Q3 2023 Repligen Corp Earnings Call

Good day, ladies and gentlemen, and welcome to up against 2000, Twenty's three third quarter earnings Conference call.

My name is Keith and I'll be your coordinator he's.

Please note that there will be a question and answer some following the company's former remarks in order to accommodate all individuals who wish to ask questions there'll be a limit of two questions at a time.

Please also note that todays event is being recorded and now let's turn the conference over to your host for todays call Sondra Newman head of Investor Relations for Epogen.

Thank you Keith and welcome everyone to our third quarter of 2023 report.

On this call, we will cover business highlights and financial performance for the quarter and year to date can you provide an update on our full year financial guidance.

Rutledge and C E O Tony Hunt and our CFO, Jason Garland will deliver a report and then we'll open the call up for Q&A.

As a reminder, forward looking statements that we make during this call, including those regarding our business goals and expectations for the financial performance of the company are subject to risks and uncertainties that may cause actual events or results to differ additional information concerning risks related to our business is included in our quarterly reports on Form 10-Q.

Our annual report on Form 10-K, and other current reports.

Clothing their report that we're filing today and other filings that we make with the SEC.

Today's comments reflect management's current views, which could change as a result of new information future events or otherwise the company does not obligate or commit itself to update forward looking statements, except as required by law.

During this call we are providing only non-GAAP financial results and guidance unless otherwise noted reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to rapid Jim's website and on SEC Gov.

Adjusted non-GAAP figures in today's report include the following book to Bill ratio base business revenue revenue growth at constant currency cost of sales gross profit and gross margin operating expenses, including R&D and SG&A.

Income from operations and operating margin pretax income income tax net income diluted earnings per share as well as EBITDA and adjusted EBITDA. These adjusted financial measures should not be viewed as an alternative to GAAP measures, but are intended to best reflect two of our ongoing operations.

<unk>. Thank.

Thank you now I'll turn the call over to Tony Hunt, Hey, Thanks, Sondra and good morning, everyone and welcome to our Q3 earnings call.

As you know 2023 continues to be a challenging year for our company and the overall by processing industry as we navigate macro headwinds.

Primarily destocking in the CD in biotech and pharma sectors overall capital conservatism and China weakness.

Despite these challenges we believe we are beginning to see the first signs of recovery play out here in the third quarter.

As noted on our August Q2 call, we highlighted our high probability opportunity funnel, that's indicative of our future order demand and projected at these orders would close in late Q3 and Q4.

I'm happy to share that our commercial team closed out many of these late stage funnel opportunities in the last half of the quarter with the majority of these orders now scheduled for delivery in the first half of next year.

Our strengthening order book through the third quarter, where orders were up 16% sequentially supports our position that demand for replicants products is starting to recover.

Our book to Bill of 1.17 for the quarter was very encouraging and was primarily driven by large pharma accounts, which were up 50% sequentially and modest growth from C. D malls.

Regionally Europe, and North America showed the strongest sequential and year over year order gains.

A highlight in the quarter was Jean Turkey, which delivered solid revenue and order growth.

About 20% of our total revenue in the quarter came from gene therapy counts representing growth of 11% year on year.

Within gene therapy revenues filtration chromatography analytics were up in the quarter.

More importantly, the average spend from our top gene therapy accounts was upgraded and 25% year to date as customers continue to scale.

Order growth was also strong up over 50% year on year and close to 20% sequentially.

The gains in gene therapy are coming from late stage opportunities and commercial wins with a b on the RNA accounts dominated as the broader gene therapy market continues to be muted here in 2023.

We are cautiously optimistic about the early signs of a recovery we're seeing.

Our expectation is that our markets will improve as we move through the first half of next year.

We anticipate that we will have sequential growth in base business revenues in the first half of 2024 versus the second half of this year for the second half of 2024, we are expecting both sequential and year on year gains.

Stepping back now towards third quarter performance.

Before covering business level performance I want to spend a few minutes.

Three key strategic initiatives that we outlined on our Q2 call.

The first is our focus on optimizing our resources and controlling cost.

As discussed on the Q2 call we started to rebalance our resources during the quarter by.

By the end of the year, we will have reduced our headcount by about 15% versus the end of last year. We will also have consolidated slides optimizing our manufacturing footprint, especially in the area of filtration.

This streamlining of our organization will ultimately put us in a much better position to drive future margin expansion as we move into 2020 for Jason.

Jason will cover our rebalancing activities in more detail in his section.

Our second key initiative was to increase our commercial focus and execution.

One of the challenges we observed in the first half of the year was the longer cycles on approvals, especially for capital equipment.

We also talked about the implementation of a corporate key accounts team to increase our visibility and penetration at our top accounts.

During the quarter, we made good progress has the commercial team pivoted to selling our full product portfolio.

The order results, including the strong rebound at our pharma accounts reflect the effort and focus of this team.

That said, there's more work to be done at our C. D. M O accounts, where demand remains soft and our key accounts ligands and growth factors for the slowdown in pharmacy spend and project delays have impacted these product lines.

Based on where we are entering Q4, we don't expect C. D. M O M protein demand to pick up until early next year.

As noted earlier commercial execution is a top priority for the company.

And we're delighted that Olivier low yellow joined us in October as our Chief commercial officer.

Olivia as experienced in bio processing strengthens our team and should prove invaluable as he takes the reins on our commercial team and business units.

Moving now toward a third area of focus which is launching new products in Q3 was it really busy quarter for us and.

In August we announced with sartorius to the launch of an integrated bioreactor system that incorporates rutledge and ATF technology.

This integrated solution simplifies perfusion in both C train on production Bioreactors.

Then in September we announced the acquisition of mixing innovator and met another to bolster and expand our fluid management offering.

With the acquisition of Flex Biosys earlier in the year, we could see the need to add mixing technology to this portfolio. So we could further penetrate the single use back market.

I don't know if that addresses this gap with their mixing in drivetrain technologies.

Our goal in 'twenty 'twenty four is to build out a broader portfolio of single use bags solutions and become a more significant player in this parts of the market.

As noted in the press release, we expect melanoma to contribute close to $5 million in revenue here in the fourth quarter.

Finally in September we launched.

Industries burst older free self contained TFS device.

Milestone achievement and the advancement of GSI technology.

This product will be ideal for customers working on Adcs and gene therapy drugs for where our fault containment is required.

So moving now to our Q3 business results.

As you saw in our press release. This morning, we delivered $141 million in revenue with our base business down 18% year on year and 8% year to date.

Business highlights in the quarter included strong performance at gene therapy accounts.

And another growth quarter for analytics.

I'll cover more on each of our franchises shortly.

On the orders front year over year base orders were flat.

Pharma and C. D malls were up in the quarter year over year with notable strength in pharma.

Third quarter base orders were up 23% on orders from our top 10 accounts and farmer were upgraded and then 20% year to date, which is very encouraging given the drop off in pharma demand in Q2.

Moving now to franchise level highlights.

In chromatography third quarter revenues were down mid single digits versus prior year on tough comps and flat versus prior quarter.

Within chromatography, our Opus business was up on unit volume, but down on revenues as we continue to shift away from Rutledge and procured vessels Q.

Q3 was a strong quarter in orders for opus up over 20% sequentially with particular strength in North America.

Operator: Good day ladies and gentlemen and welcome to Repligen's 2023 third quarter earnings conference call. My name is Keith and I will be your coordinator. Please note that there will be a question and answers to some following the company's forum marks in order to accommodate all individuals who wish us questions.

Operator: There will be a limit of two questions at a time. Please also note that this is as the event is being recorded.

For the first nine months of 2023 chromatography revenues were up 5% and we now expect full year revenue to be flat.

Our proteins business had a weak quarter as expected for both revenues and orders.

Mainly driven by delayed projects and slowdown in demand in pharma accounts.

Sondra Newman: I now want to turn the conference over to your host for today's call, Sondra Newman, Head of Investor Relations for Epigen. Thank you Keith and welcome everyone to our third quarter. On this call, we will cover business highlights and financial performance for the quarter and year to date and provide an update on our full year financial guidance. Repligen CEO Tony Hunt and our CFO Jason Garland will deliver our report and then we'll open the call up for Q&A.

As noted on our Q2 call. We continue to expect our proteins business to be down 10% to 15% here in 2023.

In filtration our year over year revenues were down by over 35% in the quarter driven by predictive sharp decline and Covid related revenue, which was over $25 million in the same period last year.

Looking at our base filtration business year over year revenues were down by 17% in the third quarter and 14% for the first nine months of 2023.

Sondra Newman: As a reminder, the forward looking statements that we make during this call, including those regarding our business goals and expectations for the financial performance of the company are subject to risks and uncertainty. That may cause actual events or results to differ. Additional information concerning risks related to our businesses included in our quarterly reports on form 10Q or annual report on form 10K and other current reports, including the report that we're filing today and other filings that we make with the SEC.

With infiltration there were pockets of strength, most notably the artisan TFS systems, and assemblies, which were up significantly versus prior year.

On the upside filtration orders during the quarter strengthened with the book to Bill ratio greater than 1.15.

This was driven by strong demand for <unk> T F, where we are seeing multiple site expenses.

Sondra Newman: Today's comments reflect management's current views which could change as a result of new information future events or otherwise. The company does not obligate or commit itself to update forward looking statements except as required by law. During this call, we are providing only non-GAP financial results and guidance unless otherwise noted. Reconciliation of GAP to non-GAP financial measures are included in the press release that we issued this morning, which is posted to Rep, website and on SEC.gov.

<unk> stage wins all in all for the year, we continue to expect the filtration franchise to be down approximately 30%.

