Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen, and welcome to the Repligen Corporation Second Quarter of 2023 Earnings Conference Call. My name is Vaishnavi, and I will be your coordinator. All participants will be in a listen-only mode. [Operator Instructions] In order to accommodate all individuals who wish to ask questions, there will be a limit of two questions at a time.

I would now like to turn the call over to your host for today’s call, Sondra Newman, Head of Investor Relations for Repligen. ahead. go Please

Sondra Newman

to months And report. Vaishnavi. business our quarter and second and We’ll XX, Thank guidance we’ll deliver also will an this for President and full then welcome call, XXXX Repligen’s the for our year call Q&A. Snodgres, six update provide three CEO, the On CFO, Tony performance Jon covering the XXXX. ended open up and Hunt; we of our June financial and our financial XXXX. you, for to periods will highlights report, be

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

information that are report to risks reports and with Form business XX-Q, in Form we that included X-K annual on the also related including the on SEC. make is we XX-K, our report filing report on today, quarterly our other filings current concerning Additional our the

as Today’s change views, as commit company to not or management’s result of events current otherwise. which does obligate could information, required The statements, forward-looking by comments except update itself or new law. reflect future a

non-GAAP on this morning, call, which and we press of this non-GAAP issued we website are and to financial Repligen’s sec.gov. GAAP is During measures are results providing that Reconciliations guidance. to the included release in posted

as margin; margin; net of SG&A; expenses, include and and report income gross including today’s in Revenue operating alternative results gross evaluating as viewed measures, per financial at not share; historical income be when to are income currency; current performance to Repligen’s the investors figures to following: investment These operating and expense, measures EBITDA intended our against operating well opportunities. and of peers as EBITDA. enable adjusted better earnings GAAP and sales, Non-GAAP performance growth constant profit and the adjusted benchmark cost but should an R&D

turn call to over the I’ll Tony. Now

Tony Hunt

and morning, to welcome everyone earnings call. you, Thank good and our QX

our in release morning, year-over-year. in sequentially, in saw million and this you the delivered $XXX we revenue As press quarter, down XX% XX% total

Our and X% year in QX inorganic performance, down revenue be quarter revenues X% reasonable versus continues our the excludes a macroenvironment. to in challenging were of base business M&A sequentially, a what which COVID delivered last very

Looking at down business total period. was base we in down $XXX last revenue. versus of the half relatively X% first up HX of XXXX, less same holding Overall the this million with XX% well year, in than delivered the again

the off growth. our years reminder, above second for the coming business quarter up In in XX% XX% market second in was base year, stellar growth. in a base was each our case This XXXX, of up challenging. And two XXXX, XX% is business the for and base for full the year. XX% As makes the comps quarter, our and really business well

largest markets Protein franchise post level, we to in far dynamics. has during three inventory COVID quarter Filtration, quarter the and Strength contributor the the from a primary calm year-over-year continues base businesses, market Filtration in second the On four exception recalibrate, Analytics, which growth down the came of being overhang, declines Filtration, was to our the sequentially. saw by revenue of quarter down and the revenue Chromatography to X% XX% the tough off and with franchises.

base year, the we of business double mid-single half first and quarter digit growth. saw to the For

of by prior our future Gene process catalyst tough OPUS which improvement on in X% year, saw for non-COVID analytics Analytics, new growth. modalities we and and and versus Revenues and Therapy of products The quarter-over-quarter the though a a was should was related up led Cell where by approvals, adoption commercial Chromatography be comps strong area Another growth mRNA. sequentially, also X% were includes comp. down which

and gene orders XXXX the therapy half the and us our and to the orders quarter, overall of a is orders, our proving business year. the in with from here quarter book-to-bill the cell be for cell steady the up for front, [inaudible]. therapy Within for first first performer base X.XX base and was book-to-bill gene X.XX for half were On X% in

broadened. are modest headwinds pharma, were the the with and sectors have which the have change seeing five quarters. most demand predominantly have a for orders second the in to at for remained to related slowdown the base quarters biotech, and overhanging However, been in big market the of that market along in CDMO integrator the after revenues off consistent we the solid two inventory confined the in CDMO a component Pharma gains. in includes market is The in drop of part from quarter quarter level which the second past

Our Pharma softened. have orders

down In sequentially. XX% XX% and China. the in in broadens year-on-year, quarter weakness first quarter year, were primarily orders were This orders the quarter for business the of down to due pharma based this in second

and for XX% here didn't last inventory longer up the sequentially, both up XXXX quarters half demand of first in whole for capital where base when we We the approval from down consumables, gains timelines is capital equipment softened half X% after pushed strong versus projects We're remains on observe New estimate XX% by also quarter drawdown, came orders. inventory third in to York, levels the programs in spend, year, year China. getting but softness of from delays equipment CDMO one this to consumables of pharma drop pharma third quarters. modest two that seeing in pharma to related a and CDMOs throughout we second two are from down something total orders final also in still seeing second purchases drawing out year for purchasing are and some about the pharma Orders and the in part

quarter improvement versus ordering China the QX. second in weak no Regionally, remained with

product for the backdrop, second excluding lines. demand and our Although half were forecast whole. APAC across dropped orders China has up a With of as XXXX XX%, many of X% this

franchises all for except analytics. our In fact, of in

year, $XXX a implies the are our full base the $XXX of now business and derisking decline expect X%. which revenue in guidance, revenues million, we million X% to range of For to

business on is to downturn. strategic I differentiated. as put on believe performance moving our want comment consistently are year If periods I in and industry business. comes XXXX through at last -- well our have over come over revised in year do we base newly XXXX the positioned of our the and we Before using and half the to why for still was market. we priorities seen QX grow business market last we we midpoint years, together an year XX five by performance this highly has on this growth XXXX, update above And growth to XXXX include been years three reflected portfolio both XX%. the XX%. three where out the average business have averages The base second outperformed From have guidance five of our

