TKNO - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen thank you for standing by. And welcome to the Alpha Teknova Fourth Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Sarah.

begin. may You

Sarah Mitchell

Officer highlights operator. XXXX you, Gunstream, everyone Chief questions. Teknova’s XXXX provide and be to company’s will review After President by happy Great. we will we conference And call. quarter business will Officer earnings conclude Chief Stephen to Matt provide Financial updates; financial On on fourth followed and Thank Executive your commentary welcome Lowell, who Teknova’s, and remarks, take today's the Teknova’s, outlook. results the call prepared

begin, as results make and for risks company we differ. to goals those a Before the statements reminder, to or expectations that during regarding uncertainties the that we the and including of subject forward-looking financial may performance this cause call, are events business actual

included itself factors, commit not SEC. measures financial in The insight evaluating to fully management that company update the these as described and does the by performance, comments obligate earlier events, press factors concerning the effectiveness release the Company’s risk information, new the believes issued or in Company’s statements can or law. business non-GAAP the results, strategies. provide more a and financial GAAP addition views, required its forward-looking meaningful the Additional could information future Company’s other except with today Today's these when to are filings change in the as and which result reflect of current various is Company’s Company of

relations always and measures Non-GAAP only a website. for, not this press be release accordance considered Reconciliations During included to financial a that the the this deck measures financial which Stephen. other supplemental section GAAP webcast. is a I Please company we as also non-GAAP advised accompany financial financial slide can measures measures today's presentation posted to Teknova’s from prepared website, of should has in today's which to GAAP. differ to will financial remarks for are companies. financial Teknova’s now, this substitute call measures of non-GAAP on certain with as the also used turn by of in call, over we supplement posted of afternoon, be the and prepared investor measures our results. The therefore will may on non-GAAP use be accessed in similarly And to that non-GAAP should named

Stephen Gunstream

a short with best And Good positioned us you, commercialization. Thank to accelerate reagents need agents thank year-end for custom-made everyone of that turnaround critical therapy and vaccines, drug and afternoon. diagnostics. novel introduction quarter their where high joining products in the from to is selling is We Sarah. times XXXX quality less in manufacture volumes, our liters. therapies, leading for you earnings molecular customers call. reagents customer and a fourth provider Teknova than scale advance they exemplified for gene discovery are there is our with significant as This of

the to rapidly custom cell discovery to our gene grade enables solutions from therapy bioprocessing ability Our drug impact. customers reduce to clinical clinical manufacture time and

the growing validate for across meet research aggressively and the solutions clinical and and need we to grade investing And to potential industry. customers, quality, interaction current high Our are continues demand. with custom the

initiatives. long-term and team, Marketing. investment including our President Bringing board, and are to of the a on strategic of a talent recently functions, breadth Vice we on priority new XXXX a where as this building Chief of we brought our Senior Teknova As remains part customer depth leadership we execute our Officer in facing Commercial

XXXX our the against to had and progress growth We of IPO. time drove and capped critical great Teknova. to strong June goals Our over a dedication be organization at we and investors in our year the We year, past to success. communicated our whose has significantly been will our to I want thank business, meaningful of off at associates grown QX all made strategic continue a commercial significant year-on-year of exceeded XX accomplishments the revenue a priorities per XX% customers growth grew our customers. active in and posting Clinical to year-over-year, doubling XX% to Solutions Sample excluding in near both increase XXXX number year clinical XXXX increase Clinical in customer the Lab total of Essentials revenue due in Essentials from robust grew and Transport. in active growth an year saw in an of average Solutions. XX active XX% by of We XXXX. driven revenue year-on-year full revenue Lab has XX%

solely of a accounts past number years XX reagents research custom we or the GMP to now also previously that catalog purchase in months, purchased Over transitioned reagents. that accounts

their accounts custom pipeline. XX up the from up or We XX reagents grow as clinical at previous which purchased GMP cell particularly these these and through therapy stands This product customer from accounts notable approximately to continue XXXX. in base, the of to gene advanced XXXX, year. XX now XX accounts our In was expect and

discuss in Importantly, significant we momentum I order made XXXX company's XXXX. the book started will exited with progress history. against largest the now the stated our and in with XXXX investment priorities

to we advanced existing facility capacity and First, investments manufacturing GMP enhance construction Hollister, in new state-of-the-art California. our meaningful on made our

will have revenue. facility We of $XXX will that to XXXX annual continue operational expect capacity of an our by be and end production in million new the

build our by out and building finance, company to the new sales, R&D, a long-term continue This bringing and across we near our included operations. talent help marketing, Second, will success. that organization ensure