Finally, our process analytics business had another growth quarter up 7% year over year, but slightly down versus expectations.

We are seeing strong revenue and order growth in North America, but weaker demand in Europe and China.

We continue to see good traction for our in line.

Analytics portfolio led by flow V P acts in RPM.

Sondra Newman: Adjusted non-GAP figures in today's report include the following. Book to bill ratio, face business revenue, revenue growth at constant currency, cost of sales, growth profiting, growth margin, operating expenses including R&D and FGNA, income form operations and operating margin, pre-tax income, income tax, net income, diluted earnings per share, as well as EBITDA and adjusted EBITDA. These adjusted financial measures should not be viewed as an alternative to GAP measures, but are intended to best reflect this of our ongoing operations.

We are integrating real time process management into our cross flow TFS systems.

While we do expect some euro and dollars to materialize here in Q4, we don't anticipate that it will be significant enough to get us to 15% growth goal for the business in 2023.

We now expect our analytics business to grow in the high single digits for the year.

Based on all of these developments, we are updating and tightening our guidance to the lower end of the range discussed on our Q2 call.

We now expect our full year revenue to be in the range of 635 million to 645 billion, which reflects a decline of 9% at the midpoint for our base business.

Operator: Thank you.

So overall, while it's been a challenging quarter on revenues and margins for the business.

Anthony Hunt: Now I'll turn the call over to Tony Hunt. Hey, thanks, Sandra.

We have made progress on a number of key initiatives.

While macro headwinds continue to persist in the C. D. Moe in China's sectors. We're cautiously optimistic that we are seeing signs of recovery with orders picking up in the quarter pharma accounts in particular within our filtration franchise and continued traction at gene therapy accounts associated with late stage commercial processes.

Anthony Hunt: Good morning everyone and welcome to our Q3 earnings call. As you know, 2023 continues to be a challenging year for our company and the overall bypassing industry, as we navigate macro headwinds, primarily destocking in the CDML and pharmaceutical sectors, overall capital conservatism and China weakness. Despite these challenges, we believe we are beginning to see the first lines of recovery play out here in the third quarter. As noted on our August Q2 call, we highlight that our high probability opportunity final has indicative of a future order demand and projected that these orders would close in late Q3 and Q4.

It's very important that these early signs of recovery persist and brought them to other sectors of the market over the coming quarters.

Before turning the call to Jason I want to mention that within the next two weeks, you'll be able to access our 2022 sustainability report on our website.

Anthony Hunt: I'm happy to share that our commercial team closed out many of these late stage final opportunities in the last half of the quarter with the majority of these orders now scheduled for delivery in the first half of next year. Our strengthening order book, through the third quarter, where orders were up 16% sequentially, supports our position that demand for replgent products is starting to recover. Our book to build at 1.07 for the quarter was very encouraging and was primarily driven by large farm accounts, which were up 50% sequentially, and modest growth from CD mobs.

We're really proud of the progress we've made on many ESG topics I encourage you to check it out.

With that I'll turn the call over to Jason for the financial update.

Thank you Tony and good morning, everyone.

First let me say that I'm thrilled to be a part of the records and team. It's been a busy first month in my role and as you can see and you'll hear this morning. My focus is on optimizing our spending and rebalancing resources to ensure we are in a better position on margins. When we kick off 2024. The team has been great and I look forward to picking up where John left off.

Anthony Hunt: Regionally, Europe and North America showed the strongest sequential and year-over-year order gains. A highlights in the quarter was gene therapy, which delivered solid revenue and order growth. About 20% of our total revenue in the quarter came from gene therapy accounts, representing growth of 11% year-on-year. Within gene therapy revenues, filtration, from photography and other risks were up in the quarter. More importantly, the average spend from our top gene therapy accounts was upgraded in 25% year-to-date as customers continue to scale.

And supporting and continuing to drive clarity on the company's financial and operating performance.

Anthony Hunt: Order growth was also strong, up over 50% year-on-year and close to 20% sequentially. The gains in gene therapy are coming from late-stage opportunities and commercial ones with AV and RNA accounts dominating as the broader gene therapy market continues to be muted here at 2023. We are cautiously optimistic about the early signs of recovery we're seeing. Our expectation is that our markets will improve as we move to the first half of next year.

Today, we reported our financial results for the third quarter of 2023 and updated our financial guidance for the year.

We expected Q3 to be the lightest quarter of the year in total revenue came in at $141 $2 million with no COVID-19 sales in the third quarter compared to $29 million in Covid sales in the third quarter of 2022. This is a year over year decrease of 30% as reported and 31% on a constant.

<unk> basis, as we continue to navigate through the macro headwinds in our industry.

FX, providing a slight tailwind in the quarter and based on current conditions, we expect no significant impact from FX for the full year.

Our base business, which excludes COVID-19 related revenue and revenue from acquisitions was down 18% on a reported basis and 19% in constant currency.

Tony shared the revenue performance for our franchises, but let me highlight the revenue performance across our global regions for context, North America represented approximately 50% of our global business in Q3, while Europe and Asia Pacific and the rest of the world represented 34% and 17% respectively.

Anthony Hunt: We anticipate that we will have sequential growth and base business revenues in the first half of 2024 versus the second half of this year. For the second half of 2024, we are expecting both sequential and year-on-year gains.

Absent the Covid revenue in Q3 versus the $29 million in the third quarter of last year contributed to the contraction across all regions year over year sales decline in North America by 18% and Europe by 32% and in Asia Pacific by 49% with China being the biggest driver of that region's decline.

Anthony Hunt: Stepping back now to our third quarter performance. Before covering business level performance, I want to spend a few minutes on the three key strategic initiatives that we outlined on our Q2 call. The first is our focus on optimizing our resources and controlling costs. As discussed on the Q2 call, we started to rebalance the resources during the quarter. By the end of the year, we will have reduced our headcount by about 15% versus the end last year.

158%.

Third quarter 2023, Joe's adjusted gross profit was $59 3 million or 48% decrease year over year on nearly $60 million of lower revenue and on a on a lower adjusted gross margin, which was 42% in the third quarter down from 57% in the prior year.

Anthony Hunt: We will also have consolidated sites optimizing our manufacturing footprint, especially in the area of filtration. This streamlining of our organization will ultimately put us in a much better position to drive future margin expansion as we move into 2024. Jason will cover our rebalancing activities in more detail in his section. Our second key initiative was to increase our commercial focus and execution. One of the challenges we observed in the first half of the year was the longer cycles on approvals, especially for capital equipment.

The year over year decline in gross margin continues to be driven by the effect of volume deleverage, particularly with the third quarter revenue at a low point was also affected by product mix, primarily the sequential and year over year declines from our proteins filtration franchises and finally, our gross margins were impacted by higher depreciation and operating.

It's tied to our capacity expansion.

Anthony Hunt: We also talked about the implementation of a corporate key accounts team to increase our visibility and penetration at our top accounts. During the quarter, we made good progress as the commercial team pivoted to selling our full product portfolio. The order results, including the strong rebound at our farm accounts, reflect the effort and focus of this team. That said, there's more work to be done at our CDMO accounts where demand remains soft and are key accounts for ligands and growth factors for the slowdown and farmer spend and project delays have impacted these product losses. Jones. Based on where we are entering Q4, we don't expect CDMO and protein demand to pick up until early next year. As noted earlier, commercial execution is a top priority for the company.

It's clear that driving volume and margin gains.

The company is.

Tony Tony discussed we are continuing to execute a program that started in July to rebalance and streamline the business to support our future margin expansion.

There are three main areas. The restructuring plans first we are right sizing head count and expect to reduce our workforce by 15% versus year end of 2022.

Second we are consolidating a portion of our manufacturing operations, especially our volumes have gone down significantly post the Covid peak.

Third we are discontinuing the sale of certain product gets used and took a deep dive into our inventory, we're evaluating materials and components that we secured during the 2000 22022, COVID-19 period when a rapid acceleration in demand was countered by a supply chain environment that was exceptionally tight and unpredictable.

Anthony Hunt: And to that end, we're delighted that Olivier Loeillot joined us in October as our chief commercial officer. Olivier's experience in bioprocessing, Stanton's our team and should prove invaluable as he takes the reins on our commercial team and business units.

As a result of these restructuring activities, we still expect to realize approximately $50 million in cost savings in the second half, which will help to partially offset the impact of lower sales volumes.

Anthony Hunt: Moving now to our third area of focus, which is launching new products, and Q3 was a really busy quarter for us. In August, we announced with Sertorius the launch of an integrated bioreactor system that incorporates Refugeant ATF technology. This integrated solution simplifies profusion in both C-Train and production bioreactors. Then in September, we announced the acquisition of mixing innovator Metanova to bolster and expand our food management offering. With the acquisition of Flex Biosis earlier in the year, we could see the need to add mixing technology to this portfolio so we could further penetrate the single use bag market.

To execute the restructuring we incurred approximately $24 million of charges in the third quarter of which approximately $21 million were noncash charges related to accelerated depreciation of fixed assets and inventory write off and approximately $2 million were severance and employee related costs. We expect an additional 2 million of severance charge.

The charges in the fourth quarter.

All of these charges are nonrecurring in nature and are reflected only in our GAAP P&L for the third quarter and total year guidance.

Continuing through the P&L, our adjusted operating income was $5 $2 million in the third quarter down $53 million compared to prior year, driven by the 55 million job and adjusted gross profit just described.

Anthony Hunt: Metanova addresses this gap with their mixing and drivetrain technologies. Our goal in 2024 is to build out a broader portfolio of single use bag solutions and become a more significant player in this part of the market. As noted in the press release, we expect Metanova to contribute close to 5 million in revenue here in the fourth quarter.

