Q1 2022 Alpha Teknova Inc Earnings Call

May 11, 2022

Okay.

Good day and thank you for standing by. Welcome to the Technova First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After this video...

Good day, and thank you for standing by and welcome to the <unk>.

First quarter 2022 financial results conference call at this time, all participants are in a listen.

Only mode.

The speaker's presentation.

And answer session.

If you ask a question during that session, you will need to press Star 1 on your...

A question session you will need to press star one.

Yeah.

Today's conference is being recorded and if you.

We advise that today's conference is being recorded, and if you require any assistance during the call, please press star 1.

Any assistance during the call. Please.

Zero.

I would now like to hand the conference over to your speaker today, Ms. Sarah Mitchell-Moore. Ms. Mitchell-Moore?

I'd now like to hand, the conference over to your Speaker today, Ms. Sandra Mitchell Moore Ms Mitchell.

The floor is yours.

Great. Thank you, Operator. I want to welcome everyone to TECNOVA's first quarter 2022 earnings conference call. On today's call, Stephen Gunstream, TECNOVA's President and Chief Executive Officer, will provide business highlights and updates, followed by Matt Lowell, TECNOVA's Chief Financial Officer, who will review financial results and provide an update on the company's 2022 outlook. After we conclude the prepared remarks, we will be happy to take your questions.

Great. Thank you operator.

Welcome everyone to check now this first quarter 2022 earnings conference call on today's call Stephen downstream Technical Vice President and Chief Executive Officer, who will provide business highlights and updates.

And that low L techno as Chief Financial Officer, who will review financial results and provide an update on the company's 2022 outlets. After we conclude the prepared remarks, we will be happy to take your questions.

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. Additional information concerning these risk factors is including in the press release the company issued earlier today, and they are more fully described in the company's various filings with the SEC.

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 additional information concerning these risk factors, including in the press release the company issued earlier today and they are.

More fully described in the Companys various filings with the SEC.

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. Additionally, the company's management believes that gap results, 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 strategy.

Today's comments reflect the Companys current views, which could change as a result of new information future events or other factors.

The company does not obligate or commit itself to update these forward looking statements, except as required by law. Additionally.

Additionally, the Companys management beliefs that GAAP results. In addition to GAAP results non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies.

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 was issued this afternoon, which is also posted to <unk> website.

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 was issued this afternoon, which is also posted to Technova's website and at the SEC website. non-GAAP financial measures should always be considered only as a supplement to and not a substitute for or superior to 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.

And at the SEC website non-GAAP financial measures should always be considered only as a supplement to and not as a substitute for or superior to 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.

Please be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks, which can be accessed on the IR section of TechNova's website and on today's webcast. And with that, I'll turn the call over.

Please be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks, which can be accessed on the IR section of techno vis website and on today's webcast and with that I'll turn the call over to Steven.

Thank you Sarah good afternoon, and thank you everyone for joining us for our first quarter earnings call.

Thank you, Sarah. Good afternoon and thank you everyone for joining us for our first quarter earnings call.

Technology is a leading provider of critical reagents that accelerate the introduction of drug therapies and novel vaccines in molecular diagnostics, we manufacture high quality customer agents with short turnaround times in a position to scale with our customers as they advance their products from discovery to commercialization.

Tecnova is a leading provider of critical reagents that accelerate the introduction of drug therapies, novel vaccines, and molecular diagnostics. We 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.

This is best exemplified in cell and gene therapy, where there is 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 is a significant need for custom made reagents and volumes less than 1000 liters.

Our ability to rapidly manufactured custom clinical grade bio processing solutions enables our cell and gene therapy customers to reduce the time from discovery to clinical impact.

Our ability to rapidly manufacture custom clinical grade bioprocessing solutions enables our cell and gene therapy customers to reduce the time from discovery to clinical impact.

Our interactions with current and potential customers continue 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.

Our interactions with current and potential customers continues to validate the growing need for high quality customer research and clinical grade solutions across the industry and we are investing aggressively to meet the demand.

As part of this investment, we are building the depth and breadth of our team across all functional areas. Bringing talent to Technova remains a top 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.

As part of this investment we are building the depth and breadth of our team across all functional areas, bringing talent protecting over remains a top 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 R. R.

Success.

Q1 was a strong start to the year as we posted record total quarterly revenue of $11 1 million and made meaningful progress against our strategic priorities.

