Q1 2021 Berkeley Lights Inc Earnings Call
[music].
Good day, and thank you for standing by welcome to the Berkeley Lights first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
That's a good question during the session you will need the press star one on your telephone.
If you acquire any further assistance. Please press star Zero I would now like to hand, the conference over to you speak of today can be a member of the please go ahead.
Thank you.
Earlier today, Firstly light released financial results for the quarter ended March 31 2021.
If you've not received the news release.
Or it seems like the attitude of the company's distribution list. Please send an email to IR at Berkeley lights Dotcom.
Joining me today from Berkeley Lights are Eric Claus, Chief Executive Officer, and Kurt what Chief Financial Officer.
Before we begin I'd like to remind you that management will make statements. During this call that are forward looking statements then the meaning of federal securities laws.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements on the press release, Berkeley lights issued today.
For a more complete list and description. Please see the risk factors section of the company's annual report on form 10-K filed with the SEC on March 12 2021.
And then as the other filings with the Securities and Exchange Commission.
Except as required by law, Berkeley lights disclaims any intention or obligation to update or revise any financial projections of forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as of the live broadcast May 11, 2021 with that I'd like to turn the call over to Eric.
Thanks, Carrie and thank you everyone for joining us this morning.
We started the year off strong and had sold of execution across our business during the first quarter.
Revenue grew 35 per cent year over year to $15 $6 million of.
I'm very pleased by the performance of our team this quarter and encouraged by the increasing demand and the enthusiasm we're receiving from our customers.
Our book of the lights, we focus on major markets of leverage cells to make products, which include of antibody therapeutics cell therapy synthetic biology, and most recently in gene therapy.
To truly enable the growth of these markets one needs to rapidly assess the relevant functions hidden in the large numbers of sequences produced the daily.
Linking the genome to the desired phenotype of at scale is at the heart of our technology. This.
This is extremely important to our customers as it increases their probability of success and leads to an accelerated time to market.
These functional tests become even more essential as the complexity of the end product increases the mold.
Of the dimensional test and parameter optimization.
The question is by themselves have limited value and are not actionable unless the particular sequence and the cell is shown to create a valuable product, which is the cure for a disease, an enzyme or a food protein.
The big lights, we're bringing functionally validated sequences themselves to life on an unprecedented scale speed of resolution.
<unk> continued to drive expansion of across our markets first demand for cell based products is growing.
Second the complexity of cell based products is increasing requiring more precise multi functional assays with the highest resolution.
And third there are new therapeutic modalities, including multi specific antibodies and cell and gene therapies, using DNA, CT mrna therapeutics, which require precise functional validation.
The benefit from these market tailwind we are focused on two key areas first we are driving our core business in existing and adjacent markets.
And second we are leveraging our technology with partnerships to expand into new addressable markets.
Starting with our core business demand was strong from both new and existing customers in the first quarter.
We grew our installed base by 10 platforms to 85 systems of which eight were direct sales in the quarter and two were attributed to the completion of milestone programs.
Five of those went to new customers from five to existing customers.
Today about one fourth of our installed base is multiple system placements demonstrating growing technology adoption.
C of O and CRO demand remained strong as Berkeley lights technology becomes the key offering in this market segment.
In the first quarter approximately one third of our revenue came from the contract research and developing industry and represented the largest contribution to our revenue during the quarter.
It's part of our technology adoption strategy is the Taylor access models to specific customer segments. We.
We do this by offering alternative access models to accommodate customers to a subscription based approach.
Initially this approach has been focused on financing Sn.
Essentially providing customers with access to the beacon score of capacity through fixed payments over time.
I prefer the market assessment, we're introducing a second subscription model to better meet their specific capacity needs.
In this model customers will subscribe to a given capacity inclusive of all of the consumables software service and support for their cell line development of our antibody discovery campaigns.
Pricing is based on campaign capacity, so customers with fewer campaign runs can cost effectively access our technology.
We believe this will increase our served available market broaden our customer base and drive incremental demand.
We were early in the release stage, but are encouraged by the interest we're receiving so far.
Curt will walk you through some of the financial details of our new subscription of approach in his remarks.
We continue to see opportunities for expansion, both in existing and new customers alike, driven by increased use cases enabled by our workflows.
The Q1, we announced on next generation antibody discovery work flow off to a parcel of be discovery 4.0.
