Q4 2024 Alpha Teknova Inc Earnings Call
Thank you for standing by and welcome to check Noble's fourth quarter and full year 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again.
Speaker Change: I'd now like to hand, the call over to Jennifer Henry Senior Vice President of marketing. Please go ahead.
Jennifer Henry: Thank you operator.
Speaker Change: Welcome to <unk> fourth quarter, and full year 2024 earnings conference call.
Speaker Change: With me on today's call are Stephen Ghansham, techno, Vice President and Chief Executive Officer, and that low Tech Novus, Chief Financial Financial Officer, who will make prepared remarks, and then take your questions.
Speaker Change: As a reminder, the forward looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company are subject to risks and uncertainties that may cause actual events or results to differ.
Speaker Change: Additional information concerning these risk factors is included in the press release the company issued earlier today and they are more fully described in the company's various filings with the SEC.
Speaker Change: Today's comments reflect the company's current views, which could change as a result of new information future events or other factors and the company does not obligate or commit itself to update its forward looking statements, except as required by law.
Speaker Change: The company's management believes that in addition to GAAP results non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategy.
Speaker Change: We will therefore use non-GAAP financial measures of certain of our results during this call.
Speaker Change: Conciliation of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to tech nova's website and at Www Dot SEC Dot Gov Slash Edgar.
Speaker Change: non-GAAP financial measures should always be considered only as a supplement to and not as a substitute for or as superior to financial measures prepared in accordance with GAAP.
Speaker Change: The non-GAAP financial measures in this presentation may differ from similarly, named non-GAAP financial measures used by other companies.
Speaker Change: Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of technical most web site and on today's webcast.
Steven: And now I will turn the call over to Steven.
Steven: Thank you Jen good afternoon, and thank you everyone for joining us for our fourth quarter and full year 2024 earnings call.
Steven: I am very pleased with the progress we made in 2024.
Steven: No.
Steven: <unk> is in a better position than ever to deliver on the plan. We laid out in 2021 that we believe will generate long term sustainable growth.
Steven: We continued to execute on our growth strategy in 2024, we supported 48 clinical customers up from 34 at the end of 2023 or 41% annual increase.
Steven: We recognized $37 7 million in total revenue.
Steven: When adjusted to exclude revenue from a single large clinical solutions order of $2 7 million in 2023 total revenue growth was 11%.
Steven: Revenue from cell sales to cell and gene therapy related customers increased from 23% in 2023% to 27% in 2024.
Steven: We maintained our service levels to customers, despite reduced head count and launched three new offerings in 2024.
Steven: Tech Express tech and our Europa.
Steven: Each of these offerings to improve the customer experience, while also adding to our top and bottom line.
Steven: We aggressively managed our operating expenses, which we've reduced by $8 1 million in 2024 compared to 2023, excluding nonrecurring charges.
Steven: We finished the year with a total cash outflow of $13 5 million subs.
Steven: Substantially better than our initial guidance of $18 million.
Steven: We also raised additional capital in July increasing our confidence that we will become cash flow positive without additional funding.
Steven: Before we dive into the details around our 2024 performance I would like to take a moment here to thank our past and present associates for putting us in a position of strength as we look to 2025 and beyond.
Steven: Our associates' ability to execute on our strategy, while reducing cost is a testament to the culture and commitment we have here at Tech Nova.
Steven: Now I want to provide more color than in years past about our performance by product type and market.
Steven: <unk> is a leading supplier of both research and clinical grade catalog and customer agents.
Steven: Our catalog business support to research and discovery across the entire life science community by providing over 1400 skus of commonly used reagents.
Steven: These reagents are cornerstone to basic molecular and cellular biology experiment, which is why about 3000 customers use our products annually.
Steven: In 2024 catalog reagents represented approximately 60% of our total revenue.
Steven: While we grew low single digit in this segment in 2024.
