NanoString Technologies, Inc.

Q3 2023 total revenue was $48.1 million, up 63% year over year. Spatial Biology revenue was $28.9 million, up more than 200% year over year; spatial instrument revenue was $21.1 million, up about 350%; spatial consumables revenue was $7.8 million, up 70%. nCounter revenue was $19.2 million, with $2.5 million of instrument revenue, $10.5 million of consumables revenue, and $6.2 million of service revenue. Q3 adjusted gross margin was 41%; adjusted R&D was $13.4 million, adjusted SG&A was $26.7 million, and adjusted EBITDA loss was $20.2 million. Cash, cash equivalents and short-term investments were approximately $97 million at September 30, 2023. For Q4, management guided revenue to $47 million-$52 million, including $27 million-$31 million of Spatial Biology revenue and $20 million-$21 million of nCounter and service revenue. Full-year 2023 revenue guidance was raised/narrowed to $175 million-$180 million, spatial biology revenue to $96 million-$100 million, nCounter revenue to $79 million-$80 million, and adjusted EBITDA loss to about $80 million-$85 million. Full-year gross margins are expected in the low- to mid-40% range, with margins expected to improve in 2024.

Brad Gray framed the quarter as evidence that NanoString is scaling its spatial biology franchise while simultaneously improving its financial profile. He highlighted record revenue, a roughly 50% sequential reduction in cash burn, more than $15 million of expected annual operating expense savings from the reorganization, and the convertible note exchange as steps that remove a near-term overhang and support a path to profitability in 2025. His tone was confident and strategic, with repeated emphasis on the company’s product roadmap, backlog conversion, and market leadership in a fast-growing spatial biology category.

Tom Bailey focused on the mechanics behind the quarter’s financials and the forward model. He said adjusted gross margin was 41% because revenue was weighted toward lower-margin spatial instruments with higher-than-planned unit production costs, and that full-year margins should land in the low to mid-40% range before improving in 2024. He also said adjusted R&D was $13.4 million, adjusted SG&A was $26.7 million, adjusted EBITDA loss was $20.2 million, and cash was about $97 million; he added that the note exchange provides 6.95% senior secured notes, potential paid-in-kind interest in year one, and about $15 million of cash expense savings, while operating expenses should be at least $15 million below Street models next year.

Analysts pressed on why the company trimmed its 2023 guide despite repeated top-line beats; management said the main reasons were the European injunction affecting CosMx sales and broader macro caution, including longer sales cycles and possible budget flush timing. Questions also focused on backlog visibility, cash needs ahead of 2025 profitability, and whether gross margins could return to the historical low-50% range; Tom said the company expects to get closer to that level as consumables become a larger share of revenue and production costs improve, and reiterated confidence in reaching cash breakeven on existing resources. There were also questions about Europe, China, ASPs, and panel mix; management said Europe remains a headwind but only represents about 10% or less of CosMx demand and backlog, China remains less than 10% of revenue and too small to draw broad trends, ASPs were up a bit in Q3, and higher-plex panels tend to cannibalize lower-plex offerings.