TKNO - Earnings call transcript Q3 2024

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Operator

Hello, and welcome to Alpha Teknova Third Quarter 2024 Financial Results. [Operator Instructions] I would now like to hand the conference over to Jennifer Henry, Teknova's Senior Vice President of Marketing.

You may begin.

Jennifer Henry

Thank you, operator. Welcome to Teknova's third quarter 2024 earnings conference call. With me on today's call are Stephen Gunstream, Teknova's President and Chief Executive Officer; and Matt Lowell, Teknova's Chief Financial Officer, who will make prepared remarks and then take your questions.

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

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

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

Stephen Gunstream

years. reported in year afternoon, compared Thanks, third strong $X.X with results Jen. cash quarter and our sustainable and million, joining while with our pleased continuing Good above-market last for thank same growth we free quarterly X to over strategy level you we're costs, and We believe advancing am manage of how the growth. I long-term outflow are period revenue our to track in today. everyone, of goal our lowest to I the call achieve the XX% on

pipeline continue market customers. about our by custom rationalize third their start by XXXX. expect reagents market clinical-grade research biopharma clinical headcount, growth quarter me in stabilized, we in of biopharma growth believe market and some the to talking Even and Let sales modest biopharma we environment, driven and was Notwithstanding to though that our environment. now reduce customers the the of has

Outside commercialization. by their to therapies encouraged sales the pleased to encouraging to we also we third custom biopharma, annual expect also underlying were in our as increased spend the that growth our again us move sales these of is are of customers the and their increase with fact the in the closer business. broader performance of the these because number quarter. of accounts We of number customers customers active biopharma to clinical The products with

sales Essentials science large growth, of single-digit Essentials related either companies, Lab few which account-specific. or primarily believe were life products to Lab offset Our -- high a catalog timing returned sales tools to catalog our we custom lower by

single over customer base in with headwinds growth business achieve rates the of of customer in Our of of we benefit is our are diversity with representing the of few high to comes spite we've a direct years. it associated X testament our managing XX the to X% ability trailing seeing customers past total no a made revenue than When the to the and more our costs, revenue difficult months. decisions

lowest million end basis free investing XXXX. In the deliver outflow combined growth than our operational several growth began reduced operating our more I of cash confident expenses in XXXX. on since an we by expenses million annualized summary, since our the of of We sustainable to since half with will above-market operating achieve XXXX first Lower for we improvements in strategy feel the our have goal have $X and that reasons. end long-term $XX of

and environment modest expect market in XXXX, biopharma stabilized First, growth XXXX. the we has in

Second, move of revenue therapies growth build we customers, additional commercialization. expect drive a strong pipeline to continue towards will their as clinical which we

prepared support core have to reduced finally, strategy. over to Fourth, successfully necessary our on and Third, provide executing the profitability to additional financials. is our while reach with infrastructure up $XXX to million approximately we the have capital. I we costs additional without now place scale our business revenue. the on facilities will to to in color And in liquidity call Matt hand the

Matthew Lowell

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

a third detail $X.X $X.X of partially quarter prepared charge and the revenue delivered the million both was the are or level RUO a $X.X include we of solid quarter an previous to of million to in and in third attributable number X% XXX% increase remarks, of use XXXX, the products are quarter good Essentials XXXX. The in we discuss quarters, sequential the quarters, Solutions the Consistent increased the a increase of increased to higher million Lab customers third Consistent according extent, revenue that Lab number primarily a financial in average of attributable revenue lesser increase saw average of Total third results in are the customer, later for in $X.X quarter. million increase quarter $X.X of will nonrecurring products. Lab quality an Essentials customers. standards offset XXXX. second and million in third from was XXXX, decrease quarter XX% during the decrease our from saw million, revenue diagnostic manufacture the products. Lab $X.X and in our of and was a Solutions impact Solutions X number increase to third XXXX. primarily during manufacturing in practices noncash per last of lower development or the of revenue of Clinical customers at the made third targeted was the for sequential or as for third a customer. quarter the quarter and X only GMP we with the Essentials Excluding and used by in in quarter Essentials third Solutions number Clinical to XXXX of similar research was XXXX custom million customers quarter. of from with Clinical catalog customers therapeutic further revenue per XXXX. components we a revenue by The $X.X the a Clinical inputs products market the

