Q4 2023 Rapid Micro Biosystems Inc Earnings Call

March 1, 2024

[music].

Ladies and gentlemen, thank you for standing by my name is gradually and that will be your conference. Operator today at this time I would like to welcome everyone to the rapid microbial systems fourth quarter and full year 2023 earnings call.

Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator. At this time, I would like to welcome everyone to the Rapid Microbiosystems fourth quarter and full year 2023 earnings call. All lines have been placed on mute to prevent any background noise.

All lines have been please on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone. If you would like to withdraw your question, again, press the star 1. I would now like to turn the conference over to Michael Beaulieu on Industrial Relations. Please go ahead.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question again press the star one.

I'd now like to turn the conference over to Michael BOLE Your Investor Relations. Please go ahead.

Good morning, and thank you for joining the rapid micro biosystems fourth quarter and full year 2023 earnings call joining.

Michael Beaulieu: Good morning, and thank you for joining the Rapid Microbiosystems fourth quarter and full year 2023 earnings call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer, and Sean Wirtjes, Chief Financial Officer. Earlier today, we issued a press release announcing our fourth quarter and full year 2023 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under investors in the news and events section.

Joining me on the call are Rob <unk>, President and Chief Executive Officer, and Shaun <unk> Chief Financial Officer.

Earlier today, we issued a press release announcing our fourth quarter and full year 2023 financial results.

Copy of the release is available on the company's website at rapid microbiome dot com under investors and the news and events section.

Before we begin I would like to remind you that many statements made during this call maybe considered forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Michael Beaulieu: Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements, including, but not limited to, statements relating to Rapid MicroBio's financial condition, anticipated future cash usage and cash runway, guidance for 2024, including revenues, expenses, gross margins, system placements, and validation activities, expectations for and planned activities related to the company's business development and growth. Customer Interest and Adoption of a Growth-Direct System, Statements regarding the planned launch and commercialization of Rapid Sterility, and the Potential Impact of Macroeconomic Uncertainty on Rapid Micro's Business.

Statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements, including but not limited to statements relating to rapid microbiome financial condition anticipated future cash usage and cash runway guidance for 2024, including revenues expenses gross margin.

System placements and validation activities.

Expectations for and planned activities related to the company's business development and growth.

Customer interest and adoption of the growth direct system statements regarding the planned launch and commercialization of rapid sterility and the potential impact of macroeconomic uncertainty on rapid micros business.

Michael Beaulieu: Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the risk factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, as updated from time to time in our subsequent filings with the SEC. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors for a list and description of the risks and uncertainties associated with rapid micros business. Please refer to the risk factors section of our most recent annual report on Form 10-K filed with the Securities Exchange Commission as updated from time.

The time in our subsequent filings with the SEC.

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

Michael Beaulieu: This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 1, 2024. Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast today March one 2024 rapid micro disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

With that I'll turn the call over to Rob.

Thank you Mike Good morning, everyone and thank you for joining us I'll begin this morning's call is over.

Robert G. Spignesi: And thank you for joining us. I will begin this morning's call with an overview of our fourth quarter 2020 performance and highlights, followed by a review of our growth strategy for 2024. I'll then turn the call over to Sean for a more detailed review of our financial results and outlook. Total revenue was $6.3 million in the fourth quarter, representing growth of 45%, and $22.5 million for the full year 2023, representing growth of 31%, compared to the prior quarter and year, respectively. We placed six growth direct systems in Q4 for a total of 16 for the year.

Review of our fourth quarter 2023 performance and highlights followed by a review of our growth strategy for 2024.

I will then turn the call over to Sean for a more detailed review of our financial results and outlook.

Total revenue was $6 $3 million in the fourth quarter.

Representing growth of 45%.

And $22 $5 million for the full year 2023, representing growth of 31% compared to the prior quarter and year respectively.

We placed six growth direct systems in Q4 for a total of $16 for the year. These results exceeded our guidance for both the quarter and the year and reflect strong consistent commercial execution and the robustness of our growth strategy.

Robert G. Spignesi: These results exceeded our guidance for both the quarter and the year and reflect strong, consistent commercial execution and the robustness of our growth strategy. Also, in our fourth quarter of results, we were pleased to report that we made significant progress and achieved near break-even gross margins, which we believe represents a positive inflection in our financial profile. This performance is a result of the efforts of our manufacturing, operations, and service teams, who have been aggressively focused on reducing costs, enhancing efficiency, and productivity. On a cumulative basis, to the end of 2023, we have placed 141 growth-directed systems globally, including 121 fully validated systems, and have shipped nearly 5 million consumables. Our customer base now includes 70% of the global top 20 pharmaceutical manufacturers and many of the largest global CDMOs, including Samsung Biologics, who recently selected the GrowthDirect system to automate their critical microbial quality control test. We have also placed Growth Direct Systems with 100% of the manufacturers of commercially approved CAR T therapy.

Also in our fourth quarter results. We were pleased to report that we made significant progress and achieved near breakeven gross margins, which we believe represents a positive inflection in our financial profile.

This performance is a result of the efforts of our manufacturing operations and service teams, who have been aggressively focused on reducing costs enhancing efficiency and productivity.

On a cumulative basis to the end of 2023, we have placed 141 growth direct systems globally, including 121 fully validated systems and have shipped nearly 5 million consumables.

Our customer base now includes 70% of the global top 20 pharmaceutical manufacturers and many of the largest global <unk>, including Samsung Biologics, who recently selected our growth direct system to automate their critical microbial quality control testing.

We have also placed growth direct systems with a 100% of the manufacturers of commercially approved car T therapies.

Manufacturing of these life saving therapies requires accuracy for automation and fast turnaround, which are hallmarks of the growth direct.

We are very proud to be the trusted partners with these leading companies for their mission critical microbial quality control processes.

As we turn to 2024, our priorities remain consistent with 2023.

Robert G. Spignesi: Manufacturing of these life-saving therapies requires accuracy, full automation, and fast turnaround, which are hallmarks of the growth direction. We are very proud to be trusted partners with these leading companies for the mission-critical microbial quality control process. As we turn to 2024, our priorities remain consistent with 2023.

First accelerating growth direct system placements remains our highest priority.

Our second priority is improving gross margins and driving towards profitability.

Our third priority is developing and commercializing innovative new products, which in the context of 2024 means achieving the successful launch and commercialization of rapid sterility.

And finally, we remain focused on prudently managing our cash.

Robert G. Spignesi: First, accelerating growth-directed system placements remains our highest priority. Our second priority is improving gross margins and driving towards profitability. Our third priority is developing and commercializing innovative new products, which in the context of 2024 means achieving a successful launch and commercialization of rapid sterility. And finally, we remain focused on prudently managing our cash.

Success in achieving our 2024 top priority of accelerating system placements as a function of the size and quality of our sales funnel, which remains many multiples of our forecast.

During 2023, our system placements were a balanced mix of new versus existing customers and single versus multi system orders.

We also achieved a balanced mix of sales into biologics cell and gene therapies, and small molecules, which reflects the global market opportunity.

Accelerating system placements is also a function of the coverage and capability of our commercial organization, where we have been investing in our global sales and marketing teams as well as critical enablement activities, such as sales tools and training we.

Robert G. Spignesi: Success in achieving our 2024 top priority of accelerating system placements is a function of the size and quality of our sales funnel, which remains many multiples of our forecast. During 2023, our system placements were a balanced mix of new versus existing customers and single versus multi-system orders. We also achieved a balanced mix of sales into biologics, cell and gene therapies, and small molecules, which reflects a global market opportunity.

We exited 2023 was solid momentum, including two thirds of 2023 systems being placed in the second half of the year and productivity from all three of our sales regions.

And finally, we continue to leverage our strong relationships and a strong track record with our customers through reference selling as we strive to meet the growth direct the industry standard for <unk> testing.

All of this gives us confidence in our ability to execute against this priority and meet or exceed our 2024 targets.

Robert G. Spignesi: Accelerating system placement is also a function of the coverage and capability of our commercial organizations, where we have been investing in our global sales and marketing teams as well as critical enablement activities such as sales tools and training. We exit 2023 with solid momentum, including two-thirds of 2023 systems being placed in the second half of the year, and productivity from all three of our sales regions. And finally, we continue to leverage our strong relationships and a strong track record with our customers through reference selling as we strive to make GoTheREC the industry standard for MQC testing.

Turning to gross margin improvement we were pleased with the progress we made during 2023 to take costs out of our product manufacturing processes and operate more efficiently.

And in the fourth quarter began to see some of the early benefits of these actions dropped down the P&L.

In fact, our cost of revenue in Q4 decreased by 7% while revenue increased by 45%.

Compared to the same period last year.

Having gross margin to near breakeven.

We think this is the start of a positive inflection point and demonstrates a significant leverage in our business model.

Looking ahead to 2024, we expect to achieve positive gross margins for the full year as we further scale, our business and continue to execute against our cost reduction efficiency and productivity programs.

Robert G. Spignesi: All this gives us confidence in our ability to execute against this priority and meet or exceed our 2024 target. Turning to gross margin improvement, we were pleased with the progress we made during 2023 to take costs out of our product manufacturing processes and operate more efficiently. And in the fourth quarter, we began to see some of the early benefits of these actions drop down to the P&L. In fact, our cost of revenue in Q4 decreased by 7% while revenue increased by 45%, compared to the same period last year, driving gross margin to near breakeven.

Our third priority is developing and commercializing new products to drive growth and provide additional value to our customers.

In early January we announced the upcoming availability of a rapid sterility application for the growth direct system.

As we highlighted in our January press release, our rapid really application can deliver time to organism detection as little as 12 hours.

And final time to result in as little as one to three days.

These data represent a significant improvement over widely used traditional test methods, which generally require a 14 day endpoint incubation and provide compelling differentiation when compared to current products on the market.

Rapid sterility as with our environmental monitoring water and bio burden applications offers a compelling value proposition for our customers that includes SaaS proprietary release more accurate results improved data integrity full automation and consistency across our manufacturing networks.

