Q4 2022 Rapid Micro Biosystems Inc Earnings Call

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Speaker 2: Good morning and welcome to Rapid Microbiosystems fourth quarter and full year 2022 earnings conference call.

Speaker 2: All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session.

Speaker 2: To ask a question you'll need to press star followed by the number one on your telephone keypad.

Speaker 2: You ask a question on the press star followed by the number one on your telephone key bed. As a reminder, this conference call is being recorded.

Speaker 2: I would now like to turn the call over to Mike Bolger, Vice President of Investor Relations and Corporate Communications. Thank you. Please go ahead, sir.

Speaker 3: Good morning and thank you for joining the Rapid Microbioste Systems 4th Quarter and full year 2022 Arne's call. Joining me on the call are Rob Spignathy, President and Chief Executive Officer and Sean Warches, Chief Financial Officer.

Speaker 3: Earlier today, we issued a press release announcing our fourth quarter and full year 2022 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under investors in the news and events section.

Speaker 3: Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker 3: Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements including, but not limited to, statements relating to rapid micros financial condition, anticipated year-end cash balance, cash runway, and future revenue and system placements.

Speaker 3: expectations for business development and growth, customer interest and adoption of the GrowthDirect system, expectations for our new RMB Nucleus Mold Alarm, and the potential impact of macroeconomic uncertainty and the coronavirus pandemic on Rapid Micro's business.

Speaker 3: Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors.

Speaker 3: For a list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the risk factors section of our annual report on Form 10-K filed with the Securities and Exchange Commission on March 24, 2022, as such risk factors are updated in our subsequent filings with the SEC.

Speaker 3: We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Speaker 3: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 3rd, 2023.

Speaker 3: Rapid Micro disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

Speaker 3: And with that, I'll turn the call over to Rob.

Speaker 4: Thank you, Mike. Good morning, everyone, and thank you for joining us to review our fourth quarter and full year 2022 results. On today's call, I will begin with a summary of our Q4 performance, then discuss our growth strategy and why we believe that the actions we have recently taken position rapid micro for a return to solid growth in 2023.

Speaker 4: I will then turn the call over to Sean for a more detailed discussion of our financial results and our guidance.

Speaker 4: Total revenue was $4.4 million in the fourth quarter and $17.1 million for the full year. We placed two new systems in the fourth quarter, including one to a new top 20 pharma customer.

Speaker 4: These results are in line or better than our January preannouncement, as well as the guidance we provided in August and reaffirmed on our third quarter call in November .

Speaker 4: On a cumulative basis, we have placed 125 systems, including 103 fully validated systems.

Speaker 4: and have sold over 3 million consumables, driving strong recurring revenue, which grew by 40% to $11 million in 2022.

Speaker 4: Customers are clearly using the Growth Direct, which speaks to the strength of our value proposition and the robustness of our business model.

Speaker 4: 2022 proved to be a challenging year, with our performance impacted by customer site access limitations and our own execution not meeting our expectations. In response to these challenges, we launched a comprehensive action plan to improve execution, drive efficiencies in the business, and enhance performance.

Speaker 4: As we look forward to 2023, our confidence stems from the improvements we have made in four key areas of our growth strategy. The first is accelerating growth direct system placements.

Speaker 4: The second is developing and commercializing new products. The third is expanding our gross margins by leveraging both internal cost initiatives and scaling the business.

Speaker 4: And fourth is a prudent management of our cash balance.

Speaker 4: which we recognize as one of our most important assets.

Speaker 4: Accelerating GrowthDirect system placements remains our highest priority, and we have enhanced not only our sales processes, but also our customer experience and service organizations.

Speaker 4: We have added focused resources and launched enhanced training programs and new sales methodologies.

Speaker 4: We are expanding our lead generation and marketing capabilities, and we have equipped our teams with new sales tools.

Speaker 4: Also, we continue to expand our focus on key accounts.

Speaker 4: This is important as we partner with our larger customers to support reference selling and in the development of scientific white papers and technical training webinars.

Speaker 4: Last month, we held our annual global sales meeting, and the team is excited about the scale and scope of these efforts.

Speaker 4: In 2023, we expect to attend over 20 events and conferences around the globe.

Speaker 4: Building on the success of the GrowthDirect Day, which held for both current and prospective customers in the fourth quarter, we are planning additional events globally in 2023. We are also planning to meaningfully increase the number of in-person customer events for GrowthDirect demonstrations and system training at our Lowell and Lexington, Massachusetts locations.

