Q2 2022 Berkeley Lights Inc Earnings Call
Once you take technology.
On our last earnings call in early May.
I shared my plan to spend my first hundred days at Berkeley lights, reviewing our business strategy.
Including four key leadership positions and engaging with key stakeholders.
I have assessed the companys current situations comprehensively.
Speaking with customers.
<unk> employees and industry partners to make informed decisions on how to move the company forward.
It is clear to me that the <unk> pioneer entirely new process by rich functional biology at a cellular level could be researched and applied integrity discoveries with unprecedented speed.
However.
Adoption of this technology.
Must evolve our organization.
The new <unk> leadership team.
Turning the page and focusing on building a diverse life sciences tools and services company with a culture of innovation.
Customer centricity.
And a commitment to excellence and quality.
We have updated our near term strategy and execution plans focusing on five key pillars.
Number one Joe.
<unk> generated positive operating cash flow by early 2025.
We will do this by building a growing profitable and sustainable business verses pursuing growth at any cost.
This will be accomplished through exploration and supported by an updated market driven product portfolio and pricing strategy.
And this simply expense and cash management.
We expect to generate positive operating cash flow at $150 million of revenue.
The management has taken initial steps to reduce operating costs through a global workforce reduction of approximately 12% in July 2022.
And an optimized business structure.
And processes.
This resulted in an immediate decrease in operating costs and working capital requirements.
Other cost saving initiatives, we expect to reduce our cash burn to approximately.
$30 million in 2023.
Number two.
The amortized R&D return on investment through increased focus and rigor on development initiatives.
We will only dedicate resources for the highest value projects.
In our partnership and our services business. This means that the highest throughput functional screening service agreements.
Must support our margin and profitability goals as.
As well as create the opportunity to participate in downstream economics, such as milestone payments and royalties when appropriate.
In the near term, we are committing resources to partnerships and services business to accommodate the growing interest from a diverse set of companies in partnering with us.
Typically in the gene therapy, and viral vector development and manufacturing space, where there is significant market demand and.
Our technology provides a highly differentiated solution.
In Q2.
Elisa validated the unique capability of our <unk>.
That form to select and three high value stable producer cell lines that will improve the cost.
Therapeutic relevant yields for manufacturing.
<unk> based gene therapies.
The bulky lights workflow text, roughly 10 days to screen up to 3000 cell lines.
Namely an unprecedented timeline and throughput that allows us to discover rare clones at a speed and cost that no other technology can match.
The cost of AAV production is widely regarded as the most significant constraint in this segment of the gene therapy industry and we believe that both realized technology is the long sought solution.
There are a growing number of.
Clinical trials every year.
With 353 clinical trials and clinical studies in 2021.
And projected to reach 850 by 2025.
We will partner with CDO bonds and gene therapy companies.
To enable them to meet the largely unmet demand of the significant number of potential growth to hit the market in the next 10 years.
Given initial market and customer interest in this Berkeley lights capability. This could be game changing in the industry and the Companys largest return on investment opportunity in the near term.
While our partnership and services team has experienced strong demand for many applications.
We intend to dedicate a majority of that team to the development of this workflow and the balance of 2022.
And in 2023.
Okay.
We believe another emerging opportunity is in TCR discovery.
As communicated in our press release last week.
<unk> partnered with the.
<unk> Leandro foundation for therapeutic cancer vaccines.
To demonstrate that our high throughput screening platform can be used to discover novel T cell receptors from patient blood in a one week workflow.
Tcs offer a powerful new therapeutic modality to target some of the most challenging human diseases, but it has been historically limited in market adoption.
Because the difficulty to discover TCR.
<unk> proven to be functional against the target antigen.
Now that we have validated our platform can rapidly.
Select functional TCR.
Partnerships and services team is actively exploring commercial partners interested in this significant opportunity.
I'm also excited about the strategy of our instrument platform business.
We plan to launch three new configurations of our system in the next three years because of which I will share in just a few minutes.
Finally, we will seek out commercial for technology partners, who are relevant.
Or explore developing a strong.
Our licensing technology model.
We are currently in discussions with several potential industry partners for cell therapy initiatives.
Number three.
Deliver consistent commercial execution through our new sales structure and enhanced product portfolio and pricing strategy.
We made two internal appointments over the last quarter.
Promoting doctor you again to general manager of the platform business and after Troy Lionberger to general manager of the partnerships and services business, most UA and Troy has been with Berkeley lights for more than six years.
