NanoString Technologies Releases Operating Results for First Quarter of 2023

– Q1 Revenue of $35.8 Million –

– Total Spatial Biology and nCounter Revenue Above Upper End of Q1 Guidance Ranges –

– Raising Annual Revenue Guidance to $175-185 Million –

SEATTLE--(BUSINESS WIRE)--NanoString Technologies, Inc. (NASDAQ:NSTG), a leading provider of life science tools for discovery and translational research, today reported financial results for the first quarter ended March 31, 2023.

“2023 is off to a strong start, with spatial biology revenue up more than 75% over the prior year,” said Brad Gray, President and CEO of NanoString. “Demand for our CosMx Spatial Molecular Imager is robust, with new orders driving an increase in CosMx backlog even as we accelerated shipments in the first quarter. We also generated sequential and year-over-year growth in consumable revenue across all our platforms.”

First Quarter Financial Highlights

• Total revenue of $35.8 million
• Spatial biology revenue of $17.1 million
• nCounter® revenue, inclusive of all service and other revenue, of $18.7 million
• Cash, cash equivalents and short-term investments balance of $154.6 million as of March 31, 2023

Spatial Biology

• Accelerated CosMx shipments during Q1, resulting in Q1 spatial biology instrument revenue growth of 110% year-over-year
• Increased CosMx revenue backlog in Q1, with revenue to be recognized in future periods from cumulative orders received exceeding $40 million
• Grew total spatial biology system installed base to approximately 385 systems, an increase of approximately 31% year-over-year
• Recorded spatial biology consumables revenue growth of 44% year-over-year, with steady GeoMx consumables pull-through over a larger installed base supplemented by growing shipments of CosMx consumables
• Approximately 120 abstracts highlighted at the American Association of Cancer Research (AACR) Annual Meeting. Nearly 60 spatial abstracts using GeoMx or CosMx, an increase of more than 40% over the prior year
• Total peer-reviewed publications featuring our spatial biology platforms were approximately 232 as of March 31, 2023, representing an increase of approximately 122 publications in the last 12 months

nCounter

• Total installed base of our nCounter platforms of approximately 1,130, an increase of approximately 6% year-over-year
• Total peer-reviewed publications featuring nCounter were approximately 6,820 as of March 31, 2023, representing an increase of approximately 1,570 publications in the last 12 months

2023 Outlook

The company updated its previous financial outlook for 2023, with results now expected as follows:

• Total revenue of $175 to $185 million, as compared to the previous range of $170 to $180 million.
  • Spatial biology revenue of $100 to $105 million, as compared to the previous spatial biology revenue range of $95 to $100 million
  • nCounter revenue, inclusive of all service and other revenue, of $75 to $80 million, unchanged from the previous guidance range
• Adjusted EBITDA loss of $65 to $75 million, unchanged from the previous range

Financial Results

We have elected to present selected non-GAAP, or adjusted, financial measures, including Adjusted EBITDA. These adjusted financial measures are calculated excluding certain items that may make it more challenging to compare our GAAP operating results across periods. Such items may include stock-based compensation, depreciation and amortization, or one-time charges such as transaction related fees and expenses or restructuring charges and severance costs. A reconciliation of adjusted financial measures to the nearest comparable GAAP financial measure can be found in the tables at the end of this press release.

(dollars in thousands)	Three Months Ended March 31,
	GAAP						Non-GAAP
		2023			2022			2023			2022
Total revenue	$	35,805		$	31,080		$	35,805		$	31,080
Cost of revenue		22,871			14,778			20,552			13,789
Gross margin		36	%		52	%		43	%		56	%
Research and development		16,118			17,417			12,655			14,956
Selling, general and administrative		37,366			36,355			29,762			29,397
Adjusted EBITDA		N / A			N / A			(27,164	)		(27,062	)
Non-operating expense, net		(688	)		(2,030	)		(688	)		(2,030	)
Net loss	$	(41,238	)	$	(39,500	)	$	(27,852	)	$	(29,092	)

Supplemental Information

As a supplement to the table above, we have posted to the investor relations section of our website, at https://investors.nanostring.com/financials/quarterly-results/default.aspx, supplemental financial data that include our adjusted financial measures as compared to the nearest comparable GAAP financial measures, for the first quarter of 2023 and for each quarter of and the full year of 2022.

