Q4 2024 Rapid Micro Biosystems Inc Earnings Call

February 28, 2025

We want to the rapid micro biosystems fourth quarter and full year 2024 earnings conference call.

All lines have been placed 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 simply press star followed by number one on your telephone keypad. If you would like to withdraw your question Press Star one again thank.

Thank you for standing by my name is.

Thank you.

I would now like to turn the call over.

Elisa and I will be your conference operator today.

Mike Mueller: To Mike Mueller.

Mike Mueller: Please go ahead.

At this time I would like to welcome everyone to the rapid micro biosystems fourth quarter and full year 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to.

Mike Mueller: Good morning, and thank you for joining the rapid micro biosystems fourth quarter and full year 2024 earnings call joining.

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

Rob: Earlier today, we issued a press release announcing our fourth quarter and full year 2024 financial results.

To ask a question during this time simply press star followed by number one on your telephone keypad. If you would like to withdraw your question Press Star one again thank.

Rob: Additionally, last night in a separate release, we announced the distribution and collaboration agreement with the life Science business of Merck <unk>.

Thank you.

Rob: Darmstadt, Germany, which operates in the U S as Millipore Sigma.

I would now like to turn the call over.

Mike Mueller: So Mike Mueller.

Rob: Copies of both releases are available on the Companys website at rapid micro bio dot com under investors and the news and events section.

Please go ahead.

Speaker Change: Good morning, and thank you for joining the rapid micro biosystems fourth quarter and full year 2024 earnings call.

Rob: Before we begin I'd 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.

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

Speaker Change: Earlier today, we issued a press release announcing our fourth quarter and full year 2024 financial results.

Any statements contained in this call that relate to expectations or predictions, including but not limited to <unk>.

Speaker Change: Additionally, last night in a separate release, we announced the distribution and collaboration agreement with the life Science business of Merck <unk>.

Rob: Statements relating to rapid micro's financial condition assumptions regarding future financial performance.

Speaker Change: Darmstadt, Germany, which operates in the U S as Millipore Sigma.

Rob: Anticipated future cash usage guidance for 2025, including revenue expenses gross margins system placements and validation activities.

Speaker Change: Copies of both releases are available on the company's website at rapid micro bio dot com under investors and the news and events section.

Rob: Expectations for and planned activities related to rapid micros business development and growth, including a recently announced distribution in collaboration agreement.

Speaker Change: 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.

Rob: Customer interest and adoption of the growth direct system and statements regarding rapid sterility.

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

Speaker Change: Any statements contained in this call that relate to expectations or predictions, including but not limited to <unk>.

Speaker Change: Statements relating to rapid micro's financial condition assumptions regarding future financial performance.

Rob: 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 quarterly report on Form 10-Q filed with the Securities and Exchange Commission as updated from time to time in our subsequent filings with the SEC.

Speaker Change: Anticipated future cash usage guidance for 2025, including revenue expenses gross margins system placements and validation activities.

Speaker Change: Expectations for and planned activities related to rapid micros business development and growth, including a recently announced distribution in collaboration agreement.

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

Speaker Change: Customer interest and adoption of the growth direct system and statements regarding rapid sterility.

Rob: The conference call contains time sensitive information and is accurately only as of the live broadcast today February 28 2025.

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

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

Speaker Change: 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 quarterly report on Form 10-Q filed with the Securities and Exchange Commission as updated from time to time in our subsequent filings with the SEC.

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

Rob: Thank you Mike Good morning, everyone and thank you for joining us.

Rob: I will begin my prepared remarks with a brief overview of our fourth quarter 2020 for performance and highlights as announced in our press release. This morning.

Speaker Change: 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.

Rob: I will then discuss the global distribution and collaboration agreement, we announced last night before turning the call over to Sean who will provide a more detailed review of our financial results and our 2025 outlook.

Speaker Change: The conference call contains time sensitive information and is accurately only as of the live broadcast today February 28 2025.

Speaker Change: 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.