Q1 was a strong start to the year as we posted record total quarterly revenue of $11.1 million and made meaningful progress against our strategic priorities.

Underlying order demand was strong in both our lab essentials and clinical solutions business lines, and we are on track to deliver at least 30% revenue growth for the full year 2022, excluding sample transport. In lab essentials, we continue to see strong demand for our catalog and custom products, as well as increase in the number of active customers and average revenue per active customer on a trailing 12-month basis. We remain confident in our 25% full-year growth target for lab essentials.

Underlying order demand was strong in both our lab essentials and clinical solutions business lines and we are on track to deliver at least 30% revenue growth for the full year 2022, excluding sample transport.

And lack of centers, we continue to see strong demand for our catalog and custom products as well as increase in the number and the number of active customers and average revenue per active customer on a trailing 12 month basis, we remain confident in our 25% full year growth target for lab essentials.

Clinical Solutions revenue was very strong in the quarter as we delivered a number of large orders. We continue to grow Clinical Solutions customer base and now expect to deliver at least 60% revenue growth for the full year.

Clinical solutions revenue was very strong in the quarter as we delivered a number of large orders we continue to grow clinical solutions customer base and now expect to deliver at least 60% revenue growth for the full year.

We also made meaningful progress on our investment priorities. First, we made investments to enhance our existing capacity and advanced construction on our new state-of-the-art facility in Hollister, California. This facility is on track to be operational by the end of 2022 and will provide the capacity to manufacture products worth approximately $150 million in revenue annually.

We also made meaningful progress on our investment priorities.

First we made investments to enhance our existing capacity and advanced construction on our construction on our new state of the art facility in Hollister, California.

This facility is on track to be operational by the end of 2022 and will provide the capacity to manufacture products worth approximately $150 million in revenue annually.

Second, we continued to build our organization by bringing in talent across the company that will help ensure our near and long-term success. This included new personnel in R&D, sales, marketing, finance, quality, and operations.

Second we continue to build our organization by bringing in talent across the company that will help ensure our near and long term success. This included new personnel in R&D sales marketing finance quality and operations.

2022 is it is our second year into the company's aggressive investment plans that will strengthen the foundation for our future growth we remain focused on the following priorities.

2022 is our second year into the company's aggressive investment plan that will strengthen the foundation for our future growth. We remain focused on the following priority.

First, to deliver revenue between $45 million and $48 million, a growth rate of greater than 30% at the midpoint excluding sample transport.

First to deliver revenue between 45, and 48 million a growth rate of greater than 30% at the midpoint excluding sample transport.

Second, to increase our current production capacity and bring our new manufacturing facility online by year end.

To increase our current production capacity and bring our new manufacturing facility online by year end.

Third, to build out our commercial and marketing teams and associated capabilities to drive demand before our new facility opens. And lastly, to develop new products to improve efficiency in cell and gene therapy bioproduction.

Third to build out our commercial and marketing teams and associated capabilities to drive demand before our new facility opens and lastly to develop new products to improve efficiency and cell and gene therapy production.

Overall, we are pleased with our performance in the quarter 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.

Overall, we are pleased with our performance in the quarter 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 financial.

Thanks, Steven and good afternoon, everyone. We delivered strong results for the first quarter of 2022.

Thanks, Stephen, and good afternoon, everyone. We delivered strong results for the first quarter of 2022.

Total revenue was $11 1 million for the first quarter of 2022 or 23% increase from $9 1 million in the first quarter of 2021, and one sample transport is excluded an increase of 37% to $11 1 million in the first quarter of <unk>.

Total revenue was $11.1 million for the first quarter of 2022, a 23% increase from $9.1 million in the first quarter of 2021. And when sample transport is excluded, an increase of 37% to $11.1 million in the first quarter of 2022 compared to $8.2 million in the first quarter of 2021.

<unk> 22, compared to $8 2 million in the first quarter of 2021.

On a trailing 12 month basis, excluding sample transport revenue total revenue increased 32%.

On a trailing 12-month basis, excluding sample transport revenue, total revenue increased 32%.

Given our small overall revenue base and the potential for large orders to drive some variability in our growth rates. We believe trailing 12 months revenue growth is a useful additional metric to track our growth.

Given our small overall revenue base and the potential for large orders to drive some variability in our growth rates, we believe trailing 12-month revenue growth is a useful additional metric to track our growth.