They have previously served in sales and commercial positions in the company and have a deep understanding of our technology.
And end markets.
I am grateful for the ongoing leadership and confident in their abilities to lead our team.
To the next phase of growth.
We have completed an in depth analysis of our markets.
Unmet customer needs in.
In various segments.
Are those recognized capabilities in antibody discovery and cell line development have enabled many biopharma customers.
<unk> and <unk> in their therapeutic discovery and development.
We believe our technology can also provide significant value in high growth academic research segments. For example, gene editing and immuno oncology applications.
Starting to form academic collaboration pilot programs to help inform the design of these new applications.
Turning to our product and pricing roadmap.
We recognize the need to provide optionality for customers to access our technology.
To support this we are materially enhancing our approach to the market with the introduction of a more flexible.
Aggression and pricing strategy that encompasses the total cost of ownership.
Beginning in 2023.
We will launch application specific models of the beacon system each year.
Culminating in the launch of the Beacon light platform in 2025, a low cost bench top Dubai with segment specific versions.
We believe broadening our portfolio.
Our platforms will allow us to access a wider array of potential customers in the market with products that are more tailored to their needs and budgets.
In addition, we will expand our access programs that offer financing options.
Number four.
Building a world class leadership team with a proven track record and profitably scaling life Sciences tools companies.
On our last call I shared our goal to build a world class lifestyles that leadership team and bring onboard individuals with proven track record of success in our industry.
And then you announced three key executive leadership hires.
<unk> Joshi.
New Chief Financial Officer.
After Rolando.
To the newly created position of executive Vice President strategy and corporate development.
Lucas vitality.
Human resources Officer.
I'm thrilled to welcome Mahle, Rolando and Lucas to the Berkeley lights leadership team.
<unk> has more than 25 years of experience in financial leadership roles.
He has been a lot of financial and operational knowledge experience building and leading global finance teams and strategic mindset will be invaluable to our efforts to fully unlock the value of Berkeley lights.
Orlando is a highly experienced corporate development leader with robust scientific expertise.
The London most recently.
As Vice President of services of Technology Alliance advances at Danaher and in several calls for development positions at exact sciences and genomic health.
So a lot of those experienced also including <unk>.
Leading thermo Fisher scientific global strategy for out licensing and commercial supply for the company's life Sciences solutions group.
Lucas Michael It brings more than 20 years of human resources experience in the life Sciences and medical device industries.
Prior to Berkeley lights.
He has served as senior Vice President of human resources at Arena Pharmaceuticals.
And as Chief Human Resources Officer Retina, Brazil.
To that Lucas spent 10 years at life technologies, where he was an integral member of the global HR leadership team and served on the company's acquisition and the integration team very supported the scaling of the company from several hundred to nearly 10000 employees.
As I discussed in my first earnings call in Maine.
My own experience is having a good scaling life sciences businesses in both public and private equity based companies.
My leadership team and I are putting in place processes to shift to a performance driven culture across all functions.
This will be critical to our efforts.
Effectively scale.
Our business and enhance our market position through targeted investments and strong execution.
Electively the new leadership team has the experience needed to build a diverse life sciences tools and services company.
Number five.
Evaluate M&A opportunities.
Help us accelerate profitable growth.
Leverage our current cost structure.
Okay.
All of the past quarter.
We have conducted and synthesize market research to understand customer.
Customers' unmet needs and competitive dynamics.
This research will help us formulate data driven decisions on what markets to expand into.
And what inorganic options will be complementary to our business and technology.
We expect to pursue.
Merger and acquisition options that expand.
Our total addressable market and or provide leverage to our.
SG&A and R&D expense picture.
We believe by focusing on these five pillars that I described.
And plus from Berkeley lights.
From a technology platform company to a diverse life sciences tools and services company.
We will continue to advance important changes to our business.
The rest of this year to lay a strong foundation.
We have immense opportunities ahead of us.
We have a strong plan in place to achieve our strategy to create value for our shareholders now I would like to turn the call over to <unk> to discuss our second quarter 2022 reserve.
Thank you Sudhakar.
I am excited to join the Berkeley lights team and.
And eager to build on the Companys strong foundation is a revolutionary innovator and continue to help scientists make extraordinary breakthroughs.
Looking at our results for the second quarter 2022.
Total revenue was $19 2 million.