Robert G. Spignesi: We think this is the start of a positive inflection point and demonstrates significant leverage in our business model. Looking ahead to 2024, we expect to achieve positive gross margins for the full year as we further scale our business and continue to execute against our cost reduction, efficiency, and proactivity program. Our third priority is developing and commercializing new products to drive growth and provide additional value to our customers. In early January, we announced the upcoming availability of our Rapid Sterility application for the GrowthDirect system. As we highlighted in our January press release, a rapid sterility application can deliver time to organism detection in as little as 12 hours, and final result in as little as one to three days.

This is a breakthrough technology and we are excited about expanding the growth rate platform with this new application.

Later this month, we plan to participate in the <unk> annual meeting, where we will give a technical presentation on a rapid sterility application and engage with both existing and prospective customers.

We remain on track for a mid year launch and look forward to providing you with updates in the coming quarters.

Wrapping up my prepared remarks, I wanted to share my latest thoughts on rapid micro and the growth direct technology I spent several weeks in January and February connecting with customers now as a reminder, the many strong partnerships we have established.

I remain confident in our market opportunity and customer demand for the drug correct and our strong service and support offerings.

Robert G. Spignesi: These data represent a significant improvement over widely used traditional test methods, which generally require a 14-day endpoint incubation, and provide compelling differentiation when compared to current products on the market. Rapid Sterility, as with our environmental monitoring, water, and bioburden applications, offers a compelling value proposition for our customers that includes faster product release, more accurate results, improved data integrity, full automation, and consistency across their manufacturing network. This is a breakthrough technology, and we are excited about expanding the GrowthDirect platform with this new application. Later this month, we plan to participate in the PDA annual meeting where we will give a technical presentation on our Rapid Sterility application and engage with both existing and prospective customers. We remain on track for a mid-year launch and look forward to providing you with updates in the coming quarter. Wrapping up my prepared remarks, I wanted to share my latest thoughts on Rapid Micro and the GrowthDirect technology.

These are truly value partnerships within a critical part of our customers quality and manufacturing processes.

As we strive to make the growth or the industry standard we will continue to expand our offerings with innovative products such as rapid sterility.

And as our platform expands we will continue to further embed our products and services within our customers' critical quality and manufacturing processes, our customers recognize the compelling value proposition of automating their QC labs with a product that supports global regulatory requirements.

Turning back to our strategic outlook, we are excited to build upon our many achievements in 2023.

We have a clear set of priorities and are building a track record of strong and consistent execution and innovation. We are confident we have the right strategy and will leverage our successes in 2023 on our path of increasing shareholder value.

And with that I'll now turn the call over to Sean to discuss our fourth quarter performance and details for our 2020 for guidance.

Sean.

Thanks, Rob Good morning, everyone I'll start my comments today with a review of our fourth quarter 2023 results and then discuss our 2020 outlook.

Q4 revenue increased 45% to $6 3 million compared to $4 4 million in Q4 2022.

During the fourth quarter, we placed six growth direct systems compared to two in the fourth quarter last year. The six systems. This quarter represent the most replacements Q3 2021, we also completed nine validation in the quarter.

Robert G. Spignesi: I spent several weeks in January and February connecting with customers, and I was reminded of the many strong partnerships we have established. I remain confident in the market opportunity and customer demand for Growth Direct and our strong service and support offering. These are truly valued partnerships within a critical part of our customers' quality and manufacturing processes. As we strive to make the growth of RACI an industry standard, we will continue to expand our offerings with innovative products such as Rapid Sterility. And, as our platform expands, we will continue to further embed our products and services within our customers' critical quality and manufacturing processes. Our customers recognize the compelling value proposition of automating their QC lab with a product that supports global regulatory requirements.

<unk> revenue, which is comprised of systems and consumables increased 45% to $4 1 million in the quarter compared to $2 8 million in Q4 last year.

The growth in product revenue was primarily driven by the higher number of systems placed in the quarter.

<unk> revenue in Q4 increased on a year over year basis, but was down slightly on a sequential basis due mainly to the timing of customer shipments.

Service revenue also increased 45% to $2 2 million in the fourth quarter compared to $1 5 million in Q4 last year. The increase was driven by a higher level of validation activity and higher recurring service contract revenue.

Fourth quarter recurring revenue, which consists of consumables and annual service contracts increased 13% to $3 3 million compared to $2 9 million in Q4 last year driven by growth in both consumables and service contract revenue.

Robert G. Spignesi: Turning back to our strategic outlook, we are excited to build upon our many achievements in 2023. We have a clear set of priorities and are building a track record of strong and consistent execution and innovation. We are confident we have the right strategy and will leverage our successes in 2023 on our path to increasing shareholder value. And with that, I'll now turn the call over to Sean to discuss our fourth quarter performance and details for our 2024 guidance. Sean?

Non recurring revenue was $3.0 million in Q4 compared to $1 5 million in the prior year quarter.

Turning to gross.

Margins product margins were negative <unk> 6 million in Q4 compared to negative $2 4 million in the fourth quarter last year the.

The improvement was attributable to higher product revenue higher production volumes in both systems and consumables and benefits from actions taken by the company to lower product costs and increased manufacturing efficiencies, including enhancements made to our automated consumables manufacturing line earlier in the year.

Service margins were positive at approximately <unk> 4 million in Q4 compared to negative zero point $2 million last year higher.

Higher revenues and increasing productivity drove the improvement in service margins in the quarter.

On a combined basis, our fourth quarter gross margin was near breakeven at negative <unk> 2 million or negative 3% of revenues.

Representing a 24 percentage point improvement on a sequential basis, and a 56 percentage point improvement compared to the fourth quarter last year.

Sean Wirtjes: We also completed nine validations in the quarter. Product revenue, which is comprised of systems and consumables, increased 45% to $4.1 million in the quarter, compared to $2.8 million in Q4 last year. The growth in product revenue was primarily driven by the higher number of systems placed in the quarter. Consumable revenue in Q4 increased on a year-over-year basis, but was down slightly on a sequential basis due mainly to the timing of

Looking at this margin improvement another way our total revenue increased 45% in the fourth quarter, while our total cost of revenue decreased 7% over the same period driving a significant improvement.

Looking forward, we expect continued margin improvement in 2024 and beyond as we continue to grow revenues reduced product costs drive higher manufacturing efficiencies control manufacturing overhead costs and increased service productivity.

Continuing down the P&L total operating expenses were $12 1 million in the fourth quarter, consisting of $3 $2 million in sales and marketing $3 3 million and R&D and $5 $5 million in G&A.

Sean Wirtjes: Service revenue also increased 45% to $2.2 million in the fourth quarter, compared to $1.5 million in Q4 last year. The increase was driven by a higher level of validation activity and higher recurring service contract revenue. Fourth-quarter recurring revenue, which consists of consumables and annual service contracts, increased 13% to $3.3 million compared to $2.9 million in Q4 last year, driven by growth in both consumables and service contract revenue. Non-recurring revenue was $3.0 million in Q4 compared to $1.5 million in the prior year.

This compares to total operating expenses of $14 7 million in the fourth quarter of 2020 to the.

The decrease was largely due to nonrecurring costs incurred in the fourth quarter last year associated with the strategic review process initiated by our board of directors in that period as well as cost savings in Q4, this year, resulting from the restructuring plan implemented in August 2022.

Net loss was $11 2 million in Q4. This compares to a net loss of $16 4 million in Q4 last year. This.

This improvement was largely due to higher revenue better gross margins and lower operating expenses showing the broad financial benefits of the progress we made against several of our strategic focus areas in 2023.

Sean Wirtjes: Turning to gross margins, product margins were negative $0.6 million in Q4 compared to negative $2.4 million in the fourth quarter of last year. The improvement was attributable to higher product revenue, higher production volumes in both systems and consumables, and benefits from actions taken by the company to lower product costs and increase manufacturing efficiency, including enhancements made to our automated consumables manufacturing line earlier in the year. Service margins were positive at approximately $0.4 million in Q4 compared to negative $0.2 million last year. Higher revenues and increasing productivity drove the improvement in service margins in the quarter. On a combined basis, our fourth quarter gross margin was near break-even at negative $0.2 million, or negative 3% of revenue.

Net loss per share was <unk> 26 cents in Q4 compared to net loss per share of <unk> 39 in the prior year quarter.

With respect to noncash expenses and capital expenditures depreciation and amortization was <unk> 8 million stock compensation expense was 1.0 million and.

Capital expenditures were zero point $4 million in the fourth quarter.

I'll now turn to our 2024 outlook, where my comments will primarily be focused on the full year.

Given current market conditions, our outlook reflects some uncertainty related to customer budgets and the timing and scale of customer purchase decisions.

With that context, we expect total revenue to be at least $27 million for the full year 2024, which assumes we will place at least 20 systems. This implies year over year revenue growth of at least 20%.

Assuming typical seasonality with revenue and placements stepping down from Q4 to Q1 on a sequential basis. We expect total revenue of at least $5 5 million in Q1, which assumes at least three system placements. We then expect revenue and placements in Q2 and Q3 to be higher than Q1, and then peak in Q4.

Sean Wirtjes: Representing a 24 percentage point improvement on a sequential basis and a 56 percentage point improvement compared to the fourth quarter of last year. Looking at this margin improvement another way, our total revenue increased 45% in the fourth quarter, while our total cost of revenue decreased 7% over the same period, driving a significant improvement. Looking forward, we expect continued margin improvement in 2024 and beyond as we continue to grow revenues, reduce product costs, drive higher manufacturing efficiency, control manufacturing overhead costs, and increase service productivity. Continuing down the P&L, total operating expenses were $12.0 million in the fourth quarter, consisting of $3.2 million in sales and marketing, $3.3 million in R&D, and $5.5 million in G&A.

We anticipate launching growth direct rapids really by mid year, our guidance assumes any contribution from this new offering will be modest in 2024, given our typical system sales cycle.

Looking at consumables, we expect revenue to increase sequentially in Q1 compared to Q4, and then continued to increase sequentially each quarter over the balance of the year as more systems complete validation and ramp toward routine use.