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, and the product is no longer marketed by the company.

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 and the product is no longer marketed by the company.

Lab essentials products are targeted at the research use only or are you old market and include both catalog and custom products.

Lab Essentials products are targeted at the research use only, or RUO, market and include both catalog and custom products.

LabEssentials revenue was $7.0 million in the first quarter, and a 3% increase from $6.8 million in the first quarter of 2021, and a 20% increase on a trailing 12-month basis.

<unk> Essentials revenue was 7.0 million in the first quarter and a 3% increase from $6 8 million in the first quarter of 2021, and the 20% increase on a trailing 12 month basis.

As our custom order business continues to grow we will see some quarter to quarter revenue fluctuations given the relative size and timing of shipment for those orders compared to catalog products.

As our custom order business continues to grow, we will see some quarter to quarter revenue fluctuation given the relative size and timing of shipment for those orders compared to catalog products.

We continue to expect approximately 25% growth in this business for the full year.

Clinical solutions products are made according to 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.

Clinical solutions products are made according to 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 diagnosis.

Our clinical solutions revenue was $3.8 million in the first quarter, a 256% increase from $1.1 million in the first quarter of 2021, and an 80% increase on a trailing 12 months basis.

Our clinical solutions revenue was $3 8 million in the first quarter.

256% increase from $1 1 million in the first quarter of 2021, and an 80% increase on a trailing 12 months basis.

Revenue was very strong in the quarter as we delivered a number of large orders during the quarter.

We now expect at least 60% revenue growth in our clinical solutions business for the full year.

We now expect at least 60% revenue growth and our clinical solutions business for the full year.

Gross profit for the first quarter of 2022 was $5 3 million compared to 5.0 million in the first quarter of 2021.

Gross profit for the first quarter of 2022 was $5.3 million, compared to $5.0 million in the first quarter of 2021.

Gross margin was 48.0% of revenue in the first quarter, which is down from 55.4% of revenue in the first quarter of 2021.

Gross margin was 48.0% of revenue in the first quarter, which is down from 55, 4% of revenue in the first quarter of 2021.

The lower gross margin reflects higher costs associated with expected investments. 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 the company is making in its current manufacturing capacity and capabilities to support long-term growth.

Operating expenses for the first quarter of 2022 were $11 2 million compared to $5 9 million in the first quarter of 2021.

Operating expenses for the first quarter of 2022 were $11.2 million, compared to $5.9 million in the first quarter of 2021.

Operating expenses increased as we continue to invest in the people critical to our near and long-term success, including the addition of key members to the R&D, sales and marketing, finance, quality, and operations teams.

Operating expenses increased as we continue to invest in the people are critical to our near and long term success, including the addition of key members to the R&D sales and marketing finance quality and operations teams.

As of March 31, 2022, the company had 272 associates up 15% from December 31 2021.

As of March 31st, 2022, the company had 272 associates, up 15% from December 31st, 2021.

We also had substantial new costs in the first quarter of 2022 compared to the first quarter of 2021 associated with operating as a public company and meeting applicable requirements.

Net loss for the first quarter of 2022 was $5 5 million or <unk> 20 per diluted share compared to net loss of zero point $7 million or <unk> 18 per diluted share for the first quarter of 2021.

Net loss for the first quarter of 2022 was $5.5 million or $0.20 per diluted share compared to net loss of $0.7 million or $0.18 per diluted share for the first quarter of 2021.

Adjusted EBITDA, a non-GAAP measure was negative $4 3 million for the first quarter of 2022 compared to breakeven for the first quarter of 2021.

Adjusted EBITDA, a non-GAAP measure, was negative $4.3 million for the first quarter of 2022 compared to break-even for the first quarter of 2021.

Capital expenditure in the first quarter was $5 9 million compared to $3 9 million in the first quarter of 2021.

Capital expenditure in the first quarter was 5.9 million compared to 3.9 million in the first quarter of 2021.

The majority of spend in the first quarter went towards our new facility.

We also continue to make investments in our current production facility.

We also continue to make investments in our current production facilities.

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.

Free cash flow, a non-GAAP measure, which we defined as cash provided by or used in operating activities less purchases of property plant and equipment in the first quarter was negative $11 1 million compared to negative $1 5 million in the first.

