Champions Oncology, Inc. Aktie

Greetings. Welcome to the Champions Oncology First Quarter Fiscal Year 2027 Earnings Call. [Operator Instructions]

Please note, this conference is being recorded.

I will now turn the conference over to your host, Rob Brainin, Chief Executive Officer. You may begin.

Good afternoon, and thank you for joining our first quarter fiscal 2027 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 you can find more information in our filings with the SEC. When we spoke in July, I said fiscal '26 was an investment year and that the onus was on us to deliver in fiscal 2027.

The first quarter was a strong data point that we're moving in the right direction. Revenue was $15.2 million, compared to $14 million in the first quarter of fiscal '26. Gross margin was 15%, up from 43% in Q1 fiscal '26. Adjusted EBITDA was approximately $700,000 and on a GAAP basis, we reported a net loss of $0.4 million. That included $1.1 million of noncash expense. This represents our fifth consecutive quarter of positive adjusted EBITDA. Both our services business and our data business contributed to that improvement, and I'll touch on them in turn.

Our translational oncology services business generated $14.3 million of revenue in the quarter. And margins in that business held where we want today and the operating discipline we described in July showed up again this quarter. This is the part of Champions that has always been a predictive modeling business. A customer brings us to therapy, we run it through the most clinically relevant models in the industry, and we predict how the drug is likely to behave in patients. The demand environment for that work is healthy, and the quality of our tuber bank continues to be a core reason customers come to us.

We feel good about how we're showing up in the market and look forward to continuing to share updates over the coming quarters as the year goes on. Data licensing revenue was $893,000 in the first quarter. To put that in context, we generated more data revenue in this 1 quarter than in all of fiscal 2026, reflecting the broader base of customers we spent the last year building. Let's look at TOS business, we look at this on an annual basis rather than a quarterly one, though. Contracts closed on their own time lines and what we're very pleased with the progress, revenue will remain lumpy.

Pipeline continues to be robust and the strategic case keeps strengthening. As sponsors lean harder on AI and machine learning to make development decisions, the constraint isn't the model. It's the data underneath it. Deeply characterized clinically annotated, patient-derived data is scarce, and we have it. That's what will let us move from predicting the outcome of one study at a time toward helping sponsors find signatures, select the right patients and design better trials.

On Corellia, our wholly-owned therapeutic subsidiary, we remain encouraged. The external conversations continue with both venture groups and potential pharmaceutical partners and the data we're generating continues to strengthen the case. I'm not going to put a date on any outcome for the same reason I came in July. If we're successful in securing outside funding or licensing partnership, the investment currently flowing into that business would be redeployed toward our other growth initiatives, particularly data and to the bottom line.

In conclusion, fiscal 2026 was an investment year. The first quarter of fiscal 2027 is evidence that those investments are paying off in revenue, in margin and in data as well as progress in our discussions related to Corellia's pipeline. We have 3 more quarters to prove it out in fiscal '27 and we'll be reporting against it in the same way each time.

With that, I'll turn the call over to David to walk through the financials in more detail.

Thanks, Rob, and good afternoon, everyone. Our full financial results for the quarter will be filed with the SEC on Form 10-Q on or before September 14. As Rob highlighted, revenue for the first quarter was $15.2 million, an increase of approximately 9% from $14 million in the prior year quarter.

On a GAAP basis, we reported a net loss of approximately $426,000 compared with a net loss from operations of $527,000 a year ago.

Turning to the cash-based operating results as we typically discuss them. Adjusted EBITDA increased to $671,000 from $59,000 in the prior year quarter. This is our fifth consecutive quarter of positive adjusted EBITDA and our focus is on continuing to grow revenue while expanding profitability.

Let me provide a little more detail on the drivers of the quarter, starting with revenue. The improved quality of our sales over the last several quarters resulted in a higher percentage of contracted study value converting to revenue in Q1. Importantly, that trend continued with sales made during the first quarter with expected conversion percentages remaining strong. And as Rob discussed, data license revenue also contributed to the year-over-year growth, reflecting the broader customer base we built last year.

Another meaningful development was the improvement in oncology services margin, which increased to 51% from 43%. The improvement was driven by a few factors. Cost of oncology revenue declined by approximately $500,000 to $7.5 million from $8 million a year ago despite the increase in revenue. The reduction was driven primarily by lower third-party radio labeling costs. As we've discussed over the past year, we've been working to bring those capabilities in-house, resulting in a lower cost structure. Increased revenue also contributed to the margin improvement, reflecting the leverage we have in the business.

