Q4 2021 Alpha Teknova Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Alphatech NOVA 4th Quarter 2021 Financial Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star then 1 on your telephone.
Ladies and gentlemen, thank you for standing by and welcome to the Alphatec Noble fourth quarter 2021 financial results 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 to ask a question. During this session you will need to press Star then one on your telephone.
please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker for today. Sarah, you may begin.
Please be advised that today's conference is being recorded.
If you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker for today, Sir you may begin.
Sarah: Great. Thank you, Operator. And welcome, everyone, to TechNova's fourth quarter and 2021 earnings conference call. On today's call, Steven Gunstream, TechNova's President and Chief Executive Officer, will provide business highlights and updates, followed by Matt Lowell, TechNova's Chief Financial Officer, who will review financial results and provide commentary on the company's 2022 outlook. After we conclude the prepared remarks, we'll be happy to take your questions.
Great. Thank you operator, and welcome everyone to check out of its fourth quarter and 2021 earnings conference call.
On today's call, Steven Gulfstream techno, Vice President and Chief Executive Officer will provide business highlights and updates followed by Matt Lowell check Noah's Chief Financial Officer, who will review financial results and provide commentary on the company's 2022 outlook. After the after we conclude the prepared remarks, we'll be happy to take your.
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Before we begin as a reminder, the forward looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company.
Sarah: Before we begin, as a reminder, the forward-looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ.
Subject to risks and uncertainties that may cause actual events or results to differ Adil.
Sarah: Additional information concerning these risk factors is included in the press release the company issued earlier today and are more fully described in the company's various filings with the SEC.
Additional information concerning these risk factors is included in the press release the company issued earlier today and are more fully described in the company's various filings with the SEC today's comments reflect the companys current views, which could change as a result of new information future events or other factors and the company does not obligate or commit itself to update these.
Sarah: Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors, and the company does not obligate or commit itself to update these forward-looking statements except as required by law.
Forward looking statements, except as required by law.
Sarah: The company's management believes that in addition to gap results, non- GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies.
The company's management believes that in addition to GAAP results non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performances performance of your effectiveness of its business strategies.
Sarah: During this call, we will therefore use non-GAAP financial measures of certain of our results. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is also posted to TechNova's website. non-GAAP financial measures should always be considered only as a supplement to and not a substitute for financial measures prepared in accordance with GAAP. The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies.
During this call we will therefore use non-GAAP financial measures of certain of our results reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is also posted to check Novus website non-GAAP financial measures should always be considered only as a supplement to and not a substitute for financial <unk>.
<unk> is prepared in accordance with GAAP the non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies.
Sarah: Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks, which can be accessed on the investor relations section of TechNova's website and on today's webcast. And now I will turn the call over to
Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks, which can be accessed on the investor Relations section of Tech Nova's web site and on today's webcast.
And now I will turn the call over to Steven.
Sarah: Thank you, Sarah. Good afternoon and thank you everyone for joining us for our fourth quarter in Year End Earnings Call.
Thank you Sarah good afternoon, and thank you everyone for joining us for our fourth quarter and year end earnings call.
Sarah: TECNOVA is a leading provider of critical reagents that accelerate the introduction of drug therapies, novel vaccines, and molecular diagnostics.
Technology is a leading provider of critical reagents that accelerate the introduction of drug therapies novel vaccine and molecular diagnostics.
Sarah: We manufacture high-quality custom reagents with short turnaround times and are positioned to scale with our customers as they advance their products from discovery to commercialization.
Manufacture high quality customer agents with short turnaround times and are positioned to scale with our customers as they advance their products from discovery to commercialization.
Sarah: This is best exemplified in cell and gene therapy, where there's a significant need for custom-made reagents in volumes less than 1,000 liters.
This is best exemplified in cell and gene therapy, where there's a significant need for custom made reagents and volumes less than 1000 leaders our ability to rapidly manufactured custom clinical grade bio processing solution enables our cell and gene therapy customers to reduce the time from discovery to clinical impact.
Sarah: Our ability to rapidly manufacture custom clinical grade bioprocessing solutions enables our cell imaging therapy customers to reduce the time from discovery to clinical impact.
Our interaction with current and potential customers continues to validate the growing need for high quality custom research and clinical grade solutions across the industry and we are investing aggressively to meet the demand.
Sarah: Our interaction with current and potential customers continues to validate the growing need for high-quality custom research and clinical-grade solutions across the industry, and we are investing aggressively to meet the demand.
Sarah: As part of this investment, we are building the depth and breadth of our leadership team, including our customer-facing functions where we recently brought on board a chief commercial officer and a senior vice president of marketing.
As part of this investment we are building the depth and breadth of our leadership team, including our customer facing functions, where we recently brought onboard a chief commercial officer, and senior Vice President of marketing, bringing new talent protecting all of it remains a priority in 2022 as we execute on our long term strategic initiatives our organization has grown.
Sarah: Bringing new talent to Tecnova remains a priority in 2022 as we execute on our long-term strategic initiatives. Our organization has grown significantly over the past year, and I want to thank all of our associates whose dedication has been and will continue to be critical to our success.
Significantly over the past year and I want to thank all of our associates, whose dedication has been and will continue to be critical to our success.
Sarah: Q4 capped off a year of great accomplishments at Technova.
Q4 capped off a year of great accomplishment that tech Nova.
Sarah: We drove significant growth in our business, made meaningful progress against our strategic priorities and exceeded the 2021 goals we communicated to investors at the time of our June IPO.
