Q1 2023 Repligen Corp Earnings Call

Speaker 2: Good day, ladies and gentlemen, and welcome to the Replaging First Quarter of 2023 on its conference call. My name is Viscenali, and I will be your coordinator. All participants will be in Ellison Only Mode. Should you meet a systems place at the La Conference Specialist by pressing star end 0.

Speaker 2: After today's presentation, there will be an opportunity to ask questions. To ask a question you may press star then one on the touch tone phone. To withdraw your question, please press star then two.

Speaker 2: In order to accommodate all individuals who wish to ask questions, there will be a limit of two questions at a time. Please note this event is being recorded.

Speaker 2: I would now like to tell the call over to your host for today's call. Sondra Newman's head of in the third relation for repulgence. Please go ahead.

Speaker 3: Thank you and welcome everyone to our first quarter of 2023 report. On this call we will cover business highlights and financial performance for the three-month period and at March 31st, 2023. We will also provide updates to our financial guidance for the full year.

Speaker 3: call, we're providing non-gap results and guidance. Reconciliation of GAP to non- GAAP financial measures are included in the press release that we issued this morning, which is posted to Revlogins website and on SEC.gov. Non-gap figures in today's report include the following. Revenue gross at constant currency. Proof.

Speaker 3: profit and gross margin, operating expenses including R&D and FGNA, operating income and operating margin, net income and earnings for shares as well as EBITDA and adjust to EBITDA.

Speaker 3: If you've adjusted financial measures, should not be viewed as an alternative to GAAP measures , but are intended to better enable investors to benchmark growth with current results against historical performance, and the performance appears when evaluating investment opportunities. Now we'll turn the call over to you, Tony. Thank you, Sandra.

Speaker 4: And good morning, everyone, and welcome to our Q1 earnings call.

Speaker 4: I still on our press release this morning, we delivered the next one first quarter, given the bioprocessing industry market dynamics, and some percent revenue both for our base business and constant guarantee.

Speaker 4: and stronger than expected gross and operating margins.

Speaker 4: Overall revenues of $183 million for the quarter were down 9% of constant currency, due to the predicted reduction in COVID related to VAMs.

Speaker 4: The story in the quarter was the performance of our proteins, comatology, distances.

Speaker 4: Where we saw solid gains in an increased contribution from non-COVID mRNA programs in the challenging gravity space.

Speaker 4: Covid related revenues came in as expected at around 23 million, a decrease of approximately 60 percent earlier.

Speaker 4: On the orders front, we saw Cook develop a base business in the quarter of 0.94.

Speaker 4: Tele and gene therapy orders were strong, up 40% sequentially and 20% versus the average quarterly order intake 2022.

Speaker 4: The region where orders were stopped was China, down 40% sequentially and 60% versus a year ago.

Speaker 4: Challenges in the region were driven by a combination of inventory burn-off that was built up during COVID and lowered demand from CDMOs and pharma.

Speaker 4: Based on current projections, we expect it will take another few quarters.

Speaker 4: for China to return to more normalized level of demand. Space orders in the other regions perform reasonably well if you want with a combined book to available on point of.

Speaker 4: Activity and interest at a customer level remains high with many customers scaling here in 2023.

Speaker 4: However, given the lack of order growth across the regions, and the situation in China and A back to a lesser extent, we feel it's prudent to just try to come here.

Speaker 4: We do expect overall orders for the company to pick up in the second half of the year and continue to strengthen as we move into 2024.

Speaker 4: Our expectation now is for 4-8% organic growth in our base business with our COVID output unchanged at $30-40 million. Strategically, we continue to make selective investments across our product portfolio.

Speaker 4: We see 2023 as an important year to complete several QR&D programs.

Speaker 4: and our intent is to increase our spend to approximately 6% of revenue.

Speaker 4: We have four new product launches planned by mid-year supporting our filtration and analytics franchises, with additional launches in second half positioning as well in 2024.

Speaker 4: We continue to see strong traction for many of the new products we launched in 2021 and 2022, which contributes at 10% overall overall revenues in the first quarter.

Speaker 4: We saw a strong demand for our arson-pronatomic filtration systems and a high level of activity around for most recent launch, our RPM system within line analytics.

Speaker 4: On the M&A front, we closed on the acquisition of Plex file systems in mid-April, giving us another play in fluid management with the addition of single-use stacks.