Which will be the industry's first fully integrated antibody discovery work flow from target identification to functional molecule.
The placement of our platform in combination with auto plasma be discovery 4.0 will provide customers with an infant turnkey solution.
We expect to release this workflow by the end of Q2.
Last month, we made another significant product announcements with the launch of of off to assure a series of assays that will provide yield and product quality data on an earlier stage in the cell line development process, enabling better lead candidate selection over a broad set of product and manufacturing parameters.
The body therapeutics are becoming increasingly complex quality issues, such as aggregation and highly engineered proteins are becoming of greater challenge with implications for drug manufacture ability and patient safety.
Identifying manufacturing cell lines, that's the create high titers of quality product is emerging as a critical challenge and so on development.
The doctor to assure our customers will be able to rapidly select clonal cell lines with favorable manufacture ability profiles early until of land development, leading to faster timelines decreased cost and the best downstream products.
After assure is an example of our strategy and inherent value proposition to move quality and yield validation to the earliest possible point in the development and manufacturing process.
And most recently at the end of April we released so on development 2.1, which significantly enhances our import capabilities by adding of proprietary on chip enrichment sort of.
This allows us the screen up to 20 times more cells compared to our previous cell line development to point of workflow and up to 50 times of greater throughput than traditional wellpoint.
Broader access to relevant biodiversity further increases the probability of finding that rare or best clone that will manufacture the product at the volume and quality of our customers need.
We are also leveraging our technology to access new markets through business development partnerships the true.
Really incredible thing about our platform based technology is its broad applicability into new markets.
As we approach new attractive so based markets. We look for the biggest problems that our customers are having and engage in business development deals with those partners to develop a solution to the problem.
We jointly develop workflows become the solution of record and commercialize those workflows in the broader market we.
We have done this and cell line development with Amgen, where beacon has been kind of Amgen standard platform for cell line development.
We're doing it with ginkgo and synthetic biology.
And our last earnings call, we announced the $17 million deal with the global leader in gene therapy space to adapt the Berkeley lights of platform to enable the selection and manufacturing of stable viral vector of producer cell lines viral.
Viral vector of producer so lights are used across multiple therapeutic modalities, such as gene therapy cell therapy, and really any therapy using viral transfection.
Did any of these therapies rely on costly and difficult to scale transient expression cell lines.
This is because quickly generating stable producer lines has not been proven possible with current approaches.
We believe the Berkeley lights technology will make it possible for the first time to execute multi parameter of functional test, including viral capsid and genomic titers without losing the lifestyle allergy.
Once developed this will allow us to select stable clones and won the two weeks that will be used to create stable master cell banks similar to what is being done and so on development for antibody manufacturing.
We believe this will become the new standard for viral vector manufacturing assets.
Significantly reduces cost enhances manufacturing predictability and provides a superior approach from the regulatory perspective.
This partnership has progressed into the next phase and we expect these types of partnerships to have a meaningful impact on our growth trajectory over the coming years.
Finally, before I turn the call over to Curt I'd like to share a brief update on our board of directors.
Today, we announced that John Shymanski, Chairman and CEO of catalyst will be joining our board effective may 14th.
John has led talent into a leading C D. Though that today supports the introduction of 200, new products and over 70 billion doses each year.
He brings deep industry and market experience and shares our passion of continuing to accelerate the discovery and development of sell these products the.
The Berkeley lights Board and I couldnt be more thrilled to have John on board.
At the same time, Michael Marx will be retiring from our board and Great News here, who currently serves on our board of as a director will assume the role of Chairman Greg has a wealth of experience growing public companies in both organically and through high growth acquisitions in the space I look forward to his continued leadership and guidance as our new chairman.
With that I will now turn the call over to Kirk for more detail on our financials hurt.
Thanks, Eric revenue for the three months ended March 31, 2021 increased 35% year over year to $18 $6 million with $13 $5 million coming from product revenue and $5 $1 million from service revenue.
Looking at our three revenue streams direct platform sales totaled of $11 $1 million in the first quarter of 2021, increasing 18% over the prior year period.
Revenue from joint development agreements and partnerships with $3 $1 million in the first quarter of 2021 compared to $1 $9 million in the first quarter of 2020.
The recurring revenue was $4 $4 million in the first quarter of 2021 up 77% over the same period in 2020.
The increase is the result of our growing installed base compared to the prior year period.