We drove significant growth in our business made meaningful progress against our strategic priorities and exceeded the 2021 goals, we communicated to investors at the time of our June IPO.
Sarah: We had a strong commercial year in 2021, posting full-year revenue growth of 31% year-over-year, excluding sample transport.
We had strong we had a strong commercial year in 2021, posting full year revenue growth of 31% year over year, excluding sample transport.
Sarah: We saw robust growth in both lab essentials and clinical solutions.
We saw robust growth in both lab essentials and clinical solutions.
Sarah: LabEssentials revenue grew 28% year-on-year due to an 18% increase in average revenue per active customer and an increase in the total number of active customers.
<unk> revenue grew 28% year on year due to an 18% increase in average revenue per active customer and an increase in the total number of active customers clinic.
Sarah: clinical solutions revenue grew 41% year on year driven by a near doubling of active clinical customers from 12 in 2020 to 22 in 2021.
Clinical solutions revenue grew 41% year on year, driven by a near doubling of active clinical customers from 12% in 2020 to 22 and 2021.
Sarah: Over the past 12 months, we transitioned a number of accounts that in previous years solely purchased catalog reagents to accounts that now also purchase custom research or GMP reagents.
Over the past 12 months, we transitioned another a number of accounts that in previous years solely purchased catalog regions to accounts that now also purchase custom research our GMP reagents.
Sarah: We expect these accounts to continue to grow as their products advance through the clinical pipeline.
We expect these accounts to continue to grow as their products advanced through the clinical pipeline.
Sarah: This was particularly notable in our cell and gene therapy customer base, which now stands at approximately 80 accounts, up from 65 in 2020. In 2021, 46 of these accounts purchased custom or GMP reagents, up from 25 the previous year.
This was particularly notable in our cell and gene therapy customer base, which now stands at approximately 80 accounts up from 65% in 2020 in 2021 46 of these accounts purchased custom our GMP reagents up from 25 of the previous year and.
Sarah: Importantly, we exited 2021 with significant momentum and started 2022 with the largest order book in the company's history.
Importantly, we exited exited 2021 with significant momentum and started 2022 with the largest order book in the Companys history.
I will now discuss the progress made against our stated investment priorities in 2021.
Sarah: I will now discuss the progress made against our stated investment priorities in 2021.
Sarah: First, we made meaningful investments to enhance our existing capacity and advance construction on our new state-of-the-art GMP manufacturing facility in Hollister, California.
First we made meaningful investments to enhance our existing capacity and advanced construction on our new state of the art GMP manufacturing facility in Hollister, California, We continue to expect that our new facility will be operational by the end of 2022 and will have an annual production capacity of $150 million in revenue.
Sarah: We continue to expect that our new facility will be operational by the end of 2022 and will have an annual production capacity of $150 million in revenue.
Sarah: Second, we continued to build our organization by bringing in new talent across the company that will help ensure our near and long-term success. This included building out R&D, sales, marketing, finance, and operations.
Second we continued to build our organization by bringing in new talent across the company that will help ensure our near and long term success. This included building out R&D sales marketing finance and operations.
Sarah: Lastly, we secured significant capital to fuel our growth plan, including a $27 million credit facility last March and proceeds from our $110 million IPO in June .
Lastly, we secured significant capital a few of our fuel our growth plan, including a $27 million credit facility last March and proceeds from our $110 million IPO in June we exited the year with a solid balance sheet and are putting our capital to work.
Sarah: We exited the year with a solid balance sheet and are putting our capital to work.
Sarah: We are now fully focused on the year ahead. 2022 is the second year of an aggressive investment plan for the company that will solidify the foundation for our future growth. Specifically, we are focused on the.
We are now fully focused on a year ahead 2022 is the second year of an aggressive investment plan for the company that will solidify the foundation for our future growth specifically, we are focused on the following priorities.
Sarah: First, deliver revenue between 44 and 48 million dollars, a growth rate of 30 percent at the midpoint, excluding sample transport.
First deliver revenue between 44 and $48 million a growth rate of 30% at the midpoint excluding sample transport.
Sarah: Second, increase our current production capacity and bring on our new manufacturing facility by year end.
Second increase our current production capacity and bring on our new manufacturing facility by year end.
Sarah: Third, build out our commercial and marketing teams and associated capabilities to drive demand in advance of our new facility opening. And lastly, develop new products and enhance our process engineering capabilities.
Third build out our commercial and marketing teams and associated capabilities to drive demand in advance of our new facility opening and lastly, develop new products and enhance our process engineering capabilities.
Sarah: Overall, we are pleased with our performance and the progress we've made against our long-term strategic plan. I will now hand the call over to Matt for a discussion of the finances.
Overall, we are pleased with our performance and the progress we've made against our long term strategic plan I will now hand, the call over to Matt for a discussion of the financials.
Yes.
Matt Lowell: Thanks, Stephen, and good afternoon, everyone. We delivered strong results for the fourth quarter and full year of 2021.
Thanks, Steven and good afternoon, everyone. We delivered strong results for the fourth quarter and full year of 2021.
Total revenue was $10 1 million for the fourth quarter of 2021, and $36 9 million for the full year excluding.
Matt Lowell: Total revenue was $10.1 million for the fourth quarter of 2021 and $36.9 million for the full year.
Matt Lowell: excluding sample transport, revenue for the fourth quarter of 2021 was 9.6 million, a 26% increase from 7.6 million in the fourth quarter of 2020, and 35.4 million for the full year of 2021.