Down 1% compared to second quarter 2021.
By geography.
North America accounted for 52% of total revenue in the second quarter.
Followed by APAC at 37%.
And EMEA at 11%.
During Q2, we experienced the same macroeconomic conditions that our industry is facing.
Including elongated sales cycles and tightening of Capex budgets.
Correct platform revenue was $6 4 million in.
In the second quarter 2022.
Compared to $11 4 million in prior year.
Our installed base grew by five placements during the second quarter of 2022.
Two a total installed base of 120 platforms.
Recurring revenue was up 50% to $5 9 million in the second quarter of 2022.
Compared to $3 $9 million in prior year.
Revenue from the partnership and services business increased by 74%.
To $6 8 million in the second quarter 2022 <unk>.
Compared to $3 9 million in the prior year.
Gross profit for the second quarter of 2022 was $12 $9 million.
Compared to $12 7 million in the prior year.
Gross margin for the second quarter of 2022 was 67% compared to 66% in the second quarter of 2021.
The increase in gross margin year over year was due to a higher mix of recurring revenue.
And partnerships and services.
We expect the Companys strong gross margin to provide significant operating leverage as we execute our strategy.
Operating expenses in the second quarter 2022 or.
$38 5 million.
Inclusive of $6 6 million of stock.
Based compensation.
Compared to $36 million in the prior year.
Inclusive of $5 6 million of stock based compensation.
Operating expenses in Q2 2022 included.
$18 $2 million in R&D.
13.
Zero $1 billion in G&A.
And $7 3 million in sales and marketing.
Net loss for the second quarter 2020 to $25 $7 million.
Compared to a loss of $18 2 million for the prior year period.
All net loss numbers are inclusive of stock based compensation.
We ended the quarter with cash and short term investments of $152 $4 million.
Our available liquidity is $162 $4 million, which includes our revolving credit facility.
Now turning to revised guidance for full year 2022.
Following the strategic business assessment by management, Berkeley lights, now expects full year 2022 revenue to be approximately in line with full year 2021 revenue.
As we put in place processes.
To execute against our updated business strategy.
Okay.
Siddhartha discussed we are laying a strong foundation this year to achieve our goal of generating positive operating cash flow by 2025.
With that I will turn the call back to Sudhakar.
Thank you Mitchell.
As I close out my formal remarks, I wanted to reiterate that I have enormous confidence in Berkeley lights.
The ability to capture the opportunities ahead of us as they accelerate the adoption of our.
Our technology.
The changes we are making will help us manage our costs and focus on the right objectives to build a growing profitable and sustainable business.
We look forward to sharing progress achieved against our new operating strategy in the coming months.
During an investor day planned for later this year.
With that.
We will now open it up for questions.
Operator.
Yeah.
If you would like to ask a question simply press star one on your telephone keypad.
We will pause a moment to compile the roster.
Yeah.
We will now take our first question from.
So Josh <unk> with Morgan Stanley .
Hey, guys.
Hey, guys good evening and thanks for the time here.
So that one for you to kick things off here.
I know you mentioned this the plan to launch apps specific instruments starting in 'twenty. Three can you just elaborate on what that means for your subscription model are you now sort of deemphasizing that in favor of.
More capex focused model.
Great question, David No I think we are going to continue to provide.
Access models and in fact are going to add more sort of on lease to own financing as well, but as we have learned.
Customers actually like to buy it outright.
And for them, we want to offer more flexible pricing and reduced features been appropriate. So we are going to actually bring down the.
There's a continuum of our pricing all due to the launch of the backstop device, but throughout the next three years, we will actually focus on total cost of ownership. So not just focusing on our platform itself, but what was the price of consumers going forward and we have a pretty good model that we run through that.
Net net.
Positive value by doing that over the next two years.
Got it that's helpful. And then in terms of your plan to launch this the low cost of Beacon light I think you mentioned 2025 there.
How exactly would that be different from the lighting platform.
That you have on the market today.
It's going to be significantly reduced version of the beacon.
Lightning and began a very different sub not going into all the technical details, but there are some features about <unk> customers. This absolutely low and have come to appreciate lightning was a good concept for an academic market, but the price point was still significantly high.
And as we look at it from a broader adoption of our technology in cell biology community. We believe that we can significantly reduce the cost structure and bring.
The applications that are specific to gene editing workflows immuno oncology workflows as well as general cell biology level at the environment. So it's totally different.