Steven: We exited the second half of the year with 7% growth compared to the second half of 2023, which.
Steven: Which we believe reflects an improvement in the general R&D funding environment and strong commercial and operational execution internally.
The diversity of our end markets, we serve and the lack of customer concentration with no direct catalog customer representing more than 4% of total catalog revenue in 2024 provides not only an entry point for our faster growing custom products, but also a stable and predictable foundation for us as we execute.
Steven: On our growth strategy.
Steven: The remaining 40% of our revenue is generated from custom research or clinical grade reagents that are manufactured to our customer specification.
Steven: And other non product revenue related primarily to services and shipping.
Steven: Our ability to quote manufacturer QC and ship custom product in weeks instead of months is a critical differentiator for us in the market.
Steven: Our largest end market for these custom products is biopharma, which includes sales to large pharma small and midsize biotech, including cell and gene therapies and CMO.
Steven: We believe this segment reflects our exposure to the bio processing end market.
Steven: Sales to these customers represented approximately 70% of custom revenue and 25% of our total revenue in 2024.
Steven: The remaining custom revenue is from regions predominantly sold to the life science tools and diagnostics customers and other end markets such as academic institutions animal health and agriculture.
Steven: The performance of our custom Biopharma business demonstrates the progress we have made in executing on our growth strategy.
Steven: In 2020 for this segment grew about 40% compared to 2023.
Steven: Attributable in part to the Onboarding of a new therapeutic clinical customer.
Steven: But excluding that new customer growth was still robust at approximately 25%.
Steven: Of the 48 total clinical customers. We served in 2024 3900, biopharma related and of those 23 were cell and gene therapy related.
Steven: We often support many or all of the therapies in a customer's pipeline.
Steven: Based on our own analysis, we believe we now support at least 50 therapies in preclinical trial 10 therapies in phase one trials and three therapies in phase II or later trials.
Steven: As a reminder, based on our market research, we expect revenue per therapy to increase on average approximately 30 fold as a therapy moved from phase one to commercialization.
Steven: For the remainder of the revenue generated from customer agents those associated with accounts outside of Biopharma 2024 was a challenging year.
Steven: We had a large single order from a diagnostics company in 2023 that made for a difficult year on year comparison.
Steven: In addition, a few of our larger life science tools companies and the sequencing and spatial genomics segments ordered significantly less than in the prior year.
Steven: Looking ahead, we believe many of these accounts specific headwinds will subside.
Steven: Taking these product and market segments together, we still expect 2025 could be a recovery year.
Steven: And we are optimistic that the market will return to more historically typical rates of growth as we enter 2026.
Steven: We expect to see mid single digit growth in our catalog business. This year, considering the market's recent stabilization and that we have little to no direct exposure to NIH or tariff related policies.
Steven: We also believe customary agents in the life science tools and diagnostics segment will grow mid single digits.
Steven: Given our recent conversations with these customers and a more favorable year on year comparison.
Steven: Regarding the custom products, we sell to Biopharma accounts, while we exited 2024 with momentum we believe uncertainty in the current macro environment has caused some of our customers to delay orders and others to reduce their annual budgets.
Steven: We are nonetheless confident that we will achieve at least 15% growth in this segment.
Steven: Therefore, we believe our guidance for revenue growth of 7% at the midpoint and fairly reflects the current overall market environment and the specific end markets we serve.
Steven: Lastly, we believe there is an opportunity over the next 12 to 24 months to expand our product portfolio through collaborations and acquisitions.
Steven: While we have spent the past couple of years investing in infrastructure systems and scalability numerous other companies have focused on developing novel products and technologies by.
Steven: By working closely with these companies, we believe we can expand our product portfolio and geographic footprint.
Steven: The combination of our operational and commercial scale with our collaborators novel products and technologies creates a great opportunity to drive additional top line growth and margin expansion over the longer term.
