TKNO - Earnings call transcript Q2 2024

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Operator

Good day, and thank you for standing by. Welcome to the Teknova's Second Quarter 2024 Financial Results. [Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Henry, Senior Vice President of Marketing. ahead. go Please

Jennifer Henry

Executive Welcome and Call. operator. on Second XXXX will and Quarter call Chief Lowell, Thank Officer, take Financial me to your on Conference who Chief President Teknova's With Stephen prepared me and today's Earnings Matt are Teknova's remarks you, make Gunstream, Teknova's Officer; then call. today's With questions.

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

information as SEC. earlier forward-looking law. which not included in company today Today's company's comments Additional the a of various factors, described the issued new are factors or they itself company's company except fully reflect does more its by the statements, the views, as these concerning events could to and result information, in other risk future the press current with is update and the commit obligate release or change required filings

effectiveness to its company's measures company's results, that the believes performance in GAAP management the provide addition evaluating and meaningful can non-GAAP strategies. insight The business when financial financial of

the measures financial afternoon, which are is during to non-GAAP non-GAAP website. that this issued included release SEC's use and we certain Reconciliations financial in posted therefore of will both of our results measures of call. We this GAAP the Teknova's press on

the financial accompany financial that the by superior this now, posted today's Relations will used as be slide to Investor webcast. on call over be accordance also on financial may And in financial measures substitute Non-GAAP section today's measures accessed Please be a always supplemental the as deck non-GAAP Teknova's named has other from and of It only similarly presentation Stephen. remarks. GAAP. can supplement measures should website to prepared to advised in The non-GAAP differ with a a I measures considered companies. for or company as turn to prepared

Stephen Gunstream

thank second call. for and afternoon, Good our you, Jen. XXXX us earnings you, for joining everyone, Thank quarter

XXXX, indicators, recent As we enter leading execution to the in the increasingly capable and from confident combination half long-term future. in growth. believe positive deliver internal of second a signals strong goal our our sustainable I our [indiscernible] I on of position above-market am of

me start changed has market, substantially the XXXX some our quarter sharing about first thoughts not Let by since earnings call. which

what as internal We focused funding years. continue environment has forward. more increased in outlook such [indiscernible] going capital, to biotech see challenging support by leading a Recent indicators customers engagement positive optimistic a very with combined stabilization biotech preserving previously a been increases, on

supportive and we more a point about these we toward typically lag impact a industry in on in XXXX. revenue, between environment their Given see funding indicators changes that X-quarter think levels our market

supply more XX cell active operate at We XXXX. customers, XXXX than of customers, of biopharma-related, which now up clinical market XX Of and and XX in segment. clinical the therapy XX active from XX the of gene end the at XX are the end

over challenging their have to position a couple the testament these is despite biotech we to to as support customers ability Our environment, they customers the in towards great the We these years. capabilities built are we acquire progress commercialization. a believe of past therapies

accelerate introduced we novel the X introduction will believe offerings that we Today, of new therapies.

a with is RUO+, control, trials. those manufacture who new reagents development research used a an trial, With to from towards cost-effective GMP-grade processes grade new quite enables and change customers' are products used called and expense launched for clinical manufacturing and ideal seamless solution First, RUO+. reagents. clinical equipment in GMP-grade for as GMP-grade but ready utilizing we This in not process associated research a early-stage transition production. the between we facilities, in our working and reagents customers the grade bridge documentation This clinical and grade same

production expedited quarter. expedited critical already customer for launched this products. and also delivery manufacturing We for service Most Teknova in offering Express-Tek agents. is [indiscernible] turnaround a time leader

Express-Tek custom products weeks. instead these their enter customers of to For production allows have days customers, in