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

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

our expired category. On to which disposal was and increased million we be average high the $X.X decrease XX.X% million production production the charge quarter quarter-to-quarter persistent reminder, of Clinical revenue the both shifts. quarter in XXXX X.X% to quarter demand. abruptly in XXXX was related statement. we of third to Just in this order third the compared percentage for ending the XXXX, created XXXX. the second noncash down Solutions third The to by half decreasing in which quarter anticipation million due demand in profit nonrecurring the was Essentials, when to can to income third $X.X third Gross Lab of size larger dropped Instead, compared Gross profit there of inventory of in as of write-down lumpiness attributable to the from inventory was margin of of in gross responded XXXX. excess a $X.X in and and second a

We during net to down the manufactured to that inventory value. is appropriate remaining write that have now period determined its realizable it

quarter $XX.X quarter XX.X% XXXX. of for XXXX. Operating of were for in this the compared third the third million quarter Excluding would margin of third have XXXX charge, million $X.X expenses gross to been the of impact the

$X.X for non-GAAP were of or of $X.XX of decline quarter the headcount or a million lowest of and the and XXXX to our XXXX. On reduced was for flow EBITDA, third was related per facility of third to $XX.X the quarter third diluted of Excluding million, per our $X.X million negative at-the-market impact the operating were at negative net the third $X.X IPO measure, $X.X of cash Net of capacity. since a million to capital $X.X are with for period. third quarter $X.X XXXX. diluted second particular expenditures were quarter in for XXXX, we loss third to write-off Capital our large continued share primarily XXXX, XXXX. XXXX In share of XXXX million expenditures production shorter in in projects a sheet. down million quarter and to of the excluding inventory negative XXXX. million compared investments related loss the $X.X $X.XX $X.X $X.X XXXX to million the expenses quarter charge their payback quarter million to the completed third million. the fees. for the compared in or focusing level quarter professional by quarter compared recorded driven expenses in charges spending, The costs, the nonrecurring 'XX of on In Adjusted was of third decrease on for balance Operating the we of

operating been compared used million a of and in a purchases at to to increase third XXXX. quarter million in was was quarter capital X the have last last expenditures outflow, in lowest we measure in outflow quarter that non-GAAP quarter amounts in the limited due in cash the Free in the continued Free $X.X decrease was property, the as plus ago the third second our lower to expect since quarter cash plant $X.X of used compared activities year quarters, define expenditures. cash XXXX. capital IPO level our reduced of XXXX. for improve of and XXXX Although to XXXX of the equipment its This of of we moderate operating quarter third activities cash and

to the balance Turning sheet.

investments $XX.X and As gross million of equivalents short-term $XX.X in and cash debt. in we XXXX, had September XX, cash, million

growth of XXX we million, although approximately XXXX the target, to company XXXX these At $XX to our the expenses to for in associates, the operating the cash The of year fourth on a X% Solutions year expenses customer be less the implies XX% product see long-term critical our the million down soften may previous to $XX outflow $XX quarter aggressively fourth growth $XX although quarter Lab primarily due investments to $X.X fewer ago. third revenue would expects revenue reorder estimate also below delivered XXXX. year $X.X The full third guidance finished from have than we this total a quarter, to quarter, revenue XXXX outlook. now posted our free XXXX. now compared expect million our midpoint, categories, fourth us the We business canceled will typically preserving higher from approximately million. The be with the of our quarter. to company we respect that company expenses do order we in of and continued revenue Clinical in customer quarter in Moving guidance We achieve to has the for of expect while recently down when XXXX, manage somewhat days. large A allow million to per targets. believe With We Essentials flat XXXX. million. reiterate for in

flow belief during our to at on in the earnings QX XXXX hand to to that As CAGR XXXX XXXX. relies growth XX% the One, impact of average cash over from revenue cash us we large excluding sufficient have from under This we last a take our following on shared call, on is similar financial believe to a assumptions. few next the to revenue total annual compounded availability liquidity grows continue and revenue XXXX. revolver This actual the total between is order minimum rate to also the of XXXX, the of delivered years. This positive.

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

growth shortly will we thereafter. fourth, limited Third, And $X in Relying Revenue competitive upside through with will grows. we be to that positive per future capital with flow adjusted the business commercialization. In into I'll EBITDA excited clinical years average. of long-term customers the assumptions, operating ultimately million the few move phases company's million we on trial $XX a breakeven the summary, are get these some in and as of expenditures call later Clinical position cash growing Stephen. the increases next when to can possible achieve in revenue and year over that, Solutions the as fundamentals. And our back of and become about attractive between turn believe million expenses market $XX annualized on also to company number

Stephen Gunstream

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

your now take will We questions.