Regionally the strength in APAC continued into the first quarter and accounted for 45% of our first quarter revenue followed by North America at 40%.
During the quarter, we out of 10 platforms to our installed base ending with a total of 85 total placements.
As Eric mentioned eight of these platforms were direct sales and two were placed in connection with the completion of the milestone program where title of the tool paths of the customer.
Gross profit for the first quarter of 2021 was $12 $5 million compared to $10 million in the prior year.
Gross margin for the first quarter of 2021 was 67% compared to 72% in the first quarter of 2020.
The decline was largely driven by the cumulative impact of the two ginkgo workflow by downs during 2020.
By executing our buy down rates on the ginkgo workflows, we gained full commercial rights to the workflows in all target markets, which allows us to expedite the commercialization of these workflows and leverage them into new partnerships and accelerate growth.
Excluding the ginkgo impact gross margins for Q1 was approximately 72% we continue.
The expect our long term target for gross margins to be approximately 70 per cent.
Total operating expenses for the first quarter of 2021 or $27 $6 million inclusive of $4 $5 million of stock based compensation.
Compared to $18 $2 million in the first quarter of 2020.
The increase of $9 $4 million was driven by $3 $3 million of stock based compensation.
$4 $1 million of G&A as we transition to a public company.
$1 $5 million of research and development and a half a million dollars of sales and marketing.
Net loss for Q1 was the $15 4 million compared to a loss of $8 $4 million in the first quarter of 2020.
All of net loss numbers are inclusive of stock based compensation.
We ended the quarter with the strong balance sheet, consisting of $230 million of cash and cash equivalents.
Turning to our outlook for 2021, we continue to expect revenue to be in the range of $90 million to $100 million.
<unk> growth between 40 and 56% over the prior year.
As we mentioned on our year end earnings call, we expect revenues to be more heavily weighted to the back half of the year as more business development collaborations and partnerships come on line and as a result of the seasonality, we typically experience in the fourth quarter.
As Eric mentioned, we're rolling out of campaign based subscription offering this offering will recognize revenue over the subscription term compared to the upfront recognition of a typical equipment sale.
As we ramp this offering it is possible that some previously anticipated capex sales may transition to a subscription offering.
This could impact quarterly revenues in the near term, but in turn would provide upside the recurring in overall revenues in future periods.
The potential variability between Capex sales and subscription mix is incorporated into our revenue guidance for 2021, and we anticipate placing at least 45 platforms during the year.
We do not expect any impact of our long term gross margin expectation of 70% from the new subscription model.
With that I would like to turn the call back over to Eric for closing comments.
Thanks, Kurt we started the year with strong platform placements continue to expand opportunities in our existing markets and grew our total addressable market.
At Berkeley lights, we envision a future where sales are of scalable and sustainable way to manufacture the products that we need to live a long and healthy life the.
The Berkeley lights platform is key to enabling this by providing precise rapid discovery and functional validation of biology.
As we look ahead in 2021, I'm more bullish than ever about the opportunities in front of us and I'm confident that we are well positioned to execute our strategy to transform the market for cell based product this year and beyond with that we will now open up the questions operator.
Thank you as a reminder to ask a question you will need the past star one on your telephone.
Shy of your question.
On T T standby, while we compile the Q&A of us there.
And the first question comes from Doug Schenkel with Cowen. Your line is now open.
Hey, good morning, everybody.
So just a couple of financial questions.
The 10 placements in the quarter.
How many were beacon versus lightning and what was the mix of subscription placements in the quarter.
Hey, Thanks for the call for the question I appreciate it we don't disclose the breakout between Beacon of Lightning. Obviously it was the majority of of Beacon.
And then from a from the subscription standpoint, we had one subscription in the quarter.
Okay. So I guess of couple of questions building off of the subscriptions.
I'm doing some quick math here, so that's always a little bit dangerous, but I think it's simple enough where it does the work like the ASP on Beacon assuming yes.
Yeah, if I, just say hey, the nine of the 10 are vast majority of our backend of just the buyback your instrument revenue of it does seem like the Asps were down so if I have that right why is that and then more generally.
Going back to when you started the subscription program I think we had collectively made in the company on the investment community on <unk>.
Of your aspirations for the impact of the existing subscription program.
What do you think hasnt work, there as well and maybe in a little bit more detail why does the new program put you on a better position to essentially lower the bar to adoption here and hopefully get you to that 45 placements this year.