Rob: Total revenue was $8 2 million in the fourth quarter, representing 30% year over year growth and a quarterly record.

Rob: Recurring revenue was $4 2 million.

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

Rob: Representing growth of 27% compared to the prior year quarter.

Rob: Thank you Mike Good morning, everyone and thank you for joining us.

We placed six growth direct systems in Q4, bringing our total of 21 system placements for the full year.

Rob: I will begin my prepared remarks with a brief overview of our fourth quarter 2020 for performance and highlights as announced in our press release. This morning.

Rob: On a cumulative basis through the end of 2024, we have now placed 162 growth direct systems globally.

Rob: Including 137 fully validated systems.

Rob: Fourth quarter gross margins improved to 12% up sequentially from 8% in the third quarter, and a 15 percentage point improvement compared to the prior year quarter.

Total revenue was $8 2 million in the fourth quarter, representing 30% year over year growth and a quarterly record.

Rob: Recurring revenue was $4 2 million.

Rob: This reflects continued progress in improving our cost structure.

Rob: Representing growth of 27% compared to the prior year quarter.

Rob: And enhanced operating leverage in the business.

Rob: The strong fourth quarter performance marks our ninth consecutive quarter of meeting or exceeding our revenue guidance and positions us well for 2025.

Rob: We placed six growth direct systems in Q4, bringing our total to 21 system placements for the full year.

Rob: On a cumulative basis through the end of 2024, we have now placed 162 growth direct systems globally.

Rob: Now I'll turn to last Night's press release announcing our global distribution and collaboration agreement with our life Science business of Merck <unk> Darmstadt, Germany, which operates in the U S as Millipore Sigma.

Rob: <unk> 137 fully validated systems.

Rob: Fourth quarter gross margins improved to 12% up sequentially from 8% in the third quarter and a 15 percentage point improvement.

Rob: To begin I will provide some context around our decision to enter into this agreement and why we believe millipore Sigma is an excellent strategic partner for <unk>.

Rob: Compared to the prior year quarter.

Rob: This reflects continued progress in improving our cost structure and enhanced operating leverage in the business.

Rapid microbial systems.

Rob: As a longstanding global leader in life Sciences, Millipore Sigma shares a common customer base and the pharmaceutical segment with rapid microbiome.

Rob: The strong fourth quarter performance marks our ninth consecutive quarter of meeting or exceeding our revenue guidance and positions us well for 2025.

Rob: Offering a comprehensive and complementary product portfolio.

Rob: Now I'll turn to last Night's press release announcing our global distribution and collaboration agreement with our life Science business of Merck <unk> Darmstadt.

Rob: Ported by an extensive commercial organization with deep relationships and experience selling into pharmaceutical quality control and manufacturing.

Rob: Moreover, Millipore Sigma also serves adjacent segments.

Rob: Germany, which operates in the U S as Millipore Sigma.

Rob: Such as personal care and medical devices among others.

Rob: To begin I will provide some context around our decision to enter into this agreement and why we believe millipore Sigma is an excellent strategic partner for <unk>.

Rob: This aligned strongly with our top priority of accelerating growth of our <unk> system placements.

Rob: Additionally, as a global supplier to the life Sciences industry. This partnership with Millipore Sigma presents opportunities to bring efficiencies to our supply chain to reduce product costs and accelerate our goal of improving gross margins.

Rob: Rapid micro biosystems.

Rob: As a longstanding global leader in life Sciences, Millipore Sigma shares a common customer base and the pharmaceutical segment with rapid microbiome.

Rob: Offering a comprehensive and complementary product portfolio.

Rob: Finally, this partnership creates opportunities to drive innovation and develop new technologies and products.

Rob: Ported by an extensive commercial organization with deep relationships and experience selling into pharmaceutical quality control and manufacturing.

Rob: So with that as context for this partnership let me now provide more details of the agreement.

Rob: Moreover, Millipore Sigma also serves adjacent segments.