Free cash flow, a non-GAAP measure, which we define as cash provided by or used in operating activities less purchases of property, plants, and equipment.

in the first quarter was negative $11.1 million compared to negative $1.5 million in the first quarter of 2021.

<unk> 2021, this decrease compared to the prior year period was primarily due to lower adjusted EBITDA and a significant increase in capital expenditures.

This decrease, compared to the prior year period, was primarily due to lower adjusted EBITDA and a significant increase in capital expenditures.

Turning to the balance sheet, as of March 31st, 2022, we had $76.5 million in cash and cash equivalents and $12.0 million in gross debt.

Turning to the balance sheet.

As of March 31, 2022, we had $76 5 million in cash and cash equivalents and 12.0 million in gross debt.

In May 2022, we amended our existing credit facility to increase the amount available under our credit facility by $30 million to $57 million.

This new financing helps ensure we will have the capital to execute our domestic organic growth plan.

Turning to our 2022 revenue guidance and outlook.

Turning to our 2022 Revenue Guidance and Outlook.

Strong first quarter results give us the confidence to raise the low end of the full year 2022 revenue outlook, our new revenue guidance is 45 million to $48 million.

Strong first quarter results give us the confidence to raise the low end of the full year 2022 revenue outlook. Our new revenue guidance is $45 million to $48 million.

At the midpoint this guidance assumes revenue growth of greater than 30% as compared to 2021, excluding sample transport.

At the midpoint, this guidance assumes revenue growth of greater than 30% as compared to 2021, excluding sample transport.

With respect to product categories, we continue to expect lab essentials revenue growth of approximately 25% compared to 2021, and clinical solutions revenue growth of at least 60% compared to 2021.

With respect to product categories. We continue to expect lab essentials revenue growth of approximately 25% compared to 2021 and clinical solutions revenue growth of at least 60% compared to 2021.

While we have not provided and theyre not giving specific guidance on our expected spend I will reiterate that 2022 will be another year of aggressive investment as we strengthen the foundation for our future growth plans we.

While we have not provided and are not giving specific guidance on our expected spend, I will reiterate that 2022 will be another year of aggressive investment as we strengthen the foundation for our future growth plan.

You will continue to invest in capacity expansion and across marketing, sales, G&A, and R&D.

We will continue to invest in capacity expansion and across marketing sales G&A and R&D.

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 facility and make other investments in current facilities in 2022. With that, I'll

This will also be another year of significant capital investment and fixed assets as we expect to fund the balance of the cost of our new facility and make other investments in current facilities in 2022.

With that I'll turn the call back to Steven.

Thanks, Pat overall, we are pleased with our first quarter 2022 performance and the progress we have made against our strategic priorities. We will now take your questions.

Thanks, Matt. Overall, we are pleased with our first quarter 2022 performance and the progress we have made against our strategic priorities. We will now take your questions. Thank you. As a reminder, to ask a question, you'll need to press

Thank you.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key.

And why is the compile the Q&A roster.

And our first question comes from Matt Larew of William Blair Your.

Your line is open.

Hey, good afternoon guys.

Hey, good afternoon, guys. I wanted to first ask about sort of customer behavior sentiment amid the market backdrop and software funding environment. You sit fairly upstream in some cases with your lab essentials business and obviously working with a lot of earlier stage biotech companies with your GMP business. So I'm just curious over the past couple of months what you've seen either from forward-looking ordering behavior or any rationalization of pipelines. It would be great to hear how those kind of.

Wanted to first ask about sort of customer behavior sentiment.

Market backdrop.

After funding environment, you said fairly upstream in some cases with you a lot of Central's business and obviously you've worked through a lot of earlier stage biotech companies with your G&P business. So just curious over the past couple of months. What you are seeing either from a forward looking ordering behavior.

Or any rationalization of pipelines.

Great to hear all the time.

Please go ahead.

Great. Thanks, Matt. So I think I'll start just by saying that we do not see any slowdown in the order demand, right? So we're still seeing the growth that we expect, and in fact, we're seeing quite a bit of interest in our custom and our GMP products.

Great. Thanks, Pat So I think let's start with by saying that we do not see any slowdown in the order demand alright. So were still seeing the growth that we expect and in fact, we're seeing quite a bit of interest in our customer and our GMP products.

And.

There's nothing in that pipeline that I think that allows us to think that that's going to change in the near

There is nothing in that pipeline that I think that allows us to think that thats going to change in the near term.