So does the.
The Zurich I'll answer the second question first and then Curt can come in on the on the on the other one right.
We look at the overall market for the Berkeley lights platform and one of the things that we found when we rolled out the first subscription is that although we've provided our customers with access with the full access to the beacon that there were still a larger subset of customers, which which could leverage of different level of capacity on the virtualized speaking of what we wanted to do.
It was was to make it as easy as possible for our customers to access our technology and so.
By offering this newer subscription on alternative access model. It accommodates our customers through this approach now as you might as I mentioned initially the approach was focused on financing, which essentially provided customers against the four full access, but but the new subscription model better meets the specific capacity in the than in this model.
Our customers are going to subscribe to a given capacity and it's all inclusive of consumable software service and support for the cell line development of our antibody discovery campaigns and I think when you place yourself in the shoes of of our customers in this space. They are really thinking about how do they execute their campaigns to serve their customers and this newest of.
Descriptions of offering does exactly that does that help the Doug the answer to answer that question on the on the newer model.
It does and I guess, my only follow up Eric what would be the.
Seems like a smart way of essentially getting more people to use the platform with maybe less of a commitment and I guess the hope would ultimately be that after more experience with beacon. They would potentially use this more or making more long term commitment I want to make sure I'm thinking about that right and then kind of building off of that before.
Or I know current at the answers the other question on Asps.
I am curious if any of this is in part motivated by competitive dynamics with folks who.
Are not selling instruments, but instead are operating somewhat similar services.
Yeah, it's not it's not.
Not a competitive offering it is in fact, we do see our customers our customers are doing incredible things with our platform dug in and it's really exciting for me to see until the more people who have access to our technology of the more the more innovation not only from birth to the idea of it from our customers into some of these new markets.
That will gain traction and I think as we continue to deploy and ramp of our technology that customer base innovation is really important and it makes it part of the story as well. So it's for me, it's it's important to see.
Our technologies continue to rollout of ramp in the market.
This value subscription is really tailored to the folks with the lower capacity need so it's the sweet spot with what we're offering and we do believe that it accelerates the.
The access of that Sam the serviceable available market for that and what we saw already as we've got good traction.
Of that initial subscription we took feedback from our customers came up with this program and already in kind of the pilot we've gotten really strong interest in this so we feel good about that.
Okay. That's great and then current on ESP anything interesting there yes.
Yes, I think what you might be missing is while we placed 10, what we mentioned in the call of two of those were essentially title transfers. The zero dollar from the completion of the milestone agreement that we did so they were included in the partnership revenue in the past and upon the successful completion of the milestones of the title past of them. So they will bear the the pull through on those tools.
Going forward, but so really from a revenue generating aspect. There were there was eight tools in the quarter that were of direct placement.
Okay, and very last one and then I'll, let others jump in here just looking at the the.
Funding environment in terms of.
Company accessed the capital Theres, certainly seems like there's been no slowdown on the pace of investment and for that matter and innovation of the field of cell therapy is that changing the mix of.
Demand that youre seeing I mean, I'm not necessarily saying that this is a huge change from trend, but I am curious.
There is a pickup in interest from emerging players or on the flip side, maybe CMO interest because of strong as ever I guess at a high level. What I'm asking is where are you seeing the most of the interest over the last three months and as the mix of backlog in terms of.
On customer profile evolving at all relative to where we were last year.
Yeah, Doug in the cell therapy space, we continue to see demand for the functional validation of the therapeutic entities debt.
The customers are creating and whether that's cell therapy user or mrna therapies right understanding that those therapeutics are having the function, which is intended by the designer right.
Cure of the diseases that they want to curious is really important for them and to be able to see the see that function on patient samples in the virtualized platform with just thousands of sales is fairly interesting to our customers and so we will continue to to learn more about that particular market space and support those customers as we.
To evolve the the capability of these different therapeutics.
Okay. It sounds good alright, thanks, guys.
Thanks, Dave.
Thank you. The next question comes from Tycho Peterson with Jpmorgan. Your line is now open.
Okay. Thanks.
Eric maybe I'll start with the cell therapy manufacturing I know you placed your first half of the units in the fourth quarter can you just talk a little bit about discussions with clinical customers. How do we think about workflow development.
The next steps.
Yes, absolutely type of.
Good morning.