Rob: Millipore Sigma has global co exclusive rights to sell the growth direct system and related consumables.

Rob: Personal care and medical devices among others.

Rob: This aligned strongly with our top priority of accelerating growth of our <unk> system placements.

Their extensive global commercial network, which reaches beyond traditional pharma in biologics manufacturing into key adjacent markets, such as personal care medical devices, cosmetics, and food and beverage aligns well with rapid and micros long term growth objectives.

Rob: By leveraging millipore Sigma scale and expertise, we expect they will significantly expand <unk> reach enhanced accessibility with existing customers and attract new customers.

Rob: Finally, this partnership creates opportunities to drive innovation and develop new technologies and products.

Rob: So with that as context for this partnership let me now provide more details of the agreement.

Rob: Additionally, access to these adjacent markets will substantially increase growth <unk> total addressable market.

Millipore Sigma has global co exclusive rights to sell the growth or X system and related consumables.

Rob: For the first two years of this five year agreement.

Rob: Their extensive global commercial network, which reaches beyond traditional pharma in biologics manufacturing into key adjacent markets, such as personal care medical devices, cosmetics, and food and beverage aligns well with rapid and micros long term growth objectives.

Rob: Millipore Sigma has committed to purchase a minimum number of growth of our existence.

Rob: This commitment is heavily weighted towards the second year.

And we expect it to have a meaningful impact in 2026 at the same time as well as the full term of the agreement rapid micro will continue to utilize its existing global direct sales team and distribution channels to sell in place growth Rx systems.

Rob: By leveraging millipore Sigma scale and expertise, we expect they will significantly expand growth direct reach enhanced accessibility with existing customers and attract new customers.

Rob: <unk>, we will also continue to validate and service all growth direct systems to include the system's millipore Sigma cells.

Rob: Additionally, access to these adjacent markets will substantially increase growth <unk> total addressable market.

A key component of this agreement is a joint commitment between rapid micro and millipore Sigma to identify opportunities to bring efficiencies to our supply chain to accelerate our goal of gross margin improvement.

Rob: For the first two years of this five year agreement.

Rob: <unk> Sigma has committed to purchase a minimum number of growth of our <unk> systems.

Rob: This commitment is heavily weighted towards the second year and.

Initial focus areas for this collaboration May include culture media plastic consumables, sterilization logistics and warehousing as well as packaging.

Rob: And we expect it to have a meaningful impact in 2026 at the same time as well as the full term of the agreement rapid micro will continue to utilize its existing global direct sales team and distribution channels to sell in place growth direct systems. Importantly, we will also continue to validate and service all growth.

Rob: We are confident that this collaborative approach will build upon our recent progress and deliver incremental and sustainable improvements in gross margin.

Rob: And lastly, the agreement enables opportunities for collaboration on joint development of new products enhancement.

Rob: Direct systems to include the system's millipore Sigma cells.

<unk> of existing products and expansion of service offerings should benefit customer workflows and create additional revenue and margin opportunities.

Rob: A key component of this agreement is a joint commitment between rapid micro and millipore Sigma to identify opportunities to bring efficiencies to our supply chain to accelerate our goal of gross margin improvement.

Rob: We held a multi day planning and kickoff meeting with our Millipore Sigma colleagues. This week and we could not be more excited to partner with Buckeye recognize recognized and highly respected leader in the life Sciences industry.

Rob: Initial focus areas for this collaboration May include culture media plastic consumables, sterilization logistics and warehousing as well as packaging.

Rob: This agreement combines rapid micros market, leading growth direct technology platform with Millipore Sigma has global scale brand strength and industry leadership.

Rob: We are confident that this collaborative approach will build upon our recent progress and deliver incremental and sustainable improvements in gross margin.

Rob: We are confident this collaboration will enhance value to customers worldwide.

Rob: And lastly, the agreement enables opportunities for collaboration on joint development of new products enhancement.

Rob: Meaningfully advancing our priorities of accelerating growth direct system placements.