We expect the for but combination points. to revenue key to the new generate of high-margin only business these offerings also pain some address not customer

again a of of quarter first start of compared Following our adjusted XXXX. XXXX. to to X% perspective, second the quarter in From strong saw and EBITDA revenue, a the the sequential we quarter, improvement delivered outflow cash revenue first on we

large delivered While our the one increase second compared the when year-over-year we Clinical resulting revenue quarter quarter was excluding order year, XXXX, revenue second was down in to the prior Solutions X%. the XX% of

diverse underlying customer Importantly, by a direct than this with representing customer XX% growth was of no driven base revenue. more

implies the stable in year half $XX full year, a guidance of the XXXX second of market our to Assuming million compared XXXX. full revenue the when remain we a through double-digit to XXXX. $XX return second guidance in of the second growth to million The midpoint our confident year half of half for

top perspective. performance line, plan executing from to to we a on our are addition In solid cost management

of from more will operating we at carried expenditures, the during and cost a provide the on capital but realized have full of we high our XXXX. first quarter Matt the out control a now quarter level, details benefits measures

million a second EBITDA improvement Our sequential $X.X quarter QX. over was adjusted

first closed Finally, to plan. a Teknova for need this Telegraph on Hill Partners for like in thank strategy to of long-term here and the bridge moment external in I more provides ability growth continued and Telegraph execute management. us their profitability shareholder a to we confidence by on believe supported $XX.X million capital our our a capital take Partners, additional would without in our funding. July, half largest the Hill We to our raise

first enjoyed In a of year. summary, we've the strong half

the to and advances made the success. to strategy positioned through are we we hand the with pleased talk long-term executing financials. in are well over will for We our now I call believe Matt

Matthew Lowell

perspective a everyone. year. and quarter XX% prior the quarter good were for same second from the Stephen, Thanks, afternoon, XXXX Results down of revenue from

second targeted However, average of was million are results we customers revenue decline from by per only decrease revenue products flat up of as XXXX or $X.X single quarter revenue revenue the large for at mentioned, research each second catalog solid for of Overall, XXXX. the XX% was market XXXX was quarters revenue financial Essential's increase order from when Essentials because second during both Total customer. the use quarter second XXXX, a the offset quarter million, of clinical million include was $XX.X of XXXX. Lab $X.X Essentials X%. Stephen the the total excluding a and in products. the and was and in solutions for revenue quarter XXXX. number Lab custom delivered similar of Lab in the a RUO second

As continued see quarter. sequential in second to the we quarter, the in of number a the during increase Lab customers first Essentials

and XX% components second the of the primarily in lab made an Solutions and in number or XXXX. practices used XXXX GMP the by of increase second was Clinical for our to decrease according ended or XXXX. customers million X,XXX are pre-release, diagnostic June to our disclosed and quality revenue recorded products. products XX, X,XXX in customers XXXX, quarter therapeutic in inputs manufacture from a in quarter we Essentials of during the are of $X.X good $X.X Solutions from Clinical As the year as million standards development

the quarter up revenue XXXX, revenue Solutions excluding delivered XX%. a from when single large order second of Clinical during However, was

we Clinical The to the the during customers. decrease number customer, Solutions see with a per offset increased to Consistent average Clinical number customers continued revenue quarter. in our Solutions quarter, first by attributable lower revenue increase was an the an in second partially of of

As ended customers disclosed XX June number XX, for XXXX. pre-release, increase in Clinical during of year an from to we XXXX in the XX our recorded the Solutions

per increase their over ramp customers customer revenue expect to We as time volumes. purchase up

by metric this of mix typically can who order However, customers be affected newer clinical the less.

in reminder, to due to Solutions compared order larger quarter-to-quarter this be average in a Just the category. size can there Essentials, revenue working Lab as Clinical

in second the As of the second GMP was customer from to XXXX. quarter XXXX. XX.X% statement. a XXXX, we which activity large for quarter order profit income On comparable in down a second no the the is the second margin was delivered million of the a $X.X quarter of XXXX, point, XXXX the compared million in of XXXX. to quarter of second to in in case second diagnostics with Gross Gross quarter XX.X% quarter of $X.X during

the The quarter second quarter overhead XXXX to increased million prior gross by by primarily in profit driven partially costs, year. for largely was were for Operating second the of completion and decrease $X.X following expenses of in $XX.X Solutions million compared XXXX. offset percentage the headcount. new the reduced lower facility manufacturing revenue expense of our depreciation Clinical