Platform compared to what lightning was.
Got it and just a follow up there. So is it fair to assume that the lighting is now essentially shelves and then last one for me.
Just curious as to your thoughts on the on the cell therapy manufacturing system and timelines for that.
Yeah, Great question. So on lightning it is not shown as much as we're going to use the lightning as a way to collaborate academic community. So that we can see the next generation platform is designed to fulfill all of their needs and no more no less so if you're going to use so have reduced versus the beacon as well as lightning.
To work with academic community in the next two years to inform our sort of full launch of that.
Lifetime form.
On the on the cell therapy manufacturing systems, we have decided that we will not do that alone.
That we will actually find a commercial partner as you know it's an incredibly.
Hot area with a lot of sort of.
Regularly expertise acquired and investment acquired debt frankly, virtualized alone should not do and as such we have very unique and differentiated things we bring to table, but if you don't bring the commercial capabilities that they're at the table. So we are in active discussions with multiple players who are very interested in accessing our.
Our technology for the cell therapy manufacturing space.
Okay.
Got it very helpful. Thank you.
Your next question comes from the line of Dan areas with Stifel. Your line is open.
Okay. Thanks for the question.
So you mentioned that focuses on total cost of ownership.
It sounds like you have your hands around the model there I'm just curious what that model sort of.
Its out and suggest it might be the breakeven timeline for a customer where a lab can recoup the investment that's made.
I think it depends on the customer's application for some customers and I think they are actually already getting significant benefits from the <unk> platform and ROI is paid up estimate they buy in and as they look.
But of course, because dual actually becomes live in their lab and some customers case, depending on the application need it may be a longer cycle and that's exactly what we are focusing on is to meet the customers where they are on their workflow needs.
Okay helpful.
And then just maybe on the general strategy and going back to the prioritization exercise.
<unk> can you just maybe give us a sense of what is making the cut and maybe what you won't pursue just so we can draw a distinction between sort of the old scope of the business and the new scope of the business.
Yeah.
Good question I think it's actually.
Not that inconsistent except for one very large team with you that we are not pursuing growth for the sake of growth.
Absolutely focused on profitable growth.
And becoming cash flow positive by 2025, so it is not as such which initiative, it's really which projects, we would pursue and which projects. We would not pursue we're still going to be in a business of launching technology platform that I described in fact more of them, but with an increased focus.
And doing that quickly enough to meet the customers' need and then second on servicing the partnership side, we are not going to try to be everything to every single potential customer, even though if you possibly could apply our tools.
Large variety of applications vague enough pick our battles for where do you think is the highest potential return of our investment of working with our customers whether it is a very significant market demand and I think the AAV vector workflow is a great example of that.
We're working with several different customers in multiple applications, but we are finding that AAV vector workflow is so powerful and such a large demand.
That idea of participants in the market <unk>, but also gene therapy target companies themselves that we believe that that's a place where you'd like to dedicate more resources.
Do some resources from other projects.
Okay.
Okay, and if I could just squeeze a third one here.
Just on the executive higher again in the C suite, what percentage of the key leadership positions you have filled out at this point and if there are some key roles.
Still need.
A person to be modeled in there what's the outlook for getting that done.
They're largely Dan I wouldn't call it 80% mission accomplished.
Okay.
Okay very good I appreciate that.
Your next question comes from the line of Brian Weinstein with William Blair.
Please go ahead guys.
Hey, guys. Good afternoon, thanks for taking the question.
So maybe you could talk a little bit about the.
The reduction enforce that you guys are implementing but 12%.
I think I heard.
You said, it I apologize, but specifically where the workforce reductions are hitting the most in terms of the different pieces of the business and then I have a couple of other follow ups for you asked about.
Yes, Brian Thank you for the question.
We basically optimize our business structure around the business structure, the platform business and services business and we went through in our highest value projects and took introductions were needed. Most of this about 40 employees most of these actually from our.
North America based businesses, but there are some global roles.
We believe this structure is actually pretty consistent for the growth that we need.
So I think it was.
What are the right thing to do.
And again going back to the <unk>.
People are not pursuing growth.
Think of the growth we are actually taking a very surgical approach to project by project.
I've been very critically to thinking about whereas the resources needed going forward for the next two to three years.
Understood and then.
One kind of short term question and one one longer term question, but on the short term.
Talking about 2020.