With respect to service, we expect revenues to be between 2.0, and $2 $5 million each quarter with variability primarily driven by the timing of validation activities. We expect to complete at least 16 validation in 2024 with at least three in the first quarter.

Turning to gross margins, we expect Q1 margins to be lower than Q4 due to the seasonality impact I mentioned earlier there.

Thereafter based on our revenue outlook, the benefits from ongoing cost reduction and manufacturing efficiency initiatives and products and increasing productivity and service. We expect our gross margin percentage to improve but still be negative in Q2, and then be single digit positive in Q3, and Q4 as well as for the full year we.

Sean Wirtjes: This compares to total operating expenses of $14.7 million in the fourth quarter of 2022. The decrease was largely due to non-recurring costs incurred in the fourth quarter last year associated with the strategic review process initiated by our board of directors in that period, as well as cost savings in Q4 this year resulting from the restructuring plan implemented in August 2022. Net loss was $11.2 million in Q4.

We expect service margins to be positive in all four quarters and for product margins to improve each quarter as the year progresses.

We expect operating expenses to be in a range of $48 million to $52 million in 2024, with depreciation and amortization of approximately $3 million stock compensation of approximately $4 5 million capex.

Sean Wirtjes: This compares to a net loss of $16.4 million in Q4 last year. This improvement was largely due to higher revenue, better growth margins, and lower operating expenses, showing the broad financial benefits of the progress we made against several of our strategic focus areas in 2023. The net loss per share was $0.26 in Q4, compared to a net loss per share of $0.39 in the prior year quarter, with respect to non-cash expenses and capital expenditures.

Capex of approximately $3 million and other income, which is comprised primarily of interest income of approximately $3 million in 2024.

Finally, we expect cash burn of roughly $40 million in 2020 for providing cash runway at least into the second half of 2026. This assumes a meaningful benefit from net working capital including inventory reductions.

That concludes my comments so at this point, we'll open the call up for questions operator.

The floor is now open for your questions to ask a question at this time. Please press star followed by the number one on your telephone keypad.

Sean Wirtjes: Depreciation and amortization was $0.8 million, stock compensation expense was $1.0 million, and capital expenditures were $0.4 million in the fourth quarter. I'll now turn to our 2024 outlook, where my comments will primarily be focused on the full year. Given current market conditions, our outlook reflects some uncertainty related to customer budgets and the timing and scale of customer purchases. With that in mind, we expect total revenue to be at least $27 million for the full year 2024, which assumes we will place at least 20 systems. This implies year-over-year revenue growth of at least $20 per month.

Just a moment to compile the Q&A roster.

Your first question comes from the line of Dan Arias with Stifel. Your line is open.

Hey, good morning, guys. Thanks for the questions here, Sean maybe just to start on the gross margin improvement how much of what would get you crossed over into positivity. This year is so to speak in the bank the.

The efficiency improvements that you made last year. The cost work that you did versus things that have yet to be done or that depend on volumes for the year and just as a follow up to that I think you said down first half of the year and then single digit.

Up in the back half of the year is that get you up for the first year and if you made that comment that I apologize, but just my rough glance at the model doesn't necessarily suggest that that communicates.

Sean Wirtjes: Assuming typical seasonality with revenue and placement stepping down from Q4 to Q1 on a sequential basis, we expect total revenue of at least $5.5 million in Q1, which assumes at least three system places. We then expect revenue placements in Q2 and Q3 to be higher than Q1 and then peak in Q4. While we anticipate launching growth-direct rapid sterility by mid-year, our guidance assumes any contribution from this new offering will be modest in 2024, given our typical system sales cycle. Looking at consumables, we expect revenues to increase sequentially in Q1 compared to Q4 and then continue to increase sequentially each quarter over the balance of the year as more systems complete validation and ramp toward routine use. With respect to service, we expect revenues to be between $2.0 and $2.5 million each quarter, with variability primarily driven by the timing of validation activity.

Yes, I'll start I'll start with your second question Dan So.

So yes. The guidance is margins, we think margins will be a little bit lower in Q1 compared to Q4 get better but still be negative in Q2, but then flip positive in Q3, and Q4 and for the full year, we expect it to be positive.

So.

Hopefully that cadence makes sense there in volume as a player in that but there's a lot of other things at play within that cadence as well.

So I think that kind of segways tears. Your first question. So I think we view there are some things like the automation improvements we made that are baked in.

<unk> is important.

And then there is ongoing work going on around the other things that we talked about service productivity costs down in products other things, we're doing around efficiency and.

The increased throughput in terms of manufacturing so it's a mix, but there definitely are some components of that that are things that we've now got baked in that are going to help support better performance on margins and move us positive in 2024.

Sean Wirtjes: We expect to complete at least 16 validations in 2024, with at least 3 in the first quarter. Turning to gross margins, we expect Q1 margins to be lower than Q4 due to the seasonality impact I mentioned earlier. Thereafter, based on our revenue outlook, the benefits of ongoing cost reduction initiatives and products, and increasing productivity and service, we expect our gross margin percentage to improve but still be negative in Q2, and then be single-digit positive in Q3 and Q4, as well as for the full year. We expect service margins to be positive in all four quarters and for product margins to improve each quarter as the year progresses. We expect operating expenses to be in a range of $48 million to $52 million in 2024, with depreciation and amortization of approximately $3 million, stock compensation of approximately $4.5 million, CapEx of approximately $3 million, and other income, which is comprised primarily of interest income, of approximately $3 million in 2024.

Okay.

Okay helpful and then maybe just.

On the revenue side annualized pull through per systems too.

Two questions. There obviously, the new systems that are getting installed alter the calculation a bit but if you looked at sort of same store sales. What you had installed at the end of last year are you confident that the average pull through level will be up this year.

And then on the consumables growth rate that we should be thinking here at 23% recurring revenue growth in 2023, how doable is a number like that this year.

Honestly you are growing the installed base so that should help.

Yes, I think I think the implied growth rate on recurring is going to be a little bit lower and I'll talk about that a little bit I mean, if we focus on Q4 performance first we.

We guided that we would be down sequentially, mainly due to timing of shipments and thats, what we saw.

I think we.

Consumables, Yes, you are right, we have new systems coming online the number we track as we've talked about in the past is validated systems and really we still have a little bit of work to do typically once we get there to get people in routine use so we've got to manage that well.

I think there is another important factor here, which we view as transient but it is important to understand and kind of where we're going to be because I would say maybe to answer one of your questions. There.

Operator: Finally, we expect cash burn of roughly $40 million in 2024, providing cash runway at least into the second half of 2026. This assumes a meaningful benefit from networking capital, including inventory reduction. That concludes my comments, so at this point, we'll open the call up for questions. Operator?

I would look at this year as being in terms of pull through per average validated system. Our consumables revenue per average validated system being relatively flat with last year and it's really there's one primary factor that's driving that we had a one of our most significant customers. Let us know in mid 'twenty three that they were actually selling.

Operator: The floor is now open for your questions. To ask a question this time, please press star followed by the number one on your telephone key. Please wait for just a moment for the Q&A list to be compiled. Your first question comes from the line of Dan Arias with Stifle.

<unk> a site that had multiple high volume systems in it.

So as we made our way through the second half of 'twenty three we started to feel the impact of that.

Those systems came offline.

Daniel Anthony Arias: Hey, good morning, guys. Thanks for the questions. Sean, maybe just to start on the gross margin improvement, how much of what would get you crossed over into positivity this year is, so to speak, in the bank a la the efficiency improvements that you made last year, the cost work that you did, versus things that have yet to be done or that depend on volumes for the year? And just as a follow-up to that, I think you said, you know, down in the first half of the year and Does that get you up for the first year?

That is a contributor to what we're seeing in most recent quarters.

That is still the case today now the good news for Us and I think a reason for optimism and something we view as upside as the new owner of that site is communicating that they do plan to bring some of those systems not all of them, but some of them back online later in 2024, so that actually having some of the some of our highest volume systems in the world.

Go from kind of full pull through to offline.

Is something Thats important to think about as you think about the guidance that I just talked about.

Okay, maybe just last quick one since it feels like at a time here just on the validation timeline do you think is an average 2020 for validation timelines will be shorter than they were in 2023.

Sean Wirtjes: And if you made that comment, then I apologize. But just my rough glance at the model doesn't necessarily suggest that that could be the case. Yeah, I'll start with your second question, Dan. So yeah, the guidance is, you know, margins. We think margins will be a little bit lower in Q1 compared to Q4, get better, but still be negative in Q2, but then flip positive in Q3 and Q4. And for the full year, we expect it to be positive. So hopefully, that cadence makes sense. There's volume as a player in that, but there's a lot of other things that play within that cadence as well.

Yes, I think we've talked about project wrap it in the past and the work we're doing to shorten that process up I think we saw good progress on that in 'twenty, three and I would expect we will see incremental progress on that in 24. So yes.

Okay I appreciate it.

Churn comes from the line of Joseph <unk> with Morgan Stanley. Your line is open.

Hi, This is Jason on for Jeff Congratulations on the quarter and thank you for taking my question. So just some questions related to sterility could you elaborate on the competitive landscape thoroughly versus other competitors in the space and with the launch do you anticipate the new offering opening up opportunities with new customers.

Or adding placements with existing customers.

Sean Wirtjes: So I think that kind of segues to your first question. So I think we view, you know, there are some things like the automation improvements we made that are baked in, you know, volume is important. And then we've got ongoing work going on around the other things that we talked about, service productivity, cost down in products, other things we're doing around efficiency and increased throughput in terms of manufacturing. So it's a mix, but there definitely are some components of that that are things that we've now got baked in that are going to help support better performance on margins and move us to positive in 2024. Okay, that was helpful.

I guess on a related note do you anticipate that you'll be building out a sales force to support thorough these sales or would you leverage your existing sales force. Thank you.

Great. Thanks for the question.

It's Rob So I think it was three in there. The first one is the competitive landscape.

No.

So as with our other apps.

Applications.

The top the top competitor is the legacy method and <unk> that being said there is what I would call.