Set by $2 million year over year reduction in total operating expenses SG.

SG&A was down 5% versus last year benefiting from the rebalancing actions taken in August and the R&D was consistent year over year as we invested in technology development and continue to introduce innovative new products like those Tony discussed earlier.

Anthony Hunt: Finally, in September, we launched the industry's first holder-free self-contained TFF device, a milestone achievement in the advancement of TFF technology. This product will be ideal for customers working on ADCs and gene therapy drugs for where a full containment is required.

Adjusted EBITDA was $14 $5 million for the quarter at 10, 2% margin rate. This compares to adjusted EBITDA of $57 $9 million of the 28, 9% margin for the second quarter of 2022.

Anthony Hunt: So moving now to our Q3 business results. As you saw in our press release this morning, we delivered 141 million in revenue with our base business down to 18% year-on-year and 8% year-to-date. Business highlights in the quarter included strong performance of gene therapy accounts and another growth quarter for analytics. I'll cover more on each of our franchises shortly. On the orders front, year-to-year base orders were flat. Farmer and CDMOs were up in the quarter year-over-year with notable strength in Farmer, where per-quarter base orders were up 23% and orders from our top 10 accounts in Farmer were upgraded in 20% year-to-date, which is very encouraging given the drop-off in Farmer demand in Q2.

Adjusted net income for the quarter was $13 $2 million down $31 2 million versus last year, driven by the 53 million dollar drop in adjusted operating income and offset by higher interest income and $10 million less of tax provisions our adjusted effective tax rate was negative $5 six.

Percent driven primarily by the efficient use of cash in our Swedish operation to prepare for the funding of our <unk> acquisition, we have updated our tax rate guidance for the year to be 18% compared to our prior guidance of 20%.

Adjusted fully diluted EPS for the third quarter was 23 cents compared to 77% in the same 2022 period, a decline of 54 or 70%.

Anthony Hunt: Moving now to franchise-level highlights. In chromatography, per-quarter revenues were down mid-single digits versus prior year. On tough comps and flat versus prior quarter. Within pro-autography, our opus business was up on unit volume, but down on revenues as we continued to shift away from refuge and procured results. Q3 was strong quarter in orders for opus, up over 20% sequentially, with particular strength in North America. For the first nine months of 2023, chromatography revenues were up 5% and we now expect full year revenue to be flat.

Finally, we continued to generate strong cash flow and ended the quarter with $638 million cash cash equivalents and short term investments.

Please note this cash position does not reflect the meta Nova acquisition that closed on October <unk>.

I'll now move to our updated guidance for the full year of 2023.

Please note that our GAAP to non-GAAP reconciliations for our 2023 guidance are included in the reconciliation tables in today's earnings press release and for further clarity or guidance includes both the impact of the flex bias. This acquisition and the recently announcement I know the acquisition.

Anthony Hunt: Arprotein's business had a week quarter as expected for both revenues and orders, mainly driven by delayed projects and slowdown in demand at farm accounts. As noted on our Q2 call, we continue to expect Arprotein's business to be down 10 to 15% here in 2023. Infiltration, our year-over-year revenues were downed by over 35% in the quarter, driven by predicted sharp decline in COVID-related revenue, which was over 25 million in the same period last year.

As Tony shared earlier, we are updating and narrowing our guidance towards the lower end of the range discussed on our second quarter call.

Now expect the full year revenue to be in the range of 635 million to $645 million, reflecting a $19, 5% to 21% decrease in total revenue compared to 2022.

Excluding COVID-19 related sales and acquisitions, our base business revenue is expected to be down approximately eight 5% to 99, 5% year over year compared with our previous guidance of minus five to minus 9%.

Anthony Hunt: Looking at our base filtration business, year-of-year revenues were down by 17% in the third quarter and 14% for the first nine months of 2023. Within filtration, there were pockets of strength, most notably the Artisan TFF systems and assemblies, which were up significantly versus prior year. On the upside, filtration orders during the quarter strengthened with a book to bill ratio greater than 1.15. This was driven by strong demand for Excel ETF, where we are seeing multiple site expanses and late-stage wins. All in all, for the year, we continue to expect the filtration franchise to be down approximately 30%.

There's no change in our projected COVID-19 related revenues of $30 million. However, our revenue guidance does now include an additional $5 million in revenue from the recent meta Nova acquisition.

We are revising our 2023 adjusted gross margin guidance to the range of 49% to 50% of one percentage point reduction from our previous guidance. This incorporates the low point of the third quarter results, but also a meaningful step up in the fourth quarter.

While the gross profit drop offset by somewhat with the gross profit drop offset by some opex improvement we are modifying our adjusted operating income guidance to a range of $96 million to $100 million for the year, a reduction of $8 million at midpoint from our August guidance.

Anthony Hunt: Finally, our process analytics business had another growth quarter, up 7% year-over-year, but slightly down versus expectations. We are seeing strong revenue and order growth in North America, but weaker demand in Europe and China. We continue to see good traction for our in-line analytics portfolio led by FlowVPX and RPM, where we are integrating real-time process management into our cross-load TFF systems. While we do expect some year and dollars to materialize here in Q4, we don't anticipate that it will be significant enough to get us to 15% growth goal for the business in 2023. We now expect our analytics business to grow in the high-single digits for the year.

Adjusted other operating income guide.

Guidance is expected to increase to $22 million compared to our prior guidance of $18 million and as discussed earlier, we expected 2023 adjusted income tax expense to be approximately 18% of adjusted pre tax income down from our August guidance estimate of 20%.

With these puts and takes we are revising our adjusted net income guidance to the range of $97 million to $100 million.

Decrease of $1 $5 million at the midpoint from our August guidance, which translates to an adjusted EPS guidance of $1 70 to $1 76.

Per fully diluted share. This assumes 50 $757 million weighted sorry, 57 million weighted average fully diluted shares outstanding at year end 2023.

Anthony Hunt: Based on all of these developments, we are updating and tightening our guidance to the lower end of the range discussed on our Q2 call. We now expect our full year revenue to be in the range of 635 million to 645 million, which reflects a decline of 9% of midpoint for our base business.

Adjusted EBITDA is now expected to be in the range of $130 million to $134 million a reduction of $12 million at midpoint from our prior guidance with depreciation and intangible amortization expenses expected to be approximately $37 6 million and $30 million respectively.

Anthony Hunt: So, overall, while it's been a challenging quarter on revenues and margins for the business, we have made progress on a number of key initiatives. While macro headwinds continue to persist in the CDMO and China sectors, we're cautiously optimistic that we are seeing signs of recovery with orders picking up in the quarter of our farm accounts, in particular, within our filtration franchise, and continue traction and gene therapy accounts associated with late stage commercial processes. It's very important that these early signs of recovery persist and broaden to other sectors of the market over the coming quarters.

Adjusted EBITDA margins are expected to be in the range of 25% to 28% for the year reflective of the exclusion of fixed depreciation costs from our capacity expansion.

We expect year end cash and cash equivalents to be in the range of $455 million to $465 million with $45 million of Capex investments being fully funded by cash generation from our operations.

Anthony Hunt: Before turning the call to Jason, I want to mention that within the next two weeks, you'll be able to access our 2022 Sustainability Report on our website. We're really proud of the progress we've made on many ESG topics and encourage you to check it out.

This revised ending cash figure is inclusive of cash payments made for October acquisition of melanoma.

Overall, we are pleased with many of the developments in the quarter from strong orders at pharma accounts continuing to execute on strategic M&A and we're putting programs in place to address the margin challenges, we remain optimistic about our markets, our differentiated portfolio and our positioning in bio processing and we look forward.

Jason Garland: With that, I'll turn the call over to Jason for the financial update. Thanks, Johnny. Good morning, everyone.

Jason Garland: First, let me say that I'm thrilled to be a part of the Revolgents team. It's been a busy first month in my role, and as you can see, and we'll hear this morning, my focus is on optimizing our spending and rebalancing resources to ensure we are in a better position on margins when we kick off 2024. The team has been great. I look forward to picking up where John left off and supporting and continuing to drive clarity on the company's financial and operating.

Finishing off the year with an improved fourth quarter with that I will turn the call back to the operator to open the lines for questions.

Yes. 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 youre using a speakerphone please pick up your handset before pressing the keys. So at anytime. Your question has been addressed you would like to withdraw it. Please press Star then two.

Jason Garland: Performance. Today we reported our financial results for the third quarter of 2023 and updated our financial guidance for the year. We expected Q3 to be the lightest quarter of the year and total revenue came in at $141.2 million with no COVID sales in the third quarter compared to $29 million in COVID sales in the third quarter of 2022. This is a year of a year of a decrease of 30% as reported and 31% on a constant currency basis.

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

And today's first question comes from Jacob Johnson with Stephens.

Hey, Thanks, Good morning, everybody welcome Jason Tony You mentioned 2024, and that's clearly the focus of the inbounds. This morning, so you're pointing to sequential growth in the first half, but it doesn't seem like year over year growth in both year over year sequential growth in the <unk>.

Jason Garland: As we continue to navigate through the macro, it wouldn't been our industry. FX provided a slight tailwind in the quarter and based on current conditions, we expect no significant impact from FX for the full year. Our base business, which excludes COVID related revenue and revenue from acquisitions was down 18% on the reported basis and 19% at constant currency. Sony shared the revenue performance for our franchises, but let me highlight the revenue performance across our global regions.

Half of the year.

That would imply something below your <unk> next year, and maybe a wide range of that should we assume some form of year over year growth I think consensus was looking maybe for something around high single digits organic growth next year, just any way to kind of frame up the magnitude of growth next year understanding it's early.