We the start we strengthening longer-term increase conditions part enormous improve high an in opportunities XX% potential have the remain last large strategy. is company. over growth for months. three amount we about of expect seen where In medium our in have based and will And near the confident the market And that we this confidence term, in in a funnel, on probability our to QX.

major we be of we said, the three the here our for should to company. do drive Before That to growth I on on priorities. the macroenvironment, the exactly focus second believe need following XXXX way efforts we're executing half

reality to the months. our our The first and and industry quarters, lower component accelerating a XXXX. this, the To COVID products. see put of manufacturing us related in demand around the It's the program believe will us with a We position costs. process and this associated pandemic the of address goal over over optimizing is required controlling to margin especially filtration and to that This this improvement rebalance resources expanding clear We're us capacity. and in next better lower we've spanned resources ramp the started to complete in to and leaves in with last our post volumes few now surge the margins. up few

of here a We spent sales in focus. and building commercial grow to continues XXXX our expand. is which our on lot Second funnel, time

and delays purchase out longer the mentioned challenges customers opportunities our with I As around dealing cycles. and closing

close For opportunities, from equipment six has months takes to out three time out example, moved to to and capital associated consumables six it to the nine months.

new been the these of can we XXXX. a expect commercial feel embed our through programs down conservativism the an in kicked remain a account and up pharma and in we But products ship anticipate The We year. we structure appropriate and the last QX in top journey we XXXX Program, materially also player is do investing efforts corporate what year. a initiated CDMO very with accounts. which in has top orders positive QX impact out response balance not this Key but positive to corporate more team have again market Repligen Account in have larger bioprocessing. as our to to in pick accounts we QX become would this We revenues, to integrated this in building QX. time impact This off We're our on from in to

to which sheet in bioprocessing new for to for is strategy our to XXXX, in setup part market on are products. of Contribution this required. first from to external involves to we self-contained key XX flat disruptive product workflows our gene new track where customers differentiated a core be finally and product Continue and full Repligen. require X launches, launches And cassette, accounted quarter, working revenues into into launch drugs on year for slightly the not in in is manufacturing XXXX our growth this and drive long-term we launched containment This saw A products customers and therapy will above second ideally and remain the first quarter. our of introduce does to year scale XX% through launch key culture, performance. QX products ADCs QX suited XX% in for of ceiling

to moving now So quarterly performance. our

the the story flat In earlier, year-on-year, in our franchises, increased of gene was X% and quarter chromatography, OPUS mentioned performance space. performance quarter analytics and of therapy was overall prior essentially cell revenues approximately second year. versus revenue and As the proteins Chromatography, the

However, in systems was and of year-on-year. XX% and our to XX% were us Europe. the up The America growth and facilities more North driver quarter ARTeSYN as OPUS which unit paths growth our than in than up at more revenue customers was shipping quarter the flow Chroma drop in more resins

XX% ARTeSYN systems first which nearly Chroma was the by XXXX, half year-on-year. driven paths doubled flow up For of over and again

XXXX. noted down of OPUS from XX% As XX%, are prior what based of growth of in in here to supply slightly guiding X% chromatography resin we second we on half guidance year mix. And comp to prior up full the quarters, expect our to pick resin

the in quarter growth of quarter Our [inaudible] solid portfolio consistent year, of first the the We of in XXXX in the for with organic digits half was a first for year. very the half encouraging. mid-single the had which half across first year-over-year saw the performance and

is to in down now our impacting is proteins where on six growth move and challenge seeing for at the demand second are factors. here both Based coming the proteins half up are XX% we push in project slowdown half. this, is business programs by being ligands to to However, second guiding with lower The accounts months. out from in we XX% in The delays their XXXX. forecasts pharma up demand now

of approximately XX% quarter business XXXX. related quarter, predicted in in by In which driven nominal was the down COVID a was our revenue, decline second sharp Filtration, for

we're were XXXX Filtration the our Looking in against quarter slightly at encouraged time likely during in were Sequentially, by were expect second we filtration X%. the in and down to in second filtration orders business, base mentioned half and this revenues do quarter, filtration revenues strength comps. down at the XX% year, quarter our challenging soft. up QX. in orders of for first for base XX% second previously, the But the pick funnel, most as

this For the on XX% year, overall, now business. be approximately we to and franchise base expect XX% down down

continue been portfolio by revenues to KrosFlo of Systems. see analytics the into integrating and to analytics up led for and performing RPM strong real second growth business our traction XX% first with inline we're and quarter half TFF We our XX% FlowVPX almost has systems time process XX% where Finally, our well process management

XX% this We seeing a performance in for expect installed for growth to an and strong are XXXX. deliver base SoloVPE business also

city mills in So first delivered which been The second have million half. sector, spread macro which of revenue $XXX little challenging. north have makes half in to integrators overall, the of the pharma we headwinds XXXX the confine more a and to

to We're increased products will resources into optimizing well confident And to a that to therapy of have turn share. finally our our the the be probability bring QX. to We we're new direction positive continues pipeline Gene positioned translate markets strengthening margins. XXXX. resilient; our in we opportunities orders to And are to in bioprocessing we market. of higher in expect capture we control charge taking continue

turn With that the update. over financial to call John I'll for the

Jon Snodgres

everyone. good the financial updating Thank non-GAAP day results for reflect quarter financial for as all measures and well year. discussed Today, we you, of reporting otherwise mentioned, Tony adjusted the are XXXX guidance our financial Unless as measures. second our