XXXX, of fees. The driven long-lived reduced spending million $X.X $X.X of charges headcount recorded second nonrecurring down related particular the by expenses in assets decrease certain quarter the professional in to in million. were was primarily and Excluding operating

quarter second were or $X.XX in was share IPO XXXX. the loss per Operating of second net share quarter of XXXX of our million loss lowest level for second XXXX in or second diluted to million $X.X for Net diluted of quarter expenses the XXXX. the the compared since a $X.X at $X.XX of quarter their per

expenditures sheet. million XXXX. balance XXXX, flow of projects with on we completed in focusing period. cash $X.X compared a large the payback of $X.X million our expenditures XXXX capacity. XXXX, investments second second were In to Capital On capital quarter the for are we and our quarter for shorter production In to

non-GAAP to Although to This plant of to increase of cash operating operating second $X.X and outflow, significantly the lower prior as our XXXX. purchases a million of cash activity the quarter expenditures capital we using decrease X compared property, quarter second that reduced second Free quarter activities for in expect capital in quarters, million expenditures. amounts for and plus have $X.X our was the equipment to due half of activity minimis compared investment XXXX. XXXX de was of the we last the cash used define been measure

of XXXX. cash XXXX our Free quarter IPO second level of was quarter second in since the outflow at its in the lowest

to balance Turning sheet. the

we raised Plus, gross our as cash $XX.X June $XX.X sheet. had July, XX, private million capital million of equity offering, million cash Stephen placement a $XX.X of As through in balance and XXXX, we and in strengthening described, in equivalents debt.

of XXXX our the implies XXXX XXXX. midpoint, compared half total $XX Turning We guidance to a to revenue to which when million the At suggests this outlook. XXXX year flat million, reiterate for of the XXXX. of approximately revenue $XX first second half similar the to

we double double with from half digit Clinical of revenue However, be in total product Solutions. XXXX, based for on categories, now approximately expect With respect the XXXX to we revenue expect growth of Essentials second second coming guidance, the Lab dollars to digits to XXXX. compared half midpoint revenue X% growth of

company reflecting company charges has achieve to our $XX in free to aggressively excluding million The quarter growth us of second of company $X.X the million, full the measures impact target, we targets. less investments will year long-term of $X.X nonrecurring manage a The expenses continues continued posted the critical announced than the expect believe quarter outflow XXXX. million below of XXXX. the preserving for cost full while first our allow The to expenses, operating cash

second a XXXX We year quarter compared in down ago associates, and quarter finished second to from of XX% XXX down XXXX. XX% the the with the than of peak more

Following us raise hand have positive. to ago, now cash availability take month revolver flow sufficient liquidity under that the our cash we from and our believe we capital a to on

key on relies following belief assumptions. financial This the X

the next similar XXXX, -- in XXXX. This few impact single large average minimum First, of the excluding compounded from to over a at annual XXXX revenue the total CAGR between to actual grows also growth XXXX revenue XXXX. is an revenue is to at on years. rate of the delivered This a total order XX%

and revenue growing through two, possible years trial the of will Number clinical number upside ultimately of commercialization. Solutions growth some later customers phases next into our few Clinical over be as move

business. additional in to approximately and through XX% XXXX beyond margin drops cost the nature an revenue of high fixed due Third, our

achieve adjusted $XX in Fourth, limited Relying also $X assumptions, to the as million on expense get that average. fifth, per flow we annualized operating become thereafter. increases million cash revenue EBITDA of these million $XX positive company breakeven year will And to we shortly on capital believe expenditures the grows. and can business

the and attractive summary, in future market a fundamentals. competitive with In we about position are excited the long-term company's

that, the to call With back will I Stephen. turn

Stephen Gunstream

executing with outlook in are end the on long-term Overall, we and our the to XXXX. accelerate other were introduction diagnostics help pleased We health. customers markets [indiscernible] strategy performance positive, to the Thanks, for our our we remains products believe of therapies, that novel human our improve committed and Matt.

take questions. We your will now

Operator

line the from comes BTIG. from question Massaro first of Our Instructions] Mark [Operator

Mark Massaro

thank customers and one you product It margin that the Express-Tek. some the accretive the provided, high first if near for the you Express-Tek metrics guess is scale? Maybe clear time and on margin require just quarter, guys the launches, wasn't will I for Congrats helpful. new the you products that can on I those a you about good margin RUO+ new that all be being gross margin. if financial just long-term talk you. was clarify high are for achieve for Or your term? you to in that will high some heard