Excluding sample transport revenue for the fourth quarter of 2021 was $9 6 million or 26% increase from $7 6 million in the fourth quarter of 2020, and $35 4 million for the full year of 2021, a 31% increase from the 27 million.
Matt Lowell: a 31% increase from the 27 million for the full year 2020.
For the full year 2020.
Matt Lowell: By way of reminder, Tecnova launched the sample transport product in the latter part of 2020 to address the urgent need for COVID-19 tests.
By way of reminder, Tech Nova launched the sample transport product in the latter part of 2020 to address the urgent need for COVID-19 tests. During Q4 2021, we shipped the remaining sample transport inventory on hand, and we will not recognize additional sample transport revenue in the future.
Matt Lowell: During Q4 2021, we ship the remaining sample transport inventory on hand and will not recognize additional sample transport revenue in the future.
Lab essentials products are targeted at the research use only or are you all market and includes both catalog and custom products.
Matt Lowell: Lab Essentials products are targeted at the Research Use Only, or RUO, market and includes both catalog and custom products.
Matt Lowell: LabEssentials revenue was $6.7 million in the fourth quarter, a 17% increase from $5.7 million in the fourth quarter of 2020.
Lab Essentials revenue was $6 7 million in the fourth quarter, a 17% increase from $5 7 million in the fourth quarter of 2020.
Matt Lowell: For the full year, LabEssentials revenue was $27.2 million, a 28% increase from $21.2 million for the full year 2020.
For the full year lab essentials revenue was $27 2 million or 28% increase from $21 2 million for the full year of 2020.
Growth was driven by an 18% increase in the average revenue per active customer to $7485 and an increase in the number of active lab essentials customers.
Matt Lowell: Growth was driven by an 18% increase in the average revenue per active customer to $7,485.
Matt Lowell: and an increase in the number of active lab essentials customers.
Clinical solutions products are made under good manufacturing practices or GMP quality standards and are primarily used by customers in the clinical development or commercial release phase of a therapy or diagnostic.
Matt Lowell: Clinical solutions products are made under good manufacturing practices or GMP quality standards and are primarily used by customers in the clinical development or commercial release phase of a therapy or diagnostic.
Matt Lowell: Our clinical solutions revenue was $2.4 million in the fourth quarter, a 46% increase from $1.7 million in the fourth quarter of 2020.
Our clinical solutions revenue was $2 4 million in the fourth quarter, a 46% increase from $1 7 million in the fourth quarter of 2020.
Matt Lowell: and $6.8 million for the full year 2021, a 41% increase from $4.8 million for the full year 2020.
$6 8 million for the full year 2021, a 41% increase from $4 8 million for the full year of 2020.
We grew our clinical solutions revenue by adding new active customers growing from 12 active clinical customers in 2020 to 22 active clinical customers in 2021.
Matt Lowell: We grew our clinical solutions revenue by adding new active customers growing from 12 active clinical customers in 2020 to 22 active clinical customers in 2021.
Matt Lowell: The addition of these new clinical solutions customers contributed to a lower average revenue per active customer in 2021, but we expect revenue per customer to increase over time as they ramp up their purchase volume.
The addition of these new clinical solutions customers contributed to a lower average revenue per active customer in 2021, but we expect revenue per customer to increase over time as they ramp up their purchase volumes.
Matt Lowell: Just as a reminder, due to the larger average orders in clinical solutions, there can be quarter to quarter revenue lumpiness in this category.
Just as a reminder, due to the larger average orders in clinical solutions, there can be quarter to quarter revenue Lumpiness in this category.
Okay.
Matt Lowell: to the income statement. Gross profit for the fourth quarter of 2021 was $5.0 million compared to $5.6 million in the fourth quarter of 2020.
So the income statement gross profit for the fourth quarter of 2021 was 5.0 million compared to $5 6 million in the fourth quarter of 2020.
Matt Lowell: and $17.6 million for the full year 2021 compared to $17.8 million for the full year 2020.
$17 6 million for the full year 2021, compared to $17 8 million for the full year 2020.
Matt Lowell: Gross margin was 49.2% of revenue in the fourth quarter, which is down from 54.8% of revenue in the fourth quarter of 2020.
Gross margin was 49, 2% of revenue in the fourth quarter, which is down from 54, 8% of revenue in the fourth quarter of 2020.
Matt Lowell: and 47.8% for the full year, which is down from 56.7% in 2020.
And 47, 8% for the full year, which is down from 56, 7% in 2020.
Excluding the impact of a <unk> 2 million benefit from reversing a portion of the reserve related to excess simple transport inventory gross margin was 47.0%.
Matt Lowell: Excluding the impact of a $0.2 million benefit from reversing a portion of the reserve related to excess sample transport inventory, gross margin was 47.0% in the fourth quarter.
In the fourth quarter of 2021.
Matt Lowell: For the full year of 2021, excluding the impact of a $0.4 million net reserve related to excess sample transport inventory, gross margin was 48.9%.
For the full year 2021, excluding the impact of a 0.4 million net reserve related to excess sample transport inventory gross margin was 48, 9%.
Matt Lowell: The lower gross margin reflects higher costs associated with expected investments that the company is making in its current manufacturing capacity and capabilities to support long-term growth.
The lower gross margin reflects higher costs associated with expected investments that the company is making in its current manufacturing capacity and capabilities to support long term growth.
Matt Lowell: Operating expenses for the fourth quarter of 2021 were $9.7 million.
Operating expenses for the fourth quarter of 2021 were $9 7 million.