As shared nearly base in all delivered press $XXX.X we the million. in second $XXX.X release morning, business at of our revenue revenue quarter, was of this which million

following growth. against As year-over-year business Tony base X% well the difficult years was comps decrease mentioned, our market above in two of

post we and necessary preserve the to to market challenging is an believe innovation to leader our our rebalance for a to are steps while bioprocessing. looking especially remain forward And to dynamics, adapt we it well are in and company While growth. industry, we market macro taking resources we and positioned return year margins COVID as

I'll first, share those But more let's and review year-to-date highlights. financial second quarter of the details.

with constant was nominal as the for decreased compared reported related and at just over the our million quarter by second XXXX For revenue currency. at total for $X quarter, the second COVID revenue quarter. XX% million, $XX

currency. X% for creating was at was less FX from year. growth. we Our FX negligible conditions headwind down the constant impact Based $X base on point full market a in expect reported one as quarter X% the and current less negative than reported on business than million, impact

As to by Asia base XX% our COVID revenue, while trends Pacific and contracted decreased as North expected, and it Pacific, Asia driven Overall and from by America XX% by saw and order revenues demand relates we North in contraction XX%, Europe waning regional respectively. softer America Europe in business.

XX% region North for represented represented distribution year-to-date America Regarding and of business. overall Asia by represented our period, global XX%, XX% Pacific revenue the Europe

Now moving down our income statement.

a The expansions. higher year-over-year XXXX Adjusted our favorable less the in XX% to in was in profit deleverage, gross of product tied million, gross margin related and $XX.X capacity volume of Second expenses XX.X% quarter. adjusted was to mix from XX.X% down quarter margin ‘XX decrease year-over-year. quarter decline the gross

to of for commercial expenses, in enabled second nearly systems. the resources revenue past Adjusted total XX% on new key transitioning the are to primary of percentage research Now expenses tied represented to P&L down year R&D quarter the Adjusted XXXX revenues XXXX XX% revenue. focus filtration mentioned, of areas efforts year made and SG&A process the drive we coupled expenses. gains. be in this capacity expenses to continuing development and market adjusted lighter continued same to being to to were increases our X.X% Tony and of quarter total with operating to market focus our expansion second over real Year-over-year, into the compared for with share the continue growth XXXX and period. launch time as products analytics investments

to adjusted moving Now earnings and EPS.

operating This compared prior for $X.XX was a Adjusted adjusted of quarter and quarter the or to for second second $X.XX, margin. to adjusted the margin million XXXX XX% EBITDA was the second XX.X% was to million XX.X year $XX.X a XXXX million, a adjusted quarter the EBITDA Adjusted $XX.X XXXX continue same challenges to of decline Volume XXXX period, of quarter XX.X%. of be the of representing quarter $X.XX mix XX.X% primary reduction. XXXX, and XXXX. quarter EPS compares in $XX.X deleverages the was income million with of XXXX million $XX.X the quarter compared in Adjusted diluted for second product $XX.X compared million of of fully margin was to same a net compared Second in XX.X% operating for XX%. to drivers. income

short maintain June a term cash, XXXX. were we and which $XXX.X with cash GAAP million strong position at metrics Finally, cash totaling investments XX, equivalents

We our will XXXX to now full year guidance. transition

in today's the financial in XXXX are non-GAAP earnings guidance tables press Our for reconciliations GAAP included release. to reconciliation

otherwise in XXXX fluctuations XXXX by in mentioned, all may our GAAP. non- unless exchange. guidance guidance impacted foreign mind will previously noted, Please also discussed that be As keep be

includes pursue. excludes additional in guidance of current Flexbiosys that potential impact acquisitions we the announced company the any impacts Our but the may April, of that acquisition

Before both underutilized, areas like ranges, about also share our more broadly plans rebalancing is where updating guidance I'd and for more resources, to capacity the organization. currently in across

but We're taking preserve difficult margins. necessary steps our protect to and

be P&L and consisting We margin approximately the XXXX. we expect rebalancing our to related By in set be will GAAP estimates, half of that our XXXX. costs, second million as in charges updated rebalancing actions of will $X which with associated for us up recognized expect severance improvement guidance, and reflected in this

to savings expect impacts in lower to timing in also other the and the cost realize partially issues. approximately $XX We volumes, P&L offset half million sales second of

current XXXX compared guidance guidance, Based our a XX% million decrease of previous XX% range a revised conditions, a to for to to we're $XX our full $XXX of Now of on reduction million revenue in market total $XXX view million, updates. reflects our This revenue guidance. our to midpoint to revising GAAP at XXXX. a compared year guidance metric

Our revenues from $X million and COVID acquisition. of overall $XX of guidance revenue revenue includes million Flexbiosys related includes

revenue is to X%to down range our with million X% $XXX revenue X%. year-over-year Our to in $XXX to compared base be by expectation previous million, X% of grow the base to business expected

XX% previous driven revenue are a to guidance XX%, We guidance the percentage our lower by XXXX XX% reduction of the primarily to two to our point margin XX%, year. range realizing for adjusted of from gross projections

from midpoint our a our of guidance million for million of $XXX a year, million income to May operating We the adjusted $XXX at are to modifying $XX.X range reduction guidance.

increased XX.X% being XX% our other income is pretax the year, with compared Adjusted is XX.X% continue now of the compared May guidance $XX revenue. operating tax of to income. $XX in to Our income range to margin approximately for of guidance million. range our expected to adjusted of be XX% XX% of And XXXX expect we guidance adjusted adjusted to prior to million expense guidance