Yes, Jacob I think it's going to be hard right now to.

Put a number on 2024 I think.

Jason Garland: For context, North America represented approximately 50% of our global business in Q3 while Europe and Asia Pacific and the rest of the world represented 34% and 17% respectively. The absence of COVID revenue in Q3 versus the 29 million in the third quarter of last year contributed to contraction across all regions. Year over year failed to climb North America by 18% in Europe by 32% and in Asia Pacific by 49% with China being the biggest driver of that region declined down 58%.

High degree of confidence given what we're seeing in the second half of this year. The first half of next year is going to improve on is going to be better the magnitude of how much better I don't know right now and I can also say that as we go through the year. We fully expect that orders are going to continue to improve for us. This quarter, though was really key right we knew.

You did see some change in the order pattern and it's early but I think it was very positive to see pharma up greater than 50%. So it really depends on how Q4 plays out how Q1 plays out before we start calling you know.

Jason Garland: Third quarter of 2023 adjusted gross profit was $59.3 million of 48% increased year over year on nearly $60 million of lower revenue and on a lower adjusted gross margin which was 42% in the third quarter down from 57% in the prior year. The year over year decline and gross margin continues to be driven by the effect of volume to leverage particularly with the third quarter revenue at a low point was also affected by product mix primarily the sequential and year over year declines from our proteins and filtration franchises.

How much growth do we see in the first half of next year versus second half in that year over year does that flat is that down.

It's hard to tell right now.

Got it.

Fair enough and then maybe prevent the follow up Tony you all called out.

From gene therapy customers I think there's a lot of debate right now about what's going on in cell and gene therapy. It seems like maybe there is strength at the later stage of things, while maybe earlier stage demands weaker just curious kind of what youre seeing in that market right now and then any changes to kind of your long term outlook for that.

Jason Garland: And finally our gross margins were impacted by higher appreciation and operating expenses tied to our capacity expansion. It's clear to drive and volume and margin gains need to be our top company. As Tony Tony discussed we're continuing to execute a program that started in July to rebalance and streamline the business to support our future margin expansion. There are three main areas of the restructuring plans. First we are right sizing headcount and expect to reduce our workforce by 15% versus year end of 2022.

<unk>.

Yes gene therapy.

We've been pretty consistent as we talk about the gene therapy market. This year, our growth is coming from late stage and commercial wins and it's coming from those accounts that we talked about it.

On our Q4 2020 to call, where we said that we had 20 plus customers that were you know million dollar plus spend with revenue that's where our growth is coming from your spot on when it comes to the.

Jason Garland: Second we are consolidating a portion of our manufacturing operations, especially our volumes have gone down significantly post the COVID peak. Third we're discontinuing the sale of certain product SKUs and took a deep dive into our inventory, we're evaluating materials and components that were secured during the 2020 to 2022. COVID-19 period when a rapid acceleration in demand was countered by a supply chain environment that was exceptionally tight and unpredictable. As a result of these restructuring activities we still expect to realize approximately $50 million in cost savings in the second half which will help to partially offset the impact of lower sales buy.

Kind of smaller players in the market. It's been it's been soft right, it's definitely being them.

Lower activity market in 2023 versus what we saw last year I expect that that's going to change and.

When you look at our normal bio processing Europe, whatever normal is going to be right now I would say that it's pretty clear that gene therapy can be at 20% plus grower.

Somewhere in that 20% to 30% range, but you got to get back into normal market conditions before you kind of can call that.

Okay.

Got it thanks for taking the questions.

Thank you thanks Jeremy.

Thank you and our next question comes from Connor Mcnamara with RBC capital markets.

Jason Garland: Tax Decute the restructuring we incurred approximately $24 million of charges in the third quarter of which approximately $21 million were non-cash charges related to accelerate the depreciation of fixed assets and inventory right off and approximately $2 million were severance and employee related costs. We expect an additional $2 million of severance charges of charges in the fourth quarter. All of these charges are non-recurring in nature and are reflected only in our gap P&L for the third quarter and total year guidance.

Hey, good morning, Thanks for taking the call.

Just.

First on margins. If you look at your margin guide for this year implies second half margins well below 15% or so how should we think about that going into next year and how quickly can you get back to pre pandemic level EBIT margins.

So Scott obviously as I've started I've spent a lot of time in getting into the details on our margin and most importantly understanding what the actions, we're taking and what we need to continue to do.

Jason Garland: Continuing through the P&L, our adjusted operating income was $5.2 million in the third quarter and down $53 million compared to prior year given by the $55 million job and adjusted gross profit just to subscribe, offset by $2 million your reduction in total operating expenses. SGNA was down 5% versus last year, benefiting from the rebalancing actions taken in August and R&D was consistent year by year as we invested in technology development and continued to introduce innovative new products like those Tony discussed earlier.

You can you can see in our guide that we'll be stepping up in the fourth quarter right from where we were at a low point in <unk>.

But I think there is still a lot of work to do to understand where we are in 'twenty four.

Certainly I think we'll be able to to improve but right now we're not going to issue guidance yet on our 24 gross margins.

Okay. Thanks.

On the on the pharma order strength can you.

How much of that strength was from new customers versus continuing projects and just whats different than than what you talked about three months ago in relation to.

Jason Garland: Adjusted EBITDA was $14.5 million for the quarter at a 10.2% margin rate. This compares to adjusted EBITDA of $57.9 million of the $28.9% margin for the second quarter of 2022. Adjusted net income for the quarter was $13.2 million, down $31.2 million versus last year driven by the $53 million drop in adjusted operating income and offset by higher interest income and $10 million less of tax provisions. Our adjusted effective tax rate was negative 5.6% driven primarily by the efficient use of cash in our Swedish operation to prepare for the funding of our Metanova acquisition.

Pharma spend.

Yes, we could see kind of right in Q1 that pharma spend dropped off just a little bit but in Boston that trend and then in Q2. It was really weak I think what we were able to do in Q3 was the high probability funnel that we talked about on our Q2 call we're able to close out.

What we saw was existing customers.

Some new but I would say majority of our existing customers.

Moving forward with phase III, and commercial projects and placing large orders.

Jason Garland: We have updated our tax rate guidance for the year to be 18% compared to our prior guidance of 20%. Adjusted fully diluted ETS for the third quarter was 23 cents compared to 77 cents in the same 2020 period at a climb to 54 cents or 70%. Finally, we continue to generate strong cash flow and ended the quarter with $630.8 million of cash, cash equivalence and short term investments. Please note this cash position does not reflect the Metanova acquisition that closed on October 2nd.

With deliveries and kind of the first quarter second quarter of next year. So I think it's very encouraging that the order pattern has increased I'd like to add that having essentially finished the month of October right as of today, we can say that the order strength has maintained itself.

Through October so again, another data point that I think is positive for <unk>.

Great. Thanks for that color Tony I appreciate it.

Thank you. Our next question comes from Dan Arias with Stifel.

Jason Garland: Announce our updated guidance for the full year of 2023. Please note that our gap to non-gap reconciliation for our 2023 guidance are included in the reconciliation tables and today's earnings press release. And for further clarity, our guidance includes both the impact of the flex biosis acquisition and the recently announced Metanova acquisition. At Tony shared earlier, we're updating and narrowing our guidance towards the lower end of the range discussed on our second quarter call.

Good morning, guys. Thanks for the questions Tony on the order book improvement good to hear that come into way that it did are you able to ballpark the percentage of the business where things actually improved.

It sounds like its pharma gene therapy, not so much <unk>.

You were to sort of crystallize or simplify that what might that look like assuming you have that number handy.

Yes, no, it's absolutely pharma and <unk> pharma in gene therapy.

Jason Garland: We now expect the full year revenue to be in the range of 635 million to 645 million, reflecting in 19.5 to 21% decrease in total revenue compared to 2022. Excluding COVID related sales and acquisitions, our base business revenue is expected to be down approximately 8.5% to 9.5% year of year compared with our previous guidance of minus 5 to minus 9%. There's no change in our projected COVID-related revenues of $30 million. However, our revenue guidance does now include an additional $5 million in revenue from the recent Metanova acquisition.

If you go back to what I said, we were at 50% up on pharma on quarter sequentially, we were 23% up on pharma on quarters year on year, our gene therapy strength in orders again was 50% year on year, 25% sequentially.

<unk> inched up a little bit in the quarter, but I would say <unk> remained sluggish and have not really recovered from where we were in Q3 when it dropped off dramatically in Q3 of last year. So.

I look at it is.

You add up kind of pharma.

And in gene therapy in one bucket, that's probably about 50% of the revenue of the company is coming from from those two buckets of them.

Jason Garland: We are revising our 2023 adjusted gross margin guidance to the range of 49 to 50%, a 1%age point reduction from our previous guidance. This incorporates the low point of the third quarter results, but also a meaningful step up in the fourth quarter. While the gross profit drop offset by some, with the gross profit drop offset by some op-ex improvement, we're modifying our adjusted operating income guidance to a range of $96 to $100 million for the year, a reduction of $8 million at midpoint from our August guidance.

Somewhere between 40, and 50% is coming from C. D malls in what we call integrators Flash Oems and those that side of the.

The ledger is just hasn't moved.

Okay. That's helpful. Thanks, and then.

Maybe on chromatography can you just touch on resin ability delivery availability there and at this point, whether you think that you might start 2024.

Was that just no longer being a constraint that seems like an area where growth next year can be about more than just the backdrop the industry backdrop.