Speaker 4: These sessions are focused events that see to deepen our customers' knowledge of the Go Direct system's capabilities and help them more robustly understand its value proposition and use cases.

Speaker 4: We continue to have a robust funnel of system placement opportunities, which includes a strong mix of new and existing customers.

Speaker 4: Our expanded focus on key accounts is important as these customers make up our largest opportunity for multi-system orders within our funnel.

Speaker 4: By product category, biologics, including cell and gene therapies, make up the majority of our funnel.

Speaker 4: as well as global opportunities within the CDMO segment.

Speaker 4: Geographically, opportunities in the US and Europe continue to make up the majority of our funnel, but we are excited about the traction we are gaining in the Asia-Pacific region, including a new customer win in the fourth quarter.

Speaker 4: We look forward to sharing highlights of our performance in this region with you over the course of 2023.

Speaker 4: Another major part of our growth strategy is the development of new products.

Speaker 4: We view innovation as a way to leverage a growth direct platform, increasing our value proposition to our customers, creating barriers to entry, and importantly, accelerating revenue growth.

Speaker 4: We were pleased to exit 2022 Momentum in our new product development efforts following the full market release of RMB Nucleus Mold Alarm. Mold Alarm is a software product that allows for the early detection of mold in the manufacturing environment and gives a growth-direct system the ability to differentiate between mold and bacteria.

Speaker 4: Customers are especially interested in differentiating between the two as mobile can grow quickly and require a significant and costly remediation plan.

Speaker 4: Mold alarm is capable of alerting customers to the presence of mold in as little as one day.

Speaker 4: Following the full release in December , we are executing against our commercialization plan, which includes fully training our sales and service teams and partnering with several of our larger customers for deployment across their networks.

Speaker 4: Turning to our rapid sorority program, we continue to make steady progress with product development including ongoing beta testing with one of our existing top 20 global customers.

Speaker 4: The Sroli products will consist of a new consumable for the GrowthDirect system, so again, leveraging our platform technology for growth. Sroli testing is typically the final step in the drug manufacturing process before the product is shipped to the market for patient use. The legacy method can take 14 days or longer and we are targeting 5 to 7 days of growth

Speaker 4: manufacturing line and a growth direct demonstration lab for current and prospective customers.

Speaker 4: We are looking forward to hosting customers at this new facility this year.

Speaker 4: So, as we begin 2023, we are encouraged with the progress and execution of our growth strategy to accelerate system placements and further new product development. Customer engagement and site access has largely returned to pre-pandemic levels, which allows our teams to work more closely with customers.

Speaker 4: understand their microQC workflows and challenges, and better demonstrate the manufacturing and regulatory benefits of the GrowthDirect system.

Speaker 4: Now, I would like to turn the call over to Sean to discuss our fourth quarter performance and our 2023 outlook.

Speaker 5: Sean?

Speaker 6: Thanks, Rob, and good morning, everyone.

Speaker 6: This morning we reported 4th quarter 2022 commercial revenue of $4.4 million, which compares to $4.9 million of commercial revenue reported in Q4 2021.

Speaker 6: We placed two GrowthDirect systems in the fourth quarter compared to three last year.

Speaker 6: Product revenue, which is comprised of systems and consumables, was $2.8 million in Q4 compared to $2.9 million in Q4 last year. Consumable sales grew approximately 20% in the quarter and offset the impact of one fewer system placement compared to Q4 last year.

Speaker 6: Service revenue was $1.5 million in Q4, compared to $2.0 million last year.

Speaker 6: We completed the validation of three systems in the quarter, bringing total validated systems to 103 at the end of 2022.

Speaker 6: while Q4 revenue was lower than last year due to less validation activity.

Speaker 6: Service contract revenue increased approximately 40% due to our higher base of validated systems.

Speaker 6: Fourth quarter recurring revenue was $2.9 million, representing an increase of nearly 30% compared to the fourth quarter of 2021, driven by growth in both consumables and service contracts.

Speaker 6: Non-recurring revenue was $1.5 million in Q4 compared to $2.6 million in Q4 last year as a result of one fewer system placement and lower validation activity. Turning to gross margins, product margins were negative $2.4 million in Q4 compared to negative $2.7 million in the fourth quarter last year.