Matt Lowell: Compared to 4.8 million in the fourth quarter of 2020.
Compared to $4 8 million in the fourth quarter of 2020.
Matt Lowell: And $29.6 million for the full year 2021 compared to $13.1 million for the full year 2020.
And $29 6 million for the full year 2021, compared to $13 1 million for the full year 2020.
Matt Lowell: Operating expenses increased as we continue to invest in the people critical to our near and long-term success.
Operating expenses increased as we continue to invest in the people critical to our near and long term success.
Matt Lowell: including the addition of key members to the R&D, sales and marketing, finance, and operations teams.
Including the addition of key members to the R&D sales and marketing finance and operations teams.
Matt Lowell: As of December 31st, 2021, the company had 237 associates.
As of December 31, 2021, the company had 237 associates up 27% from December 30, 31 2020.
Matt Lowell: Up 27% from December 30th, 31st, 2020.
Matt Lowell: We also had substantial new costs in 2021 associated with operating as a public company and meeting applicable requirements.
We also had substantial new costs in 2021 associated with operating as a public company and meeting applicable requirements.
Yeah.
Matt Lowell: Net loss attributable to common stockholders for the fourth quarter 2021 was $3.6 million or $0.13 per diluted share.
Net loss attributable to common stockholders for the fourth quarter 2021 was $3 6 million or <unk> 13 per diluted share.
Matt Lowell: compared to net income attributable to common stockholders of 0.1 million or three cents per diluted share for the fourth quarter of 2020.
Compared to net income.
Repeatable to common stockholders of <unk> 1 million or <unk> <unk> per diluted share for the fourth quarter 2020.
Matt Lowell: Net loss attributable to common stockholders for the full year 2021 was $9.8 million or $0.61 per diluted share.
Net loss attributable to common stockholders for the full year 2021 was $9 8 million or <unk> 61.
Per diluted share comp.
Matt Lowell: compared to net income attributable to common stockholders of $0.6 million or $0.16.
Compared to net income attributable to common stockholders of zero point $6 million or <unk> 16.
Matt Lowell: for diluted share for the full year 2020.
Per diluted share for the full year 2020.
Matt Lowell: Adjusted EBITDA, a non-gap measure, was negative $3.4 million for the fourth quarter 2021 compared to positive $1.6 million for the fourth quarter 2020.
Adjusted EBITDA, a non-GAAP measure was negative $3 4 million for the fourth quarter 2021, compared to positive $1 6 million for the fourth quarter 2020.
Matt Lowell: Adjusted EBITDA for the full year 2021 was negative 7.6 million for the full year.
Adjusted EBITDA for the full year 2021 was negative $7 6 million for the full year.
Matt Lowell: compared to positive 7.0 million in 2020.
Compared to positive $7.0 million in 2020.
Matt Lowell: Capital expenditure in the fourth quarter was $7.4 million compared to $3.5 million in the fourth quarter 2020 and $19.9 million for the full year compared to $5.5 million for the full year 2020.
Capital expenditure in the fourth quarter was $7 4 million compared to $3 5 million in the fourth quarter 2020, and $19 9 million for the full year compared to $5 5 million for the full year 2020 'twenty.
The majority of spend in the fourth quarter and full year 2021 was towards our new GMP manufacturing facility.
Matt Lowell: The majority of spend in the fourth quarter and full year 2021 was towards our new GMP manufacturing facility.
Matt Lowell: We also continue to make investments in our current production facilities and R&D labs.
We also continued to make investments in our current production facilities and R&D lab.
Matt Lowell: We are committed to building capacity ahead of the demand curve to ensure our customers are able to receive their custom products in weeks instead of months.
We are committed to building capacity ahead of the demand curve to ensure our customers are able to receive their custom products in weeks instead of months.
Cash flow and balance sheet.
Matt Lowell: Pre-cash flow, a non-GAAP measure which we define as cash provided by or used in operating activities less purchases of property, plant, and equipment. In the fourth quarter was negative $10.5 million compared to negative $1.1 million in the fourth quarter 2020.
Free cash flow, a non-GAAP measure, which we defined as cash cash provided by or used in operating activities less purchases of property plant and equipment in the fourth quarter was negative $10 5 million compared to negative $1 1 million in the fourth quarter of 2020.
And negative $28 9 million for the full year 2021, compared to negative $3 zero million dollars for the full year 2020.
Matt Lowell: And negative 28.9 million for the full year 2021 compared to negative 3.0 million for the full year 2020.
Matt Lowell: This decrease compared to the prior year period was primarily due to lower adjusted EBITDA and a significant increase in capital expenditure.
This decrease compared to the prior year period was primarily due to lower adjusted EBITDA and a significant increase in capital expenditures.
Matt Lowell: As a side note, we have historically reported adjusted free cash flow, but are moving to free cash flow going forward, as we believe it's a better metric for our cash users.
As a side note we have historically reported adjusted free cash flow, but are moving to free cash flow going forward as we believe it's a better metric for our cash use.
Okay.
As of December 31, 2021.
Matt Lowell: We had $87.5 million in cash equivalents and $12.0 million in gross debt.
We had $87 5 million in cash and cash equivalents and 12.0 million in gross debt.
Matt Lowell: Our net cash position of $75.5 million as of December 31st, 2021.
Our net cash position of $75 5 million as of December 31, 2021.
Matt Lowell: positions us to execute on our domestic organic growth plan.
Positions us to execute on our domestic organic growth plan.
Turning to our 2022 revenue guidance and outlook.