Jason Garland: Adjusted other operating income, guidance is expected to increase to $22 million compared to our prior guidance of $18 million and as discussed earlier, we expected 2023 adjusted income tax expense to be approximately 18% of adjusted pre-tax income down from our August guidance estimate of 20%. With these puts and takes, we're revising our adjusted net income guidance to the range of 97 to $100 million, a decrease of 1.5 million at the midpoint from our August guidance, which translates to an adjusted EPS guidance of $1.70 to $1.76 per fully diluted share.

So curious about the way in which you are thinking about starting off 24.

Particular segment thanks.

Yes, there's no doubt that resin availability has continued to improve as we've gone through the year.

I think the piece for us that's maybe changed is it's hard to predict.

What percent of our customers are going to ask us to.

Procure resin to.

<unk> comps, especially outside North America, so kind of Europe, and Asia are the two regions where.

Jason Garland: This is $57 million weighted average fully diluted shares outstanding at year end 2023. The adjusted EBITDA is now expected to be in the range of $130 to $134 million or reduction of $12 million at midpoint from our prior guidance with appreciation and intangible amortization expenses expected to be approximately $37.6 million and $30 million respectively. Adjusted EBITDA margins are expected to be in the range of 20.5 to 20.8% for the year, reflective of the exclusion of fixed appreciation costs from our capacity expansion.

We've had more.

<unk>.

And thats impacting.

The growth that we're seeing on the chromatography side and when we looked at like Q3, our volume is up right. So when you look at the number of columns that we're producing and shipping it's going up and that's going to continue to go up when we get into next year I think you're right I think resin availability should be less of an issue I mean, I think it will be.

Normal.

For our high volume restaurants is probably going to be in that six to nine weeks.

Period, but for large much larger volumes, it's going to be probably closer to 12 to 13 weeks, but again, that's really the discretion of the big suppliers of restaurants, but yes I agree more.

Jason Garland: We expect year in cash and cash equivalence to be in the range of $455 to $465 million with $45 million of CAPEX investments being fully funded by cash generation from our operations. This revised ending cash figure is inclusive of cash payments made for our Tuberck acquisition of Menanova. Overall, we are pleased with many of the developments in the quarter from strong orders at pharma accounts continuing to execute on strategic M&A and for putting programs in place to address the margin challenges.

More visibility in 2024 and should be back to a more normal year for our chromatography business.

Okay. Thank you.

Thank you and the next question comes from Puneet sooner with Leerink partners.

Jason Garland: We remain optimistic about our markets, our differentiated portfolio, and our positioning and bioprocessing, and we look forward to finishing off the year with an improved fourth quarter.

Yes, hi, Tony Thanks for taking the questions and Jason Great to have you on board.

So Tony just wanted to clarify thank.

I think you said first half 'twenty forces frequent sequentially should improve from.

Second half of 'twenty, three and then expecting that you're going to grow further from that in second half of 2024. So I mean, it's fair to say that 2024 should grow versus 2023 is just hard to sort of quantify the magnitude and I. Appreciate that so I just wanted to clarify that and then the ultimate.

Operator: With that, I will turn the call back to the operator to open the lines for questions. Yes, thank you. We will now begin the question in an infecession. To ask a question, you may press star than one on your touch-tone phone. If you are using a speaker phone, please pick up your hands at before pressing the keys. If there are any time your question has been addressed, you would like to withdraw it, please press star than two. At this time, we will pause momentarily until some of the roster.

Do you think the 15% to 20% base business growth algorithm that you have for the longer term is that still intact.

Yes, maybe start with the 20%.

Jacob Johnson: And today's first question comes from Jacob Johnson. Hey, thanks.

Business growth over the longer term, we see no reason why our business can grow at that level, we have a highly differentiated portfolio of products, we're bringing new products to market. We're seeing traction in the field, we have less competition on a per product basis. So I think long term and normal normal years for <unk>.

Anthony Hunt: Good morning, everybody. Welcome, Jason. Tony, you mentioned 2024. That's clearly the focus of the imbalance this morning. So you're pointing to sequential growth in the first half, but it doesn't seem like year-to-year growth and then both year-to-year and sequential growth in the second half of the year. That would imply something below your LRP next year and maybe a wide range at that. You should be assume, you know, some form of year-to-year growth.

Our processing, we should be able to grow at.

That level.

When you talk about next year, it's just you're right it.

It's hard to quantify what growth could look like next year, but remember we're while we're talking about as base business growth not all not overall.

Anthony Hunt: I think consensus is looking maybe for something around high single digits organic growth next year. Just anyway to kind of frame up the magnitude of growth next year, understanding it thoroughly. Jacob, I think it's going to be hard right now to put a number on 2024. I think there's a high degree of confidence given what we're seeing in the second half of this year, the first half of next year is going to improve and it's going to be better.

Anthony Hunt: The magnitude of how much better? I don't know right now. And I can also say that as we go through the year, we fully expect that orders are going to continue to improve. For us, this quarter, though, was really key, right? We needed to see some change in the order pattern. And it's early, but I think it was very positive to see VARMA upgrade of the 50%. So it really depends on how Q4 plays out, how Q1 plays out before we start calling, you know, how much growth do we see, you know, in the first half of next year versus second half and then year over year?

Because remember we had some COVID-19 related revenue and.

In 2023, but look when we get to the February call.

Obviously, the telling you exactly what.

2024 is going to look like and we'll probably when we get to the.

Three or four months from now, but much better idea as well about the order run rate order run rate is whats key to the growth.

I think we're happy that Q3 finished strong and the start of Q4 has been a good start to the quarter for us as well on orders.

Got it and then.

The gene therapy side, just wanted to clarify.

When you look at the progression of.

Sort of the phase ones to twos and and.

And how the products are getting approved and getting into the commercial.

Anthony Hunt: Is that flat? Is that down? It's hard to tell right now. Got it. Enough. Fair enough. And then maybe for the follow-up, Tony, you all called out straight from gene therapy customers. I think there's a lot of debate right now about what's going on in cell and gene therapy. It seems like maybe there's strength at the later stage of things while maybe earlier stage demands weaker, just curious kind of what you're seeing that market right now.

Theyre getting commercialized.

You know.

Are you feeling confident that you know sort of as we go into 2024.

<unk> will continue to be levered more and more to phase later phases. In later stages of the drugs and continued to see growth from that I guess the main question is sort of the sustainability of the gene therapy progress that youre seeing here.

And sort of how much of the order book.

Contribution is really sort of coming from gene therapy versus maps.

Anthony Hunt: And then any changes to kind of your long-term outlook for that opportunity. Yeah, gene therapy, you know, we've been pretty consistent as we talk about the gene therapy market this year. Our growth is coming from late stage and commercial wins. And it's coming from those accounts that we talked about at the on our Q4 2022 call. Where we said that, you know, we had 20 plus customers that were, you know, million dollar plus spend with represent.

Thank you.

Yeah, I think on gene therapy, we're a little bit of a proxy on the industry remember we were in early.

We are well embedded in small medium and large gene therapy accounts so as the.

Progression happens from phase one to phase II phase III to commercial we should follow that path.

Anthony Hunt: That's where our growth is coming from your spot on. When it comes to the kind of smaller players in the market, it's been, it's been soft, right? It's definitely been a lower activity market in 2023 versus what we saw last year. I expect that that's going to change. And, you know, when you look at a normal bioprocessing year, whatever normal is going to be right now, I would say that it's pretty clear that gene therapy can be a 20% plus grower somewhere in that 20 to 30% range. But you got to get back into normal market conditions before you kind of can call that. Thanks for your question. Thank you. Thanks, Jacob. Thank you.

Very much in parallel I can't tell you what it's going to be next year, because I think you still have to see what happens with.

With drugs that are up for approval this year, but if you take the top 25 accounts there all scaling of the average dollar spend of those accounts is going on so I think that's also a really positive sign for us.

Got it okay, all right. Thanks, Tony.

Yes. Thanks.

Thank you and the next question comes from Matt Larew with William Blair.

Hi, good morning.

If you think about some of the differences between perhaps your CMO customers relative to the pharma or gene therapy.

Conor Mcnamara: And the next question comes from Connor McNamara with RBC Capital Markets. Hey, good morning. Thanks for taking the call.

Is there anything to call out whether it's modality exposure control of our pipeline, perhaps different level of inventory stocking and destocking.

Conor Mcnamara: Just first on margins. If you look at your margin guide for for this year, it will imply a second half margin well below, you know, 15% or so. How should we think about that going into next year? And how quickly can you get back to pre-pandemic level, even margins?

Regional exposure or anything that might point to why that discrepancy recovery right now.

No I think Tom the C D M O side.

A lot of inventory build and I think thats, a big part of what's going on there is a lot of activity happening at <unk>, we do expect that as we finish off the year and we get into next year CD miles are going to improve.

Anthony Hunt: Carter, we're obviously as I've started, I've spent a lot of time getting into details on our margin and most importantly understanding what the actions were taking and what we need to continue to do. You know, you can see in our guide that we'll be stepping up in the fourth quarter right from where we were at a low point in 3Q, but I think there's still a lot of work to do to understand where we are in 24. Certainly, I think we'll be able to improve, but right now we're not going to issue guidance yet on our 24 gross margins.

We're having lots of conversations there is a lot of projects out there.

We kind of have to close some and I'm, just talking about rutledge and Matt I'm not talking about the market in general, but we have some opportunities on <unk>. We've got to do some execution over the next couple of quarters and that should really help us in 2024.

Okay. Thanks, and then on China, you know sort of another.