Operator

TD with Instructions] Cowen. first line comes the Smith Brendan question [Operator Our from of

Chad Wiatrowski

Yes, to the launches are going? area scale? they where of as of RUO+? need Wiatrowski And in speak and is any marketing Chad and Brendan. they we're to ongoing This investment kind for more is Express-Tek that Could going an you sales how just on

Stephen Gunstream

Yes. Thanks, Chad.

those launched some quarter. we in around engagement So those last orders. some We've nice of increase seen

If get otherwise, and in they is product line weeks. is their than essentially which the jump opportunity for already Express-Tek you customers the remember, to would sooner

And a are that talking for to about doing actually so in of last get orders builds. needed customers a just they're minute these handful these of product. many And you're weeks moment the are GMP

current actually engagement X-week because fine this already. turnaround essentially X-week of Many now executed are the we're takes X-week we've them full These so times customers. X-week couple but ]. [ And in a are and frame, these time there's with frame of to that speed, some to us from time operating to

a that a we've a to actually RUO+ and equipment that customers So margin thing place responsive number when talked GMP it's environment. they like do facility for systems increase using need the feature but new the constraint us, in to has been it, it. not put GMP have idea and they the control They happen. Same order and I've make They've very otherwise of to that change we're really same about. the in and the manufacturing the of processes, been

of transition they It's migrated pretty versus to when GMP. a already. to that customers So we've a RUO+ It's to obvious RUO. need seamless number them

And there. so we're seeing success

after from customers. for perspective, jump something marketing to need one It's don't that we a in bring in phase think significant transitionary there. get with great of those preclinical to for investment board. fit of there's brought of So our needed RUO+, is we a up more I to sort This we sales on conversations it's have with customers those every single speed Express-Tek, them

Chad Wiatrowski

kind And gross were on excluding going gross Are this I you you any change margin, the perspective manage And this happening, expecting additional did appreciate helpful just margins That's color. your how strong. write-down, on of then forward? write-downs? inventory

Matthew Lowell

But the stock anticipating I like better right is we've a forward. implemented any inventory and now. -- the answer first script company several last of rules frame in Chad, would us to inside And how ago, in place. And in it's inventory now, your different those when here. that, Matt. that stock, to we're now basically have when not we If and to this question, certainly And of we and we years we in helping were, relates the time quarters and have key we to much we couple your a Yes, internally done here build no, to we've which future part that's -- taking yes, going question, explanation XXXX of write-downs. how different bit say, one back about that a patterns the some at the made little have would this about production further those, market the had changes was provided all. obviously, since manage is

Operator

Baranowski Our comes of next question Capital Lucas from Markets. KeyBanc the line with

Lucas Baranowski

there trend those your terms noticed Lucas of of any look with customers, revenue or is for of cell KeyBanc. you customers? When recovery the you've is relative at growth This in in therapy on rest Knight to pace gene difference Paul at and

Stephen Gunstream

CDMOs, you go look largely We case, like. therapy right, that through biopharma was just CMOs, So closely. of Yes. in talked over products, really our as and this growth gene third clinical Lucas. custom what the time. those quarter by and if particularly, driven back And down which we've getting Thanks, companies biotech right? beginning. great. well going our it the then this about, been That's the And from they're encompasses cell pipeline as biopharma in revenue seen is strategy kind at obviously and we in We're customers

doing say, cell monoclonal versus, wouldn't antibodies, Now something other seen companies say therapy different. with respect biotech to gene and I we've

little I we're right? half stable, specific previous I type now. we've read -- if slight a of a wouldn't broader science and therapy the feel what And a year, There is different made we're we've right of is gene tools seems definitely modest account-specific to, like of therapy. the slowdown here, some you or as bit say next through pharma in a of space, year in think seeing comments maybe very it's a year. say, seen the versus But stabilization life from But I so. that it kind large in back the the growth you

Essentials the third part heard, And down. couple had accounts a if just digits we is our catalog for in actually, and single that -- actually of the that quarter, were high Lab so you that grew business in

we're there, if but pullback nothing just seeing from significant. So slight anything a

Lucas Baranowski

color. for And then question Yes, that's excellent last me. just one

you development? products are need quarters, are of a that still others launched RUO+ you of have there in Express-Tek. you or like Do new whether portfolio in in it feel products was the recent or lot all You've now the

Stephen Gunstream

products. are and bit service-related RUO+ more almost Express-Tek little yes, like a So

those, something customers we come, our continue we GMP. and from we are they we stem between had who this really so to in RUO fast or and find would like really And wish saying

to kind always particular. find in here more There AAV focus are environment. short-term operational the So and of have add improvements around investments drive and the on or some more Those we shorter or those that we'll been to to on current investments developed customers. continue given previous products value return put hold previous on a in -- investment -- have that that

fact time. to customers the these think probably need actually is actually But more think, in to and as we see provides when the more us. We products for help conversation. that number infrastructure see I could that do us organization, there opportunity I over of much built to we're we here the other to a opportunity us purchase a we add there's to that, talking products they portfolio maybe can of do commercial them if our there we that, How from what well. them might XXXX