Yes, so as we can to our team continues internally to make to make really good progress on the <unk> system, We've got out of the unit up.
Up and running right doing process optimization on culture integrating different assets. So that's great to see the the internal team continue to make great progress on on the CMS and the discussions the discussions of the market.
Or how do we integrate those next generation of assays.
And what are the critical assays that are at our customers are looking for in this space and certainly of course, the the cytotoxicity.
I say that we have.
Tyco is certainly gains interest for for our customers, but we will continue to move that forward again.
I just want to remind everyone that in the cell therapy space, Although it's the honestly exciting space. It also is one that has a has a longer burn as we get into the into the market and on <unk>.
On the on the timeline for that to start to generate revenue, but certainly progress is being made.
I'm very excited about what the team is doing inside the company right now.
Great and then on the CD of MAU front I know you talked about I think a third of the placements were either <unk> or <unk> on the back of your viral vector of deal last quarter, which is an interesting one right. I think you started out trying to show the system and it turned into the $17 million deal. So can you just talk about whether theres been kind of follow on interest from others around the viral vector production.
Similar type of arrangement.
Yes.
The type of in this particular market.
At Berkeley.
Enabling stable rapid generation of staples headlines would be would be of game changing in the market and so.
We have we have had.
Additional discussions is about as far as I think I can disclose anything in on the call, but we do have interest of course people would love to do this if we could.
The potential opportunities if we can make stable cell lines very rapidly.
We believe we can do the.
And that would that would change the way that that this particular market operates and so and so for us, it's very exciting because tyco and antibody therapeutics.
It has a wonderful the solution for antibody discovery and cell line development, but make no mistake. We are we are better than its of me better kind of of market right. We are better than the competition in that space.
And some of these other spaces, we may be the only solution in those spaces and of course for obvious commercial reasons right that has great interest to us and so we're excited about some of these new markets that we're seeing as we continue to evolve our capabilities from from our foundational markets into adjacent markets and future markets.
Okay. That's helpful. And then just a follow up on Doug's question on the new subscription model can you give us a sense of the types of customers you're targeting with this kind of all of an approach.
The customer class you're going after here.
Certainly the certainly the customers who are using a lower capacity.
Smaller C series of <unk> are of particular interest.
But but can also be large pharma companies, who who want to dip their toe on the water.
And try something and try something first before before they move on to a full purchase and so and so we do see a large market contingent in that customer and that customer base as Curt mentioned with the with the larger sort of all available market to us.
And I think youre seeing a lot of Oh.
Go ahead, none of that.
Other than Youre seeing a lot of the companies get funding debt.
Starting out with their own buyout biology.
On a run it but can't utilize the full capacity of the beacon hard to get that Capex sales through this provides an easy way for them to get in and in some cases allows them to bypass the initial feasibility study to the hurdle smaller and they go right into being able to run campaigns very quickly in a cost effective differentiated way.
Okay.
Helpful. And then last one on on <unk>, you talked about the workflows that <unk>.
On a bought down can you just talk about timelines to commercialize the those workflows.
Yes, we're still on track to deliver deliver workflows. The ginkgo this year per our previous discussions that we had tycho. The team continues to to collectively. These two teams are working together fantastically well.
There is there's new innovations as new capabilities in the space.
I am extremely happy to see.
So I continue to be happy about that particular relationship of partnership between the two companies.
Okay. Thank you.
Thanks, Tim Thanks, Doug.
Thanks.
Thank you. Our next question comes from Brian Weinstein with William Blair. Your line is now open.
Hey, guys.
Good early morning to you on the other one.
Of course.
So I.
I guess of the.
The 45 placements that are in your guide.
Excuse me on what is the mix that you guys are thinking between the different commercial models that youre expecting in longer term can you talk about what your expectations are as we think about revenue longer term as to how these different commercial models will play and I understand your gross margins are not changing but but how should we think about the.
The way that your planning around these subscription models longer term.
Yes, I appreciate the question I think when we guided at least 45 placements and in this year the lower number of placements would correlate to the higher end of the guidance because that would mean, we're doing more capex sales. What we believe is the new subscription model.
Kris of the Sam increases the unit placements. So we would expect that to drive incremental unit placements. So you would have a higher incremental units, but there could be in the short term some cannibalization rate for those customers that are on the fence of the capacity need that would trade off some of the revenue in the short term for a long.
All of our term recurring aspect of <unk>.