Loud and clear.

loud and clear. Second, just on the clinical solution side, you mentioned a couple of larger orders coming in. I'm curious if those were anticipated or maybe got pulled forward, and then anything you could give us just in terms of the growth of the active customer base and anything on the cell and gene therapy side to help us kind of frame out where the quarter came from? Yeah, maybe I'll just...

Second would be just on the political solution side, you mentioned a couple of larger orders coming in I'm curious if those were anticipated or may be got pulled forward and then anything you could give us just in terms of the growth of the active customer base and.

Anything on the cell and gene therapy side to help us kind of frame out where the district in the quarter came from.

Yes, maybe I'll just take that one first Matt.

Yes, I mean at this point in time, given the size of our business, particularly in the clinical solutions will see orders across.

Yeah, I mean, at this point in time, you know, given the size of our business, particularly in the clinical solutions, we'll see orders across, you know, a variety of different levels. We have some customers that are just

A variety of different levels, we have some customers that are just starting with us that are ordering in a smaller quantity and then we have customers that have been with us for a while that may be ordering in larger quantity. So I would just say that these are these are natural order patterns. There are fluctuations and in this case of Q1 as you can see we had a couple of.

And then we have customers that have been with us for a while that may be ordering in larger quantities. So I would just say that, you know, these are natural order patterns. There are fluctuations. And in this case of Q1, as you can see, we had a couple of larger ones fall in the same quarter, and that led to the result here. So I don't think that there's any major issue there. I don't think that there's any...

The larger ones fall in the same quarter and that led to the the results here. So I don't think that there is any.

strong reason behind just being in Q1. It's just the natural ebb and flow and where things landed this particular quarter.

Strong reason behind just being in Q1, it's just the natural ebb and flow and where things landed this particular quarter. So.

<unk>.

As we reiterated in the comments, we just made here.

As we reiterated in the comments we just made here, we would not expect that level to continue into the next quarter. We're still confident in the outlook for the full year of greater than 60 percent growth, but we did have a strong Q1 in clinical solutions and we're happy with that.

Not expect that level to continue into the next quarter, we're still confident in the outlook for the full year of greater than 60% growth, but when.

We did have a strong Q1 in clinical solutions and we're happy with that.

Okay, and then just the last one would be I think on the last call.

Okay, and then the last one would be, I think, on the last call, you talked about being comfortable with the capacity you had on hand and give the ability to flex to 24-7 shifts, but obviously, Stephen, you're alluding to your continued very strong demand from customers, and it's good to hear how else they're on track, but not coming online till the end of the year. So, you do feel comfortable with sort of your capacity and ability to meet customer demand with the timeline expectations ahead of the opening at the facility later this year?

Talked about being comfortable with the capacity you have on hand, and get the ability to flex to $24 seven shifts, but obviously sticking youre alluding to.

Very strong demand from customers and it's good to hear Hollister on track, but not coming online till the end of the year. So you do feel comfortable with sort of your capacity and ability to meet customer demand with the timeline expectations ahead of the LP at the facility later this year.

Yes, that's correct. So the facility is still coming online at the end of the year tracking really well to that in addition, adding these extra shifts and rolling out some of the new automation that we have right now we're very comfortable with the guidance that we provided for the year.

Yeah, that's correct. So the facility is still coming online at the end of the year, tracking really well to that. In addition, you know, adding these extra shifts and rolling out some of the new automation that we have right now, we're very comfortable with the guidance that we provided for the year to meet that demand. Okay, that's great. Congrats on another strong quarter.

To meet that demand.

Okay, that's great congrats on another strong quarter.

Thanks, Matt Thank you.

Thank you.

Our next question comes from Max Masucci of Cowen.

Your line is open.

Hi, This is Stephanie on for Matt. Thanks for taking my questions and congrats on a great quarter.

Hi, this is Stephanie on for Max. Thanks for taking my questions and congrats on a great quarter. Um, first one on your Salesforce. So have you.

First one on your sales force so have you seen any.

additions to your commercial organization, or have you added any new commercial efforts since coming public to call out this quarter? And as you're looking at your growth trajectory over the next two years, how should we think about the growth being driven organically by your customers, shift from stock to customized offerings, and from RUO to GMP grade products, and the portion driven by outbound sales and marketing efforts?