Operator

next the BTIG. Our line question comes Mark with of Massaro from

Vidyun Bais

early This to going but 'XX. is for you're for easy Mark. modest XXXX, you heard do of on comps, seems. it I Vivian comment it's say relatively growth understand there? positioned on How you're I think in off acceleration you

getting the be mid-teens right about it? growth way to think So back would that historical to

Stephen Gunstream

you're year, some business of number to Vivian. modest believe because Thanks, we're look to it's I on And days. said, of in some sort QX. to of the give That half Yes, going any said, the historically more now when lower we're as of obviously, we not of just and are the those 'XX. talk our seasonality business QX, the the quarters that we next that. absolutely of guidance about right. about have been back favorable compared There's And comps talking growth, stabilized market. We

point, the growth the is annual XXXX, XX%. we're and I back then with. bioprocessing up that would next growth companies over probably like in in that itself modest historical do working that's normal time, set therapeutic that return in future, but growth all XXXX. to to think XX%, these think rate, we'd we And and now market maybe year then historical opportunity higher certainly to what there's get rates for that And in at with that the growth we've business

Vidyun Bais

gross margins. And Perfect. one just then sense. on Makes

in gross margins the about talked XX% additional revenue in here? your down. Just additional gross I you scale. have margins you've XX% you think heard any do what I drop coming think pull levers to at at for comments past, on

could So to the to you margin getting discuss long-term gross target? that just path

Matthew Lowell

high say now think we there just long-term I'll and lot margin the Thanks. leverage line I mean, way that all And Vivian. P&L right XX% Sure, at the to could Yes. a is our the we of fixed good should fixed any target, in And gross be plus. even managing decreasing it's that bottom that have, cost structure, of very we've job, increases and line, cost frankly. or really I of the structure say. think, a done I because

in top we gross to going be of to of the where to top growth revenue certainly margins. that, significant on be it's today on So able are make improvement

towards Of we're is more course, products. mix production is as other There way driver, with to automation right say, or we in there help now the would that to changing are the and efficiencies think we're the base, real we our I that Solutions otherwise direction continuing some through well. a which pursue higher changes revenue we towards. other Clinical the as driver achieving and levers, the manufacture just But move primary potential for

Operator

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

Jacob Johnson

$X little confirm just And better not like for to million It you orders, to year Lab wanted sounded on new bit ticked gave -- sequentially for and just us we range a the of I the a but X% Solutions, XQ, then just customers, for that expected. first, revenue than that. looking up any Clinical Maybe growth for lumpy just kind guidance Essentials year. was

that. about we how XQ? Solutions about think sounds in where we'll curious It maybe weakness, like but Clinical some should that's see seasonal Just curious

Stephen Gunstream

of Clinical combination it's Jacob, of our start mean I X. months X% it's for orders, in quarter, like some Yes. But revenue. largest I our side. not XX not I only the of individual a why -- trailing -- general. it's there's is And customer pretty in And combination a larger transforming and a of an new example, So So like the that's lumpy, with X% our right? Solutions said, don't order the the right? large

a of some in a So know that to there now little these quarter, the ones. of but I were we're able always some we were bit timing in there's on ship. getting orders better and And decent accept large mixture, there then

absolutely, new combination there. like size. of we've Nothing in of past, specific that XXXX, but and a -- existing had like the QX it's So nothing

So on that's piece. you to... answer Do want the that

Matthew Lowell

since I'd and a order remarks just we did you add, mention at out -- the there looking we Solutions the did that where QX next quarter I have in that's going, and were fall year. order, was of move a Clinical large into that

in situation. So double-digit yes, of general we out and would in we're And also expect the again, seasonality growth. QX this just Solutions I looking we QX, pointed the coming in see QX. Clinical half because for be do general, we for lower year expect general just order to to than particular QX, back will out the for and have of that thanks that lower revenue, But

So helpful the hopefully, that's color for year-end.