Matt Lowell: Turning to our 2022 Revenue Guidance and Outlook.
Matt Lowell: We are providing 2022 total revenue guidance of $44 million to $48 million.
We are providing 2022 total revenue guidance of 44 million to $48 million.
Matt Lowell: At the midpoint, this assumes a revenue growth forecast of approximately 30% as compared to 2021 excluding sample transport.
At the midpoint. This assumes revenue growth forecast of approximately 30% as compared to 2021, excluding sample transport.
With respect to product categories, we expect lab essentials revenue growth of approximately 25% compared to 2021.
Matt Lowell: With respect to product categories, we expect LabEssentials revenue growth of approximately 25% compared to 2021.
Matt Lowell: and clinical solutions revenue growth of approximately 60% compared to 2021.
And political solutions revenue growth of approximately 60% compared to 2021.
Matt Lowell: While we are not giving specific guidance on our expected spend, I will make a few high-level comments.
While we are not giving specific guidance on our expected spend I will make a few high level comments.
Matt Lowell: 2022 will be another year of aggressive investment as we solidify the foundation for our future growth plan.
2022 will be another year of aggressive investment as we solidify the foundation for our future growth plans, we will continue to invest in capacity expansion.
Matt Lowell: You will continue to invest in capacity expansion and across marketing, sales, G&A, and R&D.
And across marketing sales G&A and R&D.
Matt Lowell: This will also be another year of significant capital investment in fixed assets as we expect to fund the balance of the cost of our new GMP facility in 2022, as well as make other investments in current facilities. With that, I'll
This will also be another year of significant capital investment in fixed assets as we expect to fund the balance of the cost of our new GMP facility in 2022 as well as make other investments in current facilities.
With that I'll turn the call back over to Steven.
Thanks, Matt.
Matt Lowell: Overall, we are pleased with our 2021 performance and the progress we have made against our strategic priorities. We are now fully focused on 2022 and excited for the year ahead. We will now take your questions.
Overall, we are pleased with our 2021 performance and the progress we have made against our strategic priorities. We are now fully focused on 2022 and excited for the year ahead, we will now take your questions.
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Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask a question, you need to press star then one on your telephone.
Thank you, ladies and gentlemen, as a reminder to ask a question you would need to press Star then one on your telephone.
Speaker Change: If you'd like to withdraw your question, press the pound key. Again, that's star 1 to ask the question. Please stand by while we compile.
If you'd like to withdraw your question press the pound key again Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Sanjeev Nair with BTIG. Your line is open.
Our first question comes from the line of Sanjay <unk> with B T. I G. Your line is open.
Sanjeev Nair: Hi, thanks for taking the questions and congratulations on the quarter and the year. Just a few questions on guidance. How should we think about revenue cadence? Is there seasonality to your business? I'm trying to look at last year's cadence and there was sample transport factored into there. So as we look at, as we think about the first quarter, you know, just the current environment we're in.
Hi, Thanks for taking the questions and congratulations on a quarter and a year.
Just a few questions on guidance.
How should we think about revenue cadence is there seasonality to your business I'm trying to look at last year's cadence and there was sample transport are factored into there. So as we looked at as we think about the first quarter. You know just the current environment. We're in.
Sanjeev Nair: the Omicron search and things like that. Anything we could kind of, any color you could provide us in terms of the potential revenue case.
The AUM across search and things like that any anything because kind of any color you could provide us provide us in terms of.
The potential revenue cadence for the year.
Sanjeev Nair: Yeah, hi, it's Matt. I would say relative to 2022 cadence.
Yeah, Hi, Angie it's Matt.
I would say relative to 2022 cadence, there's not a particular seasonality to our business as we know it in general I would say we would expect.
Matt Lowell: There's not a particular seasonality to our business, as we know it. In general, I would say we would expect a ramp throughout the year, you know, from the first quarter to the end. You know, there could be some lumpiness based upon the clinical solutions business, as we've indicated, depending on when customer orders come in and the acceleration of those customers through their pipeline.
A ramp throughout the year from the first quarter to the end.
There could be some lumpiness based upon the clinical solutions business as we've indicated depending on when customer orders come in and the acceleration of those customers through their pipelines, but I would say in general.
Matt Lowell: But I would say, in general, a growth throughout the year.
Throughout throughout the year.
Got you Great and then in terms of your gross margins for the fourth quarter, you know realize it's down year over year by the increased significantly on a sequential basis and I know, it's currently pretty lumpy there, but was wondering what the drivers are and as we think about gross margins for this year I'm assuming.
Speaker Change: Gotcha, great. And then in terms of your growth margins for the fourth quarter, you know, realize it's down year over year, but increased significantly on a sequential basis. And I know it's currently pretty lumpy there, but was wondering what the drivers are. And as we think about, again, growth margins for this year, I'm assuming, could we anticipate further declines given the significant investments?
Could we anticipate further declines given the significant investments.
Either you're planning on.
Right, Yes, the Q4 gross margin did come in higher than anticipated.
Speaker Change: Right. Yes, the Q4 gross margin did come in higher than anticipated.
Speaker Change: But I will also point to that when adjusted, the margin was 47%.
But I will also point you to that when adjusted the margin was 47%.
Speaker Change: which is still up from Q3, but I think given the higher revenue performance that we achieved in the sale of the additional sample transport product in in Q4 help with utilization of our costs as we've talked about before the biggest driver for us in gross margin over the long term is increased volume in that in the business, so we did see a little bit of that in in Q4
Which is still up from Q3, but I think given the higher revenue performance that we achieved in the sale of the additional sample transport product in Q4 helped with utilization.