Anthony Hunt: Okay, thanks. And just on the on the formal order strength, how much of that strength was from new customers versus continuing projects and just what's different than what you talked about three months ago in relation to farmers spend. Yeah, you know, we could see Conor right in Q1 that farmers spend dropped off just a little bit, but it wasn't a trend and then Q2, it was really weak. I think what we were able to do in Q3 was the high probability file that we talked about on our Q2 call.

Months since we last spoke to observe what's going on there.

Anything to update either from a competitive perspective macro perspective or customer perspective.

Yeah on the macro side not a whole lot has changed it's still a tough environment I think you hear it from all the players on the life science tools side talking about <unk>.

What's going on in China, We don't expect any recovery until we get into next year. There's a few pockets of goodness, but it's it's just counterbalanced by stuff that's not happening so.

Anthony Hunt: We were able to close out on that and what we saw was existing customers, some new but I would say majority are existing customers moving forward with phase three and commercial projects and placing large orders with deliveries in kind of the first quarter, second quarter of next year. So I think it's very encouraging that the order pattern has increased. I'd like to add that you know having essentially finished the month of October, right as of today, we can say that the order strength has maintained itself through October. So again, another data point that I think is possible for repulsion.

Yes, China hasn't changed much at all over the last three months.

Okay. Thanks.

Thank you and the last question comes from Matt Hewitt with Craig.

Craig Hallum Capital group.

Good morning, congratulations on the improvement that Youre seeing and then thanks for the update maybe first off.

Conor Mcnamara: Great. Thanks for that color. I'd appreciate it.

Kind of digging in a little bit more on the Destocking would you say that we're pretty close to being done with that process. As you speak to your C. D more customers and at this point is it more a function of some of the funding and just some some of the conservatism by some of the farm their pharma customers or what do you think is.

Operator: Thank you.

Maybe the hold up there.

I do think Destocking is getting better.

But it's still there and I think it's going to take the rest of the year to kind of.

Daniel Arias: And the next question comes from Dan Arias was people.

Get out of out of the hole that we're all in on on dealing with.

Daniel Arias: Morning guys. Thanks for the questions. Tony on the order of book improvement. Good to hear that come in the way that it did. Are you able to ballpark the percentage of the business where things actually improved? It sounds like it's pharma gene therapy not so much CDMOs. The view to sort of crystallize or simplify that what might that look like assuming you have that number handy? Yeah, no, it's absolutely pharma and and CDMO not CDMOs but pharma gene therapy.

High levels of inventory.

I think your second comment is definitely accurate, which is those being conservative.

On the pharma side.

And I know projects have been delayed we talked about it in Q2, those definitely project delays.

Do you think that that is something that.

Kind of parts of the overall industry, what's encouraging is that Q3 bounce back much stronger than we were anticipating especially within pharma and you would expect that that should flow across into CD Moe Cmos over the next couple of quarters as well so let's see how it goes I think we're.

Daniel Arias: If you go back to what I said we were 50% up on pharma on orders sequentially we were 23% up on pharma on orders year on year. Our gene therapy strength in orders again was 50% year on year 25% sequentially. CDMOs inched up a little bit in the quarter but I would say CDMOs remain sluggish and have not really recovered from where we were in Q3. You know when it dropped off dramatically in Q3 of last year so you know the way I look at it is you know if you add up kind of pharma and and gene therapy in one bucket that's probably about 50% of the revenue of the company is coming from from those two buckets. And then you know close somewhere between 40-50% is coming from CDMOs and what we call integrators slash OEM. And those that side of the ledger is just has to move. Yeah, okay. That's helpful. Thanks.

Cautiously optimistic.

That's great. Thank you and then.

I realize it's very early days, but I'm a month in or so on the melanoma acquisition.

How's the integration going Oh, you know what has the feedback been from your customers those types of things. Thank you.

Yeah on melanoma, it's been very straightforward you know they have the majority of their business is a stainless steel to call a reuse business.

That's a different channel than we sell through so we've been working very closely with the leadership team at about another.

Meeting with their channel partners. We've got some meetings next week with a larger group of channel partners. So I expect that that business is right on track to hit the numbers, we were expecting it to head in Q4 on track for next year.

Anthony Hunt: And then maybe on chromatography, can you just touch on resin availability, availability, availability there? And at this point, whether you think that you might start 2024 off, would that just no longer be in constraint? That seems like an area where growth next year can be about more than just the backdrop, the industry backdrop. So curious about the way in which you're thinking about starting off 24 in that particular segment. Thanks. Yeah, there's no doubt that resin availability has continued to improve as we've gone through the year.

I think the big part that we have to do over the next 12 months is take the technology that they implemented in the stainless steel format and start to move that across into single use married up with the bank technology that we have for flex biosys and really become a.

A bigger player in single use bags.

Side of the market, so that's kind of our goal.

Anthony Hunt: I think the piece for us that's maybe changed is it's hard to predict what percent of our customers are going to ask us to procure resin to pack the columns, especially outside North America. So kind of Europe and Asia are the two regions where we've had more, you know, refuge in and that's impacting the growth that we're seeing on the chromatography side. And when we look at like Q3, our volume is up, right?

We kind of have to keep two sides of the equation running.

And we're really happy with.

While we have and what we can accomplish.

That's great. Thank you.

Thank you and our next question comes from Tim Willi with Wells Fargo.

Great. Thanks.

So Corey to earlier question on order as you called out order strength has maintained itself through October and then to another question you called out C. D. M O integrator OEM customers orders haven't move so just wanted to confirm those are both.

Anthony Hunt: So when you look at the number of columns that we're producing and shipping, it's going up and it's going to continue to go up. When we get into next year, I think you're right. I think resin availability should be less of an issue. I mean, I think it'll be normal for high volume resins. It's probably going to be in that six to nine week period, but for large, much larger volumes, it's going to be probably closer to about 13 weeks. But again, that's really the discretion of the big suppliers of resins. But yes, I agree. More visibility in 2024. And it should be back to a more normal year for our chromatography business.

Could be interpreted on the October basis, as well as the quarterly basis.

Yeah, I have not gone and looked at the October orders by kind of segments I'm just talking about total orders in in October has remained strong, but I haven't done an analysis to see.

Anthony Hunt: Okay. Thank you.

Exactly the same pharma versus CMO that we saw in Q3.

Alright.

That's helpful, but okay, and then just thinking about pricing.

Was there any promotions or discounting or anything in the quarter.

You don't have that stat.

Well I guess what was pricing in the quarter.

Alright, and easier way to I guess ask this was the apples to apples price increase in revenues.

Puneet Souda: And the next question, Mr. Penisudo, with three partners. Hi, Tony. Thanks for taking the questions. Jason, great to have you on board. So Tony, just wanted to clarify, I think you said first off, 24, since sequentially, you should improve from second half to 23. And then expecting that you are going to grow further from that in second half of 2024. So I mean, it's fair to say that 2024 should grow versus 2023 is just hard to quantify the magnitude.

Higher than apples to apples price increase in orders.

Yes, I would say that.

Through especially at the end of Q3, we <unk>, we typically run a promotion on some of our small bench top systems, we've done that in prior years, you'll see that on our website.

That's a pretty standard.

Kind of a tactic that we've used in prior years nothing different in 2023 versus what we've done maybe two to three years ago.

And I would say price, Jason it's maintaining towards that kind of four 5% range for the year. So I think we're on track for what we said we were going to do in price at the beginning of the year.

Puneet Souda: And I appreciate that. So I just wanted to clarify that. And then ultimately, do you think the 15 to 20% base business growth algorithm that you have for the longer term is that still intact? Yeah, maybe start with the 20% base business growth in the longer term. We see no recent why our business can't grow at that level. We have a highly differentiated portfolio of products. We're bringing new products to market.

And I don't think any of the smaller promotions that we're running really impact price for the year.

Alright, great. Thank you.

Thank you next question comes from retro vein sales J P. Morgan.

Puneet Souda: We're seeing traction in the field. We have less competition on a per product basis. So I think long term and normal, normal years for fire processing, we should be able to grow at that level. When you talk about next year, it's just you're right. It's hard to quantify what growth could look like next year. But remember, what we're talking about is base business growth, not overall. Because remember, we had some COVID-related revenue in 2023.

Hey, good morning, Thank you for taking the question.

Wanted to follow up on some of the earlier comments around gene therapy. Obviously, you saw some nice strength. There this quarter, we're getting a number of questions just on that throughout the data that was released last night. We're embarked failed to meet its primary endpoint. So can you walk us through how meaningful a customer has dropped and how big of a contributor was that for <unk> for orders and revenue and then.

Going forward, how does the Embarq data and you know that failure. They are change anything in your gene therapy expectations going forward.

Puneet Souda: But yeah, look, when we get to the February call, well, obviously, we're telling you exactly what 2024 is going to look like. And we'll probably, you know, when we get to the three or four months from now, we'll have a much better idea as well about the order run rate. Order run rate is what's key to the growth. And, you know, I think we're happy that, you know, two, three finished strong. And the start at Q4 has been a good start to the quarter versus well in order, just got it.

So maybe I'll start with the second part of your question. So I saw the same reports.

Yes, you did and I think it's in really early I am sure. The results are disappointing, but theres still a submission that has to happen to the FDA.

And I think we should all sort of wait to see how that all plays out over the next couple of months, we don't comment on which.

Drugs, we're in I think what we said.

And I would probably reiterate where is the majority of the commercial approvals that happened this year.

Puneet Souda: And then on the gene therapy side, just wanted to clarify, you know, when you look at the progression of sort of the phase ones to twos and how the products are getting approved and getting into the commercial, how they're getting commercialized, you know, are you feeling confident that, you know, sort of as we go into 2024, the Repligen will continue to be levered more and more to, you know, phase later phases and later stages of the drugs and continue to see growth from that. I get the main question is sort of the sustainability of the gene therapy progress that you're seeing here and sort of how much of the order book contribution is really sort of coming from gene therapy versus maps.