Turning to operating expenses. R&D expense was $1.9 million compared with $2.1 million in the prior year quarter. We were able to reduce spending in our core services business, while redirecting resources towards Corellia and our data initiatives.

Sales and marketing expense was $3 million compared with $1.8 million a year ago. As we've discussed previously, we made a deliberate investment last year to expand our commercial organization across both our research services and data businesses. That investment is now reflected in our expense base and our focus is on generating greater revenue and profitability from it.

G&A expense was essentially flat at approximately $2.1 million in both periods.

Turning to cash. We used approximately $500,000 of cash during the quarter, primarily reflecting working capital movements in the ordinary course of business, including a reduction in accounts payable and higher accounts receivable. We ended the quarter with approximately $4.4 million of cash and no debt.

Overall, the quarter demonstrates the operating leverage we've been working towards. Revenue grew, oncology services margin improved significantly and adjusted EBITDA expanded while we continue to support the investments we've made for future growth. We are continuing to build on the foundation established last year with a focus on maintaining expense discipline and converting revenue growth into improved profitability.

With that, I'll turn the call back over to Rob and ask for any questions.

[Operator Instructions]

We currently have no questions in the queue. I'd like to turn the floor back to Rob Brainin, for any closing remarks.

Great. Thank you. Really appreciate. I appreciate everyone dialing in or listening to the recording. As you can tell, we're really encouraged and excited about the progress we've been making and the trajectory of the business. And look forward to in the coming quarters, sharing more about that progress and how we're doing. We'll speak to you then. Have a great afternoon. Thanks.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to the Champions Oncology Fourth Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Robert Brainin, CEO of Champions Oncology. Sir, the floor is yours. Thank you.

Good afternoon, and thank you for joining our fiscal 2026 year-end 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 you can find more information in our filings with the SEC.

I'd like to begin by referring back to what I said shortly after stepping into this role in late August 2025. I said then that we will build on the progress the company has made over recent years, stay focused on positive adjusted EBITDA for the year and at the same time, keep investing in our 2 growth vectors, data and Corellia, with the returns on those investments coming in later quarters and years as well as continuing to invest in our TOS business, especially around growth areas like the radioligand platform.

I'm pleased to say our execution against that plan held up well. In fiscal 2026, we delivered record annual revenue and met our commitment to full year positive adjusted EBITDA, including positive adjusted EBITDA in each of the 4 quarters on its own, the first time that has happened since fiscal 2022, driven by real strength in our core services business.

Our data business did not repeat its fiscal 2025 revenue, but the comparison is less telling than it looks, and I'll come back to why later in my remarks. And we invested across the organization to build for the next phase of growth. That combination produced a record top line as well as positive adjusted EBITDA alongside a GAAP net loss that reflects those deliberate investments.

Our translational oncology services business had its strongest year in the company's history. Services revenue grew to a record $58.7 million, up approximately 12% over the prior year as previously booked studies converted well and our PDX Bank continued to differentiate us in a market where model quality and characterization matter more every year.

I want to thank our operations team again who delivered that growth without material additions to headcount, which is the operating leverage we've been describing starting to show up in the numbers. As we said before, quarterly results can vary, primarily due to the timing of study completions. So we evaluate the business on an annual basis. After this year's strong conversion, we'd expect services growth to moderate to a more normalized pace in the near term.

The underlying demand environment is healthy, and our focus is on continuing to expand bookings and the future pipeline of work. In terms of data, the year-over-year comparison does not tell the complete story. Data license revenue was approximately $800,000 for fiscal 2026 compared to $4.7 million in fiscal 2025, and that prior year figure reflected one large transaction that did not recur.

The fourth quarter, in particular, did not include meaningful data revenue. Some of what we had expected to recognize in Q4, including revenue tied to the larger agreement we've discussed previously, shifted into the first quarter of fiscal 2027. A reminder that the timing and size of individual data transactions can result in meaningful quarter-to-quarter fluctuations in revenue. What I'd point to is the direction rather than any single quarter.

