

Speaker 2

So second half next year should be flat and then we should see a nice tick. It is as Jeff pointed out, the business is accretive on a contribution basis. And we preserved with that, so very strong technology basis like that. So we still have core microfluidics technology capability, which we believe will be useful for us in the future. And we have a state of the art manufacturing plant in Singapore that we actually expect to leverage across the business.

Speaker 2

So we're absolutely going to keep the microfluidics business and we're going to grow it and it's going to be a nice driver of profit here in the coming years.

Speaker 6

And on the thermal logic decline year over year, is that business that can be recouped or no?

Speaker 2

Yes. So it's like Paul, you have to remember a handful of customers in any one year mix of the majority of the revenue on the soma scan service side. And so any one year it will fluctuate. As I said, we're leaning in to that service expanding the service building it and want to expand it to more than a few handful. And then we are moving to a distributor solution for now with our authorized sites and then with Illumina and then getting the other revenue driver on.

Speaker 2

But so and the particular projects delayed here, yes, they will come later, but all projects are shifted out, hence the takedown of the guide. Okay. Thanks. Haven't lost any one project,

Speaker 4

just to be clear.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Michael Egholm for any closing remarks.

Speaker 2

Yes. Thanks Drew and thank you for the question and thank you for listening in. We thank you all for your continued support. We look forward to seeing many of you at the Canaccord Genuity 44th Annual Group Conference on August 13 in Boston and then at the UPS Genome Medicine Summit on August 14 in Laguna Beach. So looking forward to see you all and back to you Drew.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now

Speaker 4

disconnect.

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