Speaker 6: The improvement was a result of continued progress on our consumable manufacturing efficiency initiatives, despite unfavorable product mix. On a sequential basis, product margins were consistent with Q3.

Speaker 6: While system margins were slightly negative in the quarter due mainly to lower system revenue and reduced production volumes, they improved meaningfully compared to Q3.

Speaker 6: Consumable margins declined in Q4 on both a year-over-year and sequential basis due to unplanned downtime on our automated manufacturing line.

Speaker 6: Service margins were negative $188,000 in Q4 compared to positive $48,000 last year.

Speaker 6: The decline was due to lower validation revenue as well as higher spending on personnel, travel, and materials associated with supporting a higher level of systems under service contracts.

Speaker 6: On a combined basis, our fourth quarter gross margin percentage was negative 59 percent.

Speaker 6: This was relatively flat compared to Q4 last year, with better system margins and benefits from our consumables efficiency initiatives offset by unfavorable product mix, unplanned manufacturing downtime in consumables, and lower service margins.

Speaker 6: While we continue to see some inflationary headwinds in certain material, freight, and labor costs, they did not have a meaningful impact during the quarter.

Speaker 6: Moving down the P&L, total operating expenses were $14.7 million in the fourth quarter, consisting of $4.1 million in sales and marketing, $3.4 million in R&D, and $7.1 million in G&A.

Speaker 6: This compares to total operating expenses of $12.0 million in the fourth quarter of 2021.

Speaker 6: The increase was mainly due to $0.8 million in severance employee benefits and retention related to the restructuring plan we announced in August , as well as $1.0 million in expenses related to the strategic review process we announced in August and concluded in December .

Speaker 6: Net loss was $16.4 million in Q4.

Speaker 6: This compares to a net loss of $14.6 million in the fourth quarter last year.

Speaker 6: The higher net loss in Q4 this year was primarily due to higher operating expenses as a result of the non-recurring items I outlined a moment ago. Net loss per share attributable to common shareholders was 39 cents in Q4 2022 compared to a net loss of 35 cents in the prior year quarter. With respect to non-cash expenses and capital expenditures, the net loss per share is 39 cents in Q4 2022.

Speaker 6: Depreciation and amortization was $0.9 million, stock compensation expense was $1.1 million, and capital expenditures were $0.8 million in the fourth quarter of 2022.

Speaker 6: As of December 31st, we had $138.4 million in cash, cash equivalents, and investments.

Speaker 6: We remain confident this provides us with cash runway at least into 2026.

Speaker 6: Now turning to our 2023 outlook, my comments will be focused on the full year in the first quarter.

Speaker 6: For the full year 2023, we expect our commercial revenue to be at least $22 million, which assumes that we will place at least 15 systems and represents growth of at least 30%.

Speaker 6: For Q1, we expect commercial revenue of at least $4 million, which assumes at least two system placements.

Speaker 6: From there, we expect to continue to build momentum as we move through the year, with commercial revenue and system placements accelerating as we move into the second half, peaking in Q4. Having said that, we continue to be subject to quarter-to-quarter variability in the timing of system placements and, therefore, revenue.

Speaker 6: As Rob mentioned, most geographies are essentially back to pre-pandemic operations. However, we are still operating in a dynamic macroeconomic environment.

Speaker 6: As a result, our guidance reflects our expectation that we will continue to see uncertainty and variability in some customer purchase decisions, including longer than expected lead times for some multi-system orders.

Speaker 6: With respect to other revenue streams, we expect the fact that we placed nine systems in 2022 to result in lower revenue growth and service, mainly related to validations, and to a lesser extent consumables in 2023 as compared to 2022.

Speaker 6: we expect to complete at least 14 validations in 2023 with at least two in the first quarter.

Speaker 6: Based on our revenue outlook, we expect our Q1 gross margin to be similar to Q4 2022, and then improve as the year progresses as cost reduction and manufacturing efficiency initiatives generate benefits and volume leverage increases.

Speaker 6: With respect to operating expenses, we expect quarterly OPEX to be between $12.5 million and $13.5 million in 2023, with variability mainly driven by $1.8 million in non-recurring, restructuring-related expenses that will impact the first three quarters of the year, as well as the timing of certain new product development activities. Finally, we expect cash burn to be roughly $40 million in 2023.

Speaker 6: This includes a meaningful positive contribution from working capital, particularly as a result of Inventory Reduction Act initiatives and approximately $2 million of CapEx spend.