We expanded our fiscal 2026 customer base through a series of smaller licensing agreements while continuing to pursue larger strategic licensing opportunities, growing from a very small customer base in fiscal 2025 to a much larger one in fiscal 2026. Our pipeline has also grown, both in the number of opportunities and the size of potential transactions and customer engagement continues to build around the value of combining our deeply characterized models with clinically relevant data.

In short, we made meaningful progress in broadening our customer base while continuing to pursue larger strategic licensing opportunities, and we continued investing in the data platform to support its future growth and scalability. This is also where our services and our data come together. Our work in PDX models is a form of predictive modeling. The same predictive capability that has always powered our studies becomes far more powerful when it sits on top of a deeply characterized data set and is used in conjunction with modern machine learning and AI.

That combination is what lets us move from predicting the result of one study at a time to helping partners identify signatures, select the right patients and design better trials from the data itself. It's still early for this business, and I expect revenue to continue to fluctuate in the near term, but the strategic logic behind it and the long-term opportunity as AI becomes more central to drug discovery only gets stronger.

Turning to Corellia, our wholly owned therapeutic subsidiary, we remain encouraged. The data we continue to generate is compelling, and our external conversations with both venture capital groups and potential pharmaceutical partners have reinforced our confidence in the science and the commercial opportunity.

As I've mentioned before, our fiscal 2027 budget assumes we have Corellia funded for the full year. If we're successful in securing external funding, either by closing an outside round or through a licensing partnership, the investment currently flowing into that business will be redeployed towards other growth initiatives, particularly data, or put to the bottom line.

On timing, these processes take time, especially in the current biotech funding environment, so I won't put a specific date on it. What I can say is that the discussions are active, the feedback is positive and the data continues to strengthen the case.

In summary, fiscal 2026 was an investment year, and we made those investments deliberately while still delivering positive adjusted EBITDA. That's what positions us for stronger growth and expanding profitability ahead. The onus is on us now to deliver a strong fiscal 2027, and we'll be reporting against that in each quarterly update as the year progresses.

With that, I'll turn the call over to David to walk through the financials in more detail.

Thank you, Rob, and good afternoon. Before I begin, I'll remind everyone that our full financial results are included in our Form 10-K, which will be filed later today with the SEC. I'll also reference certain non-GAAP financial measures with reconciliations included in today's earnings release.

Rob has walked through the highlights of the year. I'll take a few minutes to review our financial results and discuss some of the key trends we saw throughout fiscal 2026. Turning first to revenue. Fourth quarter revenue was $13.8 million, an increase of 12% over the prior year quarter, bringing full year revenue to a record $59.4 million.

As Rob discussed, the comparison in our data business was affected by the large licensing transaction completed in fiscal 2025. Even with that headwind, we delivered another year of record revenue driven by 12% growth in our core study services business.

Turning to profitability. Fourth quarter adjusted EBITDA was $158,000, marking our fourth consecutive quarter of positive adjusted EBITDA. For the full fiscal year, adjusted EBITDA was $1.6 million. We believe that's an important accomplishment given what we set out to achieve during the year. We continued investing in our data platform and Corellia, expanded our sales and marketing organization and remained adjusted EBITDA-positive throughout the year.

Focusing in on margin, fourth quarter gross margin improved to 51% compared to 41% in the prior year quarter. That improvement reflected continued cost discipline and importantly, a meaningful reduction in outsourced radiopharmaceutical costs as we've continued transitioning that work in-house. As we've discussed throughout the year, bringing radiopharmaceutical activities in-house has been an important operational initiative for the company, and we're beginning to see those efforts reflected in our financial results.

While there's still work to do, we're encouraged by progress we've made and believe we're moving in the right direction. For the full year, reported gross margin increased to 48% from 46% in the prior year. While that represents a modest improvement, the underlying performance of our core study services business improved more significantly than the reported results suggest.

Fiscal 2025 benefited from the high level of higher-margin data revenue, while fiscal 2026 included a temporarily outsourced radiopharma cost. Despite those offsetting factors, we improved overall gross margin year-over-year. As we continue realizing the benefits of performing our own radiopharma work, we expect outsourced costs to continue to decline, and we believe will continue to benefit -- which will continue to benefit margins over time.

