Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Rapid Micro Biosystems' Q2 2023 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Mike Beaulieu. Please go ahead.

Mike Beaulieu

Good morning, and thank you for joining the Rapid Micro Biosystems' Second Quarter 2023 Earnings Call.

call Sean Spignesi, Wirtjes, the Executive and on and Officer; Chief me are President Rob Chief Joining Financial Officer. issued results. we quarter today, a announcing release Earlier our XXXX financial press second on A the under in News copy the website Events release available Investors section. of & at the is rapidmicrobio.com company's

safe many pursuant securities considered Rapid statements runway, provisions we anticipated within forward-looking of harbor cash events, the expectations development Before adoption that the and of business. I'd forward-looking macroeconomic to laws this new statements, results including, on Securities during Growth uncertainty meaning revenue but Act or crisis future and potential and expectations call future to RMBNucleus system, impact like Mold predictions made not begin, Micro's federal expectations or which contained to financial balance, the growth, year-end that statements made health Micro's are call the limited you of for Private of Reform public cash of system the and remind statements may this of Direct relating to, to in placements, and are be performance relate Litigation Any interest business the our customer condition, Rapid for Alarm XXXX. statements

differ or Actual implied to factors. of in materially expressed may from those due results variety the forward-looking a statements

required of on consider not that to August live subsequent and should We description events as in XX, aware information, risks as you only statements, on uncertainties as Rapid Form contains and update risks conference This Commission considered amended, accurate revise obligation, Micro filings call urge and these new these intention Securities are or or is with list guarantee are the the Rapid should and otherwise. any our broadcast disclaims by the X, Factors our March time-sensitive any filed future law, be financial the and Exchange Risk the with and today, information or factors SEC. such be refer future or you a a section of only to annual business, XX-K as except of For updated XXXX. please forward-looking because XXXX associated with projections of performance. Micro's estimates statements to of whether report

And with that, call to over I'll turn Rob. the

Rob Spignesi

to Thank joining us review for on our then our you, update second over thank followed I for turn quarter a begin our detailed will results to an performance, our review of call Mike. financial by second the with and XXXX morning, everyone, growth of execution Good related outlook. strategy. our morning's this the quarter you and I Sean will call results. summary progress to a more of

the May. of year and completed validations. above Total in QX performance revenue increase representing guidance half our compared to We the strong a was last systems XX% X X uncertainty $XX at deliver XXXX leading and representing these XX%. guidance. are full navigating of on to growth are least full total our macroeconomic revenue year our customer to year execution teams at the Based year, the we in and least Despite focused of provided placed in reaffirming our first million, strong cautious $X spending, we second quarter guidance staying million, conditions on

the renewals. was also is annual strong both which Service record in consumables driven We to pleased quarter, in the especially during execution quarter by the increased and field. were in pull-through revenue over by year. last the quarter. compared validated to the the quarter and driven per our second quarter, We again services higher recurring once validated second products both contract which strong across Growth with XX% had highlight like system during more revenue, a I'd Directs revenue

importance the While of operations. the which recurring of the Growth providing by indicator is Sean will strong revenue in emphasize worldwide as use Direct durability a of their value evidenced our of want systems to are It business drives our provide also our additional manufacturing P&L their model. and we details, demonstrates increasing predictability to I customers

With Direct the we of approved revenue while products. growth X established double-digit benefit decisions, global other are streams, variability recurring the And of is believe separate to who our solid order timing sustainable. some or customers quarterly large, from comes on is customer-specific revenue commercially our using revenue recurring Growth revenue to subject most due

execute continue through opportunities our to Growth sales placements. and strategy system against advance We Direct to funnel our accelerate

closed multisystem the one late based quarter, largest the example, second a in of CDMOs order world's with an we Asia. As in

call our about both important for quarter, win are significant this biopharma CDMO as our large, a commercial and our on team region. our customers. was with well resonate This technology opportunity discussed we demand in that technology well-earned we highlights the global excited As continues and last and to as for

also in pharmaceutical was attendees expert and Growth state-of-the-art well line. with peers of The featured operating is These partnered chapter at were media look industry system hosted PDA, opportunities well New quality local can Direct This the how for facility control and biopharma Rapid our other high-impact risks. Massachusetts tour, on educational which Parenteral professionals the Direct Micro our and in are control enhance ecosystem. today's and an With our as for data team members manufacturing events integrity, customers challenges improve discussions and in highlighted to production Drug the respect brought pharmaceutical the automated in facilitate event discussions a presentations important as minimize quality industry quality England as meeting prospective The a activities, existing among Lowell, to and as together collaborative the manufacturing given environment. leaders we Association upclose Growth June. customer event event local

of which events As customer of will have we X XXXX, we move half highlight. number a through second planned, the I of