Of our costs.
We've talked about before the biggest driver for us in gross margin over the long term is increased volume in the in the business. So we did see a little bit of that in Q4.
Speaker Change: But going forward into 2022, as you rightly pointed out, as we are getting ready for the opening of the new facility in particular, going into the end of the year, we would expect margins to, I guess, continue to decrease for the rest of the year as we start to ramp up that facility ahead of the revenue growth that will come from it. So I think that's the right way to look at it.
But going forward into 2022 as you rightly pointed out.
As we are getting ready for the opening of the new facility in particular going into the end of the year.
We would expect margins to I guess continue to decrease for the rest of the year as we start to ramp up that facility, but ahead of the ahead of the revenue growth that will come from it so I think thats the.
That's the right way to look at it.
Speaker Change: Gotcha. And then lastly, for me, 80 accounts focused on cell and gene therapy, which is great. Just kind of curious, what percentage of revenue does that represent for 2021?
Gotcha, and then lastly from me 80 accounts focused on cell and gene therapy, which is great just kind of curious what percentage of revenue does that represent for 2021.
Speaker Change: So, we're not giving that number out right now, but I think, you know, reference is from 2020 about 20%. I can say that, you know, obviously the entire business, whether it's lab essentials and clinical solutions.
So sanjiv were not giving that number out right now, but I think.
References is from.
From 2020 about 20%.
Can say that obviously the entire business whether its lab essentials.
And clinical solutions group.
Speaker Change: Pretty significantly, as you can see, in 2021, but yeah, we're not pulling out that particular segment at the moment.
That's pretty significant.
As you can see in 2021.
But yeah, we are not pulling out that particular segment at the moment.
Gotcha.
Thank you so much.
Thank you.
Our next question comes from the line of Jacob Johnson with Stephens. Your line is open.
Speaker Change: Our next question comes from the line of Jacob Johnson with Stevens, your line is open.
Hey, good afternoon, everybody and congrats on a nice quarter.
Jacob Johnson: Maybe just first on the clinical solutions segment.
Maybe just first on the clinical solutions segment.
A 60% growth, which is pretty impressive and a nice uptick versus kind of 2021 growth.
Jacob Johnson: uh... and and obviously a lot of good customer additions there can you just elaborate on your visibility into that that clinical solutions
And obviously a lot of good customer additions there can you just elaborate on your visibility into that clinical solutions demand. What are you hearing from these new customers.
That gives you the confidence to guide to that 60%.
Yeah, great. Thanks Jacob.
Speaker Change: Thanks, Jacob. You know, like we said, when we bring these new customers on, it takes some time to ramp up. And so, we're pretty confident in terms of the volume of products they will need based on discussions with them, as well as the timing in which they onboarded as a GMP customer of ours. And so, I think we have, as we've said before, good visibility for annual, but given the size and the lumpiness of the business, that quarter-to-quarter variability does exist.
Hi.
Like we said when we bring these new customers on it takes some time to ramp up and so we're pretty confident in terms of the volume of products. They will need based on discussions with them as well as the timing of which and which they on boarded as a GMP customer of ours and so I think we have as we've said before good good visibility for annual.
But given the size and the lumpiness of the business that quarter to quarter variability does exist.
Got it that makes sense and I would just point out also just in addition, as we just highlighted in the remarks.
Speaker Change: And I would just point out also just in addition the as we just highlighted in the remarks
Speaker Change: you know, going from 12 active customers up to 22 customers as of the end of last year or through last year. That also gives us some further confidence that we'll be growing that business significantly in 2022.
Going from 12 active customers up to 'twenty two customers as of the end of last year were through last year.
That also gives us some further confidence that we'd be growing that business significantly in 2022.
Thanks, Thanks for that Steven and then just as a follow up on lab Essentials, you talked about 18% revenue growth per user in that segment again, that's pretty impressive but it also implies 10% growth in that customer base and given that the size of that customer again.
Speaker Change: And then just as a follow-up on lab essentials, you talked about 18% revenue growth per user in that segment.
Speaker Change: But it also implies, you know, 10% growth in that customer base.
Speaker Change: Given the size of that customer base, I guess that's larger than I would have expected. So, can you just speak to the customer additions in lab?
So I guess, that's larger than I would've expected. So can you just speak to the customer additions and lab essentials.
Speaker Change: Yeah, absolutely. And it is important to note that we also did have growth from from bringing on additional customers. You know, we believe that a little bit of that has to do with the, with the coven pandemic. We did see some reduction in the number of customers during the pandemic for for obvious reasons.
Yes.
Absolutely and it is important to note that we also did have growth from from bringing on additional customers.
We believe that a little bit of that has to do with the COVID-19 pandemic did see.
Some reduction in the number of customers during the pandemic for obvious reasons.
Speaker Change: And I believe that we are seeing that starting to come back. And in addition, of course, we have our commercial team that is starting to ramp up, and the IPO and other things sort of bringing visibility to Technova. So I think all those things are generating an overall positive. And it's not that we don't want to attract new customers in Lab Essentials. That's certainly part of our strategy, too. And you can see it in the numbers here that that's, in fact, what we're doing in addition to growing the average revenue per account. Now, as I said, that's helpful. A lot easier to go from.
And I believe that we are seeing that starting to come back and in addition of course, we have our commercial team that is starting to ramp up and the IPO and other things that are bringing visibility to tech Nova So I think all of those things are generating an overall positive in it.
Not that we don't.