Rob: The enhancement of existing products and expansion of service offerings, we benefit customer workflows and create additional revenue and margin opportunities.

Rob: Improving gross margins and driving innovation.

Rob: Before turning the call over to Sean I would like to share my perspective on our outlook for 2025.

Rob: Our priorities this year remain consistent with 2024.

Rob: Our top priority remains accelerating growth direct system placements.

Rob: We remain focused on improving gross margins.

Rob: This agreement combined rapid micros market, leading growth direct technology platform with Millipore Sigma has global scale brand strength and industry leadership.

Rob: Third we are committed to developing and commercializing innovative new products.

Lastly, we will continue to prudently manage our cash and maintain a strong balance sheet.

Rob: We are confident this collaboration will enhance value to customers worldwide.

Rob: Our successful collaboration with Lonzo.

Rob: While meaningfully advancing our priorities of accelerating growth direct system placements.

Rob: Which resulted in an end to end automation other environmental monitoring QC process using the growth direct platform across our global cell and gene manufacturing network reinforces our confidence that we are the industry standard and.

Rob: Improving gross margins and driving innovation.

Rob: Before turning the call over to Sean I would like to share my perspective on our outlook for 2025.

Rob: And provides a clear blueprint for the industry to emulate.

Rob: Our priorities this year remain consistent with 2024.

Rob: We have multiple customers in our sales funnel with plants with similar global multi system Rollouts.

Rob: Our top priority remains accelerating growth direct system placements.

Rob: We remain focused on improving gross margins.

Rob: This also includes a growing sales funnel for rapid sterility, which is being driven by its value proposition for full automation and faster time to results for this critical end of line test.

Rob: Third we are committed to developing and commercializing innovative new products.

Rob: Lastly, we will continue to prudently manage our cash and maintain a strong balance sheet.

Rob: In 2025, we expect to improve gross margins by building upon our second half 2024 inflection we.

Rob: Our successful collaboration with Lonzo.

Rob: Which resulted an end to end automation other environmental monitoring QC process using the growth direct platform across the global cell and gene manufacturing network reinforces our confidence that we are the industry standard.

Rob: Continuing our programs to reduce product costs enhanced manufacturing efficiencies and improve service productivity.

Rob: We expect further gains in operating leverage as we move forward and will remain disciplined with cash management.

Rob: And provides a clear blueprint for the industry to emulate.

Rob: We have multiple customers in our sales funnel with plans for a similar global multi system rollouts.

Rob: While we believe there is potential for millipore segment to contribute to revenue in 2025, we.

Rob: We are not assuming any contribution in our outlook.

Rob: However, we expect this partnership to have a transformative impact on the business to include our system placement and margin improvement priorities.

Rob: In 2025, we expect to improve gross margins by building upon our second half 2024 inflection.

Rob: Driving meaningful benefits in 2026 and beyond.

Rob: With this in mind, we believe our outlook is both prudent and achievable and look forward to updating you as the year progresses.

Rob: Continuing our programs to reduce product costs enhanced manufacturing efficiencies and improve service productivity.

Rob: In closing, we believe the strength of our underlying business the significant advantages of our partnership with Millipore Sigma.

Rob: We expect further gains in operating leverage as we move forward, we will remain disciplined with cash management.

Rob: And our continued focus on delivering value to customers position us to drive sustained shareholder value creation in 2025 and beyond.

Rob: While we believe there is potential for millipore segment to contribute to revenue in 2025.

Rob: We are not assuming any contribution in our outlook.

Rob: And with that I will now turn the call over to Shaun to discuss our fourth quarter performance and outlook in more detail John.

Rob: However, we expect this partnership to have a transformative impact on the business to include our system placement and margin improvement priorities.

Shaun: Thanks, Rob and good morning, everyone.

Rob: Driving meaningful benefits in 2026 and beyond.

I'll begin my comments this morning with a review of our fourth quarter 2024 results and then discuss our first quarter and full year outlook for 2025.