We $X.XX range of a decrease guidance our share, per the We're reduction May revising adjusted range $X.XX from million of to of EPS $XX guidance guidance. adjusted May a from are fully million, the our our diluted to net at $XX income $XXX to $X.XX revising midpoint of million to guidance. our

with year is $XXX depreciation approximately Our to to to $XX.X prior a million million adjusted exclusion of costs EBITDA of of in end weighted $XX.X the of outstanding capacity at Adjusted respectively. $XXX expected $XX.X range fully million, our be guidance XX.X% assumed the average midpoint margins EPS reflective our to XXXX. are of and be million depreciation intangible $XX.X shares be million amortization range reduction from expenses in diluted at guidance expected expected the for Adjusted fixed to XX.X% expansions. and from the year EBITDA now

and equivalents, million inclusive metric revised payments our cash by $XXX of end GAAP cash is made generation for of a Flexbiosys. operations. CapEx of with cash be cash expect being to ending $XXX from We investments in funded fully year cash the This figure of million, range April million acquisition to $XX our

update. This completes our guidance financial report and

back open Now call I questions. the lines to for to the turn will operator the

Operator

[Operator Instructions]

question Leerink from Our Partners. Puneet with first comes Souda

Puneet Souda

questions. my Hi, for Tony, Jon. taking Thanks

the So first back one, on could guidance. step if you maybe

and wide totally I a you'll and have beyond obviously here industry two And key an biotech there's that few funding is think exposure one of has as to one phenomenon. But destocking. phase the understand trials. guidance times prior been the the pressures questions this cut

environment just about further bit question potential captures. beyond this trough us you given this maybe this little for the or to adequately the see And what the is cuts think biotech which talk at when turned more destocking covering and I point, there So is potential scale funding, biotech recovery, both know, phenomenon those into the for industry Thanks potentially on is of points. are capital markets so. side I an and it's levels funding a

Tony Hunt

be Thanks May with guidance cut. our start I’ll Puneet.

the when and we our that to everything perspective, we're the we we based in in we where it ordered was was orders have that's a it important we mainly destocking on the China, around dealing it's significantly CDMOs in July in the was fine May way in And difference last absolutely issues now is come and QX, really see was were the felt from of drop clearly we for guidance. the us, $XX were from integrators Repligen were right are all saw between orders dropped in the talking but you off saying China to and So the started QX, about we derisked May, QX clearly down million that and revenue through in in could all off down. China. year and But where most in continued

into One that order pharma destocking terms what off so of in wasn't but three is it So a only our it's it's and pharma maybe burn and broadened book-to- just you in we're see but the started bill there's can clearly and it strength started us visible in QX. in of things. consumables seeing QX definitely in are to visible

of year. to capital there's now definitely whole project in on seeing It's months, terms three delayed projects kicking-in for for second conservatism Projects Q that this And then supposed we're for for any systems, the then purchase cetera. months, year taking et the early longer next slated be And of half cycle. were delays. the so in industry spent six again just across

QX, looking that and what us which the year So based, those do especially million order we things to on led think exactly is we based what all saw can we gave really in combined, us declines drop. this to $XX the

order range time unless the we I'm ordering out that And believe we that. the there's that growth that around the the don't No, hit saying the declines in that for year about This gave half At only be with so. could further of there. do the think see could quarter, good this, would to I second need last we like we we But to you. I your there question think in guidance put said, us we stage, then pattern, answer this order further cuts? to in we're

when that Repligen QX. piece. impact know, terms gene And is at on first of a year put therapy sequential we last we really going And look that in as I are commercial. it we're that customers customer broad it's the want changed we've phase encouraged a in bunch cell seeing we're is and this think again, scaling, three not your those honestly to we that, really driven you In in that on funding, phase at the But be are the growth, increase, questions pieces who early the That's you this, by getting in terms market Puneet. is in would to year. looked it's -- of I biotech customers our side, question, hasn't I of had QX that but where funding it we're two, into which base, versus clear and honestly, and driven where biotech about it where were growth talking

answers Puneet. questions, So hopefully that the

Puneet Souda

I if for two No, ask now, Thank point about on, I and the business off there one, assumption was lower could talked the margin last believe those. bit to -- talk sort I still And starkly for is Is growth of as base there accurate a XXXX. was And helpful. know margins, XXXX? number who for little you've maybe XX%. covering about that you guide just quarter. street near you. if number prior off Thanks significantly that's could for of super an that jump

Tony Hunt

XXXX next end where we a we see we of the exactly I see think and give are the need growth for the for to at guidance on Yes, year, next year. year, our before

the whole the or has changed dramatically months. four last pretty over think I five market honestly

year. until So I order that revenue will this guide what year based we're then which and do end And QX, our the will on right, think say margins. translate next pickup increase But it's into in we more and on QX in stage at the wait year. prudent I of to of funnel, next us for for the seeing, anticipate

think profile. it over I I'll to margin maybe on to hand the comment Jon

Jon Snodgres

to Yes, do that. happy

the that revenue costs million drop we've at you the material the that we're has goes the seeing reduction think away margin midpoint, that biggest here got I Puneet, of $XX the when which, So, contribution a driver on cost. revenue piece

that's for percentage very margin high drop on revenue of at through margin, expectation HX. a overall So of key the overall, And that's decline. flowing driver, that the that

Operator

next question Stephens. Jacob The comes from with Johnson

Jacob Johnson

of Good thanks. of you've variety for reasons. couple on morning. Maybe Tony Hey, this destocking, of times year a kind

maybe a end cutting customers this down their in you you also of any you're around curious is confidence, for And that of kind being destocking XX%- done talking peer the kind in proxy --you good to I'm that then of face this to about with the comments quarter, a Now XX% of had any inventory. expect that. working year. work by just face and headwind, And if doing XXXX.