Full of ways to look at this if you think about the subscription model of how we're pricing it over the five year useful life of the tool, it's slightly accretive over the on the subscription on an absolute dollar basis, obviously, though we expect not just the breakeven we drive that incremental demand that we're doing so the real driver will be as of the sets of that is can we drive the incremental demand in units.
And we feel we can under the subscription model for that so I think as you look out in time as we place that more and more subscription youre going to see.
More recurring revenue come off of that plus you obviously have off of the existing installed base on the capex sale of growing consumable run rate you saw the jump in recurring year over year. This year as well we would expect that to continue it's obviously way too early for US The guide for 2022 and beyond.
We do anticipate that recurring base from both subscription and the growing installed base to be.
Strong drivers of growth in the future I will point out though this is this new subscription plan on like the old one it's all inclusive of it includes the consumables that includes the tool. It includes the the <unk>.
Service and everything on that so this really is an all in very simple sale process for us that allows them to run on on a per campaign basis all included.
Okay.
Got it. Thank you for that and then Eric I have a couple of question for you I mean, you guys of announced a lot of.
Lot of stuff from a technology standpoint of business model standpoint, if you take a step back what are the kind of key drivers to keep two or three drivers that youre looking at when you think about how this business is progressing what are you looking at internally here to kind of monitor all of this.
Yes, Thanks, Brian.
There are really three main drivers are catalysts for our business in the first is to grow the opportunity and we've talked about that through business models, such as subscription, but also with business development in regards to viral vectors.
The second thing, we're doing is expanding our biology and technology offerings does the these are the new workflows, the new capabilities that we talked about.
The <unk> and antibody discovery for Plano and the third thing we're really working on is building our corporate capabilities. So in addition to sales and marketing of business development, which we talked about also building biology, or App Dev and even into infrastructure such as our finance organization team and those of really the three.
Things that are that are driving overall debt or the.
The drivers for our business as we move forward.
Got it thanks for that and if I can squeeze one more in here.
We get a lot of questions about.
The competitive dynamics and whatnot and I know that you just addressed that the changing the commercial model was not related to competitive dynamics and I appreciate that.
But what are you seeing competitively at this point in terms of.
The other systems that are out there. Obviously there is some that are more of a high profile than others, but can you just kind of give us an update on the competitive landscape and what you see relative to how your technology of stacking up against the others at this point. Thank you.
Yes, absolutely Brian So the thing that we see in the market is it is that we're learning as debt.
The <unk>.
Actual validation of test better than anybody else and the relevance of that is that each and every biologic modality, whether its antibiotics out therapies gene therapies and every gene sequence, that's discovered or cell line thats engineered each requires functional validation.
And I believe it can be ultimately performed on the Berkeley lights platform and so for customers, who are looking to accelerate accelerate their business to discover develop into manufacturer whether any cell based products.
Roads, ultimately levered lights, and so I feel I feel very very strong about how were positioned in the market right now will continue to release capabilities too to build build build our capabilities. So that our customers are able to do the job that they need to do with their products.
Thank you.
Thanks for thank you.
Next question comes from Tim Silvana.
Savant with Morgan Stanley. Your line is now open.
Hey, guys good morning.
So Eric just one question on.
On the service revenue it looks like you came in.
Decently higher than our model and so I was just curious as to what drove the uplift there on.
Obviously, you have the CMO contract sort of working its way through the model, but in terms of how youre thinking about a more diverse that $17 million contribution.
Over the remainder of this year and then into 'twenty two.
Any sort of shift in.
And revenue recognition thinking on that front.
I'd have to dig into your model a little bit more specifically.
To answer you need on your model, but from the partnership we're not seeing a change in the.
The revenue recognition that we outlined earlier from the viral vector deal, we obviously announced that it's going into the next phase. We obviously had some revenue recognition for that in the first quarter, which is positive that arrangements going extremely well Eric mentioned the demand we're getting from others inbound coming in obviously nothing formalized to announce but we are seeing a fair.
The amount of traffic come in from that.
So we feel good about that consumable recurring run rates up and the service type.
Specifically line within the recurring.
I would say it was a normal seasonal pattern for us.
Got it and of course I want to go back to that comment you had made earlier in the prepared remarks around.
There's a certain degree to which you were expecting some of the direct installs to shift to the new subscription model here.
Given the other sort of subsequent remarks that.