Increased competitive activity from other suppliers of rapid sterility applications in the market.

Our other applications. So it is a it.

It is a market where there are some incumbents offering I'll call it technology enabled.

Rapid solutions now that being said, we knew that coming into this market and we specifically developed and designed this system to offer.

Sean Wirtjes: And then maybe just on the revenue side, annualized pull through per system. Two questions there. Obviously, the new systems that are getting installed alter the calculation a bit, but if you looked at sort of same store sales, what you had installed at the end of last year, are you confident that the average pull through level will be up this year? And then on the consumables growth rate that we should be thinking about here, 23% recurring revenue growth in 2023. How doable is a number like that this year? Obviously, you're going to the installation base, so that should help.

Compelling differentiation clearly against the legacy.

And traditional method, but also against the current I'll call. It technology enabled message and we like how we compare against the <unk>.

The other offerings in the market as I mentioned in my prepared remarks.

The second question with regard to new and existing customers I think the answer is both I think the exciting thing about <unk> is that.

Customers are excited about it first and foremost in our existing customer base. So the majority of our current customers are small molecules.

Sean Wirtjes: Yeah, I think the implied growth rate on recurring is going to be a little bit lower, and I'll talk about that a little bit. But if we focus on Q4 performance first, you know, we guided that we would be down sequentially, mainly due to the timing of shipments. And that's what we saw.

Sorry, a large molecules to include biologics.

And cell and gene, but really will also get us more deeply into small molecule injectable manufacturing as well so it'll expand.

Sean Wirtjes: Um, you know, I think, We, at Consumables, you're right, we have new systems coming online, you know, the number we track is, as we've talked about in the past, is validated systems and really we still have a little bit of work to do typically once we get there to get people into routine use so we've got to manage that well. I think there's another important factor here which we view as transient but it's important to understand kind of where we're going to be because I'd say maybe to answer one of your questions there, you know, I would look at this year as being in terms of pull-through per average validated system or consumables revenue per average validated system being relatively flat with last year and it's really, there's one primary factor that's driving that.

It will expand effectively.

Our our opportunity.

And a lot of ways and move our sales team.

More squarely into into those segments.

With regard to the sales team specifically, we primarily are planning on leveraging our current.

The sales team, which we now have up and running in all three regions that being said we will have.

A dedicated sterility I'll call it group.

TBD on the actual head count in that but.

Specialists focused on.

On assisting in enabling our sales team with some of the technical elements and application elements.

Of the really specific activities.

Got it. Thank you that's helpful and then if I could squeeze in a question so with plurality development near final stages. What are the next areas of product or what sort of developments that could enhance the customer experience on <unk>. Thank you.

Sean Wirtjes: One of our most significant customers let us know in mid-23 that they were actually selling a site that had multiple high-volume systems in it. So as we made our way through the second half of 23, we started to feel the impact of that as those systems came offline. That is a contributor to what we're seeing in the recent quarters. That is still the case today.

Yes.

From a high level, we view the growth direct as a platform technology and generally our product strategy is to continue to influence the workflow and in and around our platform technology. So we automate the microbial quality control process, we detected contamination we.

Sean Wirtjes: Now, the good news for us, and I think a reason for optimism and something we view as an upside, is that the new owner of that site is communicating that they do plan to bring some of those systems, not all of them, but some of them back online later in 2024. So actually having some of our highest volume systems in the world go from kind of full pull through to offline is something that's important to think about as you think about the guidance that I just talked about. Okay, maybe just last quick one since it feels like we might have time here.

Numerate contamination and we do that now is really being launched or tier two.

We launched mid year across the primary microbial quality control test of environmental monitoring water bio burden and soon sterility.

We also envision over time goes.

Downstream and providing more information to customers with regard to the organisms that there.

Picking up in detecting and they're in their workflows I think molds. The mobile technology. We released last year is a really good example of that and there could be extensions around that and also data we're generating enormous amounts of.

Digital data for our customers and this is the first time. These labs have had access to this kind of data and how can we help customers.

Sean Wirtjes: Just on the validation timelines, do you think, on average, 2024 validation timelines will be shorter than they were in 2023? Yeah, I think, you know, we've talked about Project Rapid in the past and the work we're doing to shorten that process. I think we saw good progress on that in 23. And I would expect we'll see incremental progress on that in 24. So yeah. Okay, I appreciate it. This question comes from the line of Teja Savant with Morden Stanley.

US manage look into their data and looking theater operations not only on a site basis, but on a global basis. Our goal is to become the new quality control infrastructure as we grow our our site network globally, we are.

We're basically creating a new microbial quality control infrastructure for our customers and with that what kind of services and insights can we provide just given the enormous amount of data that we are.

We are generating and none of this is our commitment our guidance per se, but it gives you a little bit of insight into how we're thinking about.

Expanding our influence up and down the <unk>.

Quality control workflow within our customers' manufacturing and quality operations.

Jason: Hi, this is Jason speaking on behalf of Tejas. Congratulations on the quarter and thank you for taking my question. So, just some questions related to sterility.

Thank you I appreciate answers guys.

Sure.

Next question comes from the line of Steven <unk> with BD Cowen Your line is open.

Robert G. Spignesi: Could you elaborate on the competitive landscape of sterility versus other competitors in the space? And with the launch, do you anticipate the new offering opening up opportunities with new customers or expanding placements with existing customers? And I guess on a related note, do you anticipate that you'll be building out a sales force to support a thoroughly sales operation or would you leverage your existing sales force? Thank you. Thanks for the question. It's Rob.

Great Thanks, and congrats on the quarter and thanks for taking the questions.

Yes.

Yes, one on Samsung biologics them selecting the growth direct platform for their microbiome QC can you remind us if it.

Was a multi system placement and was that multiple Samsung sites.

And then if you could give us some color on the sense of the magnitude of.

Robert G. Spignesi: So I think there are three elements in them. The first one is the competitive landscape. So, as with our other applications, the top competitor is the legacy method and Serility. That being said, there is what I would call increased competitive activity from other suppliers of rapid sterility applications in the market versus our other applications. So it is a market where there are some incumbents offering, I'll call it, technology-enabled rapid solutions. Now, that being said, we knew that coming into this market, and we specifically developed and designed the system to offer compelling differentiation clearly against the legacy and traditional methods but also against the current, I'll call it, technology-enabled methods. And we like how we compare against the other offerings in the market, as I mentioned in my prepared remarks.

Samsung going forward.

As you kind of expand across the Samsung.

No.

Global sites.

When can you expect more Samsung placements.

It's a pretty huge entity.

Yes, so thanks, Steve, but we're clearly excited about the.

Our Samsung partnership.

The company selecting us know Samsung is a great company does our diligence and we think it speaks volumes. They selected the growth direct we did place a multi system order at a single site.

Last year.

I won't go into the forward looking.

Expectation, but I can tell you we're looking forward to your point, it's a large organization.

And we're very much looking forward to growing with Samsung in the coming quarters.

Robert G. Spignesi: The second question with regard to new and existing customers is both. I think the exciting thing about Serility is that customers are excited about it, first and foremost, in our existing customer base. So the majority of our current customers are small molecules, I'm sorry, large molecules to include biologics and cell and gene. But Serility will also get us more deeply into small molecule injectable manufacturing as well.

In the coming years.

Okay, Great I appreciate that.

And then maybe a follow up question.

On the CRO landscape.

Given the current geopolitical sentiment.

The proposed bipartisan bio secure act.

Could you give us a sense of your exposure.

Two.

<unk>, then we'll kind of named in that bio secure act.

Yes.

Robert G. Spignesi: It will effectively expand our opportunity in a lot of ways and move our sales team more squarely into those segments. And now, with regard to sales specifically, we primarily are planning on leveraging our current sales team, which we now have up and running in all three regions. That being said, we will have a dedicated sterility, I'll call it group, TBD on the actual head count and that, but specialists focused on assisting and enabling our sales team with some of the technical elements and application elements of the sterility-specific activities.

It's very low I think I think I, specifically around China, yes, so our connectivity and exposure as is.

It is quite low we have a strong <unk>.

<unk> footprint I think as you know.

Our value prop resonates strongly there, but our current.

And our expected customer base would be independent of that bio secure act and the named the named parties within.

Okay.

Great that color and last one is a follow up question on rapid sterility.

Can you just walk through some of the positive earn.

Early beta testing feedback and the stress testing that you did during that Pan launch that's driving confidence in the expected.

Robert G. Spignesi: Thank you. That was helpful. And then I could squeeze another question in.

Mid year launch.

And has rapid sterility helped.

Robert G. Spignesi: So, with Serility development near its final stages, what are the next areas of product or workflow development that could enhance the customer experience on PerthDirect? Thank you. Yeah, so from a high level, we view GrowthDirect as a platform technology, and generally, our product strategy is to continue to influence the workflow in and around our platform technology. So we automate the microbial quality control process, we detect contamination, we enumerate contamination, and we do that now with Sterility being launched or to be launched in mid-year across the primary microbial quality control tests of environmental monitoring, water, bioburden We also imagine, over time, going downstream and providing more information to customers with regard to the organisms that they're picking up and detecting in their workflows.

Helping drive the conversation with new customers.

Okay.

Yes, so in reverse order.

<unk>.

It is helping drive.

Conversations with new customers and existing customers. So we have been.

I wouldn't say surprised because we expected a positive responses and we're getting it.

I think it's important to note that there is.

We have not assumed.

Meaningful contribution for sterility, and our 2020 for Guy just given the mid year.

Launch in the sales cycle.

Timing, but we're certainly going to preserve the opportunity to have upside with regards to reality and and there is there is quite a bit of excitement.

Around it and our confidence comes from a combination of customer feedback as well as rigorous development.

Process, we have internally.

Robert G. Spignesi: I think the Mold technology we released last year is a really good example of that, and there could be extensions around that. And also data; we're generating enormous amounts of digital data for customers, and this is the first time that these labs have had access to this kind of data, and how can we help customers use, manage, look into their data, and look into their operations, not only on a site basis but on a global basis? Our goal is to become the new quality control infrastructure, and as we grow our site network globally, we're basically creating a new microbial quality control infrastructure for our customers. And with that, what kind of services and insights can we provide just given the enormous amount of data that we're generating? And none of this is a commitment or guidance per se, but it gives you a little bit of insight into how we're thinking about expanding our influence up and down the quality control workflow within our customers' manufacturing and quality operations. Thank you. I appreciate the answers, guys.