Matt: In summary, while we still expect 2025 could be a recovery year, we're confident in our strategy ability to execute and capital runway I will now hand, the call over to Matt to talk through the financials.
Matt: Thanks, Steven and good afternoon, everyone I am pleased with our financial performance in 2024 as Steven mentioned, we finished the year with momentum delivering 17% and 18% year over year revenue growth in the third and fourth quarters, respectively.
Matt: And we significantly improved free cash outflow from $26 7 million and the full year of 2023 to $13 5 million for the full year 2024.
Matt: On to revenue total revenue for the fourth quarter 2024 was $9 3 million, an 18% increase from $7 9 million for the fourth quarter 2023, and $37 7 million for the full year 2024, 3% increase from $36 7 million for the full year 2023.
Matt: <unk>.
Matt: When adjusted to exclude revenue from a single large clinical solutions order of $2 7 million in 2023 total revenue growth was 11% in 2024.
Matt: <unk> essentials products are targeted at the research use only or are you one market and include both catalog and custom products lab Essentials revenue was $6 8 million in the fourth quarter of 2024% to 2% increase from $6 7 million in the fourth quarter of 2023 slightly.
Matt: Increase in lab essentials revenue in the fourth quarter 2024 was attributable to an increased number of customers, partially offset by lower average revenue per customer.
Matt: For the full year lab Essentials revenue was $28 9 million in 2024, consistent with $28 8 million in 2023.
Matt: Driven by an 8% increase in the number of customers to 3045 that was somewhat offset by a 7% decrease in the average revenue per customer.
Matt: <unk> $9486.
Matt: Clinical solutions products are made according to good manufacturing practices or GMP quality standards and are primarily used by our customers as components or inputs and the development and manufacturer of diagnostic and therapeutic products.
Matt: <unk> solutions revenue was $1 9 million in the fourth quarter of 2020 for a 110% increase from <unk> 9 million in the fourth quarter of 2023.
Matt: The increase in clinical solutions revenue in the fourth quarter of 2024 was attributable to an increased number of customers, partially offset by lower average revenue per customer.
Matt: For the full year clinical solutions revenue was $7 1 million in 2024, 5% increase from $6 7 million in 2023.
Matt: Excluding revenue of $2 7 million from a single large order in 2023 clinical solutions revenue was up 76% in 2024.
Matt: We added clinical solutions customers in 2024 growing from 34 customers in 2023 to <unk> 48 that spend more than $5000 annually.
Matt: Average revenue per customer in 2024 decreased 25% to $148000.
We expect revenue per customer to increase over time as customers ramp up their purchase volumes when they move through clinical trial phases.
Matt: However, this metric can be affected by the addition of newer clinical customers, who typically ordered less just as a reminder, due to the larger average order size and clinical solutions compared to lab essentials.
Matt: There can be more quarter to quarter revenue lumpiness of this category.
Matt: Looking at the income statement gross profit for the fourth quarter of 2024 was $2 1 million compared to $1 3 million.
Matt: In the fourth quarter 2023, and.
Matt: $7 2 million for the full year 2024, compared to $10 3 million for the.
Matt: The full year of 2023.
Matt: Gross margin was 23.0% in the fourth quarter 2024, which is up from 17.0% in the fourth quarter of 2023.
Matt: And 19, 2% for the full year 2024, which is down from 28, 1%.
Matt: For the full year of 2023.
Matt: The increase in gross profit percentage for the fourth quarter of 2024 was primarily driven by higher clinical solutions revenue, coupled with reduced head count partially offset by increased overhead costs.
Matt: The decrease in gross profit percentage for the full year 2024 was primarily driven by the $2 8 million.
Matt: Non recurring non cash charge related to the disposal of expired inventory and write down of excess inventory created in the second half of 2022 as discussed in the prior quarter.
Matt: Excluding the impact of this charge gross margin would have been 26, 5% for the full year 2024.