Additions to your commercial organization or have you added any new commercial first.

I'd like to call out this quarter.

Looking at your growth trajectory over the next two years, how should we think about the growth being driven organically by your customers shift from stock to customize spring and are you out the GMP grade product and the portion driven by outbound sales and marketing efforts.

Okay.

Great. Thanks, Stephanie So first on the sales force, yes, we continue to build out the commercial organization in November we hired our Chief commercial Officer can go house, and our senior Vice President marketing, Jennifer Henry they've begun to build out those organizations.

Great. Thanks, Stephanie. So first on the on the sales force. Yeah, we continue to build out this commercial organization. In November , we hired our chief commercial officer can go house.

and our Senior Vice President of Marketing, Jennifer Henry. They've begun to build out those organizations.

We've made a lot of progress as you can see the number of headcounts from December is up 15%

Made a lot of progress as you can see the number of head count from December is up 15%.

And many of those are actually in that commercial organization.

We expect to have those teams in full function order by the end of this year to start driving and building up the demand for our new facility as it opens. So we're making really good progress there. Obviously, we're building from almost nothing to start with here. So it takes some time to ramp up and, of course, once we start onboarding customers, there is a bit of that migration, as you mentioned in your next question.

We expect to have that as those teams and full function in order by the end of this year to start driving and building up the demand for our new facility Hasnt open. So we're making really good progress there obviously, you're rebuilding from almost nothing to start with here. So it takes some time to ramp up and of course once we start onboarding customers there is a bit of.

That migration that you've mentioned your next question from stock accustomed to GMP, taking time to kind of go through that pipeline with those customers.

from stock to custom to GMP, taking time to go through that pipeline with those customers.

On the outbound versus the migration, we actually see it one of the same. So we have a large set of accounts in the United States of over 3,000 active accounts. The vast majority of those are buying what we call catalog or stock products from us. And we are starting to see that shift towards the custom and then obviously, and you see it now in the clinical solutions.

On the outbound versus the migration, we actually see it one of the same so we have a large set of accounts in the United States of over 3000 active accounts. The vast majority of those arent buying what we call catalog our stock products from us and we are starting to see that shift towards the customer and then obviously.

And you see it now in the clinical solutions.

side when they move to GMP. A lot of those customers, the outbound work will be focused on migrating those customers since we're in almost every major account in the United States already.

Aside when they move to GMP.

Lot of those customers to outbound work will be focused on migrating those customers. Since we're in almost every major accounts in the United States are ready.

So hopefully that answers and provides a little clarity there.

Got it that's helpful. Thanks for that.

Got it, that's helpful, thanks for that color. And then focusing on your customer base, if you were to group your customer base by type, how would you describe the growth you're seeing from biotech, biopharma, and CMOs slash CDMOs, the tools and diagnostic companies? You know, is there, is growth breaking out within any of these specific segments or sub-segments of like biotech and biopharma?

Color and then focusing on your.

Customer base, if you look at group your customer base by type how would you describe the growth youre seeing.

From biotech Biopharma.

CMO slashed CMO tools and diagnostic company is there.

Sure.

This growth breaking up within any of these specific segments or sub segments.

I would like biotech and Biopharma.

Yeah, so we take a look at that internally. We don't share those details, obviously, with the broader public. However, I will say there's not one particular sector that is driving the majority of the growth. We are seeing this across the board, for the most part. And we do service, like you said, small, mid-sized biotech, CMOs, CMOs, pharma, life science tools, and molecular diagnostics. And we see strong underlying growth across the board.

Yeah. So we take a look at that internally, we don't share those details obviously with the broader public. However, I will say there is not one particular sector that is driving the majority of the growth we.

We are seeing thats across the board for the most part and we do service like you said small midsize biotech CMO CMO.

Pharma life science tools, and molecular diagnostics, and we see strong underlying growth across the board.

That's helpful. And one more from me. So you delivered a nice beat on the clinical solutions revenues versus our model this quarter. And I know you mentioned that you delivered some larger orders this quarter.

Got it that's helpful and one more from me.

<unk> delivered a nice beat on the clinical solutions revenue in the first is our model this quarter and I know you've mentioned that you've delivered some larger orders this quarter.

Apologies if you commented on your prepared remarks, but do you have any visibility into additional large orders to come in the coming quarter?

I apologize.