Rob: With this in mind, we believe our outlook is both prudent and achievable and look forward to updating you as the year progresses.

Shaun: We will then open the call up for questions.

Rob: In closing, we believe the strength of our underlying business the significant advantages of our partnership with Millipore Sigma.

Shaun: Fourth quarter revenue increased 30% to a record $8 2 million compared to $6 3 million in Q4 2023.

Shaun: During the fourth quarter, we placed six growth direct systems, which was consistent with the fourth quarter last year. We also completed for validation in the quarter compared to 9% in Q4 last year.

Rob: And our continued focus on delivering value to customers position us to drive sustained shareholder value creation in 2025 and beyond.

Shaun: And with that I will now turn the call over to Shaun to discuss our fourth quarter performance and outlook in more detail John.

Shaun: Product revenue, which is comprised of systems and consumables increased 27% to $5 $2 million in the fourth quarter compared to $4 1 million in Q4 2023.

Shaun: Thanks, Rob and good morning, everyone.

Shaun: I'll begin my comments this morning with a review of our fourth quarter 2024 results and then discuss our first quarter and full year outlook for 2025.

Shaun: Consumable revenue grew by over 30% in the fourth quarter compared to Q4 last year.

Shaun: Service revenue increased 35% to $3 million in the fourth quarter compared to $2 2 million in Q4 2023.

Shaun: We will then open the call up for questions.

Shaun: Fourth quarter revenue increased 30% to a record $8 2 million compared to $6 3 million in Q4 2023.

Shaun: This was driven by double digit revenue growth across validation services field service and service contracts.

Shaun: Fourth quarter recurring revenue, which consists of consumables and service contracts increased 27% to $4 2 million.

Shaun: Product revenue, which is comprised of systems and consumables increased 27% to $5 2 million in the fourth quarter compared to $4 1 million in Q4 2023 consumer.

Shaun: Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 32% to $4 million.

Shaun: Turning to gross margins product margins were negative 8% in the fourth quarter compared to negative 14% in Q4 2023.

Shaun: Consumable revenue grew by over 30% in the fourth quarter compared to Q4 last year.

Shaun: Service revenue increased 35% to $3 million in the fourth quarter compared to $2 2 million in Q4 2023.

Shaun: The improvement was largely due to continued progress on product cost reduction initiatives and increased manufacturing efficiencies in our consumables business.

Shaun: This was driven by double digit revenue growth across validation services field service and service contracts.

Shaun: Service margins were a record $1 4 million or 47% in the fourth quarter compared to zero point $4 million or 19% in Q4 last year.

Shaun: Fourth quarter recurring revenue, which consists of consumables and service contracts increased 27% to $4 2 million.

Shaun: The 28 percentage point improvement was driven by higher revenue and productivity as well as lower head count and other service related costs.

Shaun: Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 32% to $4 million.

Shaun: On a combined basis fourth quarter gross margins were a record $1 million or 12% compared to negative <unk> 2 million or negative 3% in Q4 last year.

Shaun: Turning to gross margins product margins were negative 8% in the fourth quarter compared to negative 14% in Q4 2023.

Shaun: Of note full year 2024, gross margins were effectively breakeven compared to negative 24% for the full year 2023.

Shaun: The improvement was largely due to continued progress on product cost reduction initiatives and increased manufacturing efficiencies in our consumables business.

Shaun: We are pleased with the significant progress we've made on margins over the course of the past two years and remain laser focused on driving substantial incremental improvement moving forward.

Service margins were a record $1 4 million or <unk>, 47% in the fourth quarter compared to zero point $4 million or 19% in Q4 last year.

Shaun: Moving down the P&L total operating expenses were $11 2 million in the fourth quarter, representing a decrease of 7% from $12 million in Q4 2023, largely due to benefits from the operational efficiency program, we announced in August 2024.

Shaun: The 28 percentage point improvement was driven by higher revenue and productivity as well as lower head count and other service related costs.