Speaker 4: We've focused our M&A efforts over the last few years in building out the management vision. We believe that Flex-Fly Systems Technology in 2D and 3D-Vigment-advictoring is a core competent team of company and something we can build upon over the next few years.

Speaker 4: With the newly built 7,000 square foot manufacturing space, we expect to increase the number of opportunities for Flex Biosystems through our dedicated commercial team and deliver approximately $5 million in revenue this year, with the business ramping up quickly in 2024.

Speaker 4: As we let to 2024, our goal is to be back to 20% plus growth for our base business, arms of the product portfolio products, and returns more to start the growth levels across the regions.

Speaker 4: So moving now to our quarterly performance. As mentioned earlier, the story of the quarter was performance of reproachings and chromatography franchises and the overall performance itself in Gene Garvey.

Speaker 4: In chromatography, our Opus Pre-Pot Column business had an excellent quarter for orders and revenue.

Overall, revenue for Chrome can then add close to 20% against a lighter comp in Q1 last year. We saw a greater than 50% increase in revenues and orders from new modality accounts focused on mRNA viral factor and lives of manufacturing. As highlighted in our year in call.

chromatography residence supply remains tight through the first three months of this year and while our results were strong year on year our base chromatography revenues for GAP 15% Ally's question.

Our expectation is that Q2 will be similar to Q1 with revenues picking up in the second half of 2023 as more residents fly comes online.

We continue to expect our chromatography franchise to grow approximately 10% this year.

Our proteins business had a good quarter with year over year reported growth in the high single digits in Q1.

The expected drop off in Cytiva ligand demand during the first quarter was more than offset by the performance for other ligands and growth factors as we continue to transform our proteins business with Rupture 12 products.

We expect proteins to be flat here in 2020's ring. In filtration, our business was down approximately 20% as reported, driven by a predicted sharp deadline in COVID-19 related revenues.

For the base filtration business revenues were down less than 5% against the top comp in Q1 last year.

base filtration revenues in Q1 were essentially in line with the revenue in the previous quarter.

our partisan systems and flow paths and ex-LATF perform well in the quarter, with our systems and flow path driving itself over 200%.

And the new modalities trend came from just saling to therapy, including mRNA. We are seeing the benefits of our relationships and staff during COVID, as many of these companies have pivoted to mRNA programs and vaccines and purviews.

with MRNHP of catalyst to grow over the next few years as new vaccines and therapeutics make their way through clinical trials.

Overall, filtration orders from quarter of a downverse to year ago, which is driven by the aforementioned weakness in China and APAC for C-DML and Farmer's Munga Soft.

We expect our filtration to be prioritized when it starts to cover during Q3 as the macro-hitwinds subside and customers complete their destocking activities.

We expect this franchise to be down 13-20% overall and flats are 8% on base business. Finally, our process and other exhibits had an excellent order on orders which were up over 30% year on year.

So overall, we're off to solid start for the year. However, given the macro environments, 2023 will be a challenging year for our industry and for the company. Refugeing continues to be well positioned with the great squeeze of innovative products and strong traction in key areas in market to manage student X-69 months. We do expect to see order pick up during sentin' out the year, which will put us in a good position for 2024. We remain very optimistic about the medium's longer term potential in bioprocessing. Once we navigate through the next few quarters, with that, I will turn the call over to John for the financial update.

Thank you, Tony. Good day, everyone. Today, we are reporting our financial results for the first quarter of 2023, as well as updating our financial guidance for the year. Unless otherwise mention, all financial measures discussed reflect adjusted non-GAAP measures.

As Shartner Press released this morning, we delivered revenue of $182.7 million in the first quarter.

The highlight continues to be the performance of our base business, which grew by 7% at constant currency driven by the performance of our chromatrography, chromatography, and protein's businesses, despite challenging market conditions.

For the first quarter, our total revenue decreased by 12% as reported and 9% at constant currency. FX impact for the quarter was above 5 million.

creating a three-point headwind on reported growth.

Based on current conditions, we expect that that excellence to continue for the first half of 2023, and then shift to tailwinds in the second half, netting out to a zero impact for the whole year.