Turning to operating expenses. Fourth quarter expenses remained generally in line with our expectations as we continue developing the business. For the full year, operating expenses increased as planned, approximately $3 million of the increase related to the temporary outsourced radio activity and the remainder primarily reflected the continued development of our data platform and the expansion of our sales and marketing organization to support both core research service business and our emerging data offerings.

Turning to the balance sheet. We ended the year with $4.9 million in cash and no debt. During the year, we continued investing in the business while maintaining a healthy balance sheet, providing us with the financial flexibility to continue executing our strategy. Overall, fiscal 2026 was an important year for Champion. We delivered record annual revenue, achieved positive adjusted EBITDA in each quarter, strengthened our operating platform and made meaningful progress on initiatives that we believe position the company well for the future.

As we move through fiscal 2027, our focus remains on executing against our operating plan, continuing to improve profitability and maintaining the financial discipline that has served us well. We'll continue evaluating opportunities to invest in the business where we believe they can generate attractive long-term returns.

With that, we'll open the call for questions.

[Operator Instructions] That concludes our Q&A session. I'll now hand the conference back to our host for closing remarks. Please go ahead.

Thank you, and thank you all again for attending today's call or listening subsequently on the webcast. We're pleased about the progress we're making in the business and look forward to sharing our continued progress in our upcoming quarterly calls. Thank you, and have a wonderful day.

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

Greetings. Welcome to the Champions Oncology Third Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Rob Brainin, CEO at Champions Oncology. You may begin.

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. We 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, pleased with the progress we're making as we scale the core services business will bode in 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 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. We all while continuing to invest in both our data business and Corellia without dilution of Champions shares.

That balance, growth in 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 imitation 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've 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 Corona. 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 factors 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.

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 do 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 while 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 and 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 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 radio labeling 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, how our gross margin would have been in excess of 50%. It is also worth noting that prior year margins benefited from the data license transactions 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 TOS team supporting both platforms and G&A expense increase primarily due to leadership transition 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 Instructions] And there are no questions currently from the lines. I will now hand the call back to Rob Brainin for closing remarks.

Yes. Thank you all for listening in today. Like we said, we're pleased with the progress we're making. I look forward to sharing with you another update in July to give you an update on that continued progress. Have a wonderful day.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Champions Oncology Second Quarter Fiscal Year 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Rob Brainin, Chief Executive Officer.

Good afternoon, and thank you for participating in our second quarter fiscal 2026 earnings call. I'm joined today by our CFO, David Miller. Before we begin, I'll remind you that today's remarks may include forward-looking statements. Actual results may differ materially, and more information can be found in our filings with the SEC.

Before we get into the quarter, I want to ground everyone in our 3 core goals for the year: one, deliver year-on-year revenue growth, scaling matters, and we can get margin leverage in our core TOS business as we grow; two, invest in our big growth levers, especially our data platforms, which opens the door to more strategic biopharma relationships; and three, stay fiscally disciplined, maintaining full year positive adjusted EBITDA and self-fund our growth without shareholder dilution.

These goals guide our priorities, our investments and our execution focus. We remain committed to them. And importantly, based on our year-to-date results and visibility into the second half of the year, we believe we are on track to deliver on all of these.

Turning to the broader environment. We continue to see gradual improvement across pharma and biotech budgets. Funding levels are not fully restored, but customer engagement and our opportunity pipeline generation are gradually improving relative to what we experienced over the last 1.5 years. As R&D budgets reset for calendar 2026, we're cautiously optimistic for booking momentum in the next calendar year. Within that context, our focus continues to be on execution, maximizing conversion of existing bookings, improving operational efficiency and advancing the capabilities to distinguish Champions in the market.

Our second quarter reflects this execution focus. Revenue was up year-over-year, driven by stronger conversion of booked work due to reduction in cancellations. Importantly, margin performance continued to improve, supported by the operational efficiencies we've implemented as we capitalize on the leverage in our operating model as study revenue increases.

A key highlight of the quarter was our continued success in our radiolabeling and radiopharmaceutical support workflows. As we introduced recently, Champions operates under the very few labs in the industry approved to perform this type of highly specialized radiolabeling work. This is an emerging area of significant interest within oncology drug development and the demand we're seeing from customers reinforces the strategic importance of this capability.

Our radiolabeling offering positions us uniquely with both established and emerging radiopharmaceutical testing and we expect this segment to become an increasingly meaningful part of our service offering over time. Bringing more of this work in-house over the coming quarters should also improve gross margin as reliance on outsourced services declines.