<unk> being similar to 'twenty, one and I'm quite the back half really has no growth.
You have announced.
Recent Urals here is that simply just a reflection of kind of what youre, saying not pursuing deals in the second half of the year that are kind of growth at any cost and being a little bit more cognizant of that or is that a reflection of the end markets being a little bit softer with funding concerns I'm just curious about the flat year over year.
Year growth that Youre talking about in the second half and then if I can just ask the third question now which is you talked about operating cash flow in early 'twenty five.
Thank you said that that's kind of on a $150 million run rate, which had a 70% gross margin of course implies operating expenses of about 100 million run rate or so thats well below where you guys are today even.
Taking into consideration some of the reduction enforced. So I just wanted to better understand the operating expense structure, you think that you will need.
Two.
Kind of be at that breakeven and just sort of how you get there. That's a dramatic difference I think from from where Youre at today, So sorry for all the questions hopefully they made sense.
Hi, Brian This is <unk> Joshi.
Talking here so just on the.
Updated guidance. So just wanted to mention again that this guidance one.
Determined by the new management team in the structure, we've put in place.
Just generally where we are experiencing experiencing some macroeconomic implications just like the rest of our industry.
Tightening of budgets prolonged sales cycles et cetera.
That being said our pipeline is still very strong.
We.
Expect acceleration of our tool sales in the second half.
This fiscal year.
Somewhat driven by historical seasonality, but also supported by our third pillar in our strategy around commercial execution.
Recurring revenue will continue to grow year on year.
As our installed base growth and demonstrates the value of our platform and then finally on the service business side asset Arthur mentioned.
We are really focused on.
Sure.
Going after contracts and customers.
Around those few areas that he talks about but also I would like to mention that the R&D phase of several service projects have ended and.
We are opportunistically shifting those resources to the viral vector development.
In manufacturing as well as TCR discovery to support our strategic pillar.
Where we are prioritizing R&D investment so this will create.
A bit of a slowdown in the second half of 2022 revenue for the partnership and services businesses.
Yes.
Brian right I think.
<unk> question that you asked which was about the opex structure.
Current opex structure and include stock based compensation. So if you exclude that Youre right you do the math correctly.
<unk> $95 million to $100 million range and as we did the realignment of the business not only we have reduced the head count. We've also significantly reduced our overall cost structure for next year as well. So for example, our cash burn in 2023 is expected to be around $30 million.
Yeah.
Okay I appreciate all the.
The clarification <unk> comments and all of the detail around the new structure. Thanks, guys. That's very helpful.
Thank you.
Your next question comes from Julia Quinn with J P. Morgan. Please go ahead.
Hi, Good afternoon here, that's probably on the question on guidance can you maybe give us more color on your confidence in hitting that full year guidance number considering that you know there might be potential organizational disruption concern.
The current customer Capex budget environment.
I know you alluded to you know commercial execution are you, mainly referring to being more flexible on pricing or are there. Other additional efforts you have plenty.
What's your confidence in that second half.
Julia. Thank you. This is a great question look I think our guidance is inclusive of both.
The risk as well as upside down.
What we communicated to you we feel pretty good about that guidance of course, there are significant changes that organized continually go through as the new management team does its job implementing putting into place the processes to improve our commercial execution and this will include recruiting some new salespeople, making sure that regional matters.
<unk> team is working well and that people are using the sales tools efficiently that we are putting in place right now having said that.
I think we feel pretty optimistic about the guidance then.
Pretty strong about the number we are putting out there.
That's helpful and one clarification on the new product pipeline can you help me understand what the difference between the applications.
Model that you are launching next year versus peak in late.
Yeah.
<unk> also have application specific tools one of the things. We are implementing is to make sure that the customers that are accessing specifically only for the applications. They are usually so making changes into our consumables and software.
Instrument box and what its good applications.
Mainly interested in which allows us to lower the cost of the tool because that tool can be used.
Other applications and actually becomes more efficient tool for that application.
Yeah.
It's tools will be used for cell line development will only be used for cell line development and will not be able to be used for other applications.
But it will be more efficient for cell line development to use.
Got you that's helpful.
Last one from me in terms of business development and M&A opportunities could.
Could you give us more color on you know what kind of opportunities or targets youre thinking of.
And also if you could touch on the out licensing opportunities and that will be great. Thanks.
Got it thank you Julia.
The theme that actually have done this before right here as you can see from the management in the <unk>.
