Q1 2022 Berkeley Lights Inc Earnings Call
Except as required by law, Berkeley lights disclaims any intention or obligation to update or revise any financial projections.
Or forward looking statements, whether because of new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as a live broadcast of May nine 2022.
With that I would like to turn the call over to Siddhartha.
Thank you Suzanne and thank you everyone for joining us.
I'm excited to participate in my first earnings call as CEO .
Nobody likes.
In the prepared remarks today I will share a bit about what attracted me to <unk>.
Some of my initial business priorities.
Top line financial results for the first quarter.
Progress against our partnership milestones and looks low advancement.
Then Paul Mccluskey, Chief Accounting Officer.
A detailed review.
Our first quarter 2022 financial results.
As a reminder.
The company in March.
I'd like to thank the Virtualized team for their support as I can.
The transition from being a member of the company's board of directors.
Into the CEO role.
While I was only on the board for less than six months I certainly.
Appreciated how revolutionary the Berkeley lights technology workflows and services are and what the significant impact the company can make in the scientific research discovery.
Transnational markets.
Since transitioning to the CEO role I'll also quickly seen Berkeley lights is made up of incredibly passionate and talented employees.
Their dedication commitment and care for our customers.
The Validus my decision to join the team.
Now I'd like to spend a few minutes sharing what attracted me to Berkeley lights.
First I will spend most of my career.
<unk>.
Life Sciences technologies and services across the globe.
I previously served as CEO of EOG laboratories, scientific services company, providing analytical testing and consulting solutions, which was acquired by European scientific.
Additionally, I've held several senior executive roles at life technologies, including Chief Marketing Officer, managing our business in Asia, and leading the $2 billion P&L as the President of Life Sciences Division.
In these roles I have successfully helped grow organizations from a $100 million of revenue 2 billion, both organically and Inorganically.
While scaling the organization for 500 employees to 5000.
Isolating Berkeley life as an opportunity to apply all my past management experiences.
Along with my knowledge and passion for biologic technology to help develop a world class Life Sciences company.
Second I saw a highly differentiated technology platform.
With the potential to deliver significant value to scientist and researchers across a number of applications to improve human health and the planet.
As a technology platform that can do things that no. Other technology can we are only beginning to scratch the surface on the available market ahead.
As part of my 100 day plan.
We have started strategizing on how to fully unlock the potential of our technology and make it more accessible by looking at our consumables and reagents model ease of use for our customers and more.
We have a high value services business.
That is just getting started in earnest and we then a purchaser transform Berkeley lights phone platform and tools company to a tools and services company.
Last year, our team grew the services business more than threefold.
From $5 8 million in 2020 to $19 9 million in 2021.
A key focus area as part of my 100 day plan is to determine how we can accelerate the growth of our highest throughput function cleaning services.
Our biopharm Breeze, and strategic partnerships with downstream economics, such as milestone payments and royalties.
In the near term, we are quickly adding resources to this area to accommodate the growing interest from a diverse set of companies in partnering with us.
And finally.
I was attracted to wear Berkeley lights is in its lifecycle I look forward to building a world class life Sciences leadership team and.
And expanding our global commercial and innovation capabilities.
We are working with top executive search firm to <unk>.
<unk>, New CFO and this is one of the key hires on the management team that I'm building that will be laser focused on operational excellence.
As you can probably hear from my initial remarks, I am incredibly excited about the future of Berkeley lights.
We look forward to sharing further details on our go forward strategy in the coming months.
Including at an Investor day planned for later this year.
Now, let's turn to a high level summary of our first quarter 2020 to business results and highlights.
Revenue for the first quarter was $22 million.
Reflecting year over year growth of eight 5% and in line with expectations communicated by our team during the last earnings call.
Strategic partnership and services business line grew 136% year over year.
Consumables and recurring revenue continued to be strong with a 24% increase over the prior year.
Our pipeline for our platform technology and workflows remained strong in.
In Q1 to become platforms for purchase by our various which was acquired by twist Bioscience late last year, giving them ownership of four beacons in total.
The two other placements during the quarter.
In the APAC region with new customers, who are using older technology methods for the antibody discovery and cell line development work and switch to the Mercury life platform to find the hard to hit targets and better clone in days.