For our overall revenue performance, we saw Europe for your reduction in COVID revenue of 30 million. This was partially offset by performance in our base business which grew by 10.0 or 4% of scientists reported and 70% of the constant currency.

with Europe and North America down as expected due to COVID revenue declines. For the quarter, overall revenues from Asia rest of the world increased by 21% while North America and Europe contracted by 15% and 21% respectively. While revenue growth in Asia was strong, orders in the region, especially in China, dropped by significantly setting the sufferings of our last three quarters in 2023 for this region. Regarding overall revenue distribution by region for the first quarter, Asia represented 23%, Europe represented 39%.

and North America represented 38% of our global business. Now I'm moving down to rankum statement. First quarter of 2023 adjusted gross profit was $100.8 million, a reduction of $23.8 million, or 19% compared to the 2022 first quarter.

Adjust the gross margin of 55.2% in the quarter was down from 60.4% in the 2022 first quarter. Gross margin declines compared to 2022 first quarter are related to volume-d leverage, less favorable product mix tied to COVID revenue declines, material cost inflation, and higher expenses tied to our capacity expansions.

Sequentially, gross margins in the quarter improved by 370 points for our fourth quarter 22 performance of 51.5%.

driven by improved product mix and fitting our material costs. Price increases covering material cost inflation from suppliers.

by improved product mix benefiting our material costs. Price increases covering material cost inflation from suppliers, and operational cost optimization in our business.

Now transitioning down to P&L to adjusted operating expenses. Adjusted research and development expenses for the first quarter, 20.3, or 6.7% of revenue. As Tony mentioned, we are focused on ramping up our R&D efforts here in 2023 in order to launch key new products into the market this year. We are focused on ramping up our R&D efforts.

with our primary focus areas being filtration and systems. Adjusted SCNA expenses for the first four, 2023 were 26% with total revenue compared to 22% in the same 22th area.

Year over year, percentage increases have had to capacity expansion and investments in commercial resources to continue to drive growth and market share gains in the short and long term.

Now moving to adjusted earnings in ETS.

First quarter of 2023 operating income was $40.9 million compared to $67.4 million in prior year quarter.

And adjusted operating margin is 22.4% compared to 32.6%, the same prior year period. Adjusted that income for the first quarter of 2023 was 36.3 million compared to 53.7 million in the same quarter of 2022, a 32% reduction. Adjusted fully delivery to ETS.

will now transition to our 2023 full year guidance.

Our gap to non-gap reconciliations for our 2023 financial guidance are included in the reconciliation tables in today's earnings press release.

As previously mentioned, unless otherwise noted, all 2023 financial guides discussed will be non-gapped. Please also keep in mind that our 2023 guidance may be impacted by fluctuations in foreign exchange rates beyond our current projection of flat on all year sales.

and includes financial estimates for flex biosus acquisition close on April 17th. Times does not include potential impact in any future acquisitions that the company may pursue.

Based on our current fuel market conditions, we are revising our 2020 free full year revenue guidance and got metric to a range of 720 to 760 million.

a reduction of 40 million at bid point compared to our February guidance. This revised guidance reflects overall reported and constant currency growth of minus 10% to minus 5% and organic growth of minus 11% to minus 6%.

Our overall revenue guidance includes COVID revenues of 30 to 40 million consistent with our February guidance, and we have included 5 million of revenue from our Flex Piusis acquisition.

We are updating our base business revenue guidance to a range of 685 to 715 million, growing at 4 to 8% is reported and a constant currency.

This compares to our February guidance of 730 to 760 million, growing at 11 to 15% is reported, 12 to 16% is a consequence.

We are revising our 2023 adjusted gross margin guidance to the range of 52 to 53 percent, 50 basis point reduction from our previous guidance of 52.5 to 53.5 percent, driven primarily by lower revenue projections for the year. We are modifying our adjusted operating income guidance to a range of 52 to 53 percent.

range of 20.5 to 21.5% for the year compared with our February guidance range of 22.5 to 23.5% of revenue.

Adjusted other income guidance is being increased to 14 million compared to prior guidance of 10 million and we continue to expect 2023 adjusted income tax expense to be approximately 20% of adjusted pre-cats income.

We are revising our adjusted net income guidance to the range of $134 to $138 million, a difference of $15.5 million at midpoint from our February guidance of $149 to $154 million. We are revising our adjusted EPS guidance to the range of $134 to $154 million.

weighted average fully diluted shares outstanding at your end 2023.

Adjusted EBITDA is now expected to be in the range of $190 to $194 million, a reduction of $24 million at bid point from our prior guidance of $213 to $219 million.

But depreciation and tangible amortization expenses expected to be approximately $35.7 million and $30.2 million respectively.