We IPO to a with capital putting $XXX growth a work. to our in Lastly, from sheet we our $XX including June. capital significant million plan, balance and March year are last solid fuel credit the facility our secured proceeds exited our million and

year company the the of on growth. ahead. XXXX is future invest for focused an solidify second our fully the now year for are foundation will We the aggressive plan that

Specifically, priorities. focused we the following are on

$XX First, excluding deliver rate growth between midpoint Transport. million, at million of $XX revenue the a XX% and Sample

manufacturing facility year by our current on new Second, increase production bring our capacity end. and

our in made new call a facility strategic over teams out financials. against capabilities of drive and are the build we opening. will our demand of our develop Overall, capabilities. our lastly, And discussion process our the for enhance the marketing products I we've long-term Third, and with commercial pleased Matt to to hand new progress plan. and advance now and associated performance engineering

Matt Lowell

And the good We afternoon, results XXXX $XX.X the fourth Thanks, delivered revenue strong for year Stephen. year. quarter everyone. million full $XX.X Total for full for the and of XXXX. of million and quarter was fourth

fourth Teknova increase for in million, XXXX. the in product of the of the tests. urgent $XX.X the Sample Sample and reminder, million of address for latter Transport XXXX Transport By of the $X.X XX% way year need XXXX, launched year the quarter million $XX for Excluding the a million from from increase the XXXX full revenue was quarter $X.X XX% fourth part COVID-XX to a full for XXXX

both or products. RUO million XX% market the will $X.X During order, catalog hand includes with sample Essentials the in XXXX. million in fourth QX XXXX we recognize transport a fourth inventory and revenue Transport custom quarter the revenue and not Lab increase the products shipped Lab in $X.X additional Only at are on of remaining and targeted Essentials future. the Sample from Use Research

Manufacturing or Growth used from to customers. Essentials quality are $X,XXX and increase customers commercial Solutions year of active Clinical year are XX% Lab Practices in products release under number clinical the made an active GMP, in in therapy standards development by phase diagnostic. of Lab the a or Good primarily or average a an revenue was increase the XXXX. was million and increase driven XX% Essentials full customer the the for by $XX.X revenue million, $XX.X For full per

the addition clinical Our quarter revenue ramp per by full XX% clinical customers XXXX. average XXXX revenue growing increase customer expect million contributed of but XXXX. fourth to customer over in in $X.X We XX% per active customers clinical they our lower solutions was XXXX, purchase solutions solutions million of a new $X.X to from million these and with increase XXXX to time year grew the their in XX from volumes. clinical clinical million full XXXX, for XXXX, the a in fourth in $X.X active quarter, as active $X.X customers year active we up revenue new revenue The adding increase from customers a a

which $XX.X XXXX, from and was the for fourth Gross can XX.X% the in to year is from in revenue fourth compared down which in statement, the there profit lumpiness quarter and a To income gross of average $X.X as year, XXXX. of XX.X% in category. the revenue for is the year Just million full in of XXXX XX.X% million for solutions, fourth to fourth the this XXXX the of XXXX. quarter, orders $XX.X% full reminder, XXXX to larger for due quarter-to-quarter be down quarter compared in the the full was clinical of quarter margin million million $X.X $XX.X revenue

related Excluding of to fourth from the XXXX. reversing $X.X inventory of quarter a the a reserve in excess Transport benefit Sample margin gross portion impact of million was XX.X% the

invest the of were For in the growth. higher reflects is $X.X the impact expenses for in the to Transport XXXX, associated compared million of XXXX. support expected the Sample marketing, and net and quarter the margin related investments members excess sales XXXX, increased that full compared to was near gross and reserve the key for of to Operating expenses to operations margin million fourth and in full year gross million teams. $X.X The year we its company capabilities XXXX people for long-term the $XX.X year costs million inventory, a capacity lower XX.X%. critical excluding of including with continue our million current of making $XX.X as fourth manufacturing addition quarter Operating the to and long-term finance XXXX $X.X to success, R&D, to full