In the services business.
Signed a strategic partnership agreement with West alone Mickey.
Making it our third AG bio agreement.
Let's start on is looking to advance the development of.
Justice idled peptide is active ingredients.
Through the safety and efficacy of crop protection solutions for the global food supply.
In this partnership.
<unk> will use our proprietary high throughput functional screening service to optimize the development and manufacturing of novel active ingredients.
We look forward to working with them as we kick off our collaboration in just a few weeks.
I'd also like to share a positive update on our core developed workflows with ginkgo <unk> and Thermo Fisher scientific.
We are on target to successfully complete the first of several workflows later this quarter to ginkgo.
The Mercury light internal teams will continue to work with ginkgo as they ramp those workflows into a production setting with their own foundry.
We're also on track to conclude our part of the viral vector Rockford envelope and that is the focus of our collaboration with telephone Fisher scientific.
Following development the workflow will be validated by our partners and accepted for tech transfer.
We expect to finish by the end of the year.
Our initial voice of the customer and market research is validating that Berkeley lights 10 day workflow is an unprecedented timeline.
Screen thousands of producing cell lines for physical capsid and viral genomic titers, often AAV product.
As such we have made.
Some headwind in our discussions with several large global <unk>, who will see value and accelerating the time to market for gene therapy developers.
In a moment.
I'll turn over the call to Paul.
To walk through our Q1 2022 financial results.
Before I do I want to touch on our 2022 guidance.
As I shared in my comments.
In the Middle of my 100 day review of the business and speaking with customers.
<unk> and our investors to evaluate the best spots to unlock our potential as a tool.
Tools and services company.
In light of that I plan to provide more specific guidance on our expectations for 2022 on our second quarter earnings calls and discussed further in our.
Our planned Investor day later this year.
Now I would like to turn the call over to Paul.
Thank you Siddhartha.
Total revenue for the first quarter 2022 was 22.
$2 million.
Eight 5% year over year.
North America accounted for 68% of total revenue.
Followed by Asia Pacific at 25% and.
In EMEA at 7%.
For the first quarter revenue from direct platform sales totaled $7 4 million.
Our installed base grew by four placements during Q1 to a total installed base of 115 platforms.
As <unk> mentioned in his remarks.
New platforms were purchased by twist Biosciences and.
And two placements were with new customers focused on antibody discovery workflow.
Strategic partnership and services revenue was $7 4 million in Q1 up $4 2 million for 136% from the prior year.
This increase was primarily due to contracts, we have previously announced with companies such as Thermo Fisher scientific aircrafts Sciences and Anika.
Additionally, we announced a new contract with debt drawn during the first quarter that will begin generating revenue in future quarters.
Typically these customers make quarterly payments.
We recognize revenue for these customers on a time and material or percentage of completion basis.
Some of our contracts include participation in downstream economics through royalties and milestone these.
These future payments are not included in our revenue.
Gross profit for the first quarter of 2022 with $13 $8 million.
Compared to $12 5 million in the prior year period.
Gross margin for the first quarter of 2022 was 68% compared to 67% in the first quarter of 2021.
The increase in gross margin year over year was due to higher margins on strategic partnerships and services as we continue to grow that portion of the business with high margin revenue.
First quarter 2022, operating expenses were $35 $1 million inclusive of $5 4 million of stock based compensation.
This was compared to $27 6 million in the prior year, which was inclusive of $4 5 million of stock based compensation.
Operating expenses in Q1 included $17 $6 million in research and development <unk> <unk>.
$7 $7 million in G&A, and $5 8 million in sales and marketing.
Net loss for the first quarter, 2022% was $21 4 million compared to a net loss of $15 4 million.
For the prior year period.
Net loss numbers are inclusive of stock based compensation.
We ended the quarter with a cash and cash equivalents balance of $165 million, our available liquidity is $175 million, which.
Which includes our revolving credit facility.
I'd like to end my formal remarks by saying how passionate I am about what is possible with the Berkeley lights platform and our amazing team members.
We're working closely with the DARPA these past two months.
Even more excited for our future.
With that I will turn the call back to Sudhakar.
Thank you Paul.
As I expressed in my earlier comments as I assess the business and dialogue with our customers potential customers employees investors and.