Speaker 6: We expect this to put us at or slightly below $100 million in cash and investments at the end of 2023.

Speaker 6: That concludes my comments on our full year in Q1 Outlook, so at this point, we'll open the call up for questions. Operator?

Speaker 2: Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. We'll pause for just a moment to compile the Q&A roster.

Speaker 4: Our first question comes from Dan Arias from Stiefel. Please go ahead, your line is open. Hey, good morning, guys. Thanks for the questions. Sean, maybe just to start on the guide, at least 22 million, obviously, that leaves the door open to something higher. And Rob's initial comment sounded pretty confident, I guess I would say, but you did highlight the question.

Speaker 4: Hey, Dan, it's Rob. I'll take the first slice of that and chunk away. Our goal for guidance was to put up something that we believe is fully achievable. So, now I can't go through how we thought about it. This may answer some other questions on the phone, but sort of on the side that gives us...

Speaker 4: confidence and what we're seeing is number one the environment as we touched on in our remarks is

Speaker 4: Basically, back to pre-pandemic levels, the quality and type and frequency of customer interactions is robust and very encouraging to include in-person events, which is critical to our sales process, as you know. Critically, customers are engaged with us in the process and we're seeing those.

Speaker 4: leading indicators that gives us confidence. Customers going through facility planning, global coordination for multi-site orders, which tends to be a part of the process to get a multi-site order as customers harmonize on our platform, the site alignment. We're seeing business cases being developed and...

Speaker 4: and work through procurement processes. That is a, you know, encouraging outlook for us. Team deployment training is going well. We're just coming off our global sales meeting, and the team's engaged and going after it. We touched on this in the remarks as well, but our Asia-Pacific region is...

Speaker 4: call it up and running largely, and we do expect contribution from North America, Europe , and Asia in 2023. And our funnel, again, has a good mix of new and existing opportunities to include multi-system opportunities for both new and existing customers. So some total of that gives us good confidence in the year. That said, bye.

Speaker 4: you know, generally the macroeconomic overlay that's out there that can, you know, create headwinds to certain budgeting processes and availability, cost of capital, and we have seen, you know, last minute or late-breaking, you know, budget moves. So that's also weighing, but there's some total of this, a bit of a long answer. I wanted to give you a full perspective on how we thought about the year.

Speaker 3: Yeah, no, that's helpful context. I mean, I guess to your last point, are you, do you feel like the budget at this point as we stand here in the beginning of March are generally set until you've gotten past the period of budgeting uncertainty or are you still dealing with that factor as we head into the end of one few and so it's a matter of how that shapes up for the, you know, over the next couple of months. we'll come back and talk about that later with depth to market.

Speaker 4: Yeah, I think it's generally set, Dan, but there's always some risk, especially when our customers are going through their year as well and their results come in. So there's always some chance of that. Or some other critical priority comes up, I would say unrelated to the macro economy, will facilities delay, that can always sort of delay things or move budget around.

Speaker 3: trending over time. I know you don't want to get too far into a long-term forecast, but one of the things that was attractive at the time of the IPO was just the way that the P&L was shaping up when it comes to the percentage of sales that were coming from recurring revenues. I think he had a goal of getting to 50% by 1 John Doschle,

Speaker 6: 2026, I believe. Is there anything you can help us with as far as like a refreshed view or an updated view on just the progression and the shift that you see there? Yeah, I mean I think with what we've been experienced with placements over the past five, six quarters, we actually are way ahead of schedule if you look at the revenue mix in terms of recurring. So I think

Speaker 6: We had 40% recurring revenue growth in 2022. That was a point of important strength for us. So I think we're gonna stay a little bit ahead of where we thought we'd be. We shouldn't be, I think if you look over the course of this year, that's still gonna be well over 50% of the revenue recurring. I wouldn't expect that to continue over time. I'd expect us to more balance out. So I think.

Speaker 6: The critical thing as we look at the business, and I think Rob touched on this, I mean, number one priority for us is getting system placements going again. If you look back a couple of years, I think

Speaker 6: the kind of mix of revenue that we saw then is something that we're working to get back to, to a large extent, where we drive placement growth, placement growth drives validation and service growth, that service growth then drives consumable growth and that recurring percentage drifts up with that.

Speaker 6: I think we were down in the 40% range in terms of recurring a couple years ago, maybe even a little bit below that. We're well above 50 now. I expect that to even out over the longer term as we get back to more significant placement growth and we get that kind of engine running again with service and consumables.