Jacob Johnson

at think part that factor follow-up just Obviously, But able of struck of I to environment and development then as degree. think we bigger growth control being it. trying customer as in about what of picture a in comments, kind about execution get customer the should talking guys really that's in about some waiting you year. kind the to maybe But to and next or sequentially. stable macro. on kind we macro Is mentioned spending segments a kind some on to guessing to Yes. then also that it, about is of of And modest it? you're Yes. fair of all are what the of here we're you plays of that's customer is, that's a I'm additions a pick growth kind way the kind guess And I'm additions per is both just think your business reliant efforts. question, up on from

Stephen Gunstream

Yes.

think I a intertwined of here. pieces there's lot

we in that by next see So customers. my biopharma market, on can growth the stable, the QX comments, had Obviously, driven modest year. was you from these growth

working QX we're not are X think When of future the clearly, their than way and those about acquire XX we market those So bring through be in share. more kind variables, and customers, the faster on picks how now obviously, the customers we specifically. able taking if from efforts the that's And growing to last the should affects It's months board, those market market up, talk efforts and pipeline. to I is also will of limited there, And so would hit sort great, to see happy be clinical Solutions, add getting go we as -- every then of right? where you and can quarter as it's customers pipelines, them Clinical as they have customers in supporting we but as sit right? So not goal, continue they double which which our with the those board kind because on a trials. we through I'm

that I some average focused on increase. we're number think biotech part customers also the customers and maybe in customer, environment funding and of that drop But is the back. more to some are of a starting of wallet spend fell per come On off Essentials now increase during that seeing the little the share, really now we side, the that bit the Lab

XXXX kind they a why from build, things And market like, spot relative is where this it's of It's guess perspective to not hey, in are is we be back. were before. So is right feel going a until we back a to bounce right? now my before, were we're to XXXX good where but

Operator

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

Matthew Larew

under versus million in Clinical or business XXXX. versus $X ] the to about a the If I XXXX, year back think this going in Solutions [ question. doubled nearly Maybe size, million now least $X at obviously, margin today $X.X million maybe business

think recent margins. some about but Matt, margin we of to the maybe quarters. is about how from giving you tie those drag expansion. should the last some there. seen us big guidance, much pieces X understanding We've in translate and a you're expansion go-forward gross related just not the together X,XXX clearly there's how And of opportunity? So can to margin capacity point, leverage expansions to gross us of think basis points your see to fixed leverage Could capacity help help the leverage drag And on to

Matthew Lowell

Yes. margin grow And pretty over substantial larger has to pretty able I need as that last business mean we've talked about. we've been you're right. be the year. much to increases much There we in the some assets the in to a place got

an In a XX% on that opportunity gross go-forward the use additional there I opportunity, revenue. approximation ago, for as just especially minutes margin, if I is mean, as terms said a drop-through I think metric substantial of of few you the

could map you you reach a a function to look step until could going out future investments, think almost there's essentially we what to mean, I like will for point where -- be I the is more use which math we've some of potential So progression that while. some possible I as there that significant movements if accelerators on production internally and are in the there we're always our are here. things enough terms working margin or mix of said, -- But productivity even to increase don't change other efforts

good fairly metric. that guess it's going XXXX. expect do commensurate type probably I to [ I And XX% see margin improvement with So into ]

Matthew Larew

a engagement, similar customers Okay. spoke sort number active last communicated increasing, to message of you of here. quarter, And then increasing customer

the process order, of they're put years-long in I guess, as or maybe malaise ready over you RFP, the to to As is relative you're and place entered the market? either to process if the Just feel finding last in that proxy, about sort kind customers you or activity how sort the more asking we're worse this capabilities years. perspective reengaging assets, Are about of the than a competition from of couple better, of time an sales when different, competitive competition, are order. reengaging the them anything you an the it's

Stephen Gunstream

of If We was we it of back now. years, right customers were don't and story. we're going from comments When able Yes. they've expand repeatedly, right? go yes, fit over as last starting we're for dynamic you have been But some the years see us, we go see Teknova. customers deliver you X of to We years, But love the them love finding not -- we're the in not. really, X found the how or can we it's us year, some couple if back to same told ordering from could and that has do, we almost different. last it business. We And and -- others data. even the to even were love that to when change we our we call you, you in the

still they think I way about like not So don't the feel fit some how the change space. big in we in there's

X-plus that despite like quite validation this customer Solutions bit increased in feel fact, we've really in last Clinical for environment. count the In of year there's every the years fact our a

which people So I batches, where the the obviously, is what custom scale, it just there's what single-use customers still built, -- want also in and feels in future space. lot we from and the we've really going like smaller the I movement a right to delivered want thing quickly, these for of are expect going story The movement, think cell smaller gene right. scale, to think but and therapy, smaller in bioprocessing

Operator

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

You may now disconnect.

Alpha Teknova (TKNO) 7 Nov 242024 Q3 Earnings call transcript