While we have 2025 accounts right now that are.

That are.

Tracking well in terms of scale up and Youre going to see bumps in the road and I think when we get to next year I think it'll be care why are some of the drugs that got approved this year, what their volumes might be in 2024.

Got it and then just wanted to follow up on some of the comments around order book trend. So nice to see that orders grew 13% sequentially. This quarter can you just walk us through the monthly exit rates on that order strength and then you mentioned the order strength continued into October. So can you clarify what that means we've got a continued step up in order.

Meaning you know growth beyond 13% sequential or is that really stable to the 13% that you saw this quarter.

And so just to be careful with your first question was monthly trends in the quarter, which set.

Puneet Souda: Thank you. Yeah, I think on gene therapy, we're a little bit of a proxy on the industry. Remember, we were in early, we're well embedded in small, medium and large gene therapy accounts. So as the progression happens from phase one to phase two to phase three to commercial, we should follow that path very much in parallel. I can't tell you what it's going to be next year because I think you still have to see what happens with drugs that are up for approval this year.

Yeah, Yeah, so exiting like what where order rates in September for example.

So I would say that that July August and September that each month got better we had a very strong September.

October if you'd looked at.

The average for the year.

It's well above what we've seen.

In other months, but not September we had a very strong September as we said in my in my prepared remarks second half of the quarter orders picked up.

Puneet Souda: But if you take the like the top 25 accounts, they're all scaling and the average dollar spends of those accounts is going up. So I think that's also a really positive sign for us. Got it. Okay. All right. Thanks, Tony. Yeah. Thanks. Thank you.

We maintained a strong order trends in October but.

But I'm not going to comment on page.

Four weeks in October is better than.

Four weeks in July are four weeks in August its pits, it's significantly better than what we were seeing in Q2.

Matthew Hewitt: And the next question comes to Matt LaRue with William Blair. Hi. Good morning.

Okay. That's it for me Thank you guys.

Matthew Hewitt: If I think about some of the differences between perhaps your CDMO customers relative to pharma or gene therapy, is there anything to call out whether it's modality exposure, control over pipeline, perhaps different level of inventory stocking and destocking, regional exposure, anything that might point to why there's sort of a discrepanct recovery right now? Yeah, I think on the CDMO side, there was clearly a lot of inventory build and I think that's a big part of what's going on.

No problem.

Thank you. Thank you and the next question comes from Dan Leonard with UBS.

Thank you first question on 2020 for framing.

I appreciate it's early to guide 2020 for gross margin, but Jason you mentioned that margins should improve in was that comment made.

Made using the second half of 'twenty three as a baseline or would you expect gross margins to improve from the full year 2023 result.

Yes, there's certainly versus the second half of 'twenty three so again a lot of similar framework that we as Tony has talked about for revenue.

Matthew Hewitt: There is a lot of activity happening at CDMOs. We do expect that as we finish off the year, we get into next year's CDMOs are going to improve. We're having lots of conversations. There's a lot of projects out there. We kind of have to close them. And I'm just talking about Rapples and Matt. I'm not talking about the market in general. But we have some opportunities and CDMOs. We've got to do some execution over the next couple of quarters, and that should really help us in 2024.

Matthew Hewitt: Okay, thanks.

But so again, we continue to try to appropriately right sized the company, we feel that we've got a path to improvement, but again, it's just an early read in terms of what that looks like for the year in terms of the guide, but but certainly a step up from where we were in the second half of 2000.

Understood and then I have a follow up on China, Tony I was wondering if you could comment on order trends in China, specifically and reflect on how important is that region to the long term growth algorithm of repetition.

Anthony Hunt: And then on China, you know, sort of another couple of months since we last spoke to observe what's going on there at anything's update, either from a competitive perspective, macro perspective, or core customer perspective. Yeah, on the macro side, I know a whole lot has changed. It's still a tough environment. I think you heard from all players on the Lifestyle Arts Tool side talking about what's going on in China. We don't expect any recovery until we get into next year. There's a few pockets of goodness, but it's just counterbalanced by stuff that's not happening. So China hasn't changed much at all over the last three months.

I think it's pretty important.

Operator: Thanks. Thank you.

China orders last year, our China revenue last year represented about 10% of our total business, but remember about a quarter of that came from Covid. So three quarters came from what we call base. So it's easy to do the math, it's about $60 million will be down probably 20%, 25%. This.

Iraq base.

And we just need to move back into recovery, it's not a huge number but it's an important it's an important region and we want to do well in the region and I think we have a really good portfolio.

Operator: I'm going to ask questions from Matt Hewitt with Craig Hallam-Caball Group. Good morning. Congratulations on the improvement that you're seeing and things for the update.

Portfolio of products that are differentiated and Theres No reason why we can't grow and we're not overly concerned about local competition. It does exist and what really needs to happen is the macro environment needs to get better we have a lot of accounts there that we.

Anthony Hunt: Maybe first off, kind of digging in a little bit more on the destocking. Would you say that we're pretty close to being done with that process as you speak to your CDMO customers? And at this point, is it more of a function of some of the funding and just some of the conservatism by some of their pharma customers or what do you think is maybe the hold up there? Do you think destocking is getting better?

Work with that we liked it like replica and so expect that.

When China turns.

It should be an improvement for us as well and.

Orders.

Have remained lie.

And the really.

All through this year, it's banned the order trend has been like we've had a we had a strong order backlog going in.

Anthony Hunt: But it's still there and I think it's going to take the rest of the year to kind of get out of the hold that we're all in on dealing with high levels of inventory. I think your second comment is definitely accurate, which is there's been conservatism on the pharma side. And I know projects are being delayed. We talked about it in Q2. There was definitely project delays. And I do think that that is something that kind of hurts the overall industry.

Coming into 2023, which made the revenue numbers for China in Q1, and Q2 were much better than what we were bringing amber versus orders.

So it's pretty it should get better as we move through 2024, but it's it's all macro driven.

I appreciate that thank you.

Thank you and the next question comes from Justin Bowers with Deutsche Bank.

Anthony Hunt: What's encouraging is that you know, kids read bounce back much stronger than we were anticipating, especially within pharma. And you would expect that that should flow across into CDMO or CDMO over the next couple of quarters as well. So we'll see how it goes. I think we're cautiously optimistic. That's great. Thank you.

Alright, good morning, and thank you just one on on the.

The cadence entering 2020 for us is the for Q.

Exit rate sort of a good jumping off for <unk> and <unk>.

Next year.

From a revenue point of view from a margin point of view from both from a revenue point of view.

Anthony Hunt: And then I realize it's very early days, but a month in or so on the Metanova acquisition, how is the integration going, what is the feedback benefit from your customers those types of things? Thank you. Yeah, on Metanova, it's been very straightforward. You know, they have the majority of their businesses stainless steel, the color reuse business. That's a different channel than we sell through. So we've been working very closely with the leadership team at Metanova meeting with their channel partners.

Yeah, I think yes.

Yes. So the one thing that Q4 has that Q3 and Q2 didn't have is COVID-19. So I think you when we get to our Q4 results I think the base business in <unk>.

In Q4 is a good jumping off point, which will be improved versus Q3, so we're expecting that.

We'll get better.

As we move into.

Anthony Hunt: We've got some meetings next week with the larger group of channel partners to expect that that business. It's right on track to hit the numbers. We're expecting into hitting Q4 on track for next year. I think the big part that we have to do over the next 12 months is take the technology that they implemented and the stainless steel format and start to move that across into single use. [inaudible] Great. Thanks.

Q1, and Q2 next year and I think Thats also reflect adjustment and the fact that you know.

A lot of the orders that we're talking about that we got at the end of Q3.

Ear and early in Q4 are going to get delivered in the first or second quarter next year.

Got it. Thank you and this is something that was just.

You were referencing.

Growth over.

One half of this year versus second half of this year. So I just wanted to.

Okay.

The quarterly cadence catheter space base.

Business.

Yep got it.

Then just government.

Okay, and then just in terms of orders and I know the business has transformed quite a bit.

Over the last few years.

But is there when you look at car across your accounts are there differences in.

Order patterns or certain seasonality just.

Anthony Hunt: So Tony, to two earlier questions on orders, you called out order strength has maintained itself through October. And then with another question, you called out CDMO and the greater OEM customers orders haven't moved. So just want to confirm those are both, you know, could be interpreted on the October basis as well as the quarterly basis. Yeah, I have not been gone and looked at the October order is by kind of segments. I'm just talking about total orders in and October have remained strong, but I haven't done an analysis to see, you know, is that exactly the same farm versus CDMO that we saw in Q3?

Neither by account or or by geography, I mean, we see that in.

And some of your peers and.

Just also noting that you do have a unique and different mix of business, but at a high level.

Yeah.

Is there any way you can characterize sort of like the seasonality, whether it's by customer or ore body.

By geography.

Sort of on a normalized basis is such a thing exists anymore.

Yeah.

It's a great question I would say that this is don.

We know it's not a normal year, so trying to really draw conclusions on order patterns and what's being like a topsy turvy year between inventory build and Destocking and then conservatism on capital spend and delayed projects.

Anthony Hunt: All right, that's helpful, but okay, and then just thinking about pricing, you know, was there any use of promotions or discounting or anything in the quarter? You know, has that stepped up? Well, I guess what was pricing in the quarter? Or easier way to guess after this was the apples, the apples price increase in revenues higher than the apples price increase in orders? Yeah, I would say that, you know, through, especially at the end of Q3, we typically run a promotion on some of our small bench top systems, we've done that in prior years, you'll see that on our website.