XX, XXXX. XXX XX% XXXX the had up from December of December associates, XX, company As

facility. the per in $X.X to $X.X million as fourth quarter million or compared and share or XXXX $X.XX income for XXXX XXXX. applicable common or negative $X.XX stockholders XXXX $X.X share year quarter for or the million for $X.XX million loss XXXX. quarter compared per stockholders diluted $X.X a fourth EBITDA compared common year the the substantial million the year million million spend income was the in to $X.X XXXX $X.X quarter XXXX to compared XXXX. attributable fourth net net the for to diluted the fourth stockholders manufacturing to to of the $X.XX the was EBITDA, XXXX to for full Capital diluted $X.X XXXX measure positive in common year million was with compared also million year fourth full loss the requirements. to full The and for million $X.X attributable $X.X common $X.X full public quarter operating full in compared to attributable full quarter was Net We company fourth for majority Net our in for million meeting for diluted Adjusted attributable per positive costs year to the share had XXXX. stockholders and XXXX. quarter $XX.X million of new new year non-GAAP share per $X.X towards was fourth for Adjusted negative associated GMP a the full was expenditure

to our continued make R&D facilities lab. also in We investments production current and

million are used instead quarter and to of months. XXXX the to year receive capital in are curve was compared XXXX. compared the provided equipment, we of cash to fourth activities, was cash negative to measure compared non-GAAP capacity in full the significant our and products free as purchases lower decrease $XX.X ahead We less full and by their increase $X.X expenditures. Cash demand year property EBITDA a define and ensure or in for quarter flow to sheet, due year customer weeks million able period and building primarily negative custom balance plant million flow negative committed for fourth $X.X the $XX.X XXXX operating a which to of This adjusted prior the negative to the million in

we side forward it's but moving free historically free a our flow use. cash cash have adjusted we to As as going better flow reported note, for believe cash a are metric

and we XX, had in cash $XX.X in December million cash and million debt. XXXX of gross equivalence $XX.X As

XX, execute December cash on Our plan. XX.X us our million of of domestic growth net positions XXXX organic to as position

guidance XXXX to outlook. revenue and our Turning

approximately of We expect categories revenue are approximately forecast of Essentials to respect and XXXX. solutions $XX growth revenue to total to XX% $XX of we this of compared approximately XX% providing excluding a as At XXXX million. the XXXX million XXXX Transport. clinical compared guidance midpoint Lab revenue to With to Sample product growth compared assumes growth revenue XX%

growth solidify While guidance plans, our marketing, high we spend, giving the on aggressive and as expected also well the XXXX that, in will our be we be sales, back for future foundation specific GMP facilities. a XXXX, as capacity over to to another are new G&A facility we make will fixed level invest I not investment of few we I'll Stephen. and year will other comments. in of turn will make across investment as significant of expansion to capital current in in R&D. investments of assets call expect another our fund year cost balance the This as With continue the

Stephen Gunstream

we made priorities. we the have Overall, pleased performance our and progress Matt. are Thanks strategic our with against XXXX

now are and We the focused ahead. fully excited year on XXXX for

will take now We your questions.

Operator

with Instructions] first you. BTIG. line Thank of Nam [Operator from Our comes Sung question Ji

Your is open. line

Sung Ji Nam

Hi. and and quarter congratulations questions Thanks the taking the the for on year.

there sample there. should revenue business? on how to I'm about we think last to cadence was Is at and Just your questions trying look factored a transport few seasonality guidance, into a cadence? there year's

we current anything the terms as the like and that, cadence the of kind in potential could of we year? about – we're the you Omicron in at could color provide think just look we environment quarter, as revenue – any any the us first things So for

Matt Lowell

Yes. be say clinical expect in on indicated when we've as through business our say the a the relative throughout I But those There some in solutions pipelines. I first as we XXXX growth end. based ramp their year. would general business, depending know. Hi. customer upon Ji, come seasonality and would there's the a would we of I not orders acceleration year particular general Sung the throughout customers could say lumpiness a cadence, the the to to would quarter to from Matt. In its

Sung Ji Nam

I your investments there, Got of it. down could margins gross it's currently wondering pretty it's assuming for And gross Great. know increased quarter, think realize year-over-year, but again, margins was planning I'm And but And for in declines drivers the further the on significant significantly terms on? then sequential we anticipate given this what you're fourth lumpy you a year, about are. we as the basis.