Speaker 2: Yeah, okay, very good. Thank you guys. Sure. Thank you. Our next question comes from Teja Savant from Morgan Stanley . Please go ahead. Your line is open.

Speaker 7: Hello, this is Yuko on the call for Tejas. Thank you for taking our question. Could you outline priorities for investment in light of focus on cash preservation and cost cuts? And then also, are you putting in any contribution from new products, namely the RMB Nucleus small alarm software into the guide?

Speaker 4: Yeah, so with regard to investment priorities in the business is consistent with our core planks of our business strategy. Number one is accelerating system placements, so that's investment in commercial and related activity. And new product development.

Speaker 6: Is it a clear priority as well and investment in inefficiency activities constitute the bulk of our? investment Approach and portfolio I'll pat on for the second part of that. Yeah, and just on that first point I'd say, you know, obviously you go we did a restructuring back in August , you know to take some cost out of the system

Speaker 6: but we are going to continue to make those investments going forward. That's the plan. On new product contribution, specifically MoldAlarm, our goal for 2023 with MoldAlarm is to basically get it out there in the market, work with a number of our customers to get them using the product so that they're in a spot where when we get to 2024 they're ready to sign up for recurring annual subscriptions to that software.

Speaker 6: Having said that, we do have a bit of a contribution. I'd say it's very modest in our forecast for this year and our guidance, but I'd expect that to be much more meaningful as we move out of 23 and get more into those annual subscription periods in 24 and beyond. Got it, that was helpful. And your prior comments indicate a gross margin positive potentially by late 23 if you place.

would likely get us there in Q4. I think what we have said, and just to reiterate, is if we look at the full year 24, we expect the year to be positive. So, you know, based on where our guidance is right now, we would not anticipate getting there in Q4. We'd be very close, and with some upside, we could potentially get there. Okay, great. And then one more, if I may. You mentioned 14 validations, except...

overstate that. And I think there's a couple important things to say on this topic, Yuko, that I'll hit. One is, we do have more than the number of systems we validated last year kind of in our validation backlog, either in process or waiting to start. Just to kind of hit that question head-on, we do have some customers, I'd say it's the manure.

construction to be completed. So that is a factor that you should be aware of that contributes to that number being a little bit higher than what we've placed in the last year plus.

And then as we go forward, as you think about the systems that we placed this year, we are working very hard, as you know, to shrink the time to get a validation completed, and that differs between new customers and existing customers, typically. So that's an important mixed question as you think about modeling it. But, you know, typically as you look at placements in the second half...

be the lower end of the system placements in the year. So those are important things I think to keep in mind as you think about the question you asked. Great. That was very helpful, Collier. Thank you very much. Our next question comes from Rachel Battenstall from JP Morgan. Please go ahead. Your line is open.

Hi guys, this is Casey on for Rachel. Thanks for taking my questions. Can you elaborate on the unplanned downtime that contributed to flat sequential margins here on the gross line? Can you maybe quantify how much of a headwind this was, why it was unplanned, and then just maybe the cadence of gross margin expansion?

embedded in the guide. I think you mentioned that you're going to see flat gross margins in one queue. Is there more downtime kind of embedded in there and how should we think about that?

Yep, sure, Casey. So, we do have some downtime that's planned. This was not what we encountered in this particular situation. We've looked at the causes of the unplanned downtime. We understand them. We've addressed them. And we feel good that they won't recur.

We'll continue to focus on that and make sure that we do what we can to make sure that's what actually rolls out. So as you think about 23 guidance, we have not assumed that we see a recurrence of that. We believe we've kind of addressed what we ran into in Q4. In terms of the impact, it was meaningful. We're not going to give a quantified number, but I would say it's the number one contributor of our variant.

I think that's true for the quarter in general. And then as we work our way through the year, given what I said a few minutes ago, we expect to end the year getting pretty close to positive in Q4. So I think if you kind of roll out the revenue guidance we gave in the sequencing there, with the volume increases that should come along with that, I'd expect to see the margins follow.

pretty closely in terms of the step up as you work your way through the year. Got it. That's helpful. And then just on the pull-through per instrument on the consumable side, I think this year was around $80,000 per system. At our conference, you talked about pull-through increasing high singles to potentially mid-teens in 2023.