Stephen Gunstream

The into would production. normally is production to Express-Tek way get customers really get a product offering into faster we for than your

And I for then So and say, is them product, pull to allows that quickly." make the this there to custom fee. it "Hey, today want all strings particular an but additional that, would order We happen. I need that very

margin And in pain times, it the that this doesn't the and they're case, will actually solving very, they gross need where of want of us. in for clinical points this as something we're many very trial in they yes, and the the quickly. build middle some be customer So happens accretive go

so production then our the line, and And rearrange them service additional our fees. offer charge manufacturing can and to order in we

Mark Massaro

That's helpful. super Okay.

backdrop said market timing I from the say in positive little average. some sort a improved language we've than around statements companies of You've that of more a further cautiously you're funding seen that other recovery the language and about optimistic probably is on positive that, biotech would

you there cited gene are majority many the in business. know in therapy. if your is clinical of and and new that your customers So I are perhaps I that about unique wonder biopharma cell something

markets maybe just if funding. what maybe wonder I So speak your and some you to can seeing. end about of just clarify perhaps And the you're optimism

Stephen Gunstream

the held quotes improve. back to are back Yes. are and as environment translated I orders purchases capital request we've most many hasn't spending of funding year totally builds last customers, mean say, but had and come are first, us XXXX. with I the really conversations plan with would biotech to seeing, for we and That yet, starting and which

think cell customers, that we're XX we as saw, of biopharma I seeing. what therapy and about therapy. gene are generally is So cell have is of But XX you It clinical gene and 'XX. that's and half

still say, seen at So there's pickup. if essentially guiding actually and a other customers generally XX, few implies biopharma-related I XX.X remember, a the quite you have in we're there wouldn't towards midpoint. XX, which

compare these seeing not And a but both so back double-digit yet, a that and half year-on-year midpoint of is even from pickup we're XXXX. growth perspective the XXXX when of you

Mark Massaro

Okay. last Great. me. for Maybe one one

you you Next easy, against up comps of then comps, year, or on of will how a X against quarters plus least at easy X QX. easy XX maybe go quarters describe going negative depending X from and but up

talked we to half double-digit of being as of about you about the year, return year. So think the about a the second growth guys second half this in that

it unreasonable? to in is reasons there achieving think any would double-digit growth of why you Assuming top funding, 'XX think reasonable biotech trends stay line be terms are in constant or

Stephen Gunstream

Yes.

the annual average the and funding, look and just giving easy this take I back which business at since we're yet. way think pandemic guidance go So averaged would anything look it. is we at ends XX% of you actually that book sort said, as not moment, we has obviously, XXXX, growth our the said, and but 'XX on don't And tend the do XX% the say, was of then. has at biotech a XXXX, been about XXXX And Matt to if there to all

don't the we glad that market But these wouldn't been lot see don't up course, be very a of we careful stabilized, I and I been we're of through to think it's historically. and we've unreasonable it it's necessarily from I picking it's last think say forward. have years, expect going So couple watching to that to had what -- but

Operator

of from Jacob will come from question line Stephens. Our next the Johnson

Jacob Johnson

new of think two the first, quarters? and how that as follow-ups growth how layering and from is much the next quarter. AAV-Tek have much launches, there of of Mark. product XX% to I on just recent guess, couple of contribute got could about last line questioning quantify the any Congrats I've historical on some a we on contributed I those or way those kind new in of then in over product Or that year introductions? guess

Stephen Gunstream

impact Jacob, of is year far. those or we're biggest therapies, commercialization we'd and actual are that the showing new they've so Yes. been and I and just expect are of but say some amount, the purchases I pretty in a significant go -- There overall. to them. should be the these of launched not buying onboarding lot small like we've on talking that to forward would I It's in a those AAV-Tek that say more. these us contributor to bringing said, the would last some of more us XX%. getting products stuff in and in X AAV-Tek into customers customers course, dollar But they're it's become fact generally the commercialized from and in what I think

XX% not -- that So at you're -- not they're I if into XX%, 'XX. 'XX wouldn't it's between built that and looking