The stakeholders I'm more excited about the work and opportunities ahead of us than when I joined Mercury life, just a few weeks ago.
The management team and I are dedicated to crafting and executing a go forward strategy to transform the market for cell based products and services.
I look forward to sharing our refreshed view of our path forward in the months to come.
With that.
We will now open it up for questions operator.
At this time to remind everyone in order to ask a question. Please press star.
One on your telephone keypad.
Your first question comes from Matt Sheerin.
J P Morgan.
Your line is open.
Hi, good afternoon, thanks for taking our question.
The data I know, you'll probably give more much more color.
Later in the year when you finish to a 100 day assessment that and just wondering if you can get any preliminary color on your learning so far from talking to customers and assessing the portfolio and any early thoughts on the potential strategy. You think you will maybe do differently to identify to help accelerate the revenue.
Yeah.
Yeah.
Thank you Julia.
I appreciate your call and appreciate your acknowledgment of.
I mean my journey, let me tell you what I see what is the most exciting thing for me right now as I'm learning Virtualized technology can do things that no. Other company can right now no other technology in the market can do and there's really five or six core capabilities are core competency.
I would like to kind of describing in the future when we have more time together.
Really unique Berkeley lights platform.
And that will allow us to do things and cell biology space.
That are incredibly unique and I'm quite focused on how do we leverage the maximum potential from all of that as.
As we look forward to the future strategy for our company and I think as you know clearly there is a lot of demand for the services business as I like to call. It is growing and allocating resources towards that business is one of my highest priority right now.
Gotcha definitely looking forward to hearing more on that.
Separately on our partnerships I believe you previously.
Expected.
Over $42 million in new bookings this year.
You give an update on the progress achieved with this new.
And that's around partnership you announced and are you on track to achieve that 42 million for the whole year.
I think our pipeline for partnerships remains robust and strong and actually think liquidity abroad.
So yes, we are actually on track to.
Deliver I will tell you that I mean.
Comprehensive review of all of our kind of a year long forecast as I'm assessing my current capabilities of the commercial teams that are delivering all those things and adding resources overall team dynamics.
As we move forward, but the.
That's part of our business is looking extremely strong right now.
Great last one from me.
And that you are on track to often is that tech transfer to thermo Fisher by the end of this year any framework. We can use to think about the ramp of subscription revenue I want that tech transfer is completed next year.
Yes, because there are still ongoing dialogue with the customer.
I'm not going to specifically mentioned, but.
Needless to say it.
Similarly pleased with the progress we've made and in addition to the work we are doing with our current clients on that biotech. The workflow. There are several large global CMO is that the same value even further evaluate exploited with time to market for gene therapy developers. So we I think a consistent message on the market that is still.
Producer cell line that we have.
The focus of our work right now is really a key to scaling the global manufacturing for AAV based gene therapy products and and we are in active dialogue with multiple participants from from that from that market space.
Great. Thank you very much.
Our next question comes from Brian .
Weinstein with William Blair.
Your line is open.
Hey, guys. Good afternoon, and thank you for taking my questions.
I thought I would just ask you about you know kind of the tone of business right now recognizing that you are not giving formal guidance, but can you talk about.
What you're seeing as far as interest in in the platforms that you have out there or how the funnel is building and any thoughts on kind of end market demand and what youre seeing out of your customers' willingness to engage with you at this point.
Brian Thank you.
To hear from you again.
I think I'll I'll stop my couple of.
Comments on pipeline remains robust for us.
Our teams around the world are working hard as you know there are some constraints with Asia Pacific, which is a very robust market for us already right now.
Q2, or Q1, usually has an uptake.
Without giving yourself any more specific on our guidance for.
Short term or for the full year I'm not willing to give you a full year guidance on this call.
I will tell you that I'm, 50% of my through my 100 day, Onboarding process and I am really focused on three things.
Listening to our stakeholders customers employees.
An investor.
And getting a range of internal external inputs into my processes building a world class life Sciences leadership team that is focused on operational excellence as well as sales and marketing excellence around the world and then finally working with the leadership team to design. This comprehensive strategy for our go forward.
To unlock the full potential of our platform that we have at Berkeley lights, and all of those three things actually leave me too.
Concluded.