Alongside radiolabeling, we continue to invest in our data platform, enhancing its functionality and expanding its utility for our pharma partners. The combination of deep biological data, pharmacology capabilities and our PDX assets gives us a differentiated platform that supports target identification, validation and translational insights. Customer interest continues to grow and we view this as a critical long-term value driver for Champions.

We've made targeted investments in our commercial and business development teams to support the anticipated growth of these offerings. While these investments do increase near-term OpEx, they are aligned with our strategy and are necessary to expand our revenue base and customer footprint.

I also want to address Corellia, our wholly owned subsidiary focused on target discovery. We are making solid progress in discussions with potential venture capital funding partners and are encouraged by the level of interest in that business. Until the transaction is completed, Corellia will continue to be reflecting in our P&L and that may remain the case through fiscal 2027.

Importantly, once external funding is secured, our plan is to redirect the majority of those investment dollars toward accelerating growth in our data business. We're not managing this transition for near-term P&L impact. Instead, the focus is on using capital efficiently to reflect longer-term revenue growth curves, particularly in areas where we believe that Champions has competitive advantages.

Stepping back a bit, we're encouraged by the progress we made during the quarter. Our performance reflects improved operational discipline, a strengthening commercial position and continued strategic investment in areas where we hold clear competitive advantages, namely our uniquely characterized tumor bank, radiolabeling capability and our data platform. As we enter the second half of the fiscal year, we remain focused on delivering year-over-year revenue growth and full year positive adjusted EBITDA, and we believe the actions we have taken position the company to meet these goals.

With that, I'll turn the call over to David to discuss our financial results in more detail.

Thank you, Rob, and good afternoon, everyone. Before I dive in, as a quick reminder that our full results will be filed on Form 10-Q with the SEC later today. And as always, I'll reference certain non-GAAP metrics with reconciliations to GAAP included in our earnings release.

As Rob highlighted, the second quarter reflected meaningful progress across both revenue and margin performance, supported by disciplined execution and a more stable operating environment. Total revenue for the quarter was $15 million compared to $13.5 million last year, an increase of 11% year-over-year, driven by improved conversion of booked work due to a lower level of cancellations.

Income from operations for the quarter was $185,000 and adjusted EBITDA was approximately $800,000. Importantly, on a year-to-date basis, we remain on track to achieve full year positive adjusted EBITDA which is one of our core financial goals for fiscal 2026.

Turning to margins. Cost of sales for the quarter was $7.3 million compared to $7.4 million last year. Our flat cost of sales on an increased revenue base generated gross margin of 52% compared to 45% last year. While there is quarterly margin variability due to the timing of specific costs such as outsourced lab services, this quarter is a good reflection on the margin expectations of our core business.

Operating expenses for the quarter were $7 million, up about $2 million from last year, but the increase was in line with our strategic priority, specifically investment in our data platform. Let me break that down.

R&D increased by about $900,000 due to investments in sequencing and related costs to support the development of our data platform. Approximately $200,000 of the total increase was related to Corellia's target discovery initiatives. Sales and marketing increased modestly, driven by higher compensation as we strengthened our commercial organization to support data sales, and G&A increased about $800,000 and mostly related to leadership transitions and IT infrastructure investments. We expect some of those G&A increases to be temporary as we work through system inefficiencies and find ways to streamline costs. Although these investments raise OpEx in the short term, they are essential to positioning the company for sustained growth and operating leverage.

Turning to cash flows. Net cash used in operating activities for the quarter was $1.9 million, the primary driver was a decrease in deferred revenue as we recognized revenue on a cash received in advance. All changes in our working capital accounts were in the ordinary course of business. We ended the quarter with $8.5 million in cash and no debt, maintaining a solid financial position. Looking ahead, our focus remains on driving consistent execution, strengthening margins and supporting long-term growth through continued investment in strategic capabilities.

While quarterly results may fluctuate, with improving market conditions and increased engagement across both services and data offerings, we believe the company is well positioned to deliver year-over-year revenue growth and positive adjusted EBITDA for the full fiscal year while we continue to invest in our data platform and core services to drive our longer-term growth.

With that, we'll open the call for questions.