I think the way I look at it.

Justin is a little bit light.

Are we beginning to see improvements in our funnel right and in and that is what's the most encouraging piece for me is that even though we've had a good.

Order quarter in Q3, we've been able to replenish that.

50% and above probability funnel in the same time periods. So that's what's encouraging is that theres more opportunities moving through which is spread across pharma and <unk> and.

Anthony Hunt: That's a pretty standard kind of tactic that we've used in prior years, nothing different in 2023 versus what we've done maybe, you know, two, three years ago. And I would say price, Jason, it's maintaining towards that kind of four or five percent range for the year. So I think we're on track for what we said we were going to do in price at the beginning of the year. And I don't think any of the smaller promotions that were running really impact price for the year. All right, great, thank you. Thank you.

And integrators, so that's what I am looking to see what progress we make in Q4, but progress to make in Q1, I think trying to draw a conclusion on order patterns.

As we've gone through this year.

Isn't going to tell us a whole lot about what the two just gonna look like.

Got it okay. Thanks, Tony.

Thank you next question comes from Brendan <unk> with Jefferies.

Hey, Thanks, good morning.

Unknown Attendee: And then ask us on some retrovent sales, JB Morgan.

Jason talked about some SKU rationalization plan can you just touch on which segments that will affect and weather.

Unknown Attendee: Great morning. Thank you for taking the questions. And so I want to follow up on some of the earlier comments around gene therapy. Obviously, you staff and nice strengths there this quarter. We're getting a number of questions just on that surrepted data that was released last night where embark failed to meet its primary endpoint. So can you walk us through how meaningful the customer is to rough down how big of a contributor was that for 3Q for orders and revenues. And then going forward, how does that embark data and that failure there change anything in your gene therapy expectations going forward?

A headwind to revenues I imagine that's not for programs that are already commercial but any more color Jeremy.

Yeah, Brandon, it's really just thoughts on the Covid related.

Business that we had so that a SKU level that were either COVID-19 or demand is no longer there. So nothing that affects any any go forward from a base business perspective.

Mainly filtration.

Anthony Hunt: Maybe I'll start with the second part of your question. So I saw the same reports, probably as you did. And I think it's in really early. I'm sure the results are disappointing, but there's still a submission that has to happen to the FDA. And I think we should all sort of wait to see how that all plays out over the next couple of months. We don't comment on which drugs were in.

Okay, and then Tony what do you expect the cell and gene therapy <unk>.

Customer base to do in terms of revenue growth 23, I think that had been flat I'm just curious if that changed.

I think and I don't have the exact number but I would say, it's probably flat.

Year on year.

Which is not bad considering the rest of the market spend this year.

Anthony Hunt: I think what we said, and I'll probably reiterate we're in the majority of the commercial approvals that happened this year. But we have, you know, 20, 25 accounts right now that are tracking well in terms of scale up. And you're going to see bumps in the road. And I think when we get to next year, I think it'll be clear, you know, why are some of the drugs that got approved this year, what their volumes might be in 2024.

Thank you.

Okay.

Unknown Attendee: Got it.

And this concludes our question and answer session I would like to turn the conference over to Tony Hunt for any closing comments.

Great no. Thanks, everybody for joining us look forward to chatting with everybody in a few months' time and hopefully close out 2023 and talk about improvements in 2024. So.

Look forward to catching up then thank you guys. Thank.

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

Unknown Attendee: And then just wanted to follow up on some of the comments around order book trends. So nice to see that order is going to be 13% sequentially this quarter. He just walk us through the monthly exit rates on that order strength. And then you mentioned that order strength has continued into October. So can you clarify what that means without a continued step up in order is meaning, you know, growth beyond 13% sequential or is that really stable to the 13%.

Unknown Attendee: And then you saw this quarter, and Rachel, just to be clear, what your first question was, Monthly Trans, in the quarter is about to set? Yeah, yep, so exiting like what were order rates in September for example. So I would say that July, August and September, that each month got better. We had a very strong September, as we said in my prepared remarks. Second half of the quarter's, orders picked up, we've maintained a strong order trend in October, but I'm not going to comment on, hey, four weeks in October is better than four weeks in July or four weeks in August. It's significantly better than what we were seeing in June too.

Unknown Attendee: Okay, that's it for me. Thank you guys. No problem. Thank you.

Daniel Leonard: And that's question from Dan Leonard with UBS. Thank you. First question on 2024 framing. I appreciate it's early to guide 2024 gross margin, but Jason, you mentioned that margin should improve. And was that comment made using the second half of 23 as a baseline, or would you expect gross margins to improve from the full year 2023 result? Okay, so certainly versus the second half of 23. So again, a lot of similar framework that we, this county's talked about for revenue.

Daniel Leonard: But so again, we continue to try to appropriately write sides of the company. We feel that we've got a passive improvement, but again, it's just an early read in terms of what that looks like for the year in terms of the guy, but certainly a step up from where we were in the second half, 23. Understood.

Anthony Hunt: And then I have a follow up on China. Tony, I was wondering if you could comment on order trends in China specifically and reflect on how important is that region to the long-term growth algorithm of refugees? I think it's, it's clearly important. You know, China orders last year, or China revenue last year represented about 10% of our total business. But remember about a quarter of that came from COVID. So three quarters came from what we call base.

Anthony Hunt: So it's easy and we just need to move back into recovery. It's not a huge number, but it's an important, it's an important region and we want to do well in the region and I think we have a really good portfolio of products that are differentiated and there's no reason why we can't grow and we're not overly concerned about local competition. It does exist and what really needs to happen is the macro environment needs to get better.

Anthony Hunt: We have a lot of accounts there that we work with, that we like, that's like Replicin. So expect that when China turns, it should be an improvement for us as well. And you know, orders have remained light in the really, you know, all through this year. It's been, the order trend has been light. We've had a, we had a strong order backlog going in coming into 2023, which made the revenue numbers for China in Q1 and Q2 were much better than what we were bringing in that person's orders. So it should get better as we move through 2024, but it's all macro driven. Appreciate that. Thank you.

Justin Bowers: And the next question comes in Justin Bowers, a twitcha bank. All right, good morning, and thank you. Just one on the the cadence entering 2024 is the 4Q exit rate, sort of a good jumping off for 1Q and 2Q of next year. From a revenue point of view, from a margin point of view, from both. Yeah, from a revenue point of view. Yeah, I think, yeah, so the one thing that Q4 has that Q3 and Q2 didn't have is COVID.

Justin Bowers: So I thank you. When we get to our Q4 results, I think the base business in Q4 is a good jumping off point, which will be improved versus Q3. So we're expecting that things will get better as we move into Q1 and Q2 next year. And I think that's also reflected Justin in the fact that a lot of the orders that we're talking about that we got at the end of Q3 and here and early in Q4 are going to get delivered in the first quarter next year.

Justin Bowers: Got it. Thank you. And just that was just your referencing growth, you know, growth over one half of this year versus second half of this year. So I just wanted to just go ahead and quarterly came. Yeah, but it's based on base business. Yep. Got it. And then just. Okay, and then just in terms of orders and I know the businesses has transformed quite a bit. You know, over the last few years, but is there, when you look across your accounts, are there differences in order patterns or certain seasonality, just, you know, either by account or.

Justin Bowers: Or by geography. I mean, we see that in, in, in some of your peers and just also noting that you can do have a unique and different mix of business, but at a high level. Is there any way to characterize sort of like the seasonality, whether it's by customer or, or by. By geography on sort of a normalize basis, such a thing exists anymore. Yeah, I, it's a great question. I would say that this is not, and we know it's not a normal year.

Justin Bowers: So trying to really draw conclusions on order patterns. In what's being like a topsy turvy year between, you know, inventory build and destocking and then conservatism on capital spend and delayed projects. I think the way I look at it. Justin is a little bit like. Are we beginning to see improvements in our funnel, right? And in, and that is what's the most encouraging piece for me is that, you know, even though we've had.

Justin Bowers: A good order quarter in Q three, we've been able to replenish that 50% on above probability funnel in the same time period. So that's what's encouraging is that there's more opportunities moving through, which is spread across farm and CDMO and integrators. So that's what I'm looking to see, you know, what progress do we make in Q for, what progress do we make in Q one? I think trying to draw conclusion on order patterns. As we've gone through this here isn't going to tell us a whole lot about what the future is going to look like. Thank you. Got it. Okay, thanks, Tony. Thank you.

Brandon Couillard: And the next question, Constra Brenner, who you are with, Jeff Rez.

Anthony Hunt: Good night, good morning. Jason talked about some new rationalization plan. If you just touch on which segments that will affect and whether the head would to revenues, I imagine that's not for programs that are already commercial, but any more color in general. Thanks. Yeah, Brandon, it's really just folks along the COVID related, you know, business that we have. So it's that a skew level that where there's COVID or demand is no longer there.

Anthony Hunt: So nothing that affects any, any go forward from a base business perspective. And mainly filtration. Okay, Tony, what do you expect to sell gene therapy, customer base to do in terms of revenue growth in 23 now? I think that had been flat. I think I don't have the exact number, but I would say it's probably flat. You're on here, which is not bad considering for the rest of the market spend this year. Thank you.

Operator: And this concludes our question and answer session.

Anthony Hunt: I would like to return the conference over to Tony Hunt for any closing comments. Great. No, thanks, everybody, for joining us. Look forward to chatting with everybody in a few months time and hopefully close out 2023 and talk about improvements in 2024. So, but forward to catching up then. Thank you, guys. Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation. I mean, I'll send you along.