So that process goes through the system readiness fee.

Basically a new consumable that worked with the system and in a lot of testing with regard to some of the data that you've seen published with regard to time to detection and time to result.

And then of course that that data.

We'll work with customers to to opening over time validate and their environments, but we're now where we are today.

Quite confident in what we're seeing that gave us the confidence to.

Released a press release and all of the above kind of feeds into that our internal data feedback from the market research, we've done and our internally generated data all kind of collude together to give us that that outlook and confidence to to move forward and and also inbound interest from customers.

Also as feathering into the into the mix now too, which is which is very exciting so more more to follow up we look forward to update you as we go forward.

Through the quarters here, but I can say just kind of in summary, we're excited about the product and so far the market also seems quite excited about the product as well.

Robert G. Spignesi: Sure. The next question comes from the line of Stephen Ma with TD Cowen. Your line is open.

Poon Mah: Oh great, thanks and congrats on the quarter and thanks for taking the question. One on Samsung Biologics, you know, them selecting the Growth Rec platform for their microbial QC, can you remind us if it was a multi-system placement or was that multiple Samsung sites? And then if you could give us some color on the sense of the magnitude of Samsung going forward, you know. We can use open source format content dedicated to making videos for you.

Okay, great thanks for that and congrats again.

Okay.

Thanks, Steve for the question and thanks, everyone for joining us today again.

Again, we enter.

The year with strong momentum.

In a great position to deliver an excellent year in 2024, I will look forward to speaking with many of you over the next few weeks at TD Cowen.

And key and Keybanc life Sciences conferences. Thank you all.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.

Robert G. Spignesi: Global Sites, you know, when can you expect more Samsung? Yeah, so thanks, Steve. We're clearly excited about the Samsung partnership and the company selecting us. You know, Samsung is a great company, does its diligence, and we think it speaks volumes. They selected the Grow Direct. We did place a multi-system order at a single site last year. I won't go into forward-looking expectations, but I can tell you, we're looking forward to, to your point, it's a large organization, and we're very much looking forward to growing with Samsung in the coming quarters and the coming years. I appreciate that. And then maybe a follow-up question, you know, on the CRO landscape, you know, given the current geopolitical sentiment, you know, the proposed bipartisan Biosecure Act. Did you give us a sense of your exposure to CROs that were kind of named in that Biosecure Act? Yeah, it's very low.

Okay.

Yes.

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Robert G. Spignesi: I think it's specifically around China. Yeah, so our connectivity and exposure is quite low. We have a strong CDMO footprint. I think, as you know, our value proposition resonates strongly there, but our current and our expected customer base would be independent of that Biosecure Act and the named parties with it. Okay, appreciate that color.

Yes.

Okay.

Yes.

Okay.

Yes.

Robert G. Spignesi: And last one's a follow-up question on rapid sterility. Can you just walk through some of the positive... You know, early beta testing feedback and the stress testing that you did during that beta launch that's driving confidence and the expected Mid-Year Launch and has rapid sterility helping drive the conversation with new customers? Yeah, so in reverse order, we it is helping drive conversations with new customers and existing customers. So we've been, I wouldn't say surprised, because we expected a positive response, and we're getting it.

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Robert G. Spignesi: And I think it's important to note that we have not assumed meaningful contribution for sterility in our 2024 guide, just given the mid-year launch and the sales cycle timing. But we're certainly going to preserve the opportunity to have upside with regard to sterility, and there is quite a bit of excitement around it.

Thank you.

Sure.

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Robert G. Spignesi: Our conference comes from a combination of customer feedback as well as rigorous development processes we have internally. So that process goes through system readiness. It's basically a new consumable that works with the system and a lot of testing with regard to some of the data that you've seen published with regard to time to detection and time to result.

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Robert G. Spignesi: And then, of course, that data, we will work with customers to ultimately, over time, validate in their environments. But where we are today, we're quite confident in what we're seeing. That gave us the confidence to release a press release. And all of the above kind of feeds into that.

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Robert G. Spignesi: We'll look forward to updating you as we go forward through the quarters here. But I can say, just kind of in summary, we're excited about the product. And so far, the market also seems quite excited about the product as well. Okay, great.

Okay.

Thanks.

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Robert G. Spignesi: Thanks for that and congratulations. Okay. Well, thanks, Steve, for the question. And thanks, everyone, for joining us today. Again, we enter the year with strong momentum and are in a great position to deliver an excellent year in 2024. I look forward to speaking with many of you over the next few weeks at the T.D. Cowan and KeyBank Life Sciences Conference.

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Operator: Thank you all. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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Operator: ?Outro Music? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www.microsoft.com.ca ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator. At this time, I would like to welcome everyone to the Rapid Microbiosystems fourth quarter and full year 2023 earnings call. All lines have been placed on mute to prevent any background noise.

Okay.

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Michael Beaulieu: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone. If you would like to withdraw your question, again, press the star 1. I would now like to turn the conference over to Michael Beaulieu on Industrial Relations. Please go ahead.

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Robert G. Spignesi: Thank you, Mike. Good morning, everyone, and thank you for joining us. I will begin this morning's call with an overview of our fourth quarter 2023 performance and highlights, followed by a review of our growth strategy for 2024. I'll then turn the call over to Sean for a more detailed review of our financial results and outlook. Total revenue was $6.3 million in the fourth quarter, representing growth of 45%, and $22.5 million for the full year 2023, representing growth of 31% compared to the prior quarter and year, respectively. We placed six growth direct systems in Q4 for a total of 16 for the year.

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Ladies and gentlemen, thank you for standing by my name is Nigeria, and I will be your conference operator today at this time I would like to welcome everyone to the rapid micro biosystems fourth quarter and full year 2020 earnings call.

Robert G. Spignesi: These results exceeded our guidance for both a quarter and a year and reflect strong, consistent commercial execution and the robustness of our growth strategy. Also, in our fourth-quarter results, we were pleased to report that we made significant progress and achieved near break-even gross margins, which we believe represents a positive inflection in our financial profile. This performance is a result of the efforts of our manufacturing, operations, and service teams, who have been aggressively focused on reducing costs, enhancing efficiency, and productivity. On a cumulative basis, to the end of 2023, we have placed 141 growth-directed systems globally, including 121 fully validated systems, and have shipped nearly 5 million consumables. Our customer base now includes 70% of the global top 20 pharmaceutical manufacturers and many of the largest global CDMOs, including Samsung Biologics, who recently selected the GrowthDirect system to automate their critical microbial quality control test. We have also placed Growth Direct Systems with 100% of the manufacturers of commercially approved CAR T-therapy.

All lines have been please on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time press star followed by the number one on your telephone keypad.

If you would like to withdraw your question again press, thus far wide.

I'd now like to turn the conference over to Michael <unk> Investor Relations. Please go ahead.

Good morning, and thank you for joining the rapid micro biosystems fourth quarter and full year 2023 earnings call joining.

Joining me on the call are Rob <unk>, President and Chief Executive Officer, and Shaun <unk> Chief Financial Officer.

Earlier today, we issued a press release announcing our fourth quarter and full year 2023 financial results.

Copy of the release is available on the company's website at rapid micro bio dot com under investors and the news and events section.

Before we begin I would like to remind you that many statements made during this call may be considered forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Robert G. Spignesi: Manufacturing of these life-saving therapies requires accuracy, full automation, and fast turnaround, which are hallmarks of Growth Direct. We are very proud to be trusted partners with these leading companies for the mission-critical microbial quality control process. As we turn to 2024, our priorities remain consistent with 2023.

System placements and validation activities.

Expectations for and planned activities related to the company's business development and growth.

The time in our subsequent filings with the SEC.

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

Robert G. Spignesi: Accelerating system placement is also a function of the coverage and capability of our commercial organization, where we have been investing in our global sales and marketing teams as well as critical enablement activities such as sales tools and training. We exit 2023 with solid momentum, including two-thirds of 2023 systems being placed in the second half of the year, and productivity from all three of our sales regions. And finally, we continue to leverage our strong relationships and a strong track record with our customers through reference selling as we strive to make Growth Direct the industry standard for MQC testing.

With that I'll turn the call over to Rob.

Thank you Mike Good morning, everyone and thank you for joining us I'll begin this morning's call with an overview of our fourth quarter 2023 performance and highlights followed by a review of our growth strategy for 2024.

I will then turn the call over to Sean for a more detailed review of our financial results and outlook.

Total revenue was $6 $3 million in the fourth quarter.

Representing growth of 45%.

And $22 $5 million for the full year 2023, representing growth of 31% compared to the prior quarter and year respectively.

Robert G. Spignesi: All this gives us confidence in our ability to execute against this priority and meet or exceed our 2024 target. Turning to gross margin improvement, we were pleased with the progress we made during 2023 to take costs out of our product manufacturing processes and operate more efficiently, and in the fourth quarter, we began to see some of the early benefits of these actions drop down to P&L. In fact, our cost of revenue in Q4 decreased by 7% while revenue increased by 45%, compared to the same period last year, driving gross margin to near breakeven.

This performance is a result of the efforts of our manufacturing operations and service teams, who have been aggressively focused on reducing costs enhancing efficiency and productivity.

Robert G. Spignesi: We think this is the start of a positive inflection point and demonstrates significant leverage in our business model. Looking ahead to 2024, we expect to achieve positive gross margins for the full year as we further scale our business and continue to execute against our cost reduction, efficiency, and productivity programs. Our third priority is developing and commercializing new products to drive growth and provide additional value to our customers. In early January, we announced the upcoming availability of our Rapid Stability application for the GrowthDirect system. As we highlighted in our January press release, a rapid sterility application can deliver time to organism detection in as little as 12 hours, and final result in as little as one to three days.