Conference Call

Management will host a conference call today beginning at 1:30 pm PT / 4:30 pm ET to discuss these results and answer questions. Investors and other interested parties can register for the call in advance by visiting https://events.q4inc.com/attendee/850976054. After registering, an email confirmation will be sent including dial-in details and unique conference call codes for entry. Registration is open throughout the call, but to ensure connection for the full call, registration in advance is recommended. The link to the webcast and audio replay will be made available at the Investor Relations website: www.nanostring.com. A replay of the call will be available beginning May 3, 2023 at 7:30pm ET through midnight ET on May 17, 2023. To access the replay, dial [phone] or [phone] and reference Conference ID: 573494. The webcast will also be available on our website for one year following the completion of the call.

Non-GAAP, or Adjusted, Financial Information

We believe that the presentation of non-GAAP, or adjusted, financial information provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. Reconciliation of adjusted financial measures to the most directly comparable financial result as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of adjusted guidance measures, including Adjusted EBITDA, to corresponding GAAP measures is not available without unreasonable effort due to the uncertainty regarding certain expenses that may be incurred in the future, and we are also unable to predict the probable significance of such adjusted guidance measures. Accordingly, in reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, we have not provided a reconciliation for adjusted guidance measures provided in this press release. For further information regarding why we believe that these adjusted measures provide useful information to investors, the specific manner in which management uses these measures and some of the limitations associated with the use of these measures, please refer to “Notes Regarding Non-GAAP Financial Information” at the end of this press release.

About NanoString Technologies, Inc.

NanoString Technologies, a leader in spatial biology, offers an ecosystem of innovative discovery and translational research solutions, empowering our customers to map the universe of biology. The GeoMx® Digital Spatial Profiler is a flexible and consistent solution combining the power of whole tissue imaging with gene expression and protein data for spatial whole transcriptomics and proteomics. The CosMx™ Spatial Molecular Imager is a single-cell imaging platform powered by spatial multiomics enabling researchers to map single cells in their native environments to extract deep biological insights and novel discoveries from one experiment. The AtoMx™ Spatial Informatics Platform is a cloud-based informatics solution with advanced analytics and global collaboration capabilities, enabling powerful spatial biology insights anytime, anywhere. At the foundation of our research tools is our nCounter® Analysis System, which offers a secure way to easily profile the expression of hundreds of genes, proteins, miRNAs, or copy number variations, simultaneously with high sensitivity and precision. For more information, visit www.nanostring.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding expectations for demand for our products and growth in our business, future revenue growth, future operating results, future cash flows, the impact of new products, the growth trajectory of our nCounter, GeoMx and CosMx franchises, our estimated 2023 operating results and our anticipated GAAP and non-GAAP operating results. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include market acceptance of our products; delays or denials of regulatory approvals or clearances for products or applications; the extent and duration of adverse conditions in the general domestic and global economic markets; the effects of ongoing litigation; the impact of competition; the impact of expanded sales, marketing, product development and clinical activities on operating expenses; delays or other unforeseen problems with respect to manufacturing and product development; as well as the other risks set forth in our filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. NanoString Technologies disclaims any obligation to update these forward-looking statements.

The NanoString logo, NanoString, NanoString Technologies, GeoMx, CosMx, AtoMx and nCounter are trademarks or registered trademarks of NanoString Technologies, Inc., in the United States and/or other countries.

NANOSTRING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
	Three Months Ended March 31,
		2023			2022
Revenue:
Instruments	$	11,370		$	9,103
Consumables		19,776			17,468
Services and other		4,659			4,509
Total revenue		35,805			31,080
Costs and expenses:
Cost of revenue		22,871			14,778
Research and development		16,118			17,417
Selling, general and administrative		37,366			36,355
Total costs and expenses (a) (b)		76,355			68,550
Loss from operations		(40,550	)		(37,470	)
Other income (expense):
Interest income		1,285			151
Interest expense		(1,891	)		(1,883	)
Other income expense, net		(7	)		(217	)
Total other expense, net		(613	)		(1,949	)
Net loss before provision for income taxes		(41,163	)		(39,419	)
Provision for income taxes		(75	)		(81	)
Net loss	$	(41,238	)	$	(39,500	)
Net loss per share, basic and diluted	$	(0.88	)	$	(0.86	)
Weighted average shares used in computing basic and diluted net loss per share		46,936			45,998
(a) Includes $7.6 million and $7.7 million of stock-based compensation expense for the three month period ended March 31, 2023, and 2022, respectively.
(b) Includes $3.5 million and $1.5 million of depreciation and amortization expense for the three month period ended March 31, 2023 and 2022, respectively.