In a very good place to actually design that Crawford was already communicated with you.
And I have more full.
Data to provide for you guys.
Okay understood, but if I may appreciate just a little bit on that.
Just kind of wondering kind of what you were seeing as far as interest in engaging with the company from from your various customers.
Is their willingness to engage.
Still at levels that that are positive and moving in the right direction are you seeing any change in behavior in any of your end markets for many of your customers anything that you can provide on qualitative commentary on how things are building.
Yeah, so on the on.
The pharmaceutical end market some of the large power company.
The discussions and the demand and demand and that I think as you know the small biotech start going through the kind of.
Resetting the marketplace right now we haven't seen as of yet any sort of a change if anything theres a little bit of a slowdown in the end.
The pipeline building process and how long it takes to close the transaction, but the active engagement on sort of what that platform can offer.
The robust demand and finally on the on the strategic partnerships and services part of it I think there is an increased demand.
Actually as the word gets out of our capabilities and our willingness to partner with people on that.
Okay.
Okay, and then one more if I may.
With respect to the beacons in the quarter you had four into the market.
There were a couple of that.
Got the read from the fourth quarter of last year that we had talked about.
When that took place that were supposed to get pushed into 2022 can you just talk about.
Were these beacons that were sold this quarter reflective of those or.
What what.
When we may be able to think about those coming back that back into the into the model.
That is correct. The two of the four that had slipped from Q4 into Q1 are the ones that are reflected here.
Okay. So then there were two incremental then for the quarter itself.
Yes.
Okay, great. Thank you.
Thanks.
Your next question.
T J Hebert with Morgan Stanley .
Your line Okay.
Hi, Jonathan this is Edmund on for <unk>. Thank you for taking the time today.
I'm one of the conversations that we had last time one of the things that you said was the company needs to transition from one that's being led by engineers.
That needs to be co led by engineers and biological application specialists as well. So I was wondering what are your plans using smooth ensure smooth transition.
Yeah.
Thank you and might Augusta pages as well.
Look I think you're absolutely right. The company stood have look more workflows and how more biology I'm currently in the review of our biologically which is fantastic I think we just need a lot more of the biology and the company I think the platform as it is the engineering part of that promise fully developed and in a good place.
I think in.
In the process of allocating further resources for biology development right now I will I will be very happy to share. It much further details on this later in Investor day.
Got it appreciate the color on your CFO search.
Leveraging an executive search firm.
Where does it stand and should we be expecting any other additional personnel changes going forward.
A great Great question again, Edmund Yes, Lucas CFO search is going great.
Tremendous amount of interest we are happy with the talent we are seeing.
Of course, I would've loved to have their own fill the next day. After they joined but this is a very important roles I'm, taking my time to make sure that the right fit for the company and the business model that we have.
And in business.
Going toward is achieved.
We make that progress towards the search.
I will tell you that.
Company.
Is a is a great company with fantastic people I love the fashion of both the management team existing management team and the company's employees at large.
The company does need a significant enhancement on the on the leadership and actually filling in the gaps that we have right. Now so you will be hearing about several per the rules.
Just announced.
Fantastic edition of our Chief Human Resources Officer.
Lucas Vitale has joined US a couple of weeks ago, and he and I are now planning for the next level of organization developing an.
And building a great leadership team here.
Okay. Thank you for the color there and then another question on China. It was 25% APAC was 25% of your sales in the quarter and I was just wondering if you could talk about some of the impacts you're seeing from the Lockdowns in China from an operational perspective are you seeing any slowdown in research activity or site access related issues because of that and more.
How is this impacting your Shanghai.
Look Shanghai has been in a lockdown for last 50 days.
Lockdown is slowly starting to lift as we speak right now I am I want to take a moment to thank all of my colleagues in Asia Pacific.
They are listening into this call because I can tell you.
I don't think anybody in divestment voyages in the kind of lockdown that experiencing and their dedication and commitment to the company and to our customers is really unparalleled and I am in a tremendous amount of gratitude and in that of those employees. They are working very hard.
Have you seen the slowdown of activity of course this is.
This is a real lockdown and so our customers are not able to get to their sites.
They are not able to perform that work right now and the sundial demo lab is affected by all of that stuff. However, I think given sort of how successful. The team has been operating and driven this circumstance that makes me feel very confident of that.