[Operator Instructions]

The first question comes from Matt Hewitt with Craig-Hallum.

It sounds like cancellations have kind of gotten back to maybe historic levels. The funding environment is improving. So a lot of good things from an external standpoint. I'm just curious, from an RFP perspective, the inbound call volume that you're receiving, have you seen an uptick there? And how quickly do you think you can translate that into kind of getting back to that recurring double-digit revenue growth?

Yes, I'll take that one. And David, maybe you want to weigh in question. We're definitely feeling good about the -- what we call OpGen, the opportunity generations we're seeing. It still is a tough market out there, but it is improving, and we have optimism. Endpoints News did a recent survey of 77 biotech execs and over 1/3 of them talked about increasing their outsourcing next year. It wasn't specific to preclinical pharmacology. But in general, with less than 2% forecasting a decline. And so we can play right into that.

We've -- as David mentioned, we've built out some investments in our commercial team as well. So we feel really well positioned as the market continues to recover with what we'll be able to do there.

That's great. And regarding the data platform, it's nice to see that you're making some investments there. When you look at the sales and marketing investments, specifically, are those new hires, are they specifically and exclusively targeting the data opportunity? Or are they also supporting the PDX and some of the other services that you provide?

To some extent, some are both, but I really want to highlight a recent hire we just made. I was very excited to be able to bring on Dr. Tammer Farid to lead the data business as a General Manager. He joined us most recently from Illumina, but spent a chunk of his early career at the Boston Consulting Group.

So he brings not only a very strategic mindset to the business, but also important domain expertise that will serve us well, not only as we execute against the opportunities we have in the near-term pipeline, which we're seeing and getting excited about, but also then longer term as we really think strategically about what is the right way to grow this business and to partner with our customer base around their opportunities to use this data in ways that will really enhance their discovery and development programs. We still have a lot of work to do, just to be clear, but we're believers in it, and we'll continue to invest there.

Got it. I guess lastly is on the margin side, specifically gross margins, a nice pop here, both sequentially and year-over-year. It sounds like this is kind of a way to think about the base business or the core business. As you look out over the remainder of the year, what would -- where could those go? You've obviously added a few people. I don't know if that's going to necessarily impact gross margins. It sounds like it's more OpEx. But can we expect to see further growth in gross margins, which in theory should be flowing through to the bottom line? Or is there something that would cause those to kind of trick down a little bit here, maybe in Q3 or Q4?

Yes. I could take that one. So a couple of things. So I think this is really where we see the margin for the service business being in the 50%, 52%, even a little bit higher range, all things remaining equal. We all think this is covered on several quarters over the years. There can be various expenses that hit in a given quarter. We mentioned one of them, which is outsourced lab service costs, specifically related to radiolabeling. So while we bring some of that work in-house, we are still in the middle of the transition, and there can be some left over outsourced services costs that will hit in a future quarter, which can impact margin. But -- so that would be a change.

But overall, this is the area where we really expect to be in our core services business. And obviously, when we get more heavily into data, we can certainly see an overall lift to margins. And then similarly, based on variances, fluctuations in revenue, that would impact the margins. But overall, this is the way we're thinking about the business.

[Operator Instructions]

The next question comes from [ Richard Beferin ], private investor.

Can you comment on how far along your drug candidates are for Corellia before Corellia files for an IND application. Can you comment on that? And as a follow-up, can you comment or give us a range as to what kind of valuation you're looking at or the investors are looking at too on Corellia, please?

Richard, thanks for the question. We really haven't shared that information publicly about Corellia. What I will share is that we're very excited about the data we're seeing and where we are on our lead program and programs and the traction we're starting to get with some of these VC partners as we share that story is gaining real traction. So I think we'll have to leave that one as a watch this space coming attractions, and we'll be sure to share that information as soon as there's something more meaningful and relevant that we can share.

[Operator Instructions]

Okay. We currently have no further questions in the queue. I would like to turn the floor back to management for any closing remarks.

Yes. I just want to say thank you all for joining. As you can tell from what David and I have shared, we're excited about the business and the direction we're heading. We're looking forward to updating you more in future quarters about our radio opportunities, about our data opportunities, about Corellia to be able to give more clarity and crispness around where we are on those. But in the meanwhile, I just want to wish everyone a happy holidays, and thank you again for joining. Have a great afternoon and evening.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.