Matt: The decrease in gross profit in 2024 was also driven by increased overhead costs largely depreciation expense. Following the completion of our new manufacturing facility in 2023.
Matt: Which were partially offset by reduced head count.
Matt: Operating expenses for the fourth quarter, 2024 was $7 8 million compared to $12 2 million for the fourth quarter of 2023.
Matt: Excluding the nonrecurring charges of <unk> 3 million related to a loss contingency accrual and the noncash trade name impairment charge of $2 2 million in the fourth quarter of 2023.
Matt: Operating expenses were down.
2.0 million.
Matt: The decrease was driven primarily by reduced head count and spending in particular in professional fees.
Matt: Operating expenses for 2024 were $33 4 million compared to.
Matt: $45 9 million in 2023.
Matt: Excluding the nonrecurring charges of $1 4 million for the full year 2024, and $5 8 million for the full year 2023.
Matt: Operating expenses decreased $8 1 million.
Matt: The decrease was driven by reduced head count and spending primarily on professional fees and insurance, partially offset by increased stock based compensation expense related to the stock option repricing as well as facility costs.
Matt: At the end of fourth quarter 2024, we had 173 associates compared to 211 a year prior.
Matt: Net loss for the fourth quarter, 2024 was $5 7 million or <unk> 11 per diluted share.
Speaker Change: Care to a net loss of $10 7 million or 26 cents per diluted.
Matt: Sure for the fourth quarter 2023.
Matt: Net loss for the full year 2024 was $26 7 million.
Matt: Or <unk> 57 per diluted share compared to a net loss of $36 8 million or $1 16 per diluted share for the full year of 2023.
Matt: Adjusted EBITDA, a non-GAAP measure was negative $3 2 million for the fourth quarter of 2024 compared to negative $6 zero million.
Matt: For the fourth quarter of 2023.
Matt: Adjusted EBITDA for the full year 2024 was negative $14 5 million compared to negative $19 8 million for the full year 2023.
Matt: Excluding the $2 8 million inventory charge adjusted EBITDA would have been negative $11 7 million in 2024.
Matt: The cash flow and balance sheet highlights.
Matt: Capital expenditures for the fourth quarter 2024 was <unk> 6 million compared to zero point $3 million for the fourth quarter of 2023.
Matt: Capital expenditures for the full year of 2024 were $1 1 million compared to $7 9 million for the full year 2023.
Matt: Free cash flow, a non-GAAP measure, which we define as cash provided by or used in operating activities less purchases of property plant and equipment was negative $1 5 million for the fourth quarter 2024.
Matt: Third to negative $3 2 million for the fourth quarter of 2023.
Free cash flow for the full year of 2024 was negative $13 5 million compared to $26 7 million for the full year 2023, this decrease compared to prior periods for both the quarter and full year was due to lower cash used in operating activities and a decrease in capital expenditures.
Matt: Note that for the financial periods in 2025, we are changing the definition of free cash flow.
Matt: Two cash provided by or used in operating activities plus cash provided by or used in investing activities definition.
Matt: Better aligns with our current reporting method for short term investments.
Matt: Turning to the balance sheet as of December 31, 2024, we had $34 million in cash cash equivalents and short term investments and.
Matt: $12 1 million in gross debt.
Matt: For 2025 outlook.
Matt: We are providing 2025 total revenue guidance of 39 million to $42 million.
Matt: The midpoint this implies 7% revenue growth compared to 2024.
Matt: While we saw a nice rebound in 2024 from our Biopharma customers. We believe 2025 is another recovery year.
Matt: The remains cautiousness across some of our customer base, which we believe is related to macroeconomic uncertainty, particularly as it relates to the rate of capital flowing into the sector.
Matt: The low end of our range assumes these headwinds worsen in the high end assumes some easing.
Matt: As we have indicated before due to the high percentage of fixed costs associated with our operations. We estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70% with some variability year to year.
We expect to see gross margins in the high 20 percentage range in 2025 compared to a normalized mid 20 percentage range in 2024.