Matt Lowell

the margin in did Right. costs anticipated. that I Yes, that is we sample in the the product QX biggest given sale margin our the increased point gross also in volume XX% revenue the achieved of before, is than which from was but with additional talked we for the gross us the the think to But driver in higher come QX higher transport long-term helped as utilization about up QX, adjusted will over of in still I business. performance margin when

we would for of ramp-up of pointed see a decrease bit new the margins getting that QX, forward the XXXX, as of We of ahead So come the to, of facility continue facility into to growth year. to that the revenue guess ahead we opening in did ready as going year, out the end into in – little rest rightly I going it. for the but the we start that of from will the as are you particular, expect

the that's it. way – the think to So that's I I right at think look

Sung Ji Nam

and And therapy, great. from accounts me is it. cell which lastly focused XX on gene then Got

of of revenue kind XXXX? for that percentage Just what represent does curious

Matt Lowell

out giving that Sung we is now, can XXXX right significant Solutions Ji, So in XX%. that yes, are we number entire are flowing reference the obviously particular XXXX. from but can business, whether Lab I the not about moment. not at you pretty as But I it's that see Essentials say segment and grew Clinical out think

Sung Ji Nam

much. Got it. Thank you so

Operator

you. Thank

comes next from Johnson question with Our Jacob Stephen. of the line

open. is line Your

Jacob Johnson

that kind is Hey the good and And a to growth, Maybe that confidence solution of nice elaborate on you there. first guide hearing you're clinical that uptick pretty just impressive customer solutions are obviously XX%? congrats visibility clinical the your and XX% XXXX on growth. quarter. new afternoon, into everybody What you Can you these from lot just versus gives demand? of customers segment additions next guiding a which good that on to

Matt Lowell

said, Thanks up. ramp customers time bring Great. we takes Like Yes. to new we some Jacob. it when these on,

GMP of volume they'll they pretty confident based well with the on discussions are And timing the which so terms as of ours. which of as – a as we customer of on-boarded them in in need products

we exist. size the but we've so lumpiness And think for the business and quarter-to-quarter good I variability of said visibility annual the does given before, have that as

Jacob Johnson

Got sense. That it. makes

Stephen Gunstream

And customers we further – addition, the just in just that active growing last I that we'd highlighted through also customers some from business up or confidence year be the that to remarks of as would that us as in XXXX. also in out point XX significantly just gives going year XX of end the last

Jacob Johnson

growth on – revenue that guess that's it Thanks given in a pretty of for And implies customer in would've XX% base, but as segment. I user growth size expected. large Essentials, that's XX% that the then Stephen. also about Lab that, customer that I just impressive, up that a and per Matt talked you follow Again and base

to Essentials? So Lab can you speak the in just customer additions

Stephen Gunstream

also for obvious And that and to it is that of And that has pandemic back. believe of customers number that that and pandemic. the important absolutely. other some the in that starting during additional Yes, to did a commercial things IPO we note seeing Teknova. starting bit have is in COVID did the the do to to little come reasons that believe visibility growth on reduction team and We from are up are customers. of ramp bringing addition, see course, bringing have our we we with to We

fact addition average new strategy essentials their we account. growing generating part can we're what And you don't an that see in overall in our think to revenue certainly I it's want in positive. here it per of So, the attract to And lab customers that things too. that's all those not are that's doing numbers and

Jacob Johnson

X,XXX A XX go No, easier XX from than lot to helpful. to higher. that's

questions. taking it leave Thanks the for I'll there. So,

Stephen Gunstream

Yes. Thanks.

Operator

you. Thank

from with of comes the question next Max line Cowen. Our Masucci

Your line is open.

Max Masucci

for curious And in thanks right. we expect the to GMP just QX should questions. any reagents boost Just from testing? taking grade there if used pacing, was boost COVID the QX? Hi, In get COVID any then in of sort trying

Stephen Gunstream

the did and about the ahead there. we address the Sample have additional question GMP go Obviously, I'll product. from QX Transport revenue

So, I quarter. also gross margin to in the contributed that higher think the

is the a versus But we've secondary before, volume driver the factor Although, RUO. as GMP primary is said overall.

key say would was not contributing I factor there, the definitely So, a but there contributor. a driver,

Matt Lowell

Yes.

say testing Transport, would I outside for if you're Sample Transport. or of Sample outside that's asking COVID-related of think I things we QX for Max not think, material about

Stephen Gunstream

Right.