Tony Hunt

out start down work inventory actively maybe don't last the Yes, how with I piece. think trying to figure levels. we are working with to customers

And, they're conversation working and of timing are customers exists. of the absolutely work areas are way that'll have projects its that through we with working where system. months that need. us they on our and the the projects product on know that those We most think they the and of the that through, know the I that inventory

just maybe today. turns destocking four is headwind, we months were are these projects between in that, It's and we difference, cycles, honestly, spending ago, where XX% longer destocking the said other And kind in conservatism of end factors. see competence I think total Jacob maybe think is more a of the is destocking this than much I of of I is where phenomenon. and delays It's purchase patterns, don't XX% at the that. much that's and as terms it more a difference And but the year. the

close destocking, on our destocking on the projects signs we're third expect to year, fully it the in beginning slated And again, of will the of my And started really by able while the this until pipeline lot be that of to know the happen. view late that large in this. they're to the fourth I'll majority to for second us continues destocking we to reiterate orders end last a all of And probability half high opportunities be You I year that the think I quarter. And over wasn't that of out increase. the of the our dropped early working positive quarter, quarter, continue get will grow, fourth are year.

Jacob Johnson

spot to processes helpful. you're bigger of Got integrating integrate into of picture by seemed just about I'm kind maybe question, of if bit analytics analytics bright received curious you then Tony, a kind like further. quarter, of something opportunities it, And been that's talked in just having And a hat's CTech your customers. process kind systems, a conversations how additional seeing and this

Tony Hunt

we Yes, integrated know, into and as flow technology the benchtop TFF. our you

And been from positive, units and we customers each quarter. has more selling gaining more the momentum, incredibly are so and response definitely

So we That's we us what be quarter integration, a a future. That's to upgrade ARTeSYN that systems that months complete we our, forward. as with good second do continue based the XX it'll production business in to we in And that QX, We as XX do. think natural will, take want. half we'll part And so include our evolution we to expect it than months we to that to and probably what on going especially to the move scale had let's half all inline plan, to of going for the pipeline. the the customers the did more systems have analytics, a good see call benchtop I which it's the that's very is from for moved process portfolio it's our say scale the systems. in would we're best first

and happy how doing. really with we're yes, So it's portfolio analytics the

Operator

Dan The Stifel. next Arias comes question with from

Dan Arias

your situation On guys. of kind for like place general, much the do Tony. have there's feel the on China, a that, than play at in sounds the the like current guys they that a there? Thanks do It on handle there. to It's factors question. ground tough are morning, multiple environment. less Good

at the for the And is point expectation understanding where of China moving the So is year? revenue parts? what on level this the for

Tony Hunt

you've it heard has Yes, from consistent happening. pretty there so over other think a to good what's what that players. handle team do be our honest, I And with is on no,

the China, outside everything are So weakness projects XXXX coming at just it's it that right, from, and It's CDMO XXXX. China, was but in are CDMOs not within China. the what of not through the really level, in number are,

and lot I X feeding up those biotech companies early the were funding the dried biotech Tier think a of CDMO. into so

I think a challenge. been that's So

that's inadvertent think for all the year that, China the inventory. is was going other an in I piece year buildup companies of there a was China on stop such in start last

what as than funnel, the months plan in year, is but much is of may we're look number like the the So because six industry back China turns months actually way nine of that that China we have lower activity projects of that out, until China working to and expect think But an said ago, we played off. don't up, the has inventory, deliberately, the that right of at were in rest excess end And ago, I built year don't was, ago. burnt a what excess they last now a there China how level on. our the get year we the have in was May, in seeing inventory we'd programs that we of

Dan Arias

it best Thanks. the that you on there? competence just of the the feel for it we guess. the improvement it sort order given highest of about the funnel good just up here? on to that you down? Is or sounds about that Can where's What and trajectory I end like CDMOs nicely? way Okay, Is you feel funnel XQ maybe of order just about, being year then everyone that pretty you talked as maybe crystallize activity do the the pushed

Tony Hunt

big the portfolio. happening conversations And this what have we're a challenging, look that it's thought are slower seeing, at the everybody I the within just projects fall of at customers, based are with say marketplace, our else, pace. macro much of it's we that's And, we so many it's when great challenging pickup happening, QX. portfolio as And, order on the environment, but we're on that portfolio, would in for for and see I programs the challenging well. Dan, projects Filtration the a think, in working and, Because position I we products. for our Now, be really competencies, us,

Operator

next Our Matt William comes question Larew Blair. from with

Matt Larew

there the probability helps perhaps visibility behavior? that'd to in that notion ordering with And the you've in you of up cited, be earlier metric the past over kind able just be if are wanted I been like, understand to being exactly anything Tony as it follow metrics And And Hi, that into six good months, the customer one on what morning. associated increase derisked. better well. thing opportunities. just XX% higher do year, again think trended, guidance May get visibility, and that of us then to means, helpful what else

Tony Hunt

this the our on optimized is we've organized the so visibility helping. commercial organized commercial side, or I how year way team, definitely team we Yes, think