will available customer where X presentations early in a Direct D.C., the exhibit at and will we poster in we First, host October, Conference demonstrations. Microbiology for have Pharmaceutical Washington, an present PDA Growth

the approaches in to data regulators, to value planned events to engage Customer allow have adoption savings, thought annual integrity, automation. we this global to within of professionals, the and discuss authorities. us importantly, event advance and group a similar conference and from patient help the Building and cost opportunities customer testimonials, this largest and Direct Advisory includes Growth growth combined microbiology Board high-value academia industry us Growth result, user industry attend we reminder, successes, And regulatory faster time proposition and on in prospects These focused Day event with leaders, discussions, representatives customers feature safety topics. of will November, and Direct that build and past direct global multi-day our funnel Europe. other on is a sessions As and then

our efforts. product Now I'll brief provide on a development update

Directs pleased upgrades system are Mold Growth commercial to the of existing to sales to is encouraging. progressing We rates our software Alarm that Attachment and launch on new report are product plan.

in has Our training track. been are and effectively leveraging programs positive, and on are confident teams the virtual we awareness. we right Customer on-site education engagement are to increase

year progress forward While it to are are and We rapid on important to over details our later in look momentum to this this we sterility, is are expect of our our sharing still development we respect balance on product With focus early the additional increasing with track on commercialization. year. build the into and XXXX. and the ramp, pleased continue to commercial with

we XXXX. am to consumable first demonstrates committed of total a revenue, compares this summary, a our Massachusetts service our that and continuity guidance to of XXXX, capabilities. of are Turning year manufacturing representing on our manufacturing half brief to of million been to that Lexington, facility of first line the update to for pleased over the announce full important supply. consumable global $XX morning customers has world-class I is our XX% half achieved we $XX and This our through at them million. with In compared an in backup providing least XXXX completed. revenue milestone growth This in

We more our Direct systems, customers of from services continue and operations. the in mission-critical the to and their our of our many platform significant companies continue consumables attract value to existing platform to as Growth the of benefit manufacturing they use our world in best

the customer funnel continues revenue strategy with service in recurring on our Direct In and our our finally, validates an achieved advancing our consumable revenue. laser as we quarter, growth strong And and to use contract high improve execution Growth commercial and second system all-time model. placements. sales we demonstrates focused our satisfaction revenue specifically This, through and coupled remain accelerating opportunities

quarter second now the to our I'll over that, performance. discuss with And Sean? to call Sean turn

Sean Wirtjes

everyone. Rob, good morning, and Thanks,

year. almost quarter XXXX which the XXXX. for second in QX majority to We QX to compared to QX same driven is revenue the in million Product X year. systems XX% Second $X.X QX $X.X which to $X.X compared Direct performance consumables, year quarter, million placed million XX% the last last the increased million systems by in placed This of in compared comprised revenue, Growth we by increased accounted and number was also consumables growth. to year-over-year and $X.X last of increased XX%

strong to As system quarter led This in was basis. average both per was validated consumables, by the which new in a Rob average which an online $XX,XXX per coming XXXX. on we discussed, had annualized pull-through we record over systems compares and validated system generated $XX,XXX

the on high our making this full growth in are single-digit good of in achieve progress percentage are to for goal metric and We area track this year.

solid the to in number year. compared quarter systems $X.X XX% the validations growth contract last as We last and in Service with both in revenue. validation the revenue completed increased to $X.X quarter, service year, second million X of the same million

XXX had total to increase of last service contract a As we of the June XX% systems, contributed XX, year. a which quarter second validated revenue in to compared

$X.X service quarter Nonrecurring strong revenue growth in revenue. million the with $X.X recurring both to driven XX% in million $X.X was consumables QX, to last which million flat was and by the year increased quarter. year, prior revenue Second contract compared

due to consumables automated second margins last compared and that margins. were benefit $X.X The decline to in to Turning downtime year. our enhancements in million $X.X million on negative Product margins. in line manufacturing mainly the volumes production to future negative manufacturing was quarter due to will gross efficiency lower QX implement

of the were down these quarter QX, by completed capabilities QX, them revenue While and quarter, our negative $X.X activities benefit to slight was cost end the last offset gross serve customer negative base. margins partially continued of from in basis, our QX was substantially contract The expect Service in margin of into the we XX% expand global benefiting and a compared beyond. combined million to and year. compared service some margins to our On by last slightly investments improvement be a growing percentage to have higher second year. gross