Matt: The company posted operating expenses, excluding nonrecurring charges below 8 million for the third quarter in a row.
Matt: That reflects steps we took during 2024 aimed at reducing operating expenses, which resulted in total cost savings of $8 1 million, excluding nonrecurring charges in 2024 compared to 2023.
Matt: We believe that we are appropriately sized at operating expenses of approximately $8 million per quarter, allowing us to moderately increase our investments in sales and marketing to position our position ourselves for the market recovery.
Matt: At this spending level, we continue to expect to achieve adjusted EBITDA positive.
In the range of $50 million to $55 million in annualized revenue.
Matt: The company saw a reduction in free cash outflow during the fourth quarter 2024, both sequentially and versus prior year.
Matt: This is the lowest free cash outflow since first quarter of 2021.
Matt: Once again the company is pleased to report that free cash outflow for the full year of 2024, a $13 5 million was significantly below our most recent guidance of less than $16 million as.
Matt: As we turn to 2025, the company expects free cash outflow to be less than $12 million.
Matt: We're also pleased to announce the amendment and extension of our credit facility.
Matt: First and foremost we have reset the maturity date of the credit facility to March 2030, with no scheduled repayment of principal for the next three years.
Matt: However, we are increasing the principal amount on our term loan to $13 2 million, representing a $1 1 million increase rather than paying cash at closing for the exit fee owed to our lender.
Matt: Through covenant changes, we have effectively increased our liquidity by $4 million, giving us additional cash runway.
Matt: In conclusion, we're excited about the future and the company's competitive positioning in the market with attractive fundamentals and believe there is significant margin expansion potential in topline growth accelerates.
With that I'll turn the call Stephen.
Stephen Ghansham: Thanks, Matt.
Speaker Change: Overall, we were pleased with our fourth quarter and full year 2020 for performance and the progress we've made against our strategic priorities.
Speaker Change: We believe the long term outlet for our end markets remains positive and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies.
Speaker Change: <unk> and other products that improve human health.
Speaker Change: We will now take your questions.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question.
Speaker Change: Comes from Matt Larew of William Blair. Please go ahead, Matt.
Matt Larew: Hey, guys and congrats on level.
The next progress Stephen I wanted to focus on that.
Speaker Change: Comments, you made around sort of softening and typically beginning of the year.
Matt Larew: Wanted to perhaps some conservative customer budgets delayed purchases is.
Speaker Change: Is that something that.
Speaker Change: February relative to January you saw the softening.
Speaker Change: That's the first part and then was this really regardless of customer designation, meaning large biopharma or small small biotech or how does it change your behavior, mostly been we'll stay at those kind of cash burn.
Matt Larew: Yes, Thanks, Matt.
Matt Larew: So I would say, yes, it's a little bit more recent that we're continuing to see this.
Matt Larew: Sure.
Matt Larew: Okay.
Matt Larew: It is a.
Matt Larew: The phenomenon, we've seen for the last couple of years, where some customers are very excited in December as we talked about left with a lot of momentum Janney.
Matt Larew: January still felt pretty good but then you started to hear about well maybe it will order that in Q2, instead of Q1 type of conversations.
Matt Larew: That said of course, we still we still believe in that 15% growth I mentioned in Biopharma in the script here.
Matt Larew: So theres still some companies out there that are very positive I think there's still some others are trying to figure out in this environment, what that's going to meet.
Matt Larew: <unk> for them in terms of their capital runway.
Matt Larew: So it's not all bad but it is definitely picking up a little bit more and Thats too late January February timeframe.
Matt Larew: We are seeing it more in the smaller companies I would say I think large pharma were still seeing pretty good pieces in the catalog business.
Matt Larew: No.
Matt Larew: It continues to do fairly well that we have very little academic exposure there as you know, but it really more and maybe some life science tools and.