Adjusted EBITDA margins continue to be strong and are expected to be in the range of 25.5 to 26.5% for the year, reflective of the exclusion of fixed depreciation costs for our capacity expansions from this metric.

We expect year-end cash and cash equivalents, a gap metric, to be in the range of $620 to $640 million, with $60 million of CapEx investments being fully funded by cash generation from our operations. This revised any cash figure is inclusive of cash payments made for our April acquisition of Flex honours.

This completes our financial report and guidance update, and I will now turn the call back to the operator to open the lines for questions.

Thank you. We will now begin the question and answer session. To ask a question you may press star then one on your touchtone phone. If you are using a speakerphone please pick up your handset before pressing the keys.

If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Again in order to accommodate all individuals who wish to ask questions, there will be a limit of 2 questions at a time.

At this time, we will pause momentarily to assemble our roster.

Don.

Our first question comes from Dan Arias with STIFL. Please go ahead. Thank you.

The first question comes from Dan Arias with STIFL. Please go ahead. Good morning, guys. Good morning, guys.

Tony, maybe just to start on where things might be improving a little bit here, is there an overlap between the new modality accounts we are seeing that pick up and order activity and those that look to be...

you know, some of the heavy inventory builders during the COVID trough, or do you feel like those two dynamics are separate right now? And then within that is this question of small and emerging biotech, just given where those companies tend to play. How should we extrapolate the comments there to that customer bucket overall? Obviously, there was quite a bit of discussion on that subset last week. Yeah, so thanks, Pam. Simply to answer your first question.

I don't think they're related between any kind of inventory buildup with be going on. The companies that were involved in COVID plus the company is focusing on mRNA in new indications. So there is any.

a significant number of companies that have really focused on new mRNA-based vaccines, mRNA-based therapeutics. I think a lot of the work we've done over the last two or three years put us in a good position to be able to get involved in many of those programs. And that's kind of setting us up well in terms of what you saw in terms of revenue growth and order growth. And I think that's again going to be a nice catalyst for us.

Let's go to the next few years. On the small, emerging biotech, no revenue.

next few years. On a small, emerging biotech, no revenue, sort of discussion from last week.

Where, you know, we look at our accounts, right, the most exposure that we have is probably in the cell and gene therapy space.

And obviously there's some exposure in the biotech that are working on quantum athletes as well. So we're at the, you know, just a little north to 10% of our revenue comes from the small biotechs.

with one caveat, right? That does not include what percent of CDMOs focuses on small biotechs. We just don't have any idea how we would split our CDMO revenue into small biotech versus large biotech. So, but in general, it's like, you know, a little north of 10%, closer to 10%.

Okay, helpful. And then just maybe on some of the comments that you made around relationships that were made during the pandemic, one of the pieces in the equation seems to be this idea that there may have been some.

or just new business wins during COVID as some of the larger players felt themselves constrained. Now that we're decently removed from the height of the situation, can you maybe just comment on what you're seeing from your seat in terms of, you know, share games that you think should stick versus business that maybe moves back to the big guys. Anything notable that you're taking away in just in terms of the current state of affairs there.

with the right capacity to be able to serve many of the companies that were deeply involved in COVID vaccine manufacturing.

the relationships with those companies have continued and that's rolled into other programs. And we continue to get our share of those opportunities. And all the other players in bioprocessing are also working with those companies as well. So it's not like this is unique to RepliTune. I think the

broader, the broader comment I would make is that the overall market, it's a tough market out there and everybody is kind of working, every company in the bioprocessing spaces is working hard to secure orders and...

get traction at various accounts, but it's just a tough macro environment right now that everybody's working through. Yeah, okay, thank you, Tony. Thanks, Tom. The next question comes from Jacob Johnson with Stevens. Please go ahead.

Hey, thanks. Good morning. Tony, maybe starting off where you just ended on a tough macro environment and the weakness in Asia-Pacific. Can you just unpack what you're seeing from that region? It sounds like some of this is destocking, but I think there's also been some scuttle butt around local competition in China.

maybe some re-shoring going on too. Can you unpack what you're seeing in Asia Pacific? Yeah, and just to be very specific about it, most of the challenges we are seeing are in China. And if we look at the order patterns that we saw in 2022, China...

An impact kind of followed very much in line with what we saw in North American Europe with strong first half of the year, and then dipping down in Q3, China recovered in Q4, and then dip down significantly in Q1 up this year. And our view of it is that it is combination of stocking that happens, not because...