So opportunities we know there's out focus real on that that a there. the are

the got the you of any sort is so confidence funnel. that what look are various you right, probabilities conversations customers, And happening gives closing. at and that increased on with you've When us on have funnel,

see So overall but probably, of we I early continued probably that, more year, the honestly, this second our increased, been to year, opportunities. has has it's think started on through last funnel half

what XX% So maybe and we're significantly, was probability. move XX% we the and at now early seeing funnel it than increased XX% into what lot less XX% above. call of increases But the the than the greater a

three the seen they'll a So last those any probability over close. four other quarters. of are high in very we quarter level just that that And jump haven't or

encouraged with. down we we're can associated exact by right that's tap into the that. And So opportunity

execute, end there orders in that at are the we've signal to POs. provide got the to picking customers and QX. happening So of activities continue up But out have the close year to and

Matt Larew

a of starting here, sort margin thinking presume double that obviously, next to least at I or get for year? the operating of are towards sense gross going digits margins off Okay, low moving point, half jumping guidance side on point like next for that is margins margin, what for help and year. the based XXXX left just half back new the some about of the point XXs fuller you're cost right through the think reasonable then off for margins I a jumping actions other the high impact end year, But pieces us right on first suggests quarter something margin, first or

Jon Snodgres

we I you into picked half look, the Yes, the As that, right, up year. think of second on

in the to expect additional to We margins QX, dip ahead throw down and recover here out. in bit QX go volume I'll with this and start a

revenue kind Just cadence perspective. from a of

the operating that QX, margin dip and of the then closer XX% at probably going is to does in the margins rebased digits points volume up are, come lower XX% on until level, HX around out QX got year. of of in to Our in an Our by end the they'll margin the on rebound the the gross the now. XXXX? XXs we've for year. implies will implied in come it of the here out mid mid-single us in to midpoint with get to is kind QX, or views end right down How here the revenue lay of This are and we're lining QX expectation the a going in way lower margins laid and

second think we now the model model such really, on where obviously, and look I point, that, margin And we good up. We're way start before driven we to QX variable to taking costs improvement cost a we're it think excuse did margins definitely our half really right numbers mean, off volume off on way in margins drive to is can, I a driven implied and the it in is but the jumping can out working based our company or structure it's XXXX, that. built by it. at me, And, for improvements expect

Operator

Morgan. comes question next The from J.P. Rachel Vatnsdal with

Rachel Vatnsdal

the you taking morning. Good And thank for questions. Thanks.

primarily but declined now purchasing broadened overhang talked a on And customers, noted that CDMO you form of and the you approval longer et by dynamics times you to previously softness XX% outs, that the push that pharma sequentially. and has was these So and some about noted cetera. to related orders inventory region product

those just improve So are related to well, those or some of, hearing of us Thank some delayed linger your things? conversations the making with with terms of what can you. decision through in XXXX really customers trends into you you walk

Tony Hunt

the Yes, so sense maybe pharma a second part question, the give before situation. I to people just answer of the of

everybody So year, saw should what of through really quarter pharma revenue half I the consistent first with realize by last the we it's actually like think year.

CapEx which mix inventory look drawdown, spend. consumables, you is you XX% about that to of third in splits versus year-on-year down third about orders, China. some repeat inventory don't XX%, get revenue. following pharma drawdown it just was And from a XX. quarter. there's change XX the the that third we CapEx give XX% from probably in big been QX to you one think And sequentially, product orders then So changes of an the you in is orders year is is, actually And drop a was probably order QX XX% for there's coming the ago, probably idea to then no really And is at is the how quarter sequentially. a at start lower the where But it, if XX% is in if look up, to coming down pharma

it a very, second that in when in is year. the overall, of change start does you pharma revenue with to a predict going pharma to by what's view quarter, to much happen from it So the half point see start of

So the done just conservative to inventory pharma and it. pharma one answer be drawdown of inventory saying, mode, the right. And drawdown just will on your question the moved think part is is what's it of year? into I end by more

definitely XXXX us, event not the and the a for projects. on, in when the XXXX think a you the conservatism, we're a working at look projects pharma, it with But lot we're get And that really projects as like of XXXX. needle will It's really in projects CapEx spend. feels move QX I right on event, into now. delays working some it's big we it's

Rachel Vatnsdal

that been for just inflationary you on pricing. an thank in Obviously, we've question color. then here a environment Great, here. And

we you. shifting move And as for So pricing pricing multiyear has can historical, contribution us are how about contributor stack into that you the on expectations guide give you than just updated XXXX, update been, year? for given your this bigger thank thinking on a an a just then pricing

Tony Hunt

would was that at that And year. we general what Yes. X%. to guided of holding the beginning say I is Jon pricing in I think the

Jon Snodgres

X%, yes. round Right

Tony Hunt

for well. with And to had deal all issues that as So we're the on that. track just that's we matching inflationary

and So to out it's what components covering we're parts all our the suppliers on we buy. paying that

subsiding. to I level but you anything that normalize is going inflationary which be what to average I give don't been into to on XXXX-XXXX to want kind our materials. our is because, of I about I And to it's year, costs which or just it's think of return industry, is would the And, that seem up. going per in be think X% in pressures forward, get prices more covering again, It's historical. industry, a in not specific going when probably guide think XXXX, X%, very it's increases pricing about price on putting everybody

price modest in So we ‘XX, expect that going XXXX. increases to be more it's and

Operator

Knight Paul from The next question comes KeyBanc. with

Paul Knight

How and the cliff much that shock do look here COVID? to related think, you of at treatments getting psychology when this their other that factor Moderna, Yes, like you XX% it's spend? sales pharmas are Tony, vaccine XX% from Is guessing part of of a to I'm we for Pfizer think in QX, down their are COVID. on