I don't want to attract new customers and lab essentials, Thats, certainly part of our strategy too and you can see it in the numbers here that Thats in fact, what we're doing in addition to growing the average revenue per account.
No. That's helpful. A lot easier to go from 12 months to 22, then three.
So I'll leave it there thanks for taking the questions.
Speaker Change: Yeah, thanks.
Yeah. Thanks. Thank.
Thank you.
Speaker Change: Our next question comes from the line of Max Lacouste with Collin. Your line is open.
Next question comes from the line of Max <unk> with Cowen Your line is open.
Hi, Thanks for taking the questions.
Max Lacouste: In Q4, was there any boost from GMP grade reagents used in COVID testing? And then just curious if we should expect any sort of COVID boost in Q1. Just trying to get the pacing right.
In Q4 or was there any boost from GMP grade reagents.
Using COVID-19 testing and then just curious if we should expect any sort of COVID-19 boost in Q1.
Trying to get the pacing rate.
I'll go ahead and address the.
Speaker Change: I'll go ahead and address the question about Q4. There obviously we did have the additional revenue from the GMP sample transport product, so I think that was a...
Question about Q4, obviously, we did have the additional revenue from the GMP sample transport products. So I think that was a.
Speaker Change: You know, also contributed to the higher gross margin in the quarter, although as we've said before the primary driver is volume overall, but a secondary factor is the GMP versus RUO. So I would say there was a contributing factor there, not the key driver, but definitely a contributor.
Also contributed to the higher gross margin in the quarter, although as we've said before the primary driver is volume overall.
A secondary factor is the GNP versus our euro so I would say there was a contributing factor there not the key driver, but definitely a contributor.
Speaker Change: Yeah, I think if you're if you're asking that about outside of sample transport, I think we would say that's not material for Q4 or for things for COVID related testing outside of sample transport.
Yeah, and I think if youre, if youre asking math about outside of sample transport I think we would say that's not material for Q4 or.
Four things for Covid related testing outside the sample transport.
Speaker Change: Okay, got it. And then, you know, how are you thinking about the pathway, you know, to adjusted EBITDA break-even with the capacity coming on board? You know, you now have three earnings reports, you know, under your belt in the public arena. So, you know, if you look at how the mix of lab essentials and clinical solutions might evolve over the next few years and the growth trends you're seeing, you know, how are you thinking about that pathway to adjusted EBITDA break-even?
Okay got it.
And then you know how.
Are you thinking about the pathway to adjusted EBITDA breakeven with the capacity coming on board.
Three earnings reports under your belt in the public arena. So yeah. If you if you look at how the mix of lab essentials and clinical solutions might evolve over the next few years and the growth trends you're seeing.
How are you thinking about that pathway to adjusted EBITDA breakeven.
Speaker Change: Yeah, I mean, I think as we as we highlighted here right now in 2022, we're in an aggressive, the second year of our aggressive investment plan. So, you know, we will continue to be negative.
Yes, I mean, I think as we as we highlighted here right now in 2022 and in the second year of our aggressive investment plan. So we will continue to be EBITDA negative.
Speaker Change: This year, obviously, and I think we see the turning point coming by the early 2024 timeframe from an EBITDA perspective as we will start to see the benefits to our revenue growth with the new factory and all the other investments that we're making to drive top line come into play. So I do think it's in that type of outlook, Matt.
This year obviously.
And I think we see the turning point coming by the early 2024 timeframe from an EBITDA perspective, as we will start to see the benefits to our revenue growth with the new factory and all the other investments that we're making to drive topline come into play. So I do think it's in that.
That type of.
Outlook Max.
Matt Lowell: Great, well congrats on a strong finish in 2021.
Great well congrats on a strong finish in 2021.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Matt LaRue with William Blair. Your line is open.
Thank you.
Our next question comes from the line of Matt <unk> with William Blair. Your line is open.
Hi, good afternoon.
Matt LaRue: Hi, good afternoon, you know, obviously you've been investing in building out the sales and marketing function and assembling the scientific affairs team and R&D resources.
Obviously, you've been investing in building out the sales and marketing function and assembling the scientific affairs team and R&D resources.
Speaker Change: Just curious, Stephen, if there's, you know, anything you can point to from the back after the year in terms of return on the sales team. I know in the IPO process, you said that most of your sales opportunities were inbound or, you know, sort of customer referrals. And I'm curious if you're starting to see more success from the sales team and then that you're building out. And then on the R&D side, if there's anything in particular your team's excited about bringing to market in 22.
Just curious Stephen upstairs.
Anything you can point to.
The back half of the year in terms of return on our sales team.
In the IPO process, you said that most of your sales.
Sales opportunities, where inbound or sort of customer <unk> I'm curious if you're starting to see more success from the sales team and then you build it out and then on the R&D side. If there's anything in particular youre teams excited about bringing into market in 'twenty two.
Great.
Stephen: Thanks, Matt. So from a sales and marketing perspective, you know, I think
Thanks, Matt.
So from a sales and marketing perspective.
I think what you can see.
Stephen: is some traction, right? We've gone from 12 to 22 customers on the clinical side. Just the engagement we're having with these customers is at a different scientific level than we've had in the past. And I believe that's starting to have an impact on the business.
Some traction right. We've gone from 12 to 22 customers on the clinical side just the engagement, we're having with these customers is that a different scientific level than we've had in the past and I believe that's starting to have an impact on the business. Obviously those play out over time right. As these customers onboard ramp up and then their products moved down the clinical pipeline, we should see.