Because of COVID, not because of COVID vaccine manufacturing, just that there was such a start stop in China throughout the second half of last year, that I don't think that the amount of product that was procured and first half was just actually used for the manufacturing that may be scheduled for the year. That's that. I do think that there's a bit of a reset going on in China.

And we think that demand is soft and it's beyond just the stocking of demand between routes of these soft. We have a good quarter on revenue, but the orders will be weak. And we expect that that's going to continue through most of the year.

On the competition side, there's always going to be local competition in China. That hasn't changed, you know, over the last five, 10 years. And there are more players popping up. So there's always that, um, there's always going to be some competition and some probably, you know, changes in share, but it's not, it's not a, um,

primary or secondary reason.

while we're observing right now. Got it. Thanks, Matt Tony. And then just the follow up going back to last week, I think one of your peers talked about less visibility in the current environment. And I'd be curious kind of how you compare to trust your visibility right now versus maybe pre-COVID, especially in light of the comment around 20% returning to 20% growth.

Thanks for your question, Tony. The next question comes from Koni Soda with SVB Securities. Please go ahead. You had Tony, thanks. So maybe just first one, I appreciate the comments on emerging biotech being about 10 percent. But just, you know, could you remind us what's your exposure for phase one and two? Obviously, that's an important question. Sort of what you're seeing within that segment for you. Obviously, you've been in love with more of the innovators and early adopters of the technologies in phase one and two.

Yeah, so maybe a broader way of answering that question, I think in general, right? 65% of our revenue comes from clinical, 35% is coming from commercial and that's ex-COVID. So that's looking at our base business.

I don't have a split on phase one and two, but you could assume that our 10% emerging biotech is all pre-tutical phase one, phase two. A small, maybe a small percentage in phase three, but that would be my sense. And again, I would...

caveat that we don't know what percent of the CDMO part of our customer base, how much that is serving small black checkers per cent. Got it. And then this is a clarification on, you know, excluding flex bios, should we be looking at a 3 to 7 percent?

guide for the year versus four to eight. Just wanted to confirm that. And then Tony, on the resin side, seems like things are improving, but obviously you're pointing out that this is still recovering into the second half, things should improve more. Can you just elaborate a bit on your conversations and the...

The resin supply, I think, was tight throughout Q1, right? I think we, in our February call for the year ends, 2022, we called out that we had seen a slow down in terms of resin supply versus what we saw in Q3, Q4 last year and that's why I...

I provided that 15% sequential drop-off in revenue versus Q4. That said, our conversations are indicating that as we move through Q2 and Q3, supply is going to get better. So we fill.

fairly confident based on the conversations that we've been having that you know things will start to open up in a second half of the year or order the order strength on our pre-packed columns is stayed high and so we have a nice backlog of orders that needs to be fulfilled but it's all dependent on drop shipping of wrestling.

And again, we expect that to open up in the second half of the year. Got it. Okay, thank you. Thanks, Judy. The next question comes from Julia Kim with JPM Chase. Please go ahead.

Good morning, thanks for taking a question. So, tell me a little follow up on the order trends you mentioned. Booked a bill during a quarter was 0.94 in some strengths at mRNA customers. Could you talk about order trends excluding mRNA customers? And what have you been seeing in terms of book to build coming out of one queue?

and generally what's your expectations for the trend through the rest of the year. And then in light of the pressures that you mentioned, how is pricing trending versus your prior expectations? Could you repeat the last part again? Julia, I missed that. How's pricing holding up versus your prior expectations?

Okay, let me start with pricing. My seems, this helped pretty well. It's covering our inflation. So...

Okay, let me start with pricing. Pricing has held up pretty well. It's covering our inflation.

going exactly the way John and myself and the team figured it would play out here in 2023. On the book to Bill, um...

I know that I would say that it's, I don't have the exact book to build with how MRNA, but it obviously it'll be a little lower than the 0.94, but it's not a massive contributor. Obviously this is a market that's just taking off.

So I beyond the fact that we're getting really strong traction and actually reasonable orders, multi million dollar type orders, I it's just not big enough to really move the needle up or down. So it's

There's nothing really a whole lot less. Maybe it's point nine. I'm not sure exactly, but it's it's not a big

There's nothing really a whole lot less. Maybe it's 0.9. I'm not sure exactly, but it's not a big detractor when you take it out.