On a cumulative basis to the end of 2023, we are pleased with 141 growth direct systems globally, including 121 fully validated systems and have shipped nearly $5 million consumables.

Our customer base now includes 70% of the global top 20 pharmaceutical manufacturers and many of the largest global <unk>, including Samsung Biologics, who recently selected the growth or X system to automate their critical microbial quality control testing.

We have also placed growth Rx systems with a 100% of the manufacturers of commercially approved car T therapies.

Manufacturing of these lifesaving therapies requires accuracy for automation and fast turnaround, which are hallmarks of the growth direct.

We are very proud to be the trusted partners with these leading companies for their mission critical microbial quality control processes.

As we turn to 2024, our priorities remain consistent with 2023.

First accelerating growth direct system placements remains our highest priority.

Our second priority is improving gross margins and driving towards profitability.

Our third priority is developing and commercializing innovative new products, which in the context of 2024 means achieving a successful launch and commercialization of rapid sterility.

And finally, we remain focused on prudently managing our cash.

Success in achieving our 2024 top priority of accelerating system placements as a function of the size and quality of our sales funnel, which remains many multiples of our forecast.

During 2023, our system placements were a balanced mix of new versus existing customers and single versus multi system orders.

We also achieved a balanced mix of sales into biologics cell and gene therapies, and small molecules, which reflects the global market opportunity.

We exited 2023 was solid momentum, including two thirds of 2023 systems being placed in the second half of the year and productivity from all three of our sales regions.

Robert G. Spignesi: I spent several weeks in January and February connecting with customers, and I was reminded of the many strong partnerships we have established. I remain confident in the market opportunity and customer demand for Growth Direct and our strong service and support offerings. These are truly valued partnerships within a critical part of our customers' quality and manufacturing processes. As we strive to contribute to the growth of the Iraqi industry, we will continue to expand our offerings with innovative products such as Rapid Sterility. And as our platform expands, we will continue to further embed our products and services within our customers' critical quality and manufacturing processes. Our customers recognize the compelling value proposition of automating their QC lab with a product that supports global regulatory requirements.

And finally, we continue to leverage our strong relationships and a strong track record with our customers to reference selling as we strive to meet the growth of Iraq the industry standard for Mtc testing.

All of this gives us confidence in our ability to execute against this priority and meet or exceed our 2024 targets.

Turning to gross margin improvement we were pleased with the progress we made during 2023 to take costs out of our product manufacturing processes and operate more efficiently.

And in the fourth quarter began to see some of the early benefits of these actions has dropped down the P&L.

In fact, our cost of revenue in Q4 decreased by 7% while revenue increased by 45%.

Compared to the same period last year.

<unk> gross margin to near breakeven. We think this is the start of a positive inflection point and demonstrates a significant leverage in our business model.

Looking ahead to 2024, we expect to achieve positive gross margins for the full year as we further scale our business to continue to execute against our cost reduction efficiency and productivity programs.

Our third priority is developing and commercializing new products to drive growth and provide additional value to our customers.

In early January we announced the upcoming availability of a rapid sterility application for the growth direct system.

As we highlighted in our January press release, our rapid is really application can deliver time to organism detection as little as 12 hours.

And final time to result, and with as little as one to three days.

These data represent a significant improvement over widely used for additional test methods, which generally require a 14 day endpoint incubation and provide compelling differentiation when compared to current products on the market.

Sean Wirtjes: Thanks, Rob. Good morning, everyone. I'll start my comments today with a review of our fourth quarter 2023 results and then discuss our 2024 outlook. Q4 revenue increased 45% to $6.3 million, compared to $4.4 million in Q4 2022. During the fourth quarter, we placed six growth direct systems compared to two in the fourth quarter last year. The six systems this quarter represent the most we've placed since Q3 2021. We also completed nine validations in the quarter. Product revenue, which is comprised of systems and consumables, increased 45% to $4.1 million in the quarter, compared to $2.8 million in Q4 last year. The growth in product revenue was primarily driven by the higher number of systems placed in the quarter. Consumable revenue in Q4 increased on a year-over-year basis but was down slightly on a sequential basis due mainly to the timing of customer shipments.

Rapid sterility as with our environmental monitoring water and bio burden applications offers a compelling value proposition for our customers that includes faster product release more accurate results improved data integrity full automation and consistency across their manufacturing networks.

This is a breakthrough technology and we are excited about expanding the growth direct platform with this new application.

We remain on track for a mid year launch and look forward to providing you with updates in the coming quarters.

I remain confident in our market opportunity and customer demand for the drug correct and our strong service and support offerings. These are truly value partnerships within a critical part of our customers quality and manufacturing processes.

Sean Wirtjes: Service revenue also increased 45% to $2.2 million in the fourth quarter compared to $1.5 million in Q4 last year. The increase was driven by a higher level of validation activity and higher recurring service contract revenue. Fourth quarter recurring revenue, which consists of consumables and annual service contracts, increased 13% to $3.3 million compared to $2.9 million in Q4 last year, driven by growth in both consumables and service contract revenue. Non-recurring revenue was $3.0 million in Q4 compared to $1.5 million in the prior year.

As we strive to make the growth racking industry standard we will continue to expand our offerings with innovative products such as rapid sterility and as our platform expands we will continue to further embed our products and services within our customers' critical quality and manufacturing processes.

Our customers recognize the compelling value proposition of automating their QC labs with a product that supports global regulatory requirements.

Turning back to our strategic outlook, we're excited to build upon our many achievements in 2023.

We have a clear set of priorities and are building a track record of strong and consistent execution and innovation. We are confident we had the right strategy and will leverage our successes in 2023 on our path of increasing shareholder value.

Sean Wirtjes: Turning to gross margins, product margins were negative $0.6 million in Q4 compared to negative $2.4 million in the fourth quarter of last year. The improvement was attributable to higher product revenue, higher production volumes in both systems and consumables, and benefits from actions taken by the company to lower product costs and increase manufacturing efficiency, including enhancements made to our automated consumables manufacturing line earlier in the year. Service margins were positive at approximately $0.4 million in Q4 compared to negative $0.2 million last year. Higher revenues and increasing productivity drove the improvement in service margins in the quarter. On a combined basis, our fourth quarter gross margin was near break even at negative $0.2 million, or negative 3% of revenue.

And with that I'll now turn the call over to Sean to discuss our fourth quarter performance and details for our 2020 for guidance.

Sean.

Thanks, Rob Good morning, everyone I'll start my comments today with a review of our fourth quarter 2023 results and then discuss our 2020 outlook.

Q4 revenue increased 45% to $6 3 million compared to $4 4 million in Q4 2022.

During the fourth quarter, we placed fixed growth direct systems compared to two in the fourth quarter last year. The six systems. This quarter represent the most we've placed in Q3 2021, we also completed nine validation in the quarter.

<unk> revenue, which is comprised of systems and consumables increased 45% to $4 1 million in the quarter compared to $2 8 million in Q4 last year.

The growth in product revenue was primarily driven by the higher number of systems placed in the quarter.

<unk> revenue in Q4 increased on a year over year basis, but was down slightly on a sequential basis due mainly to the timing of customer shipments.

Non recurring revenue was $3.0 million in Q4 compared to $1 5 million in the prior year quarter.

Turning to gross margins product margins were negative <unk> 6 million in Q4 compared to negative $2 4 million in the fourth quarter last year.

Service margins were positive at approximately <unk> $4 million in Q4 compared to negative <unk> $2 million last year higher.

Higher revenues and increasing productivity drove the improvement in service margins in the quarter.

On a combined basis, our fourth quarter gross margin was near breakeven at negative <unk> 2 million or negative 3% of revenues.

Representing a 24 percentage point improvement on a sequential basis, and a 56 percentage point improvement compared to the fourth quarter last year.

Looking at this margin improvement in other way our total revenue increased 45% in the fourth quarter, while our total cost of revenue decreased 7% over the same period driving a significant improvement.

Looking forward, we expect continued margin improvement in 2024 and beyond as we continue to grow revenues reduce product costs drive higher manufacturing efficiency control manufacturing overhead costs and increased service productivity.

Continuing down the P&L total operating expenses were $12 1 million in the fourth quarter, consisting of $3 2 million in sales and marketing $3 3 million and R&D and $5 $5 million in G&A.

This compares to total operating expenses of $14 7 million in the fourth quarter of 2022 the.

Net loss was $11 2 million in Q4. This compares to a net loss of $16 4 million in Q4 last year. This.

Net loss per share was 26 cents in Q4 compared to net loss per share of <unk> 39 in the prior year quarter.

With respect to noncash expenses and capital expenditures depreciation and amortization was <unk> 8 million stock compensation expense was $1.0 million in.

Sean Wirtjes: We expect total revenue of at least $5.5 million in Q1, which assumes at least three system places. We then expect revenue placement in Q2 and Q3 to be higher than Q1 and then peak in Q4. While we anticipate launching growth-direct rapid sterility by mid-year, our guidance assumes any contribution from this new offering will be modest in 2024, given our typical system sales cycle. Looking at consumables, we expect revenues to increase sequentially in Q1 compared to Q4 and then continue to increase sequentially each quarter over the balance of the year as more systems complete validation and ramp toward routine use. With respect to service revenue, we expect revenues to be between $2.0 and $2.5 million each quarter, with variability primarily driven by the timing of validation activity.

And capital expenditures were zero point $4 million in the fourth quarter.

I'll now turn to our 2024 outlook, where my comments will primarily be focused on the full year.

Given current market conditions, our outlook reflects some uncertainty related to customer budgets and the timing and scale of customer purchase decisions.

Assuming typical seasonality with revenue and placement stepping down from Q4 to Q1 on a sequential basis. We expect total revenue of at least $5 5 million in Q1, which assumes at least three system placements. We then expect revenue and placements in Q2 and Q3 to be higher than Q1, and then peak in Q4.

We anticipate launching growth direct rapids really by mid year, our guidance assumes any contribution from this new offering will be modest in 2024, given our typical system sales cycle.