The operating is essentially dealer that folks with the lower capacity need.
The stem to bypass the initial sort of feasibility studies and so on.
Can you just walk through why a.
The customer who was potentially going to buy one $5 million to $2 million Beacon would now.
The this model I can understand why the old subscription model might sort of resulted in some of those customers switching to a more flexible sort of.
The offering but from a direct install perspective can you just walk us through the dynamics there. Please.
Yeah, if you look at the lower capacity, it's obviously the.
The more campaigns youre going to run on a tool the more app more app you are to purchase of that tool and get the economies of scale there.
But for some customers that have lower let's say 10 or less type campaigns, they're probably going to consider and say look there do.
Do I want to do I want to spend the cash on that right now or and can I get the return of doing that on it or am I better off entering into an all on exclusive relationship that doesn't have that same long term commitment on there and thats what were seeing as of few folks that really see the value of it.
But have that lower campaign capacity need that put them on the cost and it's actually those customers that generally have a longer sales cycle to begin with so this alleviates that constraint of a longer sales cycle allows them to have a way to access the technology all in and there is likely going to be some cannibalization.
I think it's a very low percentage of cannibalization, but you'll likely see some of that and then the majority of of the sales will be new incremental growth that we have.
Does that answer your question, yes Super helpful color.
And then a couple of for you Eric.
Just on timing I think Tycho asked us around.
Timelines for the ginkgo workflow commercialization.
I know you mentioned the partnership is on track on is working well, but over what timeframe should we expect GAAP. The workflow that you bought down to be commercialize across the broader customer set and then any updates you can share on the expansion of the Biopharma re that you.
<unk> in the UK and Asia.
Just how that's translating into customer of inbounds and pipelines in those geographies would be very helpful.
Uh-huh, Yes, we continue to we continue to see the world.
Let's answer the work flow question first so the workflow of question will we will release. Those later this year and as we released those later this year in Q4.
Late Q4, then youll start to see us commercialize these through through 2022, okay.
On the on the the bio foundries of the labs the lodge in the Asia Pacific and in the European Union.
We just it's great to see the pictures coming back from the teams allows the built the systems installed working running with customers with customers in the market in the Asia Pacific area, we have an upcoming well have our second user group meeting. This summer so looking forward to bringing our customers together and APAC and so as things begin to <unk>.
Even up in APAC, we see again record strong recurring and strong interest in that space and the demo lab and in the European Union. Just was just as the tools. We're just installed I think two weeks ago and sort of soften pictures coming from Gareth over over in.
Europe. So those are moving forward again running customer demos customers love to see their biology operating on our systems. So certainly I think that I do believe thats a great sales tool for our team members in these regions.
Got it Super helpful. Thanks, guys.
Yes.
Thank you. Our next question comes from Dan Arias with Stifel. Your line is now open.
Good morning, guys. Thank you Eric can you just expand a bit about how the lightning figures into the equation going forward you've got the the.
<unk> outright purchase of the <unk> subscription uptake.
I'm, just sort of curious where the sweet spot is for the for that system at this point.
Yes, so as everybody is aware of lighting as our lower capacity less automated way to access our technology and and we continue to place on <unk>.
Lightnings and the in the quarter as well.
So and so we see it's very interesting we see some very interesting demand.
In the lighting space in particular back to the question I believe was asked by the Tyco, which is in the cell therapy space and understanding taking samples from patients.
Before.
Fusion of the cell therapy.
And of course after infusion of the cell therapy.
And I think there is a fit there for lightning in the cell therapy space. So we continue to release, our our cell therapy workflows in that space and as we continue to move into the future rate is there is there another access model for the relating to be determined right. Now we continue to see like I said on the academic space of.
Some pretty strong in building interest on using the lighting in the cell therapy space.
Okay, and then just maybe on the beacon and the placements that youre, making today versus say a year ago are you seeing the validation and the ramp up period gets shorter of these days as labs get smarter and you.
You guys sort of get smarter at bringing customers up the speed and do you think that thats something that can positively impact the pull through rate that you might see.
I'd say the first 12 months of the ownership for the customer.
I think the key yes. So so I think the key thing is bridging lights continues to improve these workflows and I do believe as we continue to develop and improve the workflows.
We are going to see increase in recurring revenue. So for example of antibody discovery for point of though is it's great because not only do we have.