NANOSTRING TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
	March 31,		December 31,
	2023		2022
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	121,408	$	112,250
Restricted cash and equivalents		625		898
Short-term investments		33,236		84,282
Accounts receivable, net		34,867		31,506
Inventory, net		46,711		43,273
Prepaid expenses and other		15,011		14,565
Total current assets		251,858		286,774
Property and equipment, net		47,729		44,457
Operating lease right-of-use assets		16,484		17,581
Other assets		4,344		4,600
Total assets	$	320,415	$	353,412
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	20,486	$	16,619
Accrued liabilities		6,181		7,884
Accrued compensation and other employee benefits		12,604		17,494
Customer deposits		1,741		1,757
Deferred revenue and other liabilities, current portion		11,646		9,588
Operating lease liabilities, current portion		5,333		5,518
Total current liabilities		57,991		58,860
Deferred revenue and other liabilities, net of current portion		4,600		3,754
Long-term debt, net		227,001		226,622
Operating lease liabilities, net of current portion		17,203		18,362
Total liabilities		306,795		307,598
Total stockholders’ equity		13,620		45,814
Total liabilities and stockholders’ equity	$	320,415	$	353,412

Notes Regarding Non-GAAP Financial Information. In addition to our results reported in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe certain non-GAAP, or adjusted, measures are useful in evaluating our operating performance. We use adjusted financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that adjusted financial measures, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, adjusted financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In particular, other companies, including companies in our industry, may calculate similarly titled non-GAAP or adjusted measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our adjusted financial measures as tools for comparison. A reconciliation is provided below for adjusted financial measures to the most directly comparable financial measure stated in accordance with U.S. GAAP. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP, or adjusted, financial measures as analytical tools. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these adjusted financial measures to their most directly comparable U.S. GAAP financial measure, and not to rely on any single financial measure to evaluate our business.

Expenses excluded from non-GAAP, or adjusted, cost of revenue, gross margin, research and development expense and selling, general and administrative expense and net loss. We exclude stock-based compensation expense and depreciation and amortization expense, which are non-cash expenses, from certain of our adjusted financial measures because we believe that excluding such items provides meaningful supplemental information regarding operational performance. We exclude certain expenses related to cloud computing arrangement implementation expenses, litigation expenses, and other business development expenses from certain of our adjusted financial measures because such expenses have no direct correlation to the continuing operation of our business as such expenses are non-recurring or non-operating in nature, and therefore we believe excluding these items provides meaningful supplemental information regarding operational performance.

Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure defined as GAAP net loss adjusted for stock-based compensation expense, depreciation and amortization, net interest expense, net other expense, provision for income tax and other special items as determined by management, including certain expenses related to cloud computing arrangement implementation expenses, litigation expenses, and other business development expenses.

The following tables reflect the reconciliation between GAAP and non-GAAP measures (in thousands).

	Three Months Ended March 31,
		2023			2022
Net loss - GAAP	$	(41,238	)	$	(39,500	)
Stock-based compensation		7,626			7,667
Depreciation and amortization		3,536			1,543
Interest expense, net		606			1,732
Other expense, net		7			217
Provision for income taxes		75			81
Other business development expense		—			349
Litigation expense		2,071			693
Cloud computing arrangement implementation expense		153			156
Adjusted EBITDA - non-GAAP		(27,164	)		(27,062	)
Non-operating expense, net		(688	)		(2,030	)
Net loss - non-GAAP	$	(27,852	)	$	(29,092	)
	Three Months Ended March 31,
		2023			2022
GAAP Cost of revenue	$	22,871		$	14,778
Stock-based compensation		(792	)		(576	)
Depreciation and amortization		(1,527	)		(413	)
Non-GAAP Cost of revenue	$	20,552		$	13,789
GAAP Gross margin		36	%		52	%
Non-GAAP Gross margin		43	%		56	%
GAAP Research and development	$	16,118		$	17,417
Stock-based compensation		(1,962	)		(1,743	)
Depreciation and amortization		(1,501	)		(718	)
Non-GAAP Research and development	$	12,655		$	14,956
GAAP Selling, general and administrative	$	37,366		$	36,355
Stock-based compensation		(4,872	)		(5,348	)
Depreciation and amortization		(508	)		(412	)
Other business development activities		—			(349	)
Litigation expense		(2,071	)		(693	)
Cloud computing arrangements implementation expense		(153	)		(156	)
Non-GAAP Selling, general and administrative	$	29,762		$	29,397