$XX.X operating million and million sales and Total in P&L. the G&A. million $X.X of the million down $X.X marketing, consisting expenses were R&D quarter, in Moving $X.X second in in

loss the million and prior we year. in to plan million capital to per and $XX.X capital expenditures $X.XX Net was last the QX. $X.X share to were Net loss in stock total QX. $X.X expenses per of year August, operating quarter. depreciation million second total expenses million announced to last second This OpEx quarter compared a in in loss $X.XX Excluding the This $X.X the in compensation $XX.X retention expenditures, compares in noncash was share expense and QX compares to million, loss in amortization million $XX.X net of respect million of costs $X.X was was related quarter. $XX.X net XXXX. of With million was

third I'll year and XXXX full the the our to turn outlook quarter. for now

represents of and at which We will least are reaffirming guidance systems. place $XX least full least our XX revenue we of at XX% million, previous XXXX assumes growth year at

quarterly operating teams and While dynamic and first the environment. timing a generally in half scrutinize scale purchase of Customers in established continuing companies, year the may are effectively large uncertainty have result in higher to our variability we navigated our decisions, customers which still are macroeconomic in the and our are of revenue.

reflect continues in the and are uncertainty customer assessing interactions continuously this we decisions. monitoring Our purchasing changes for and to guidance environment

a we were placed new For includes part least system which multisystem that X already expect that $X.X the guidance X revenue were in of assumes which July. customer the systems mentioned earlier, order in third commercial Rob This QX million, of at placements. quarter, from at least

We validations in continue complete least at to XXXX, least expect X including to in third quarter. at XX the

QX both and expect be we comparable periods. than higher the strong XXXX versus growth QX revenue, validation to to respect QX and with With

service and can experience variability quarter-to-quarter for customer the reduction for systems from Gross both based as work again systems the to leverage for as and of improvement be Shifting in between gross sequential us. related and consumables, validation increased QX and as activities top placements. activities in a system a reminder, production lag placed QX productivity validations cost volumes to we particularly strategic in well in objective placements previously and system validation timing from continues in margin service. on margins, expect we As benefit sales, some higher improvement new higher

on We efficiency cost in increasing increasing in manufacturing driving are products services. and efficiency and productivity focused reduction and

of as continue over to XX% We scale expect the the as business well volumes with in positive expansion gross higher to margins us these sales to XX% benefit to time. actions to lead XXXX to continues as

to expenses, respect operating continue million QX that of as over development new mainly between well impact costs and With $XX.X activities. expect as we the retention timing product with driven balance quarter will to $XX.X XXXX, per by of million nonrecurring variability the

million in equivalents of and had second investments XX. Finally, burn as $X was quarter. Cash we approximately cash, approximately the million June in $XXX cash

year, to we to in burn of consistent QX from benefits cash cash QX realized with we forward the expect management. be and the Looking then second QX working capital as to in half decline

a cash with concludes and or my below to XXXX investments As runway $XXX XXXX. on at provides result, slightly outlook. year into cash expect this to full least comments continue confident and end that us QX we our We with That remain at million.

open we'll Operator? call point, for questions. this at up the So

Operator

the [Operator comes Your line Tejas Instructions] from first with Savant Morgan Stanley. question of

Yuko Oku

on for Tejas. Yuko the call

from persisting time And macro you're to customer you since what seeing the challenging last trended purchase to quarter? decisions the screening? here, budget With how make share could has customers' related

Rob Spignesi

this so Rob. Yes, is

in difference. certainly with still a hasn't just than are what seeing So budget reported QX, We're we're -- material That increased seeing a what thematically. some faster filter is basically said, tighter a customers not being been scrutinies, there's consistent we others. moving

push why seen and guidance. hasn't But right throughout dramatically the budgets countermeasures have reaffirming that, against it are working, been are that's So believe, QX. some and changed. effective we In cases, we we're to our

being also having gives we're encouraged further in at rollouts with our projects customers confidence us increasingly, level senior with prioritized. we're Direct and and interactions that think are Growth I ensuring the the our outlook. This

a So major just throughout change theme increased again, some continuation so scrutiny. but tightening of here, budget general the no year-to-date and the of

Yuko Oku

financial Lexington helpful we consumable facility there as And that Got be facility with manufacturing backup to begins it. contemplating incremental up any impact ramp? running, then that are should color. and now That's or in costs

Sean Wirtjes

to be active, Yuko, will but No, Sean. It's it's a it is It ready backup facility. not go.

not be X use at need operating facilities not we same separate we consumer it. it, will if So will time. the manufacturing It -- will we be

Operator

question Stifel. next Arias the line comes Our from Dan of with

Dan Arias

set feels in out. And the that the Rob, maybe just beginning feel that's you to today say, guys today stuff for a doesn't nicely in with, is the you version today falling of the be because of the and first now question conversation funnel there. been business the -- time way not the about a of not the you're I would mean you're is it intact. the up realizing forecast intact just that tenor do that given talking a of lot work guiding booking line obviously, and you're but for, about with right you know I XXXX or like good year XXXX

are question you okay So right XX the based the is environment X the set that just next like, up to we're on months, now? in for