Max Masucci

And it. about capacity coming public breakeven you how EBITDA reports, three Got board, to in then belt thinking Okay. now pathway with are arena. under the have the you adjusted earnings on your the

mix So, might Lab pathway the the Solutions next you're look adjusted you growth if thinking and you of evolve how about that Essentials to how years breakeven? and are trends EBITDA the at Clinical over few seeing,

Matt Lowell

year Yes, I XXXX, highlighted investment mean, I we our of now think, as in right in aggressive are second we plan. the here

we'll And the coming drive our we to continue to revenue play. line So, an year, obviously. EBITDA perspective, new growth come to will we timeframe factory into making I the early this with investments be all see as see other to by we're from the think start EBITDA benefits the negative point the that turning XXXX and top

do of it's So, outlook in type I think that Max.

Max Masucci

finish on congrats to Well, strong XXXX. a Great.

Matt Lowell

Thank you.

Operator

Thank you.

of from question Blair. Matt Larew William of the line next Our comes

Your is open. line

Matt Larew

and good and assembling out Obviously, the been you've team, in and Affairs function R&D Hi, sales Scientific afternoon. the resources. marketing investing building

year the anything or terms there's were in in return the point sales IPO of that if inbound I'm team? market from more about you building half then back to team process, there your your you're of out? sort to XXXX? particular, R&D to can are decided on excited most you I Stephen, of curious, know bringing is sales curious in team that the And the anything opportunities starting side, referrals. the in is sales Just you if from if see success on customer the

Stephen Gunstream

Great, thanks, Matt.

gone some and market on XX what the right? you customers to think, can So, XX see a sales from We've from perspective, I traction, clinical side. is

part starting is And we will Henry Just end in of that over I Obviously, teams. board I time, online should move past. we're their come Ken had are Jennifer of clinical products we pipeline, we've this these impact believe an to expect those play these that's the they our and out on on have business. right? that customers the building beginning, out than go we right? facility and to up a to scientific down, at other in labor. new now, the calendar out in customers see just fruits the the be different execution with Right the Gelhaus, engagement is ramp the we And created, year brought XXXX. are level then having As the ready So, fill that think to of by we their

about So, we're excited that.

not will to year. obviously think think impact we're of I at end we yet we're where running I seeing some the but that, up be in do this fully

on R&D Secondly, we your excited. are very internally

development excited in that are our disclosing not capabilities doing, to what still But is progress in us about in a a we're six out are exactly through much development months product nine to fair years. the pipeline, We products a to taking but on the we've pipeline year it's XXXX internal these last that made and we've say we out think year I front. the for built in commercialize

Matt Larew

of some the so just past flex believe front, run additional you added current can remind capacity you the well. on you've as year do bring on can And if Hollister the facility constraints with have the end in I but coming capacity know to you us capacity by I online you facility? the start Okay. into current but shifts,

Stephen Gunstream

Absolutely.

process engineering And you as drive so on yes, investing manufacturing. capacity our and seven-day increase automation the moved have week and will to further work in the we in And efficiency. a see well QX it current spend to

are to XX-hour addition, a we to yet In switch day.

to until next ready something be whether out we're to into, else turn capacity do our And with on. ample a we the capacity we meet should facility so, have happen build new facility, will something that expanding demand have related a chain or continuing of it's we supply

Matt Larew

guess from time. of one chain final rapid and standpoint; raw a part the are you supply delivering just I the inflation turnaround what And material is obviously is Okay.

to you that inputs, so logistics inflation the of side sourcing are that extent customers built catalog into any pass have second to in some piece price And especially be are one. things or increases contracts had would to part had And you've getting then issues the either to on those with on things, the your customers?

Stephen Gunstream

first, long is or chain a environment. bags work raw with. or perspective, containers, are like lead from very materials materials and customers that it So a times to have supply There challenging single-use certain or are like products they raw very containers specific

of in have the manufacturing should they benefits to One is raw product swap different need to the containers, or that that we flexibility out our materials different sooner. them

chosen have So, customers some to wait.

and have a do passing of so we of Contracts key supply are products customers we out inflation that, obviously that those From where the that we not I perspective, ourselves running we are we but chain that we production. move into to We continue issues necessarily moment. to see do they the manufacturers see are mitigate expected piece the it's is we can at can other through that. sensitive able the not Some these on cannot price actually some offer. that believe that think how some solution so swap really part those as of we chosen help

Matt Larew

lot, a Thanks Okay. Stephen.

Stephen Gunstream

thanks, Matt. Yes,

Operator

participation. your further in and Ladies call. gentlemen, you Thank you. for showing conference this I'm the concludes no queue. Thank today's questions

a now disconnect. day. have Everyone You wonderful may

Alpha Teknova (TKNO) 16 Mar 222021 Q4 Earnings call transcript