I guess, can you just walk through what's embedded in the 2023 guidance from an instrument pull-through perspective and then what needs to happen for you guys to get to the high end of that range? Yeah, just like put some takes into that range.

Yeah, so we did finish the year in 22 around that $80,000 mark. The guidance has built into it, I think, in the high single digits in terms of the full year growth in that metric. And I'd expect us to start the year in the first half below.

where that would put us and to finish the year above where that would put us. I think the things, moving validations ahead in line with what we expect is critical to make sure that happens.

as is some of the things we're working on around what we refer to as Project RAPID, where we're doing things to reduce the amount of time it takes to actually get a validation completed. So I'd say we haven't assumed heroics on those things to get to the guidance number. So there is potentially upside there if we can over-execute on that. Those are the main things that would drive our ability to get to that range and that high single-digit type growth.

I'm not going to get into a lot of specifics, but I think as we look at ASPs on systems, we do expect a modest increase in ASPs as we compare 23 to 22.

Okay, gotcha. Maybe if I can just squeeze one last one in. The guide is pretty back and loaded.

Can you talk generally about your visibility into those placements in the back half of the year? You know?

Two placements in one queue, 15 on the year. So to get to that high single digit placement number in 4Q, I guess how much visibility do you have into that from a customer conversation perspective? Thank you.

Yeah Casey, it's Rob. As I touched on in the intro question by Dan, what's giving us confidence in the guide is the conversations we're having with customers and in some cases regarding their purchase intentions on multiple systems and just the shape of the process and when we expect things to land in...

outlook, and also just practically speaking is kind of how we think about the year rolling out with a bit more of the back end waiting. Okay, great. Thank you guys.

is kind of how we think about the year rolling out with a bit more in the back end waiting. Okay, great. Thank you guys. Thank you.

Our last question comes from Max Masucci from TD Cowen. Please go ahead, your line is open. Hi, this is Stephanie on for Max. Thanks for taking my question. Most of my questions have already been asked, but I can ask a couple of quick ones. So you mentioned in your prepared remarks that you have about 20 or so events and processes planned for the year, which is great to hear.

shows. Our largest one is end of the year, which is PDA. If Stephanie, if your question is referring to the public with facing or open trade shows, if not, you know, but please please please steer me. But with regard to milestones, PDA is a big one. We've got a collection of other events around the world.

together and do all things grow at the record for a full day. I wouldn't call it a catalyst per se, but it's certainly a milestone as we think about interacting with key customers around the world.

Got it. No, that's helpful. Thanks for that. And then on the consumable utilization side, so I know this has already been touched on a bit in the Q&A, but how quickly have existing customers been ramping on that consumable utilization versus your expectations? Do you see that there could be potential for further acceleration versus your expectations for a year?

Yeah, I'll start and maybe Rob will have a comment as well. I think it depends on the customer. I think in general we are...

comment as well. I think it depends on the customer. I think in general we are

improving in terms of how we work with our customers to help them make that transition more quickly, but a lot of times it is heavily dependent upon their situation and resourcing and plan. Having said that, you know, that's getting better. I would also say that we are continuing to work with customers to find different ways to even when they are in routine use and in policy.

that we believe over time we're going to be able to get that pull through number higher for the business.

Just a couple other comments that Stephanie, we have dedicated sales people slash consultants that work with our customers across our regions to do just that. So, ramp them as quickly as possible into routine use after validations. Any training required, but certainly any ordering required, standing order. So basically...

And of course, look for opportunities inside any manufacturing plant if a customer, for example, has automated environmental monitoring, there's opportunities to further automate water and bio-burden applications, which could be put on existing capacity, or many times triggers a purchase of a new system. So think of it as a

organic sale to a customer. In most cases it's opportunity with an actual manufacturing plant. That's how we seek to maximize pull through and also it's also a great lead source for new system opportunities as well.

sale to a customer, in most cases it's opportunity within an actual manufacturing plant. That's how we seek to maximize pull-through and it's also a great lead source for new system opportunities as well. Got it. Really helpful color there. Thank you for taking my questions.

Great. Well, thanks, Stephanie, again. So we're going to wrap the live call now. As a reminder, we are attending the TD Cal and Healthcare Conference in Boston next Wednesday, March 8th, and look forward to speaking with many of you in the coming weeks. Thanks, everyone, for joining us today.

Julianne, we will close the call now. This concludes today's conference call. Thank you for your participation. You may now disconnect.

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