Bringing aboard we've all kind of been there done that in life Sciences tools industry life Sciences tools industry is actually valid for continuing to expand.
The addressable market by technology acquisitions.
We will only pursue technology acquisition spending.
Revenue accretive to us and they actually makes sense to walk on our stated strategy of generating positive operating cash flow by early 2025.
And as.
As you know we have recently taken public company with a significant productivity is very capable on SG&A and R&D platform and anything that provides us a leverage level.
We will continue to look at that we are very selective about that we've studied the market evolve veto wherever you want to place our bets and frankly, given the market dislocations that experience I think right now we believe in the next two years, there will be significant opportunities for his strong leadership team too.
Go ahead and pursue inorganic growth.
Coming back to your second question on partnership opportunities.
The whole industry is kind of ability if you go back 25 30 years.
So much cross licensing between different market participants here.
He likes us truly unique and differentiated platform.
<unk> grown and only utilized by the team there is internal here.
Built a significant and formidable intellectual property position in the marketplace and there's literally nothing else.
In a market that can be compared to delight and ability to do two things.
With lifestyle more than mid life without touching them and <unk>.
Number two keeping them alive.
This is Ed.
But perhaps.
Understood part of book, Therefore, we can keep ourselves which means in all applications you could study those cells after you've actually done some already.
Biological functional assay on them.
So the whole biotech communities are two different types of questions what is happening to different cells under disease condition under different conditions and why is it happening.
Only technology that can allow us to do both.
Our technology, because we keep ourselves alive throughout that process, so instead of doing that ourselves.
I'd like to pursue opportunities to license, our technology to others, who maybe.
Longer than other parts of that question of why.
And partnering with <unk>.
We might go and acquire the ability for us to answer the question why the sales side to make that hopefully that explains it more clearly what we mean by licensed.
King.
Yes very helpful. Thanks for your time here.
Your next question comes from the line of Steven Mah with Cowen. Please go ahead.
Okay, great. Thanks, operator, and thanks for taking the questions.
I.
I apologize if you guys have said this already but maybe im wondering I needed a little bit more color on the applications specific instruments and the beacon light.
Is that more for the CRM, <unk> and CMO channels or.
What specific channels or it goes for individual labs or companies give us a little color.
Yes, Stephen Great question actually Seattle, CDM was who are used to using beacon. They use as a workhorse and we're not actually going after that market with this.
These tools. These tools are more specifically designed for small to medium sized biopharma companies as well as sort of large academic medical centers.
And.
Smaller.
A smaller Seattle, CDM, which are emerging not a large one and as you know there is working on applications like nowadays a significant amount of kind of money that has gone into emergence.
The smaller players, which might have need for flexible budgets and thats because we are going with this application specific models.
Okay. That's helpful. And then a follow up question talking about <unk> and <unk> can you talk about the trends youre seeing in terms of.
Of beacons into those.
Channels space, or just cash conservation and capital expenditure budgets get squeezed.
Yes, Hi, this is <unk>. So we are still seeing continue.
Continued growth in this <unk> space relative to beacons.
Followed by pharma and then the academic market is also starting to pick up in terms of sales.
Yes, just to give you a little bit more color all five of our placements were for new customers.
Okay.
In Seattle and in <unk> and <unk>.
So at the highest users of our consumables.
I think the one thing I wanted to point out which is startup.
In the numbers, but our recurring revenue numbers are starting to <unk>.
Very robustly and the idea of creating a truly the razor razorblade model from bulk livestock.
Is becoming a reality as we look forward to the next two or three years plus.
And our pipeline is built on putting more beacons in place or whatever you want to call them <unk> light Beacon Beacon selected we can license in place.
Over the over the next few years and.
But but go after that recurring revenue stream both for me.
Warranty that our services as well as consumers.
To date.
Okay, Great that's helpful and if it gets sneak one more in.
And this is a follow up on the reduction in force questions you already had.
I'm just wondering if you know.
The risks will potentially impact.
The cadence of signing of new R&D partnerships.
What should we expect as far as the news flow and workflow releases from from your existing partnerships and will those be impacted both by the roofs.
Yeah Steven.
Great question.
So let me spell partnership model I would think about the business not in terms of just the number of partners they've signed but the value we are bringing to the partner.
And how deep we are going into capturing that workflow.
Serving our customers' needs.
And example of AAV vector workflow the value provided is tremendous.