On the upfront sort of capability is as we come into the into the Max Lytic environment, but we're also enabling our customers to rapidly re expressed their proteins as they've discovered in all of this can be done and less of the weekend. So.
We continue to turn the creagh and improve these protocols improve these workflows.
Our coming of faster Dan for for our customers and I think that as our customers see the system. The C computer control biology and action right. They tell their friends about hey, this these tools come in they will amend the plug in a couple of gas <unk> power on the Internet and all of a sudden we're up and running.
Antibody discovery workflows faster than we could ever on.
And so that's very positive for our customers I think it's also positive for the market and as we continue to add capabilities. We will continue to take more upstream and downstream capability into the Berkeley lights workflow, which will drive recurring revenue is up.
Yes.
Okay. One more for you and then I'll hop off on on consumables utilization, how would you compare of the increase in pull through when you just look at your anchor users Amgen at various etcetera to some of the new buyers I mean, obviously the dollar amount is higher for the big time customers.
But I'm sort of just.
Curious, whether youre seeing a steady progression towards higher utilization across the board here when you look at the various types of customers.
You hit the nail on the head there of kind of varies by segment that you go for and then obviously part of the subscription offering we're doing is from some of those customers that have lower campaign and consumable.
Requirements, but when we look at our like for like basis, we actually saw a little bit of an uptick year over year Q1 to Q1 on the customer's debt.
That were in service so similar to like the same store sales type metric, we saw a slight uptick.
Okay. Thanks, a bunch of.
Thank you. Our next question comes from Paul Knight with Keybanc. Your line is now open.
Hi, Eric are the academic customers more oriented to the second subscription model or are they more of a lightning customer of your opinion.
Yes, certainly so the.
The academics love to play and they love to invented Theyre coming up with great stuff ball. So so they are more on the side of buying consumables. So by the consumables the reagents and the they'll play into a new space. The new subscription offering is really it's a turnkey solution right.
Customers I think is as current had mentioned.
Smaller smaller startups certain amount of money on the bank rate need need to run they need to run a number of campaigns. They noted they need to execute those things on a timely manner to drive the value of their of their of their organization.
And so really because of the new subscription includes the consumables the sort of support the software et cetera for running a given number of campaigns I think.
That's excellent in the commercial and the commercial area, but but the academic slipped the plant <unk>. So much that it wouldn't it wouldn't it wouldn't suit their needs certainly not targeting them at this point in time with that with that subscription model.
And then the success Youre seeing in Asia, with 45% of sales from that market.
What's driving that.
Yeah sure Paul I mean, certainly we saw Asia Pacific come out of COVID-19 earlier than the rest of strong growth in the Asia Pacific region is one due to their the response and to COVID-19, but Additionally, the Asia Pacific market is.
As a market is an emerging market and an emerging market. They don't have installed infrastructure in place.
You have to forgo to move to a new technology and so they are rapidly adopting the Berkeley lights technology as its the fastest and most efficient way to get to the solutions and build their pipelines.
So new technology can make the biggest impact in emerging markets and so I believe that's another reason why we're seeing the rapid adoption of our platform in that space.
The optical assured.
The contract manufacturing purchased for a contract research for purchase.
So I'll do assure you you'll see of used more in the CD them other than our cell line development work flow and opt to assure the first the first that we've released without to assure is is the aggregation of assay and so on.
Our customers need to know and understand whether the antibodies that the engineered our discover it have this aggregation of potential because these drugs just operate differently inside of patients.
So and so it's very valuable for our customers to know that at the point of cell line development, rather than learning that downstream, while they're trying to scale of things up that would of course, there's a lot of waste in terms of processing time on dollar spend for our customers and so what we're doing as part of our strategy has always been to take to take these downstream.
The quality checks and move them as early in the process as possible. So the.
Of our customers have a better product.
Have the best product as they move into scaling up their solution and then lastly, your sales head count and the sales headcount goals for the year end.
Yeah, we continue to drive of our sales head count up and we had previously mentioned that we're looking to push up from 2023.
Through a factor of two into 2021 and will continue to drive sales heads in sales head count as we move but simultaneously Paul its inhibition of head count. It is all about also getting efficient with our sales head count ensuring that we have the right marketing materials and these things for and sales tools for our sales.
The numbers are.
Sales of leads to be able to effectively do their job. So it's a balance of both head count and process.
Thanks.
Okay.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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