Sean Wirtjes: We expect to complete at least 16 validations in 2024, with at least 3 in the first quarter. Turning to gross margins, we expect Q1 margins to be lower than Q4 due to the seasonality impact I mentioned earlier. Thereafter, based on our revenue outlook, the benefits of ongoing cost reduction initiatives and products, and increasing productivity and service, we expect our gross margin percentage to improve but still be negative in Q2, and then be single-digit positive in Q3 and Q4, as well as for the full year. We expect service margins to be positive in all four quarters and for product margins to improve each quarter as the year progresses. We expect operating expenses to be in a range of $48 million to $52 million in 2024 with depreciation and amortization of approximately $3 million, stock compensation of approximately $4.5 million, CapEx of approximately $3 million, and other income, which is comprised primarily of interest income, of approximately $3 million in 2024.

Looking at consumables, we expect revenue to increase sequentially in Q1 compared to Q4, and then continue to increase sequentially each quarter over the balance of the year as more systems complete validation and ramp toward routine use.

Turning to gross margins, we expect Q1 margins to be lower than Q4 due to the seasonality impact I mentioned earlier there.

We expect service margins to be positive in all four quarters and for product margins to improve each quarter as the year progresses.

We expect operating expenses to be in a range of $48 million to $52 million in 2024, with depreciation and amortization of approximately $3 million stock compensation of approximately $4 $5 million.

Capex of approximately $3 million and other income, which is comprised primarily of interest income of approximately $3 million in 2024.

Sean Wirtjes: Finally, we expect cash burn of roughly $40 million in 2024, providing cash runway at least into the second half of 2026. This assumes a meaningful benefit from networking capital, including inventory reduction. That concludes my comments, so at this point, we'll open the call up for questions. Operator?

That concludes my comments so at this point, we'll open the call up for questions operator.

Operator: The floor is now open for your questions. To ask a question this time, please press star followed by the number 1 on your telephone. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Dan Arias with Stifle.

The floor is now open for your questions to ask a question at this time. Please press star followed by the number one on your telephone keypad.

Just a moment to compile the Q&A roster.

Your first question comes from the line of Dan Arias with Stifel. Your line is open.

Daniel Anthony Arias: Your line is open. Good morning, guys. Thanks for the questions here. Sean, maybe just to start on the gross margin improvement, how much of what would get you crossed over into positivity this year is, so to speak, in the bank a la the efficiency improvements that you made last year, the cost work that you did, versus things that have yet to be done or that depend on volumes for the year. And just as a follow-up to that, I think you said, you know, down first half of the year and then single digit, up in the back half of the year. Does that get you up for the first year?

Sean Wirtjes: And if you made that comment, then I apologize, but just my rough glance at the model doesn't necessarily suggest that that could be the case. Yeah, I'll start with your second question, Dan. So yeah, the guidance is, you know, margins, we think margins will be a little bit lower in q1 compared to q4, get better, but still be negative in q2, but then flip positive in q3 and q4. And for the full year, we expect it to be positive. So hopefully, that cadence makes sense to you there.

Yes, I'll start with I'll start with your second question Dan So.

So.

Hopefully that cadence makes sense there volume is a player in that but there's a lot of other things at play within that cadence as well.

Sean Wirtjes: Volume is a player in that, but there's a lot of other things that play within that cadence as well. So I think that kind of segues to your first question. So I think we view, you know, there are some things like the automation improvements we made that are baked in, you know, volume is important. And then we've got ongoing work going on around the other things that we talked about, service productivity, cost down in products, other things we're doing around efficiency and increased throughput in terms of manufacturing. So it's a mix, but there definitely are some components of that that are things that we've now got baked in that are going to help support better performance on margins and move us to positive in 2024. Okay, helpful.

So I think that kind of segways tears. Your first question. So I think we view there are some things like the automation improvements we made that are baked in.

<unk> is important.

And then there is ongoing work going on around the other things that we talked about service productivity cost down in products other things, we're doing around efficiency and.

Okay.

Okay helpful and then maybe just.

On the revenue side annualized pull through per systems too.

Two questions. There obviously, the new systems that are getting installed alternate calculation a bit but if you looked at sort of same store sales. What you had installed at the end of last year are you confident that the average pull through level will be up this year.

And then on the consumables growth rate that we should be thinking here, 23% recurring revenue growth in 2023, how doable is a number like that this year.

Sean Wirtjes: You know, obviously, you're growing the installed base, so that should help. I think the implied growth rate on recurring revenue is going to be a little bit lower, and I'll talk about that a little bit. I mean, if we focus on Q4 performance first, we guided that we would be down sequentially mainly due to the timing of shipments, and that's what we saw. Um, you know, I think, Consumables, you're right.

Honestly you are growing the installed base so that should help.

Yes, I think I think the implied growth rate on recurring is going to be a little bit lower and I'll talk about that a little bit I mean, if we focus on Q4 performance first.

We guided that we would be down sequentially, mainly due to timing of shipments and thats, what we saw.

I think we have consumables, yes, you are right, we have new systems coming online the number we track as we've talked about in the past is validated systems and really we still have a little bit of work to do typically once we get there to get people in routine use so we've got to manage that well.

Sean Wirtjes: We have new systems coming online. The number we track, as we've talked about in the past, is validated by systems. And really, we still have a little bit of work to do, typically, once we get there, to get people into routine use. So we've got to manage that well. I think there's another important factor here, which we view as transient, but it's important to understand where we're going to be. Because I would say, maybe to answer one of your questions there, I would look at this year as being, in terms of pull-through per average validated system, or consumables revenue per average validated system, relatively flat with last year. And there's one primary factor that's driving that. One of our most significant customers let us know in mid-23 that they were actually selling a site that had multiple high-volume systems in it. So as we made our way through the second half of 23, we started to feel the impact of that as those systems came offline. That is a contributor to what we're seeing in the recent quarters. That is still the case today,

I would look at this year as being in terms of pull through per average validated system. Our consumables revenue per average validated system being relatively flat with last year and it's really there is one primary factor thats driving that we had a one of our most significant customers, let us know in mid 'twenty three that they were actually selling.

<unk> a site that had multiple high volume systems in it.

So as we made our way through the second half of 'twenty three we started to feel the impact of that.

Those systems came offline.

That is a contributor to what we're seeing in most recent quarters.

Sean Wirtjes: Now, the good news for us, and I think a reason for optimism and something we view as an upside is that the new owner of that site is communicating that they do plan to bring some of those systems, not all of them, but some of them back online later in 2024. So actually, having some of our highest volume systems in the world go from kind of full pull through to offline is something that's important to think about as you think about the guidance that I just talked about. Okay, maybe just last quick one since it feels like we might have time here.

Go from kind of full pull through the offline.

Is something that's important to think about as you think about the guidance that I just talked about.

Okay, maybe just last quick one since it feels like we might have time here just on the validation timeline do you think is an average 2020 for validation timelines will be shorter than they were in 2023.

Sean Wirtjes: Just on the validation timelines, do you think, on average, 2024 validation timelines will be shorter than they were in 2023? Yeah, I think you know, we've talked about Project Rapid in the past and the work we're doing to shorten that process. I think we saw good progress on that in 23.

Jason: And I would expect we'll see incremental progress on that in 24 hours. So yeah. Okay, appreciate it. This question comes from the line of Tejosa Vaughn with Morgan Stanley. Hi, this is Jason on behalf of Tejas. Congratulations on the quarter and thank you for taking my questions. So just some questions related to sterility.

Okay I appreciate it.

Churn comes from the line of Josh Levine with Morgan Stanley. Your line is open.

Hi, This is Jason on for Jeff Congratulations on the quarter and thank you for taking my question. So just some questions related to sterility could you elaborate on the competitive landscape are thoroughly versus other competitors in the space and with the launch do you anticipate the new offering opening up opportunities with new customers.

Robert G. Spignesi: Could you elaborate on the competitive landscape of sterility versus other competitors in the space? And with the launch, do you anticipate the new offering opening up opportunities with new customers or expanding placements with existing customers? And on a related note, do you anticipate that you'll be building out a Salesforce to support us through all these sales, or will you leverage your existing Salesforce? Thank you. Thanks for the question. It's, it's Rob.

Or adding placements with existing customers.

On a related note do you anticipate that you'll be building out a sales force to support early sales or would you leverage your existing sales force. Thank you.

Great. Thanks for the question.

It's Rob So I think it was three in there. The first one is the competitive landscape.

Robert G. Spignesi: So I think there are three elements in them. The first one is the competitive landscape. So, as with our other applications, the top, the top competitor is the legacy method and Serility. That being said, there is what I would call increased competitive activity from other suppliers of rapid sterility applications in the market versus our other applications. So it is a market where there are some incumbents offering, I'll call it, technology-enabled rapid solutions. Now, that being said, we knew that coming into this market, and we specifically developed and designed the system to offer compelling differentiation clearly against the legacy and traditional methods but also against the current, I'll call it, technology-enabled methods. And we like how we compare against the other offerings in the market, as I mentioned in my prepared remarks. The second question with regard to new and existing customers, I think the answer is both.

So as with our other.

Applications.

The top the top competitor is <unk>.

<unk> method and <unk> that being said there is what I would call.

Increased competitive.

Activity from other suppliers of rapid sterility applications in the market versus our other applications. So it is a it is a market where there are some incumbents offering I'll call. It technology enabled.

Rapid solutions now that being said, we knew that coming into this market and we specifically developed and designed this system to offer <unk>.

Compelling differentiation clearly against the legacy.

And traditional method, but also against the current I'll call. It technology enabled methods and we like how we compare against the.

The other offerings in the market as I mentioned in my prepared remarks.

The second question with regard to new and existing customers I think the answer is both I think the exciting thing about <unk> is that.

Robert G. Spignesi: I think the exciting thing about Serility is that customers are excited about it, first and foremost, in our existing customer base. So the majority of our current customers are small molecules, I mean, I'm sorry, large molecules to include biologics and cell and gene. But Serility will also get us more deeply into small molecule injectable manufacturing as well.

Customers are excited about it first and foremost in our existing customer base. So the majority of our current customers are small molecules I'm sorry, a large molecules to include biologics and.