Stephen: Those play out over time, right? As these customers on board ramp up and then their products move down the clinical pipeline, we should see the fruits of that labor. And I think the other part of that is we are just beginning. Right? So we've created. We brought in Jennifer Henry and can go house. They're building out their teams right now. We expect that to be execution ready to go by the end of this calendar year to fill out.
See the fruits of that labor and I think the other part of that is we are just beginning right. So we created we brought in.
Jennifer Henry and can go house Theyre building out their teams right now we expect that to be execution ready to go by the end of this calendar year to fill out.
Stephen: the new facility that will come online in 2023.
The new facility that will come online in 2023.
Stephen: Um, so we're excited about that. I think we're seeing some impact to that, but I do not think we're yet, uh, obviously, uh, fully running and where we will be at the end of this year.
So we're excited about that I think we're seeing some impact of that but I do not think we're yet obviously.
Fully running and where we will be at the end of this year.
Stephen: Secondly, on your R&D, we are internally very excited. We're not disclosing much about exactly what we're doing, but I think it's fair to say that 2020 year is still a development year for us in taking these products through a product development pipeline to commercialize in the out years. But we are excited in our internal capabilities we've built out and the progress we've made in the last six to nine months on that front.
Secondly on your R&D. We are we're internally very excited we're not disclosing much about exactly what we're doing but I think it's fair to say that 2020 year, it's still a development year for us and taking these products through our pipeline of product development pipeline to commercialize in the out years, but we are excited.
Our internal capabilities, we built out and the progress we've made in the last six to nine months on that front.
Okay and on the capacity front, so hollister coming online by the end of the year, but can you just remind us.
Speaker Change: Okay, and on the capacity front, so how they're coming online at the end of the year, but can you just remind us?
Speaker Change: the capacity, additional capacity you can bring on the current facility. I know in the past you've added shifts, but I believe you do have some flex if you start to run into capacity constraints with the current facility as well.
The capacity.
Dave or capacity that you can bring on the current facility I know in the past you've added shifts, but I believe you do have some.
Some flex if you start to run into capacity constraints with the current facility as well.
Speaker Change: Absolutely. And so, yes, we have moved to a seven-day workweek on the manufacturing, and you'll see it in the spend as well in Q4, investing our current process engineering and automation to increase capacity further and drive efficiency.
Absolutely and and so yes, we have moved to a seven day work week on the manufacturing and you'll see it in the spend as well in Q4 investing our current process engineering and automation to increase capacity and further and drive efficiency. In addition, we have yet to switch to a 24 hour day and so we do.
Speaker Change: In addition, we have yet to switch to a 24-hour day, and so we do have capacity that we will be.
Have capacity that we will be.
Speaker Change: Expanded into should something happen with the build out a new facility whether it's a supply chain related or something else We have ample capacity continuing to meet demand until we're ready to turn that next facility on
Expanding into should something happen with the build out of new facility, whether it's a supply chain related or something else. We have ample capacity continuing to meet demand until we're ready to turn that next facility on.
Speaker Change: Okay and the final one is just from a supply chain and raw material inflation standpoint, I guess
Okay, and then final one is just.
Hi.
From a supply chain and raw material inflation standpoint.
I guess.
Speaker Change: Part of obviously what you're delivering is the rapid turnaround time. And so, have you had any issues with either sourcing or logistics getting things to customers would be part one. And then the second piece, to the extent that you've had inflation in some of your inputs, are those things, especially on the catalog side, that are built into contracts to pass along price increases to customers?
Obviously, what you're delivering is the rapid turnaround time, and so have you had any issues with either sourcing or logistics getting things to customers, who would be part one and then second piece to the extent that you've had inflation.
And some of your inputs are those things, especially on the catalog side that are built into contracts to pass along price increases to customers.
So first from a supply chain perspective, it is a challenging environment there are certain raw materials or containers like single use bags that are have very long lead times and customers are very specific products or raw materials or containers they'd like to work with.
Speaker Change: So first, from a supply chain perspective, it is a challenging environment. There are certain raw materials or containers like single-use bags that are.
Speaker Change: have very long lead times and customers are very specific products or raw materials or containers they'd like to work with.
Speaker Change: You know, one of the benefits that we have is the flexibility in our manufacturing to swap them out to different raw materials or different containers should they need that product sooner. So some customers have chosen to wait, some other customers have chosen to swap out so they can continue their production. We really see, obviously, the supply chain piece, we see ourselves as part of that solution where we can actually help mitigate some of those issues that some of these P...
One of the benefits that we have is the flexibility of our manufacturing to swap them out to different raw materials or different containers should they need that product sooner. So some customers have chosen to wait some other customers have chosen to swap out so they can continue their production.
We really see obviously the supply chain piece, we see ourselves as part of that solution, where we can actually help mitigate some of those issues that some of these P. A.
Speaker Change: manufacturers are running into at the moment.
Manufacturers are running into at the moment.
Speaker Change: from a passing on inflation perspective, we believe that we are able to do that. You know, contracts is not necessarily how we do that, but I think that it's expected and that we are not so price sensitive that we cannot move those through the products we offer. Okay, thanks a lot, Stephen.
From a.
Passing on inflation perspective, we believe that we are able to do that.
Contracts is not necessarily how we do that but I think that it's expected and that we are not so price sensitive that we cannot.
Those through the products we offer.
Okay. Thanks, a lot.
Yes, Thanks, Matt.
Thank you.
I'm showing no further questions in the queue.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a...
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Okay.
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