Jacob Johnson

of kind historical obviously, this over. of on you But rolled higher Got quantification at kind the level, of macro then then perspective appreciate I and Stephen, guess growth it. embarked strategy. I XXXX, of the And from the of a I kind growth rates. in a kind qualitative And guess,

your expectations do so, your With in guess, ago? last today or a at of how years cost versus opportunities couple think the of stabilizing the I about and growth front macro over the year control you Teknova efforts you

Stephen Gunstream

Okay.

outcome The XX-plus can into still customers preclinical a early percent of out a I timing of We're phases, the question, say where took we So we is that in been company this of laid those onboard confident that think of in rationalized. still right? trials, situation Phase growth get business. this. of did very that really I'm in range I I many the the public. long-term lot trials would and we we have type

customer we're, results a from and and to very so it time to put come if get certain trials, And But these of this trials amount of through of there's it X but binary that. maybe often base, that success some the we course, of with building in clinical a perspective, in get impact millions they to can in to business. of be growth expect us be the that hundreds huge dollars, X years, of spend And commercialization of or dollars overall the today, thousands to right? the that takes

that customers, the the these meantime, We catalog and business, as foundation of to acquire also onboarding which well In as do that need the run the continue says obviously, the have of this run ones business, XX%-or-so through trials. clinical rest the we these we but to get business, helping customers keep right?

Operator

line question come Steven next from the from will Our Mah Cowen. of TD

Poon Mah

have just a couple follow-up I questions. of

on So is or you're first, Express-Tek for products? variable charging delivery price? the on it just fixed Express-Tek. And Uber like it faster you is really a premium premium comment Can a at

Stephen Gunstream

necessarily we're -- to a going the X% and customer. order we we're to I to And of range, by it It's that not not but it's really going be it's going to customers to These But fee, XX% it really that Yes, -- total because on trials think dollars work to get request and the and XX% pricing you clinical likely it don't we something get GMP orders go their or put exact the move amount to into though. do in every up. big is on demand-based price keep really, need It's in the essentially like not production. It's going comment RUO+ the of varies in right? -- quickly going? say to to that represent forward Express-Tek can of have to day. bunch if use orders products be are

Poon Mah

capacity other have And it. the the takes are do meet to And Got this if demand offering Okay. companies this? express you off?

Stephen Gunstream

dramatically do will others, say faster companies customers, of other the had But product have quarters, normal do time up you of to this. first particularly many of around aware that not really been the couple needed we situation I capacity And this. turnaround quickly. offering I'm custom have scale that say, see, out of where capacity we of they've I not in ability the expect something to run really our have this in is a to in than quickly. any side. number still order

problem we'd so to to great that love a And solve. go have like

Poon Mah

helpful. and -- it's there is is A Super expensive last right. offering more RUO+. is And product? be conditions unique made given COGS this anyone perspective? Or going to All not then question, guys? else it GMP documented similar on then to that under is you from question a And my it, that just

Stephen Gunstream

Yes.

GMP. be that customers increased the here. are there that service want the lot of there GMP lot a than they call in somewhere use only of want facility it but offer doing we And here over out in laid RUO. the This under we're RUO+, and would the from them the So really and really to go price of number the maybe have new out companies side that made reagent a it for in research reasons RUO+ not controls would an our that there. helps that buy that this we between A

So was makes documentation, smoother. in lot we a transition really more managing change control, lock that the it much and and the that process, that

a go likely even when they increase through RUO+. more will be additional to RUO+ they cost pricing bit costs we'll increase little GMP, over the but those Obviously, choose RUO. to costs when go you the recovering So when

Operator

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

from from of will Paul the question next KeyBanc. Knight come Our line

Paul Knight

your and marketing that are have to thoughts market. do to rebound yours. GA similar improvement? What to you and your your competition more sequential to business their seen to Sigma-Aldrich we've related this show leverage you'll also meaning think correlates When lines with Avantor relative your Stephen, strategy, improvement this speed

Stephen Gunstream

related the to and regions access Yes, going. on to much to think trials get very these spend I money it's

that our XXXX, even funding prior funding ramps, biotech in -- X-quarter think I track directly to you even growth as and that But the about with fact, if can you a look our actually 'XX. lag. that, historical through 'XX, when at to era sales of

some So that does through. we're gets It's certain to optimistic XXXX bit we money. come amount funding when of It a seem not see that biotech of to be is a single start little different. every

of So business we're it that's I may for the a because broad-based, change well. indicator so but dynamics leading us that, think great do catalog even in as our

the probably of through. the new made that's flow investments customers on QX and them. and we'll certainly, next in help bring looking like So us those see support our QX, to organization, the funds you commercial be time will facility said, I think time year those we've in some And the