Tony Hunt

I would think activity surprise are XX%. to COVID I have because areas. therapeutics are that sitting on highly companies terms in programs But general related beyond impacts that. down out, everybody don't that are active predict haven't on it do, that and Pfizer to I the know and that a There's bioprocessing Pharma, Moderna. of are if down. How that on getting they some conservatism and how change across was total spoke level I projects And can about. but the would reports other to that the same it's go the by XX% going and saw of the they exactly the think drop people close but not I'm are what I it's think off worked could built, projects any I I probably And on side knew realize vaccines of you projects numbers in tell Yes, inventory board. that programs seen And enough don't I or much in what companies those the pushed and also way some a

broad the just across it's vaccine, not guys, pharma. it's So

at not different vaccine the companies. anything I'm some are senior So pharma seeing company, dealer

Paul Knight

product. worldwide. regarding never money was buyers multinationals operate then, some the expansion understand for demand had for desire a that there they read from product. the or understand and guess [inaudible] Western was China China I of And They impression becoming Is were there here? China, fair what? Okay. Western I of is under were own I there, I really emerging biotech, I its local doing guess companies becoming that kind

Tony Hunt

are there into any that I served country. Yes, of, a to in very or Korea, think honestly, it's, fair Asia, CDMOs making products China, sales CDMOs And lot that's biotech, Chinese that's think team companies a for a India, other I that country whether in country market. in that there's go are it's versus read. don't we looked definitely lot I of our use. any think sell that early does the sales in I broadly at what are different,

in down I biotech first pullback hitting CDMOs number activity, So the pretty been gone year. general, the And because in the of in number, though, I think dried China. think because think there's the the projects has I a in funding the half big has up dramatically of

Paul Knight

or Tony, that Asia rest biotech there? lastly, pretty looked that in do in attribute that continuing to? you of good. were made look, Singapore What to bill good Asia rest you see do what a it things And Is pretty then now that's the of in

Tony Hunt

we is the think lot side the have of sell a we outside which those projects And countries accounts, only into so probably and needle I of really because on when perspective, the and Repligen I that some handful look we think on that peers different. order sales. nice little a But other I into accounts can growth on at from at are that our accounts, a is really really ones and China, Asia, going but a the accounts move a what's we question the driving of maybe handful sell answer it in

Operator

question from Conor RBC McNamara Markets. with comes Capital The next

Conor McNamara

taking morning, Good thanks for the questions. and

Tony, in return what us seeing just you activity easy more pick the activity in of First, remind order in Or on was a on this last year? quarter comps? QX, an can QX it growth and is growth market? your function commentary that your you're actual And to up is

Tony Hunt

down down same to orders a in little we me were we from for QX let saw general, last almost in, But in dip dip and about in QX. orders to QX. last we not so where bit right, QX QX, they dropped the talk Yes, amount down, at year so QX, the were hold at year begin able

at were look point will that So view orders same. our from if you dollar and you were consistently book-to-bill, go of see the back

you three start quarters, go steady state industry, the when from grow and need to pullback hey, through in we we've happening you that to So know you a there's a here. feel like, look, hit

what I saw further we think a happened dip. is QX in

you of from that go orders, you same which from a same then was environment. puts over drops then a different QX, And three in orders, it in And same environment. quarters So in volume not really the unexpected. tough but again, the customers,

so QX, orders drop So the down can in we down book-to-bill pretty our were clearly. in think XX% point, I to see was you X.XX

and that funnel higher level, projects us. just at of for higher confidence which our our the probability the in probability I moving the increased is through on that always orders think into probability around or results we look based QX

programs. to view. have So material it's on projects it's activity based believe impact QX, going not our QX. based also on That's that, our, more on a in But going impact in is it's based on we an have to of revenue

Conor McNamara

that. derisked just, you've then you year. your guidance Thanks the for for it. said now Got And

overall we upside you market or that that just more the function faster? a quicker about back? the come it rest help about of thinking gains year? coming potential should return it is potential how of areas So a high conversion of Would growth talked Or share of to be you for from funnel the probability market can

Tony Hunt

of of guided of function kind honestly, into ‘XX a business, months. terms our what don't what to was kind like we coming right. the of a when three the back. not the unless in guidance much Repligen just seeing at it's or I overall there's think to, in what have where see that And because in at remarkable we're we've next were of QX. I market upside a four you turnaround higher were to look you related, came ‘XX with doing look COVID we base And percent and I,

And our on then when XX% had So be two few our script, percentage base XX% considering in this business not in we to much actually in X% a bad the impact at a to years a the COVID this business, growth environment business seen much years. is to and of X% we've you on my higher. and look base last growth year, base row, result, down how is base over us

guidance, it's including years, think three the I So last the would happy. we grow if And be on said XX% latest years years. three the over three super you back out we XX%. ago just average average next were and Everybody

all to it's good our think I question dealing So portfolio this of with we're main how to reflection more and environment that's a macro is. here. of your And, back the

think upside honestly revenue for in the from turnaround come market. into late happening any a we that see But the -- I don't think upside get until XXXX. it'll faster QX, which don't would see I too I in be I

Operator

from Group. comes Hewitt with Capital question Craig-Hallum next The Matt

Matt Hewitt

Good morning.

assume I Just start if this expected missed confidence one question and it that's those stage in much safe for is cancelled or I conversion and/or regarding likely commercial to which pipeline your more to apologize me, to here more because earlier, but as you are delayed. that QX is they're much so tending be or look at to projects phase projects, three be less the late

Tony Hunt

looked move cancelled. at your analysis in I Yes, is get late funnel, right, many and them stage. every of I haven't exactly, they there's And that forward single higher think that probability I accurate, but a opportunity great are Matt. think question,

Operator

UBS. from The with question next Lisa comes Garcia

Lisa Garcia

would of can integration Hey, of for know market, get sense just I early obviously, create that early the I it's days, a on be guess, in. squeezing guys, to Flexbiosys. great it interesting kind but but guess, I opportunities. thanks times in And,

get the just of you sheet have optionality, get kind funnel So from it opportunities looking And quick is guys, of up. and sense be kind you a M&A the would in given to of from a appetite, kind follow balance the guys, market a how at the great I sense and moment.

