On March 12, 2020 Champions Oncology, Inc. (Nasdaq: CSBR), engaged in an end-to-end range of research and development technology solutions and services to improve the development and use of oncology drugs, reported its financial results for the third fiscal quarter ended January 31, 2020 (Press release, Champions Oncology, MAR 12, 2020, View Source [SID1234555483]).

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Third Quarter Highlights:

Record quarterly revenue of $9.0 million, an increase of 40% year-over-year

Reported income of $881,000 excluding stock-based compensation and depreciation

Achieved record quarterly bookings

Ronnie Morris, CEO of Champions, commented, "Our third quarter revenue results were record breaking, exceeding $9 million for the first time. We continued to see bookings strength, aided by an increase in end point analysis testing in our studies. The pipeline of opportunities in GCLP flow cytometry services continued to expand and we are confident GCLP flow will contribute to future revenue growth."

David Miller, CFO of Champions added, "As anticipated, we started the second half of the year with very strong results with near record income on both a GAAP and Non-GAAP basis and we anticipate remaining profitable for the remainder of the year."

Third Fiscal Quarter Financial Results

For the third quarter of fiscal 2020, revenue increased 40.6% to $9.0 million compared to $6.4 million for the third quarter of fiscal 2019. The increase in revenue is due to increased sales, both in number and size of studies. Additionally, customers are seeking more complex study designs and end point analysis testing, leading to larger contracts, contributing to the revenue growth. Total costs and operating expenses for the third quarter of fiscal 2020 were $8.6 million compared to $6.8 million for the third quarter of fiscal 2019, an increase of $1.8 million or 26.5%.

Exhibit 99.1

For the third quarter of fiscal 2020, Champions reported income from operations of $433,000, including $229,000 in stock-based compensation and $219,000 in depreciation expenses, an increase of $803,000 compared to the loss from operations of $370,000, inclusive of $335,000 in stock-based compensation and $164,000 in depreciation expenses, in the third quarter of fiscal 2019. Excluding stock-based compensation and depreciation expenses, Champions reported non-GAAP income from operations of $881,000 for the third quarter of fiscal 2020 compared to non-GAAP income from operations of $129,000 in the third quarter of fiscal 2019, an increase of $752,000.

Cost of oncology solutions was $4.3 million for the three-months ended January 31, 2020, an increase of $900,000, or 26.5% compared to $3.4 million for the three-months ended January 31, 2019. For the three- months ended January 31, 2020, gross margin was 52.0% compared to 46.7% for the three-months ended January 31, 2019. Gross margin varies based on timing differences between expense and revenue recognition. The increase in cost of oncology services for the three-month period was mainly due to an increase in compensation and lab supply expenses. The overall expense increase is generally in line with the expected contribution based on the growth in revenue and study volume.

Research and development expense was $1.4 million and $1.3 million for the three-months ended January 31, 2020 and January 31, 2019, respectively. We continued to invest in research and development to offer new PDx models, ex-vivo assays and to expand our endpoint analysis testing. Sales and marketing expense for the three-months ended January 31, 2020 was $1.3 million, an increase of $428,000, or 48.7%, compared to $879,000 for the three-months ended January 31, 2019. The increase was primarily due to compensation expense driven by the continued expansion of the sales force and commissions earned. General and administrative expense was $1.6 million for the three-months ended January 31, 2020 compared to $1.2 million for the three-months ended January 31, 2019, an increase of $400,000 or 33.3%. The increase was mainly due to an increase in compensation expense and a non-recurring bad debt write-off.

Net cash used in operating activities was $41,000. The quarter’s use of cash from operations was primarily due to ordinary course of business timing differences in working capital items for the third quarter of 2020, including an increase in accounts receivable, of $759,000 and a decrease in accounts payable of $893,000.

The Company ended the quarter with $3.3 million of cash. Additionally, subsequent to the quarter end, approximately 700,000 warrants were cash exercised, adding an additional $4 million to the balance sheet. The Company has no debt.

Year-to-Date Financial Results

For the first nine months of fiscal 2020, revenue increased 20.8% to $23.4 million, as compared to $19.3 million for the first nine months of fiscal 2019. For the first nine months of fiscal 2020, total operating expenses increased 22.7% to $23.3 million, as compared to $19.0 million for the first nine months of fiscal 2019. The increase in revenue is due to increased sales, both in number and size of studies, and expanding our customer base.

For the first nine months of fiscal 2020, Champions reported income from operations of $109,000, which includes $437,000 in stock-based compensation and $579,000 in depreciation expenses, a decrease of $277,000 or 71.8%, compared to income from operations of $386,000, inclusive of $498,000 in stock-based compensation and $433,000 depreciation expenses, for the first nine months of fiscal 2019. Excluding stock-based compensation and depreciation, Champions reported non-GAAP operating income of $1.1

Exhibit 99.1

million for the first nine months of fiscal 2020 compared to income of $1.3 million for the same period last year.

Cost of oncology solutions was $12.0 million for the first nine months of fiscal 2020 compared to $10.0 million for the first nine months of fiscal 2019 an increase of $2.0 million or 20.0%. Gross margin was 48.8% for the first nine months of fiscal 2020, consistent with 48.5% for the first nine months of fiscal 2019. The increase in cost of oncology services for the nine-month period was mainly due to an increase in compensation and supply expenses.

Research and development expense was $4.0 million for the first nine months of fiscal 2020 an increase of $485,000, or 13.7% compared to $3.6 million for the first nine months of fiscal 2019. The increase is due to increased compensation and lab supply expenses related to new model development and product expansion. Sales and marketing expense for the first nine months of fiscal 2020 was $3.2 million, an increase of $1.0 million, or 47.6% compared to $2.1 million for the first nine months of fiscal 2019. The increase is the result of the continued expansion of the sales force. General and administrative expense was $4.1 million for the first nine months of fiscal 2020, an increase of $807,000 or 24.4% compared to $3.3 million for the first nine months of fiscal 2019. The increase for the nine-month period was mainly due to an increase in compensation, professional fees, and depreciation expenses offset by a reduction in recruiting costs.

Net cash provided by operations was $360,000 for the first nine months of fiscal 2020 compared to net
cash provided by operations of $1.6 million in 2019, a decrease of $1.3 million or 81.3%. The decrease in net cash provided by operations is primarily due to a decrease in working capital items for the third quarter of 2020 including an increase in accounts receivable and a decrease in accounts payable.

Conference Call Information:

The Company will host a conference call today at 4:30 p.m. EST (1:30 p.m. PST) to discuss its third quarter financial results. To participate in the call, please call 877-407-8035 (domestic) or 201-689-8035 (international) ten minutes ahead of the call and give the verbal reference "Champions Oncology."