Matt Larew: Small midsize biotech that are that are kind of more in a tougher situation, but with regard to capital raise.
Hugh: Okay. Thanks, and then Hugh.
Hugh: Give some numbers around.
Hugh: On the clinical side.
Hugh: We're our own customers with respect to preclinical phase, one and phase two and beyond.
Hugh: I understand the progression of that is in large part dependent on your customers' clinical success.
Speaker Change: Curious, maybe if you could help us with what is the composition of your new customer pipeline look like if at all.
Speaker Change: On the preclinical side or are you, having any opportunities to win business.
Speaker Change: Clinical stages as well.
Speaker Change: Yeah, obviously as you get further down that pipeline, it's much harder to convert business. We have been successful move in a phase two or later.
Speaker Change: Customer of therapy over to us and then expanding within that pipeline to get the remaining.
Speaker Change: Therapies that they're working on particularly on the downstream processing.
Speaker Change: Which covers preclinical all the way through phase II. So.
Speaker Change: It can be done at the 12 to 18 month process.
Speaker Change: It requires work on both sides to make that happen.
Speaker Change: Most of our new customers are coming in at a preclinical or phase one.
Speaker Change: <unk>.
Speaker Change: So that is where we typically attract them and we continue to see that go up despite them rationalizing some pipelines over the last couple of years and some difficult macro environment.
But I think we are able to convert these customers given the platform.
Speaker Change: Okay, and then just last one for Matt Obviously, you had the large clinical solutions are in 'twenty three that you're copying and 24, just as we're thinking about 25 any kind of large.
Speaker Change: One time ish kind of.
Speaker Change: Thanks to be aware of from 24.
Speaker Change: No I wouldn't I wouldn't highlight anything in particular in 2024, I'd just say.
Speaker Change: Generally with the business of our scale and then we are going to have times. When there is lumpiness in the revenue and clinical solutions and even in lab essentials, where we have some of our custom orders and larger customers there but.
Speaker Change: No I think it really was that one in particular was so large that warranted, calling out and of course it was disclosed in our filings, but I don't see anything.
Speaker Change: So so large like that to call out, but there will at times be some lumpiness.
Speaker Change: Yes, I think it's fair to say that 2024 as a whole we didn't have any single customer representing more than 4% of our total revenue.
Matt Larew: But to Matt's point.
Matt Larew: Around $1 million can shift a quarter and that obviously has a big impact.
Matt Larew: Okay fair enough. Thanks, a lot guys. Thanks, Matt.
Speaker Change: Thank you. Our next question comes from Matthew <unk> of Keybanc capital markets. Please go ahead Matthew.
Speaker Change: Hi, Yes. This is Matt <unk> on for Paul Knight at Keybanc I believe you mentioned on the call.
Speaker Change: But I was sure if you could just say it again provided number updated number of cell and gene therapy customers and then if you could provide any insight to how many of the newly approved cell and gene therapies, you are involved with or any.
Speaker Change: Total commercial.
Speaker Change: Cell and gene therapies, you are involved with.
Speaker Change: Yes, So we said on the call that now 27% of our total revenue is made up of cell and gene therapy related companies.
Speaker Change: And that includes obviously their discovery work revenue as well as their sort of clinical trial work, so catalog custom and our clinical solutions products.
Speaker Change: We also had 23 clinical customers.
Speaker Change: In that category and we now support there'll be updated in the slide deck as well, but you'll see that over 100 total cell and gene therapy customers.
Speaker Change: As at this point in time, we're not reporting any commercialized, Belgium therapies. If you remember we really started down this pathway.
Speaker Change: 2021, and those have not migrated through but that is obviously the.
Speaker Change: The strategy here is to get these customers and then go down that pipeline.
Speaker Change: Thank you.
Speaker Change: And then one other one would be if you could just more around the modeling you could provide some detail on the phasing for revenues in 2025, and if we should expect the usual seasonal freight phasing throughout the year.