Tony Hunt

partly. maybe Yes,

of think the last is, dead I first M&A half of versus this look So the activity, it half first year, this if half lot half I to at of of last first the pretty was think I be a say more continue I year, marketplace. on, we year shown year, think I active would buyers. kind very years over the going And in selective we're we've that first activity

now we part strategy, what well. how has to how like they that what it we grow integration fact expand to we're with what like the over the did what market. that year, the in they the We that have, want it focused but And the is Flex So the XX on. some plans We have our bioprocess to of of bag part the portfolio, gone next months strengthen and with we we have. also do has with portfolio we're earlier fit in some big we do

our doing of what the in what drivers acquisition. that think and we're facility, be I that's success we're assembly between doing So of of to Hopkinton particular at going kind Flex the

funnel in actually terms few And think us don't of over reasonably see M&A I years. next is strong. the the So slowing I down

forward pace the we've pace move that of kind with. done we'll the in So the probably is past

Lisa Garcia

And think unit increase I at volume Great. you great OPUS, hear to then the said. like XX%,

trending could year. of relative expectations that. to the bit that has a you a the beginning how give I If an availability of resin and was on quick year the for appreciate update in issue little of know been just kind

Tony Hunt

two Yes, getting We it's -- better. that definitely see availability it’s the three steadily has Resin big improved. getting suppliers, from

drop ship improving. volume the or customers or in we margin us helps facility Breda, the added starting of resin we a in encouraged it's our North side. yes, us. just piece But what drop ordering to are hard get I the America to and on be look, orders to in unit resin with that's a is is without ship we've the predict driven we're we definitely in pulled to think percent the resin to resin always in or are out since increase Europe by clearly availability lot resin that of And going

Operator

from question Tim comes with Fargo The next Wells Securities. Daley

Timothy Daley

Great, thanks.

So just got one here.

give year you the Tony, So, update communicated this previously an were hesitant outlook, up. versus XX% to ends to wanting where see ’XX

factors Just the this consistency. want understand behind to has

earlier, suggests another Comps year. the dynamic, question pharma maybe are easier with here. cuts, that just the Rachel's seem be least to you spend over indicate a to inventory suggested question, getting ‘XX putting prior today's you all be pause the destock To So might together guide will event? four at this it

up on may ‘XX ’XX ‘XX winded that growth comps or in way are where other comp in where So long to or say into the growth ‘XX your up to waiting the ends us are you factors end see ‘XX? update see concern leak to there

Tony Hunt

that I we all. was that that no, right were QX, Yes, factoring we saw at in given that not think in and changes something now, the

you Y. twists and saying, we don't, right do weakness in turns just growth definitely is end and this of year. think the closer think so prudent a number see the And just out, why to hey, until don't to year pharma X now on it's comment to so reason have out the start primary many I XXXX we putting to that, another want we don't it's the had can and get We I there

we it has issues because I knew And a think broadened. confident lot about ago, quarter the that we were. more where a destocking felt and

to got about before stable to base we we've talking get more a XXXX. start So customer through and

it's now nothing comps. do we're with. industry dynamics, the pulls So dealing market fast out got to to got It's with with and the everything how do what

Operator

The next from Couillard Jefferies. question comes with Brandon

Brandon Couillard

morning, Thanks. Good Tony.

normal Can trend be your I mostly that across a six to normal be or impact. your that You pushed you bases. part business. it in being back, this these terms there's called material some that accurate? for mean, I seems churn are But out, customer therapies? more make consistent imagine just a of campaigns of three imagine the revenue unpack Is And call that may a months. I are of commercial more many them little bit?

Tony Hunt

Brandon, I think it's the right. combination of everything,

some you the inventory really, obviously companies together same difference. pushed I to past, of of by, then think the these at when online pharma that's right two time, there's building could probably that delays coming cycles that just it challenging. combination were you customers that out POs. delayed you one, supposed that the We've projects were some and got getting at quarters, makes seeing capital could you go on biotech are we're companies, out really once in this things into but the handle year, And programs seeing in any or find a have the projects. overhang. We're all have like longer are and all at are of it projects delayed. where handful got getting CDMOs It's coming approval year, all facilities happen it But

Brandon Couillard

what contribution mentioned in Okay, Last Jon, M&A full one, the XQ? that's the dollar have year? really And you for up helpful. break you then could

Jon Snodgres

we the Yes, for million $X Flexbiosys. the M&A be would said

consistent and back changed that's call in excuse we QX me. what haven't QX So that, said call, with we

Tony Hunt

back operator. the maybe to Okay,

Operator

Tony conclude for All conference to turn right, any the the I'd remarks. closing back question-and session. I to like Hunt I will, this over answer

Tony Hunt

you. Thank Right.

So We'll thanks, for on back few QX. months everybody update us. be joining in have an a

Operator

This concludes presentation. our conference. attending Thank you today's for

may disconnect. all You now

Repligen (RGEN) 2 Aug 232023 Q2 Earnings call transcript