Paul Knight

still you million of Do revenue $XXX the you Hollister that believe capacity. gives capacity

Stephen Gunstream

of like Yes. daily. with that We've but the we and depends new it and things And scale been it that that on out you XXX-plus complexity the our of facility new does running to we around mix yes, do math, can obviously, could orders range. work when those, the facility,

Operator

come [Operator next question Blair. from our Matt of Instructions] from Larew will the William And line

Matthew Larew

any that But here? it's mentioned theme to any new obviously, the the referenced, is customer just the sort there's if XX to wanted of consistent point traction last new it. new sort you itself, over the traction, presume new of quarter of nice a Obviously, products on facility, traction. number of sort of even whether but I curious customer you part ask back in XX, I months, the

Stephen Gunstream

critical a you get Yes. we through, getting make talked Matt. to about to they a and get them XX months. factor the while Thanks, a the facility, then onboard how We've And out, start them They and mentioned, quality takes meet actually this once time we we it's customer see new to it It's for usually as team. can ordering. onboarded is straightforward pretty get here. walk them products XX

say, However, facility timing, of been how also a would has Getting support some in customers have of the has of the it. side has environment that about part, certainly but having we commercial macro on the helps. I depending capabilities been the part and changed conversations the The of can changes the other and definitely, right them we front course, right?

is commercial new growth. would I combination the the think and what's facility really that So of the customer driving

Matthew Larew

any of You seeing, shoots improved inbounds I or are sort if of metrics that's of to customer you generic support to Anything sort kind can or script to the in share your green referenced POs some what to you're engagement. whether and of shoots facilities. alluded green commentary. teeth the customer Curious there think audits add

Stephen Gunstream

Matt. biotech the customers couple these are were there's and Yes. funding a which past, CMOs means seem of a order lot they of think the they're seeing environment of the in change of to with they is, I other actually And therapies them. had, here, a course, of -- engaged lot us than they many when things coming One used ordering capacity. conversation's then, other now, They to to be the more from

a sign. that's positive very So

ramping think up. to So they're about starting

our the We're customers. Obviously, whole have necessarily now now customers Obviously, existing customers. number new through early increased, the types of get to through. of some customers. I wouldn't new of you of getting that lot but but a we're we on, customers went audits say starting audits coming has

there And think customers then And wide trials clinical are about right? start you predicated and here XX bit dollar ramp do of amounts. those the as between the that they're course, spend, the of is on stable. time they to talked biotech say, just you're up onboarded larger will this lag the there's and Well, their we a actually lot they starting remains a and there's time a looking fact that stuff, know of all have out, spend spending I which quite I to customers. number a at generally, in so would again, funding variety that And then, but just start a bit, little that still is we customers, a

Matthew Larew

that's been sort the markets, I X%, incorporate, last discussion of compensated Clinical one but but interest versus realize for would shoots. green X% updated stable guidance the Solutions My is now amidst all growth, by growth of think, end of I Okay. consistent, be XX%.

it is the Just curious down what guide? that's of growth taking sort

Stephen Gunstream

Yes, absolutely.

Clinical So number include at Lab of does we it, Solutions. look Remember, Lab Essentials Essentials, a preclinical these customers.

have we're us large engaging for still and getting are we And XX% but still discovery growing position fast as on our Again, I the also it's but long-term rebound we right there call as year-on-year that a are that it's again, to little and and difficulty, were it's -- about with out. they growth on not pretty laid out that comparison our for profitability. much those early very even before. side, feel customers So one pharmas watching a say now those confident some of handful. to that's that on how But bit

And we good before did this spot. long But play we out I over see change do a that. think, to want the run, in so we're

Operator

close showing program. not conference. call. in I'm concludes With thank go the further This questions today's the that, This the in queue. participation and And ahead for I'll your -- concludes you

great now have Everyone, disconnect. a day. may You

Alpha Teknova (TKNO) 13 Aug 242024 Q2 Earnings call transcript