The rest of.
This.
The city and the state actually in China are back to normal we will be back to business.
Okay.
Got it. Thank you and one last question from me just wanted to confirm that you guys sold zero lightning units and subscription models.
So.
On the right thing Youre correct.
We haven't sold a lightning in this in this quarter on subscription we did it.
We just signed up for new clients.
<unk>, who has done a subscription revenue model.
That's great. That's it for me thank you very much.
Thank you.
Your next question comes from Steven.
With Cowen.
Your line.
Great. Thanks, operator, and thanks for taking the questions.
Thank you Steven.
So maybe just to build on Brian's question about the trends that youre seeing in the marketplace I wanted to talk about.
Any sort of trend youre seeing in the CRO and <unk> space.
Especially you guys have been talking about kind of this push towards outsourcing versus capital expenditures as a way to conserve cash as becoming a trend that's becoming more prevalent maybe if you can give us some color on what you guys are seeing in this.
Crow and CMO space.
But I think <unk> is one of our most active client segment right now.
And for various reasons of course.
But that from an ability to offer more things to their clients that they cannot offer today.
An example of the CDMA side actually the AAV.
Viral vector workflow that we are developing right now which is of interest to as you can imagine multiple different Seattle CBD analyst in this space.
And then similarly.
People are using bottlenecks that prompted to antibody discovery.
And there are multiple Seattle's who are also looking with us on that and more to come on that but it's the <unk>.
Most active segment right now.
Okay, Yeah I appreciate the color.
I appreciate the color you gave us on the news flow and workflow releases from from Thermo bear and ginkgo, but.
Could you give us a sense for the cadence of signing new R&D partnerships in 2022.
Yes, yes, we are on track to sign further develop further.
Strategic partnerships and services agreement.
We are in active dialogue with multiple clients. This things educate through partnership with services discussions, but there's a lot of back and forth with our clients.
Cannot tell you exactly when all of them.
And each one of them will get signed but theres a lot of activity right now in place.
Were also adding additional resources to support that type of business development at the company right now.
Okay got it and then.
Last one for me I know, you're not giving formal guidance, but should we still consider the 2022 revenues as being more back end loaded.
I think that is a safe assumption. Thank you.
Okay perfect. Thanks, so much.
Your next question comes from Darren Thank you.
<unk> Capex.
Your line is open.
Hi, guys. Good afternoon, Thanks for taking my call or my questions I just have two for you.
No.
Didnt mentioned the full year 2022 guidance you provided on the last call.
Plus 30% year over year revenue growth.
Was there anything that I guess happening between that call and today's that prevented you guys from from maintaining that guidance or is it more so just waiting to see how more near term visibility play out.
Yes.
If you recall.
There's nothing that I can point to other than the fact that I have just assumed the leadership.
Subsequent to that call and.
My I have been about 50 days into the job. So I want to make sure I do a full review of the business.
Before we exited providing you with more visibility on our full year guidance. That's all it is.
Got it got it thanks, and then just one more for me do you have any timeline updates or maybe even near term catalysts that we should expect regarding your internal cell therapy efforts.
Okay.
Look great question, there's a lot of activity going on with cell therapy.
There are three.
Different versions of it in the company right now.
And a tremendous interest in the PCR workflow all our people who are.
Trying to provide and innovate around cell therapies that is.
The.
Potential platform under <unk>, you see that.
We are working in partnership with several different people on how the QA QC platform would look like as you know these are all emerging areas right now and a lot of movement and we have defined index that Goldman and finally, there is a cell therapy manufacturing system, which could be a full fledged cell therapy manufacturing.
Getting systems that could be used in.
And the closer to the patient if you will and the top three different grid creations.
Trying to evaluate what kind of resources going to play with our own resources, and where we might look for partners to do it.
So a much more to come on that.
Ill give you one specific timelines on that.
Got it appreciate the time guys. Thanks.
Thank you Bill.
There are no further questions at this time I turn the call back over.
Yeah.
Thank you everyone for participating in the Berkeley like Q1 2022 financial results. We appreciate your support and look forward to talking with you soon thank you.
Thank you. This concludes today's conference call you may now disconnect.