And cell and gene, but its really will also get us more deeply into small molecule.

<unk> manufacturing as well so it will expand.

Ill expand effectively.

Robert G. Spignesi: So it'll effectively expand our opportunity in a lot of ways and move our sales team more squarely into those segments. And now, with regard to sales specifically, we primarily are planning on leveraging our current sales team, which we now have up and running in all three regions. That being said, we will have a dedicated sterility, I'll call it group, TBD on the actual headcount and that, but specialists focused on assisting and enabling our sales team with some of the technical elements and application elements of the sterility-specific activities.

Our our opportunity.

And a lot of ways and move our sales team.

More squarely into into those segments.

With regard to sales team specifically, we primarily are planning on leveraging our current.

The sales team, which we now have up and running in all three regions that being said we will have.

A dedicated sterility I'll call it group.

TBD on the actual head count on that but.

Specialists focused on.

On assisting in enabling our sales team with some of the technical elements and application elements.

Of the really specific activities.

Robert G. Spignesi: Thank you. That was helpful. And then I could squeeze another question in.

Got it. Thank you that's helpful. And then if I can squeeze another question on ASO with plurality development near final stages. What are the next areas of product or what sort of developments that could enhance the customer experience on <unk>. Thank you.

Robert G. Spignesi: So, with Serality development near its final stages, what are the next areas of product or workflow development that could enhance the customer experience on PerthDirect? Thank you. Yeah, so from a high level, we view GrowthDirect as a platform technology, and generally, our product strategy is to continue to influence the workflow in and around our platform technology. So we automate the microbial quality control process, we detect contamination, we enumerate contamination, and we do that now with Strility being launched, to be launched in mid-year across the primary microbial quality control tests of environmental monitoring, water, bioburden, We also imagine, over time, going downstream and providing more information to customers with regard to the organisms that they're picking up and detecting in their workflows. I think Mold, the Mold technology we released last year, is a really good example of that, and there could be extensions around that, and also data.

Yes.

From a high level, we view the growth direct as a platform technology and generally our product strategy is to continue to influence the workflow and in and around our platform technology. So we we automate the microbial quality control process, we detect contamination we.

We have new more contamination and we do that now is really being launched.

We launched mid year across the primary microbial quality control test of environmental monitoring water bio burden and soon sterility.

We also envision over time.

<unk> downstream and providing more information to customers with regard to the organisms that there.

Picking up in detecting and they're in their workflows molds. The mobile technology. We released last year is a really good example of that and there could be extensions around that and also data we're generating enormous amounts of.

Robert G. Spignesi: We're generating enormous amounts of digital data for customers, and this is the first time that these labs have had access to this kind of data, and how can we help customers use, manage, look into, and look into their data and look into their operations, not only on a site basis but on a global basis? Our goal is to become the new quality control infrastructure, and as we grow our site network globally, we're basically creating a new microbial quality control infrastructure for our customers. And with that, what kind of services and insights can we provide, just given the enormous amount of data that we're generating? And none of this is a commitment or guidance, per se, but it gives you a little bit of insight into how we're thinking about expanding our influence up and down the quality control workflow within our customers' manufacturing and quality operations. Thank you. I appreciate the answers, guys.

Digital data for customers and this is the first time. These labs have had access to this kind of data and how can we help customers.

Use manage look into their data and looking to get our operations not only on a site basis, but on a global basis. Our goal is to become the new quality control infrastructure as we grow our our site network globally. We are we're basically creating a new microbial quality control infrastructure for our customers and with that.

What kind of services and insights can we provide just given the enormous amount of data that we are.

We are generating and none of this is our commitment our guidance per se, but it gives you a little bit of insight into how we're thinking about.

Expanding our influence up and down the the the quality control workflow within our customers' manufacturing and quality operations.

Thank you I appreciate the answers guys.

Robert G. Spignesi: Sure. The next question comes from the line of Stephen Mah with TD Cowen. Your line is open.

Sure.

Next question comes from the line of Steven Mah with BD Cowen Your line is open.

Poon Mah: Thanks, and congrats on the quarter, and thanks for taking the question. One on Samsung Biologics, you know, them selecting the Growth Rec platform for their Microbio QC, can you remind us if it was a multi-system placement, and was that multiple Samsung sites? And then, if you could give us some color on the sense of the magnitude of that.

Great Thanks, and congrats on the quarter and thanks for taking the questions.

Yes, one on Samsung biologics them selecting the growth direct platform for their microbiome QC can you remind us if it.

Was a multi system placement and was that multiple Samsung sites.

And then if you could give us some color on the sense of the magnitude.

Robert G. Spignesi: Samsung going forward, you kind of expand across the SAM. Global Sites, you know, when can you expect more Samsung? Yeah, so thanks, Steve. We're clearly excited about the Samsung partnership and the company selecting us. You know, Samsung is a great company, does its diligence, and we think it speaks volumes that they selected GrowthDirect. We did place a multi-system order at a single site last year.

Samsung going forward.

As you kind of expand across the Samsung ops.

Global sites.

When can you expect more Samsung placements now obviously, it's a pretty huge entity.

Yes, so thanks, Steve.

We're clearly excited about the.

Samsung partnership.

The company selecting Osteo Samsung is a great company does our diligence and we think it speaks volumes. They selected the growth direct we did place a multi system order at a single site.

Last year.

Robert G. Spignesi: I won't go into forward-looking expectations, but I can tell you, we're looking forward to, to your point, it's a large organization, and we're very much looking forward to growing with Samsung in the coming quarters, in the coming years. That's great, I appreciate it. And then maybe a follow-up question, you know, on the CRO landscape, you know, given the current geopolitical sentiment, you know, the proposed Bipartisan Biosecure Act. Did you give us a sense of your exposure to CROs that were kind of named in that Biosecure Act? Yeah, it's very low.

I won't go into the fall.

Forward looking.

Expectation, but I can tell you we're looking forward to your point, it's a large organization and we're very much looking forward to growing with Samsung in the coming quarters and the coming years.

Okay, Great I appreciate that.

And then maybe a follow up question.

On the CRO landscape.

Given the current geopolitical sentiment.

The proposed bipartisan boss secure act could.

Could you give us a sense of your exposure.

To see Roes that were named in that biopsy Care Act.

Yes.

It's very low I think I think specifically around China, yes.

Our connectivity and exposure is is it.

Is quite low we have a strong <unk>.

<unk> footprint I think as you know.

Our value prop resonates strongly there, but our current.

And our expected customer base would be independent of that bio secure act and the named the named parties within.

Okay.

Great that color and last one is a follow up question on rapid sterility.

Robert G. Spignesi: And last one's a follow-up question on rapid sterility, you know, can just walk through some of the positive. You know, early beta testing feedback and the stress testing that you did during that beta launch that's driving confidence and the expected Mid-Year Launch and has rapid sterility, you know, to help drive the conversation with new customers. Yeah, so in reverse order, we it is helping drive conversations with new customers and existing customers. So we've been, I wouldn't say surprised because we expected a positive response, and we're getting it. And I think it's important to note that we have not assumed meaningful contribution for sterility in our 2024 guide, just given the mid-year, Launch, and the sales cycle timing. But we're certainly going to preserve the opportunity to have upside with regard to sterility.

Can you just mark through some of the positive ERM.

Early beta testing feedback and the stress testing that you did during that ban launch that's driving confidence in the expected.

Mid year launch.

And has rapid sterility.

Helping drive the conversation with new customers. Thank you.

Okay.

Yes, so in reverse order.

<unk>.

It is helping drive.

Conversations with new customers and existing customers. So we have been.

I wouldn't say surprised because we expected a positive responses and we're getting it.

I think it's important to note that there is.

We have not assumed.

Meaningful contribution for sterility, and our 2024 guide just given the mid year launch and the sales cycle.

Timing, but we're certainly going to preserve the opportunity to have upside with regards to reality and and there is there is quite a bit of excitement.

Robert G. Spignesi: And there is quite a bit of excitement around it. Our conference comes from a combination of customer feedback as well as rigorous development processes we have internally. So that process goes through system readiness. It's basically a new consumable that works with the system and a lot of testing with regard to some of the data that you've seen published with regard to time to detection and time to result.

Around it and our confidence comes from a combination of customer feedback as well as rigorous development.

Process, we have internally.

So that process goes through and the system readiness the bay.

Basically a new consumable that worked through the system and a lot of testing with regard to some of the data that you've seen published with regard to time to detection and time to result.

And then of course that that data.

We'll work with customers to to opening over time validate and their environments footwear and where we are today.

Quite confident in what we are seeing that gave us the confidence to.

Robert G. Spignesi: Our internal data feedback from the market research we've done and our internally generated data all kind of collide together to give us that outlook and confidence to move forward. And also, inbound interest from customers is also feathering into the mix now, too, which is very exciting. More to follow. We'll look forward to updating you as we go forward through the quarters here. But I can say, just kind of in summary, we're excited about the product. And so far, the market also seems quite excited about the product as well.

Also as feathering into the into the mix now too, which is which is very exciting so more more to follow appropriate. We look forward to update you as we go forward.

Through the quarters here, but I can say just kind of in summary, we're excited about the product and so far the market also seems quite excited about the product as well.

Robert G. Spignesi: Okay, great. Thanks for that, and congrats. Okay.

Okay, great thanks for that and congrats again.

Okay.

Robert G. Spignesi: Well, thanks, Steve, for the question. And thanks, everyone, for joining us today. Again, we enter the year with strong momentum and are in a great position to deliver an excellent year in 2024. I look forward to speaking with many of you over the next few weeks at the T.D. Cowan and KeyBank Life Sciences Conference. Thank you all. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Thanks, Steve for the question and thanks, everyone for joining us today again.

Again, we enter.

For the year with strong momentum.

In a great position to deliver an excellent year in 2024, I will look forward to speaking with many of you over the next few weeks at the TD Cowen.

And key and Keybanc life Sciences conferences. Thank you all.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.

Okay.

Q4 2023 Rapid Micro Biosystems Inc Earnings Call

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