Speaker Change: Yes, I'll make this comment about 2025.
Speaker Change: I do expect the first quarter to be the lowest quarter of the year, probably similar to the year ago quarter, maybe a little bit below that and.
Speaker Change: And that's in part due to some of the reasons that Steve was just talking about there is some always some lumpiness in there, but also the current market environment, but we are confident in our full year guidance. So I would expect to see from Q1 at the low point.
Speaker Change: Moving up to Q2, and then into Q3, and then per our usual seasonality might expect a little bit less in Q4, just because of the fewer business days.
Speaker Change: Which impacts the catalog part of our business in particular, so Q1, the lowest kind of progressing up Q2, three and maybe a little a little less in Q4 are getting it in that 39% to 42 range.
Speaker Change: Sounds great. Thank you so much thank you.
Speaker Change: Thank you our next question.
Speaker Change: Comes from Mark Massaro.
Speaker Change: Please go ahead Marc.
Speaker Change: Hey, guys. Thanks for taking the questions.
Speaker Change: Maybe a two parter.
Speaker Change: I understand that the revenue per customer.
Speaker Change: Declines as newer customers come on board, new customers typically order less than more mature customers.
Speaker Change: Can you give us a sense for how long it typically takes a new clinical customer to reach a similar level of a more mature customer and then the second part of that has there been any changes to any of the pricing of the reagents I assume it's been.
Speaker Change: Flat to slightly up but I just wanted to check on that.
Mark: Sure Mark so on the revenue ramp.
Speaker Change: I'll just give you from a sales cycle perspective, right we typically.
Speaker Change: We engage with the customer present to them our capabilities and then theres a process of where they come visit the facility.
Speaker Change: And then a quick little validation piece and I say quick quick for us could be a couple of months of work.
Speaker Change: To get them to validate that we can manufacture the product.
Speaker Change: They're looking for us to make and then we're then very much dependent on their trial timelines right. So what we've seen is.
Speaker Change: Some customers come in pretty early spending in the tens of thousands of dollars and then it takes about a year to year and a half to really get it ramped it up to the hundreds of thousands of dollars to give you that kind of perspective.
Speaker Change: And of course there.
Speaker Change: Every customer very little bit, but that kind of gives you an idea.
Speaker Change: On the pricing side, yes, we do we do annual price increases.
Speaker Change: It's based on.
Speaker Change: Our portfolio how unique each product is in.
Speaker Change: In this space and the market pricing and so we go through that process and we've implemented a new pricing for our entire catalog product as well as new algorithms for our custom pricing and we did that at the beginning of the year.
Okay.
Speaker Change: Any chance that you could try to quantify what the price increases where were they consistent with general levels of inflation or is there any additional color you could provide.
Speaker Change: Yeah sure Mark about mid single digit increase on average overall.
Speaker Change: Okay that makes sense and then I think I heard you talk about your 2025 guidance.
Speaker Change: Bakes in if I heard correctly mid single digit growth.
Speaker Change: Among I think some of your diagnostics customers.
Speaker Change: Did I hear that correctly and is it safe to say that that might be the fastest growing segment relative to.
Speaker Change: Perhaps a gene therapy customers that may be under more pressure from a capital markets perspective. It would just be helpful to get a sense of.
Speaker Change: Also how youre thinking about the sequencing and spatial space.
Speaker Change: Yeah, absolutely so.
Speaker Change: Break it down for you.
Speaker Change: On the catalog side, which represents 60% of our business. We believe mid single digit we exited the year as you heard me say with 7% growth in the back half of 2024.
Speaker Change: We're thinking this year it'll be it'll be in the mid single digits there.
Speaker Change: Life Science tools diagnostics difficult year on year comparison, some challenges just with a few accounts. We think we're kind of over that now, but I do believe it will still be mid single digit to some of these some of these companies are still.
Speaker Change: Struggling to ramp up a bit.