From what I understand the manufacturing capacity for gene therapies is significantly constrained by this SKU and we are.
At least in the early experiments have been proven out and we have a solution for that a significant demand, but we can only sell so many people well.
<unk> services business before Stephen.
And it is important to so the current and existing customers really well and not to overbuild for growth because it doesn't build a sustainable business. So.
There's nobody can give you the exact answer said that you'll need for your models, but we are not focused on a number of customers. We are focused on growing that business as robustly as strong double digits for the next three years.
Okay, great. Thank you.
Your next question comes from Mark Massaro with.
<unk>. Please go ahead.
Okay.
Hey, guys. Thank you for the questions I guess siddhartha.
Revenue from our recurring revenue grew 50% year over year.
The fastest rate of growth since Q1 of 'twenty one.
So I guess, what Im what my question is.
Is that a reasonable target to consider for the back half of the year.
Do you think that could be a potential run rate recurring revenue growth recognizing it is off of small numbers, but I guess, what I'm trying to get at is we all have to lower our beacon.
Estimates in terms of placements. So just help us figure out a way to sort of right size. The recurring revenue run rate with what the Beacon placement run rate might look like going forward.
<unk>.
Sure.
Hi, there. This is made we will again, so I think.
You kind of almost answered the question yourself.
As we put more placements in the recurring revenue growth rate will likely not stay at the 50%, but it will be in somewhere between high <unk> to $2 50, and it will fluctuate.
Overtime.
Okay.
Maybe another question to what extent are you.
Committed to the current configuration of the Beacon there there had been some industry concerns that added $2 million price point that sort of boxes out a lot of potential users. So yes. So multi part question how committed to you all.
How committed are you to the Beacon as currently configured and then can you just.
Provide a little more clarity around the three new configurations over the next three years.
Should we expect one each year and when.
When should we expect the first configuration to be.
Deployed commercially.
Yeah Fantastic question Mark.
We are already doing a pilot in Q4.
For one instrument right now it's already been through the development cycle.
Pretty strong demand for our cell line development.
Application for that.
Launched commercially in 2023.
Most likely in the first half of 2023 in 2024, we will launch another unit.
That would be at even a further reduced features that will be more specific to applications acquired by.
Gene editing workflow and immuno oncology applications and then finally that will culminate into.
Innovation work that is going on in significantly taking the cost out off the vehicle platform remember Beacon platform was actually launched.
Five six years ago, and all of the supply chain and all the technology used in about eight years ago.
Okay.
The technology team has for the last six seven years have continued to experiment with bringing the same technology not all of the features but most of them that are used by customers.
Scott So we've got a lot of in house work that has gone on into taking the cost out of what we call. The <unk>, which is why the beacon lighting is the fleet as we are using for beacon that is going to be launched in 2025.
But we have we have significant headroom on taking the cost out there.
Okay and I also wanted to ask about.
Oh go ahead go ahead, but just to make sure that I answer your question about how committed we are to beacon.
Absolutely committed to supporting customers, who are actually interested in buying will become platform, but we're also aware of the fact that $2 million price point is not the right price point for everybody, which is why we are launching new versions with introduce features.
In 'twenty three 'twenty four as you make the bridge to the 25 with a with a much larger adoption by a very wide range of cell biology laboratories.
Okay is there a point in time, where or maybe maybe that point in time could be now can you give us a sense for.
So it's 2 million might be a little out of reach for some.
How are you thinking about the different pricing configurations.
Presumably some may be below a $1 million, but can you give us a sense for what you think the.
Sort of the appetite is in terms of the capital expenditure for the system.
It's a great question, what I would like to do it at the later at Investor Day.
I will give you a little bit of a hint on is that it is not just the placement and the pricing of the instrument. It will also be what would be the cost of consumables.
The cost to own and access to the technology introduced we will modify the cost of consumption along with that and we have a pretty strong model that shows that actually right from get go if we do it right in the in the ninth month. After the last one was acquired it becomes cash flow positive events.
Yes.
Okay.
Also wanted to ask about <unk>.
Recognizing that you are both new in terms of <unk>.
Having an operational role at the company.
But just going back to the original guidance for the year was 30% growth.
Now you are guiding roughly flat.
It's a $26 million delta so like in simple terms that could be as little as 13 system placements right.
But maybe it's not that simple so maybe can you help us maybe.