Commented on your prepared remarks, but do you have any visibility into additional large orders.

Coming quarter.

So maybe I'll start and then feel free to chime in.

We have visibility from an annual basis. I think the challenge we have as the business, the size of some of the size of these orders are, is really which part of the, whether they fall in, which quarter they actually fall in.

We have visibility from an annual basis I think the challenge we have as a business. Besides environment. Some of the size of these orders orders are is really which part of the whether they fall in which quarter they actually fall in some.

Some customers are very specific about the timing in which they want those delivered. And so, you know, from a predicting from an exact quarter to quarter basis, it's kind of a lumpy business. But from an annual basis, we see a strong underlying flow and are confident in the guidance that we've provided.

Some customers very specific about the timing in which they want those delivered.

And so from a predictive for my exact quarter to quarter basis.

It's kind of a lumpy business, but from an annual basis, we see a.

A strong underlying flow and are confident in the guidance that we've provided.

Yeah, and I just I'll just add on to that by saying, you know, for us, as we mentioned about the clinical solutions business in the past, there is this

Yes, and I'll, just I'll, just add onto that by saying for us as we mentioned about the clinical solutions business in the past there is this.

You know, spread of customer types within that summer early with us and still ordering in smaller quantities than the more mature customers that have been with us for a bit longer. And, as Stephen said, on an annual basis, we know that that's going to smooth out. From a customer perspective, where we are focused on with clinical solutions is the number of customers.

Spread of customer types within that some of our early with us and still ordering in smaller quantities than the more mature customers that have been with us for a bit longer.

And.

As Steven said on an annual basis, we know that that's going to kind of smooth out.

From a customer perspective, we are focused on with clinical solutions as the number of customers and we have seen an increase again in the number of active customers, particularly when compared to the trailing 12 month period, a year ago. So things are progressing there, but these the timing of these orders is difficult to predict for a number of reasons.

And we have seen an increase, again, in the number of active customers, particularly when compared to the trailing 12-month period a year ago. So things are progressing there, but the timing of these orders is difficult to predict for a number of reasons. Got it. Understood. Congrats again, and thanks for taking my question.

<unk>.

Got it understood Congrats again and thanks for taking my question.

Thanks, Stephanie.

Thank you.

Again to ask a question. Please press star one on your telephone to withdraw your question. Please press the pound key.

Our next question comes from Jason Johnson of Stephens.

Your line is open.

Hey, good afternoon, guys and congrats on a nice quarter just one more on these large orders I mean is that a sign or a positive signal that you have some customers moving their therapy, maybe through the clinical trial process is this some customers kind of platforming or <unk>.

Hey, good afternoon, guys, and congrats on this quarter. Just one more on these large orders. I mean, is that a sign or a positive signal that you have some customers moving their therapy maybe through the clinical trial process? Is this some customers kind of platforming or onboarding onto your products? Is there any other color you can give as to kind of why you see these larger orders?

On boarding onto your products is there any other color you can give events.

Why you see these larger orders in.

If you don't want to comment, feel free to tell me to stop there.

If you don't want to comment.

Feel free to tell me to stop there.

Thanks for the out there, but I do think it's very, it's positive, right? We are seeing

Thanks for the out there.

And look I do think I.

I do think it's very it's positive right we are seeing <unk>.

larger orders come through, and like we said, the quarter-to-quarter lumpiness can be challenging when you start predicting from a quarter perspective.

A larger orders come through and like we said the quarter to quarter Lumpiness. It can be challenging when we start predicting from a quarter perspective.

But, you know, some of these are customers clearly moving down that pipeline and ordering from CMOs and things like that. So, you know, as we reported at the end of the calendar year, the migration of our total cell and gene therapy customers, right, not only has that gone up, but it's actually started migrating that pipeline from catalog to custom to clinical, and I think we're going to refrain from giving a little bit of those metrics until we get to another annual basis for that.

But some of these are customers clearly moving down that pipeline and ordering from CMO and things like that so.

As we reported at the end of the calendar year, the migration of our total cell and gene therapy customers right now has that gone up but it's actually started migrating that pipeline from catalog accustomed to clinical and I think we're going to refrain from giving a little bit of those metrics until we get through another annual basis for that.

Okay, Perfect and then just on lab essentials kind of up modestly in the quarter, but youre still looking for pretty robust growth in that segment for the year.