Speaker Change: And then the fastest growing segment is the biopharma the custom Biopharma, which we think represents.
Speaker Change: The bioprocess and segment and yes, we're seeing some headwinds, but I remember you grew 40% last year and so we believe this is more of a 15% growth in 2024, given the current macro environment right and so the book ends of our guide as things get worse versus things get better.
Speaker Change: Yes that makes sense and then maybe one more should we you might have mentioned it should we assume flat head count and flat commercial organization.
Speaker Change: I would say generally so mark as I mentioned, we're going to we're going to tweak up the commercial investments a little bit this year.
Speaker Change: It won't be head count driven there may be a couple of head count here and there, but by and large as we've communicated in the past we believe.
Speaker Change: The infrastructure, we have in the company, including our operating expenses and the head count associated with that that generally where we needed to be right now as a company. So we're not looking to grow their its more just one off types of things. So I would say, yes, generally flat, although not precisely there could be a couple here and there.
Speaker Change: Alright, great. Thank you for taking my questions. Thanks Mark.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from Matt Hewitt of Craig Hallum. Please go ahead, Matt.
Speaker Change: Good afternoon, and thanks for taking the questions maybe first off I was hoping we could dig in a little bit more on the market commentary.
Speaker Change: Yes.
Speaker Change: As you listen to earnings calls over the past few weeks the bio processing sector. In particular commentary has been pretty healthy, saying that in 2026, everyone expects the market to kind of get back to where it has been historically it sounds like you're kind of calling for a similar but maybe things have changed here over the past few weeks in my hearing.
Speaker Change: That correctly.
Speaker Change: I think I think well put it this way right. We are basically saying that we will grow in the 15% range in that bio processing segment, which I think is probably similar to some of the peers I still don't think we're back to.
Speaker Change: What was historically normal rates of growth in that space.
Speaker Change: And if that happens we think we could grow more like we did in 2024 right we grew 40%.
Speaker Change: We were coming into the end of the year feeling pretty good about where we sat with those customers and then we did see some slippage. So it is more recent Matt that we're starting to see things. Some of these orders that we would expected Q1 get pushed to Q2 that sort of thing.
Speaker Change: So so yes.
Matt: Does that help yes. It does thank you and then.
Speaker Change: Maybe a little bit of <unk>.
Speaker Change: <unk> versus your comments earlier that you are really not impacted by NIH funding and tariffs and whatnot, but there has been some discussion about implementing.
Speaker Change: Implementing like a 25% tariffs tariff on drugs that are imported to the U S. How would that impact your business.
Speaker Change: Yes.
Speaker Change: You are largely a domestic.
Speaker Change: Provider, but is there a chance that you could potentially see some double dipping where maybe your customers that were manufacturing or U S. So you know.
Speaker Change: What we need to shift production to the U S and therefore.
Speaker Change: The products that we have been ordering before we now have to actually order a second round of those is that is that possible or am I thinking too far afield on that.
Speaker Change: It's certainly possible first I would say.
Speaker Change: Yes, so on the NIH side for.
Speaker Change: 4% of our sales are related to academic institutions of course, which are not all funded by the NIH. So pretty limited exposure there around 95% of our sales are domestic and we manufacturing manufacture everything here in the United States.
Speaker Change: So we're relatively insulated from that perspective now.
Speaker Change: If we believe things are green being brought more onshore here.
Speaker Change: Some of those 48 customers clinical customer support or <unk>.
Speaker Change: If they get more busy than we will likely get more busy and that could be.
Speaker Change: Opportunity for additional growth.
Speaker Change: So I think it's possible there I haven't really thought about the double dipping piece I guess, we'd have to wait and see.
Speaker Change: Got it alright, thank you very much.
Speaker Change: Thank you.
Speaker Change: And that is all the time, we have for Q&A today.
Speaker Change: This concludes today's conference call.
Speaker Change: You for participating you may now disconnect.
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