Better understand what the Delta is between the current guidance and what it was at the beginning of this year.
And what the factors are.
I think Neil went through it again, but we can go through that again and for the sake of clarity. It really is one I think the most important backdrop that you would appreciate it.
I was asking about our guidance and our forecast when I first started which was my.
<unk> and.
I was evaluating what the current.
Progress is a lot has changed in the macroeconomic environment and the capital cycles in life Sciences tools in Brazil, London, there are significant challenges being faced by not just us but many companies. The large part of it is that another part of it is applying our judgment and frankly not pursuing growth for the stake.
And I can I can tell you that.
A much better shape to how profitable because we believe that we will be.
Turning the page as we move into 2020.
Significant growth ahead of us.
Yeah.
Okay.
I can ask one more and then I'll I'll stop I promise.
The <unk>.
<unk> had some time to assess the business and the end markets of course.
The initial total addressable market from the management team I think was somewhere in the $23 billion to $25 billion range, primarily driven by cell therapy at $15 billion 6 billion for antibody therapeutics.
Viral vectors and Sym bio 2 billion. Each do you still agree with the size of the market and maybe maybe just comment about.
Anything that you think may be different from how you see the opportunity now and the end markets versus how this was sort of.
Presented to investors back at the IPO.
Yes, good question.
Right now.
Pretty significant customer research project.
When we are ready to have an investor day, we will actually deep review with a full estimate of what is the current addressable market.
Study four depth.
<unk>.
My instincts tell me right now based on the early data that it will be smaller.
What it was.
Estimated at the time of the IPO, but it is still in the billions of dollars.
Okay. Thanks for all the questions.
Thank you.
Your next question comes from the line of GARP go parents you.
With Baron Berg capital markets. Please go ahead.
Yeah, Hey, guys just two for me.
Run by you guys. So should we expect pretty consistent or at least similar direct platform sales segment revenues to continue to.
Remain at that Deescalation growth that they're at right now it seems like it's kind of hovering around 30.
36% to 40%.
That current rate relatively in the near term or do you think this is something that we should expect to kind of a turnaround out relatively quickly.
Hi, govern this meeting like in a year or so.
This is <unk>, so I think.
We're.
Our guidance was relative to.
2022, we haven't really.
Provide any guidance around 2023, but as I mentioned in the 2022 guidance we do.
Expect acceleration of the tool sales in the second half of the year.
Relative to.
The first half of the year and again some of it is cyclical but it's also supported by some of the commercial execution things that that will occur around.
But the platform as well as pricing that said Arthur kind of talk through so.
We do.
Expect acceleration in the second half of <unk>.
This fiscal year and as I mentioned, we should see a little bit of a slowdown on the subscription or their platform and services businesses as some of the contracts. The R&D contracts have now ended and we are refocusing our resources on.
The higher value.
Areas that again <unk> talked about.
Okay.
Got it that's helpful. And then just one more from me before I, let you guys go.
More of a general question, how do you guys look to.
Looking at the public view of the company right. How do you look to correct that messaging of the company to the market. The reason I ask is the general public perception of the company in the market given.
The last 12 months or so isn't the most favorable so any color on initiatives that sense on communicating the strategic focus on bigger scale would be helpful.
That's a fantastic question.
Well you.
I've been in life Sciences.
20 years.
I would also new.
In the context of all of that that is going on the company and a perception. My first task was to understand the value and the volatile this technology.
I was sitting on a board for two quarters before that I can tell you by being in the company.
I'm Super excited about the power of the technology.
It's forgotten perhaps in the in the all the publicity of hands that this technology was already use in the most important public health crisis of our time it used to discover the first COVID-19 antibody and in since I've been here I've seen.
Using impact on things.
Things that no other technology can do and allowing scientific breakfast to happen through the use of <unk>.
Like technology.
I am also incredibly encouraged by fashion of our employees get a small company.
Everybody here is here because they have a purpose.
To change the role that have an impact.
And then finally I think what is missing from the company and this is all only time will tell everybody. The leadership team coming here is experience.
It is what we are doing and we are.
Putting in place what was missing in our company, which is a commercial.
Human and fiscal discipline.
But as I say.
The only time will actually.
The narrative as you know.
Yeah.
No of course, thanks for the response and it's great to get taken into account you guys soon.
Yeah.
There are no further questions. Thank you all for attending the Barclays Light second quarter call you may now disconnect.
[music].