Okay, perfect. And then just on lab essentials, kind of up modestly in the quarter, but you're still looking for pretty robust growth in that segment for the year. Was this just a tough comp or maybe also just touch on kind of the visibility into revenue growth accelerating in that segment for the balance of the year?

Is this just a tough comp maybe also just touch on kind of the visibility to revenue growth accelerating in that segment for the balance of the year.

Yes, I'd say, it's a little bit of both right in that it is a tough comp.

Yeah, it takes a little bit of both, right, in that it is a tough comp.

from the previous year in some sense. But also remember that LabEssentials includes the catalog products, which those average orders are in the thousands, and the custom products, which you're starting to see those average orders in the hundreds of thousands, tens of hundreds of thousands.

From the previous year in some sense, but also remember that lab essentials includes the catalog products, which those average orders are in the thousands in the custom products, which youre starting to see those average orders in the hundreds of thousands tens to hundreds of thousands and at the base that we're at from a revenue standpoint of around $7 million.

And at the base that we're at from a revenue standpoint of around $7 million, a change in those has a pretty significant impact on the growth. But what we can say is when we look through the order flow and the demand, that we're confident in the approximate 25% guidance we've given on LabEssentials. So that underlying business is still looking good.

A change in those has a pretty significant impact on the economy growth.

But what we can say is when we look through the order flow and the demand that we're confident in the in the approximate 25% guidance. We've given on lab essentials. So that underlying business is still looking good to us.

Okay, and then just last question, just kind of a clarification. The credit facility expansion, I think you're pretty clear that this is for organic domestic investments, so fair to assume this will not be used for M&A, and then maybe I'll also just get your pulse on the outlook for M&A in the current environment.

Okay, and then just last question.

Just kind of a clarification on the credit facility expansion I think you are pretty.

Clear that this is for organic.

Mastic investments.

So fair to assume this will not be used for M&A and then maybe also just to get your pulse on on the outlook for M&A in the current environment.

Yeah, we're real pleased, of course, about the expansion of the credit facility, giving us access to additional capital.

Yes, yes.

We're real pleased of course about the expansion of the credit facility, giving us access to additional capital.

And that's right, this is intended for our domestic organic growth plan.

And that's right. This is intended for our domestic organic growth plan that's.

That's not to say that we're completely stepping out of the possibility of M&A. We'll continue to evaluate opportunities as they may present themselves, and depending on where and what that is, we'll address the capital need for that at the time. But for us, since we have a strong organic growth opportunity, we want to make sure that we add...

That's not to say that were completely stepping out of the possibility of M&A. We will continue to evaluate opportunities as they may present themselves and depending on where and what that is will we will adjust the capital need for that at the time, but for us since we have a strong organic growth opportunity wanted to make sure that we had.

The capital that we need to make sure that we can get this done regardless of economic conditions or anything else like that so we're very happy to have concluded that with our with our lender.

know, the capital that we need to make sure that we can get this done regardless of economic conditions or anything else like that. So we're really happy to have concluded that with our lender.

And I'll just touch on that M&A front, Jacob. We're still interested, as Matt just mentioned, that we have a very strong organic plan. It has to be a very good fit that matches our strategic initiatives, whether that be expansion globally or products that are adjacent that we can fit into the sort of investments and infrastructure that we're putting together here. So pretty selective there, but that doesn't mean that we've stopped looking. Thanks.

And I'll just touch on.

Taking the question sorry, sorry, I was just going to touch on the M&A front Jacob.

We're still interested.

As Matt just mentioned that we have a very strong organic plan. It has to be a very good fit that matches, our strategic initiatives, whether that be expansion globally or products that are adjacent that we can fit into the sort of investments in infrastructure that we're putting together here so pretty selective there, but that doesn't mean that we have stopped looking.

Got it thanks for taking the questions.

Thanks Jacob.

Yes.

Thank you.

And speakers I do not see any more questions in the queue.

And speakers, I do not see any more questions.

This will conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

This will conclude today's conference call. Thank you all for participating. You may now disconnect.

Hey!

Yes.

[music] Cogs.

Okay.

Sure.

Alright.

Yes.

[music] revenue.

Hum.

Thank you.

Okay.

Hum.

Yes.

Okay.

Yes.

Q1 2022 Alpha Teknova Inc Earnings Call

Request a DemoDemo

TKNO

Alpha Teknova

Earnings