Rob Spignesi

the Yes, outlook. the a Dan, first little like Yes, more from color question. we maybe

team. we ensuring team do have with up essentially commercial encouraged year, execution talent point, in we Now trained, this our of intact which we and the have the commercial clearly, on is calibre that past the incredibly focus over full our at

insight we're global getting And question, better we inside a ever us As that, believe we're increasingly, senior access indicator. stay in Certainly plans, exposed certainly prioritized. help as guarantees customers. to been will to into I touched history, rollout no which visibility it's Yuko's decision-makers great probably also Micro's and best in but Rapid in leading

about We again et geographies, healthy a up, in of is enhanced field, -- right the X and generating funnel feel Our number cluster number marketing. cell the gene, leads good regions of cetera. composition the and reps of with funnel the biologics, our of

it's I consumables our important to business. also would say note

good -- that in existing that is usage consumption, continue good look important our as typically I But to think at increase very, it's services some heard withstand customer helping very leading is and across of customers could -- about indicator a comments. the as of some that indicator a systems indicator through times which consumables for leading and that bit a quite it you us and great these be I a to of be can decisions prioritized helps purchase to leading experience stay and many global budget scrutiny. networks, the us future also

range. I in and And on, already can Sean QX thematic, short say, the have with in quarter holidays here, because term vacations would access. we are helpful clearly, QX, as placements longer customer is touched those and X be tricky So the a which

of it's the future and with all above, the So of saying about way the a long outlook. we're optimistic

Dan Arias

yes, did with quarter. that's Well, revenue Okay. pleased And sound the recurring the in good. pretty you

into think guess, that double here? item to march are you So and up base think -- next You as installed year? can do to continues you mentioned digits Sean, I we the do tracking lineup that that how about grow that upward sustainable,

Sean Wirtjes

using well therapy. existing just in gene sign and and coming volumes at systems utilization just validated ramping. and recurring not we going customers us clearly was where Yes, more contracts going but as to systems in I forward expect systems of not see growth like We'll be that that's pieces good we're consumables are growth think probably recurring customers bringing online, and both more up we're increasing to that's XX% of as get But in expectation. Dan, the as going QX, systems we get say new revenue system in clearly placements cell as it, building we for who through higher more

are and we as continue recurring. going to those go us are trends continue forward have to growth good to we expect we see that are in So help that now going to

Dan Arias

-- demonstratable is Are if set of cell there's we a and that lot gene the that within up guys the going be are consumables looked model, that that is now? still number holding Because hood users, within there. customers, on you the obviously, is more under the today? Okay. intense the idea the at Would --

traditionally whether curious way about we just have thought things true So today? holding the that is

Rob Spignesi

I Dan think it's the -- at Rob.

generally customers quite that's are volume, typically It's true. it our a heavier site gene the consumers larger our And as the of use Biologics other also and biologics water the segments at high high has monitoring and bioburden think and level, The to application. segment environmental and cell be and of well. I but sizable users tend products. pull-through segments is in

of on the it's a So review mixed depending sort segment.

Dan Arias

Got it.

Sean Wirtjes

us Yes. in into runway kind that would have within expected gene biologics, metric of expect And over get talked we space say the I over the meaningfully that range to can just that we've we time of and business about increase get plenty to just accelerate and this get I in high-volume time that that potentially. think to cell to past. the But

grow over that of grow. mix is But customer to it we is we expectation the So kind going are to going how will just this fast metric -- that meaningfully really time. with go clearly, be

Rob Spignesi

Right.

Dan Arias

Okay.

it I'll there XQ, dealing with the relates me suggest Okay. made the the really you headwind the to hop stops a off. on Sean, that you downtime for and that the by starts and gross comment as production then margin aren't lines, there? one Last did for

Sean Wirtjes

and where This right them going to that started investment mean and forward. QX, that we investment now making case we positivity of some going have downtime, short-term in are part we some a drive I it's a that downtime's of have Dan. where things now we're Yes. on doing still always was

example give manually. a So cost will consumables you historically moved we're which are right including of manufactured we And things. One that doing we the lower lot onto water have have working to product. some of I'd benefits, automated get our is, over process, bioburden and now

of more onetime kind I'd So a call of thing. this

quarter We by expect will the future. this I in to any likely be means. things every like it have wouldn't

I So quarter I margins get expect march forward as sequentially to QX is guidance year, think we QX. the through and think each we in better the

not are in We guiding positive to QX. gross margins

done some and over that we possibility the exists there we from need if reduction think upsides standpoint I the drive get we get to can system things a second done still cost half.

the and it this Dan. do, thing it's to something was as to into expect think year get is Thanks, move that think conscious 'XX. and So We a decision. in late I right we benefit we us the

Rob Spignesi

Yuko. and Dan, thanks, Well,

for We are today. up the live now. everyone going call to for us joining Thank wrap you

Rapid Micro Biosystems (RPID) 4 Aug 232023 Q2 Earnings call transcript