Order trends, we're expecting that orders will pick up in the second half of the year, but it's slower pace than what I think we all thought back in February . So that's really the piece that we all have to keep an eye on as we go through Q2 and we get into Q3 and Q4. The expectation is that the orders will pick up.

in the second half of the year, and that will contribute towards overall revenue for us in 2023, and obviously sets us up for a better 2024. Got it. That's helpful. And then a follow-up on China Dynamics. Are you seeing any differences in terms of activity or order patterns?

between different types of customers or between your different product lines. And within your guidance, what kind of recovery expectation have you baked in? And if any, what supports your confidence for a return to normal in China? Thanks.

Yeah, in China, it is a challenging situation. I would say the CDMOs in China are down more than the pharma companies. That said, you know, it's a, you know,

It's a significant drop off in what I think everybody was expecting for the year. So we've taken out, we've de-risked China for the year. We expect that orders will start to pick up in Q4, but not soon enough to have any meaningful contribution to Q4 revenue. But the conversations we're having with customers.

still around a lot of activity and investment. And I don't think there's anyone in bioprocessing that believes that China is going to stay in a prolonged slump. I think this is a few quarters that everybody has to work. At least we have to work through particularly speaking to our situation in China. And that we expect that that will get carried out by the end of the year and it returns to more normal growth rates that we've seen in the past for China.

even pre-COVID. Thank you. The next question comes from Matt Larue with William Blair. Please go ahead. Hey, good morning. So just thinking about the guidance reduction here and in terms of three or four onstage Serves.

trying to assess whether there might be additional risk or not for the guidance of the valve there. When you talk about an expectation for orders picking up in the second half of the year, could you give a sense just for what underlies that? Is it sort of actual on the ground order activities, customer surveys, assessment of product shelf-wise with a customer inventory?

more qualitative conversations, just what are the kind of other metrics internally that treat into that optimism for the second half there? Yeah, I think that when you look at our funnel and we look at the progression of opportunities as there is, as there is.

Those opportunities move through the final up to the higher probability level that is getting better. We are talking to a lot of customers around second half of the year programs and activities. So again, that gives us some confidence.

So it's really based on the feet on the street and conversations that we expect that the second half of the year is going to pick up.

And obviously, you know, as we go through the next three, six months, we'll absolutely see if all of that's going to mature your life or not. Okay, and then just for John , no gross margins, Ralph D Strong in the first quarter, and I'll ask him COVID maybe with a part of that. But I think...

And to sort of balance the year, it looks like the guide would imply something, you know, 51.5%. The initial conversation for the year, I think, was to start at 51% and then build throughout the year. I think the quarterly revenues for 2.2 through 2.4 are just based on guidance above that within Q1. Again, I know the majority of COVID was in Q1.

So maybe just help us understand what exactly is going on from a gross margin perspective for the rest of the year. Sure, just to give a little bit of color on Q1. Q1 came in with a better product mix than we were originally projecting, so our proteins came in a bit higher. Our open revenues came in a bit lower.

with some of the pressure on resin supply being a little bit more than we even expected. And then we had some favorable product mix within our overall filtration business, so a higher mix consumable products versus equipment. So that was a positive. The challenge with that though is as we move through the year we expect that to correct itself and go back to the original budget assumption for the full year.

facilities costs and all those things do not come out of the equation. So, as we see that dropping through, you know, that's putting pressure on the overall margins and I'll call it, you know, volume D leverage, right, as the major headwind there. So, those are the drivers. The revenue impact in the second half of the year.

We expect to be stronger than the first half of the year for overall revenue. But again, with some of these other headwinds, bring down the overall revenue projection, that's the impact. If you look at phasing, we expect the phasing on the gross margin that roughly 51.5 at midpoint should be a good gauge for through the rest of the year at this point.

OK, thank you.

The next question comes from Paul Knight with Key Bank. Please go ahead.

Could you give us a little color? I know you're building a factory or you're positioning a product to get to the next year's growth. So what should we think about for 2024? Is it seed technologies? Is it fluid management? Is it artisan expansion of manufacturing at the end of the year?

the hollow fiber, I mean what are kind of the three levers you're looking at and doing this year to get ready for 24? Yeah great question Paul. I think that when you look at it,

I think it's exactly the three areas that you highlighted. I think fluid management is a big lever for us, right? Obviously, there is a...

a key or the stocking challenge that goes on with the component side of fluid management. We're investing very heavily on the assembly side of fluid management. We expect that that's going to be a growth driver for us next year. There's a lot of work going into our...

systems portfolio and ever since we did the acquisition of Artisan, we've been really trying to transform that business from a custom system shop to a more standardized system shop which we were able to do from most parts in 2022. But what we're trying to do right now is continue to build up the overall systems portfolio whether it's the bench top.

you know, Care2Eyes that have been around for a number of years. It came out of the Spectrum deal by adding in advanced analytics. It's a combination of advanced analytics with our systems. That's going to be a big driver for us next year. And then there's some other products that we'll talk about as we go to the earth that I think will serve as a catalyst for growth for us. But you can see that the evolution of the company.

is really happening, right? If you went back a few years ago, Paul, you would see us as an individual product by product company and now we're a lot more integrated between our consumables and our systems and our fluid management solution. So it's that kind of integrated offering that I think is going to be a driver for us when we get into 2024.

Thanks. Our next question comes from Lisa Garcia with UBS. Please go ahead. Good morning guys thanks for taking the questions. So I think you guys called out that new products were about.

10% of revenue this quarter. Is 14% kind of still the right number to think about for this year? Kind of how are you guys thinking about 2023 and kind of the new product build? I know you guys also kind of threw in the new acquisition this year. I think 14% is still a very good number for the year.

to discuss the order book by customer type, kind of thinking about pharma versus CDMO. And I don't know if you have these numbers at your fingertips, but maybe are you able to even speak qualitatively about kind of where kind of the fill ratios are and kind of, you know, kind of thinking about parsing between those two customer types and kind of where we sit? Yeah, a little bit. I would say down on the CDMO side.

very low order book in China and APAC didn't help on that. Right, so, but in general, CDMOS have moved back up. I think if you look at pharma, if you take pharma excluding China APAC, I think pharma in Q1 versus the average pharma intake in 2020.

comes from Matt Hewitt with Craig Halen Capital Group. Please go ahead. Good morning. Thank you for taking the questions. Maybe first up, I'm just curious what feedback you've gotten on the large scale controller that you launched during the quarter. How do you expect that to ramp over the course of the year?

Yeah, this is just an evolution really of our ATF portfolio. So we've been making probably custom large-scale controllers for a handful of companies over the last 12 to 18 months. Feedback from those companies has been really, really, very positive. And so we did a technical launch of it in Q1. You'll probably start to see more of a marketing launch done on the controllers.

right now. I think our customers expect it, they want it, they like what we've added in terms of feature sets and I think it's a lot more around ease of use, customer satisfaction than anything else. But it's where we should be checking that portfolio. I guess along those lines as you look at the remainder of the year, the number of launches

get launched this year. But it's going to take a little while. Remember when we had those conversations, Matt about TFDF and how long it takes to get market traction. I just think it takes a while even when you have some great products to get customers to get into the market, and getting those Hangouts.

not only adopt but start to platform the technologies at an account. So you get into a process but what you really want to be is platformed. We have a number of products this year that I would say are disruptive products and I think we're looking forward to getting those into the market. Expect that but we're going to be talking about as we go through the years really around.

you know, systems, analytics, and filtration products. They're kind of the buckets where most of the products fall. Understood. All right, thank you. Yeah, thanks, Matt. The next question comes from Brandon Coolier with Jefferies, please go ahead.

Tony, just on China, will you remind us how big China is? Is it percent of the mix? What were you assuming for growth there previously and what's embedded in the new guide? And longer term, do you think you need to have more in China for China manufacturing to be competitive locally?

Yeah, great question, Brandon. In general, are China exposures at 10% revenue last year? So that kind of gives you an idea of how big China is for replicants grown quite rapidly. That 10% did include COVID-related accounts as well.

In terms of assumptions going into this here, I don't have the exact growth at my fingertips, but it would have been probably on base business, probably close to 20% growth going into the year. Fairly, that's going to be a real challenge.

given the dynamics that we're dealing with. In China, for China, that's a security there's

plenty of manufacturing going on at our peer level and also with other local competitors in China and that's something that we talk about internally but right now I think we're continuing to you know manufacture outside the region and with a really great team in China we've been able to compete well doesn't mean we won't.

manufacturing in China in the future. It's just where we are today. Thanks. This concludes our question and answer session. I would like to turn the conference back over to Tony for any closing remarks.

Thanks everybody for joining the discussions today. Look forward to connecting with everybody in a few months time and talking through how first half of the year has gone for us. Thanks everybody for joining.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.