Shaun: On a combined basis fourth quarter gross margins were a record $1 million or 12% compared to negative <unk> 2 million or negative 3% in Q4 last year.

Shaun: Within Opex R&D expenses were $3 4 million, representing an increase of 3%, which was mainly associated with new product development activities.

Shaun: Of note full year 2024, gross margins were effectively breakeven compared to negative 24% for the full year 2023.

Shaun: Sales and marketing expenses were $3 million, representing a decrease of 6%.

Shaun: And G&A expenses were $4 8 million, representing a decrease of 13% due mainly to lower head count related costs.

Shaun: Net loss was $9 7 million in Q4. This compares to a net loss of $11 2 million in Q4 last year.

Shaun: Loss per share was 22 in.

Shaun: In Q4 compared to net loss per share of <unk> 26 in the prior year quarter.

Shaun: With respect to noncash expenses and capital expenditures depreciation.

Shaun: Within Opex R&D expenses were $3 4 million, representing an increase of 3%, which was mainly associated with new product development activities.

Shaun: Depreciation and amortization expenses were <unk> 9 million stock.

Shaun: <unk> expense was <unk> 7 million and capital expenditures were <unk> 1 million in the fourth quarter we.

Shaun: Sales and marketing expenses were $3 million, representing a decrease of 6%.

Shaun: We ended the year with approximately $51 million in cash and investments.

Shaun: G&A expenses were $4 8 million, representing a decrease of 13% due mainly to lower head count related costs.

Shaun: Now I'll turn to our 2025 outlook.

Shaun: While we believe there is potential for millipore Sigma to contribute to system placements and revenue in 2025, our initial guidance does not assume any such contribution. We believe this is prudent given our typical sales cycle.

Shaun: Net loss was $9 7 million in Q4. This compares to a net loss of $11 2 million in Q4 last year.

Shaun: Net loss per share was <unk> 22.

Shaun: In Q4 compared to net loss per share of <unk> 26 in the prior year quarter.

Conversely, our guidance does account for some ongoing uncertainty around the timing and scale of customer purchase decisions, particularly with respect to larger multi system opportunities, which often involve more complex purchasing considerations and processes.

Shaun: With respect to noncash expenses and capital expenditures.

Shaun: Depreciation and amortization expenses were <unk> 9 million stock compensation expense was <unk> 7 million and capital expenditures were <unk> 1 million in the fourth quarter.

Shaun: With that as context, we expect full year 2025 total revenue of at least $32 million with between 21% and 25 system placements.

Shaun: We ended the year with approximately $51 million in cash and investments.

Now I'll turn to our 2025 outlook.

Shaun: We expect Q1 revenue of at least $6 $5 million, including at least three system placements with the sequential decline from Q4 consistent with typical seasonality.

Shaun: We then expect revenue and placements in Q2, and Q3 to be higher than Q1, and then peak in Q4 looking at consumables. We expect Q1 revenue to step down slightly from Q4. We then expect consumables revenue to be higher than Q1, and the remaining quarters with variability driven by the timing of customer orders and shipments.

Shaun: Conversely, our guidance does account for some ongoing uncertainty around the timing and scale of customer purchase decisions, particularly with respect to larger multi system opportunities, which often involve more complex purchasing considerations and processes.

Shaun: With respect to service, we expect revenue to be between $2 6 million and $3 million in Q1, which is likely to be our highest service revenue quarter in the year, primarily due to the timing of validation activities.

Shaun: With that as context, we expect full year 2025 total revenue of at least $32 million with between 21% and 25 system placements.

Shaun: We expect Q1 revenue of at least $6 $5 million, including at least three system placements with a sequential decline from Q4 consistent with typical seasonality.

Shaun: We expect to complete at least 18 validation in 2025 with at least five in the first quarter.

Shaun: Turning to margins, we expect Q1 gross margins to be slightly positive, but lower than Q4 due to the revenue seasonality impact I mentioned earlier.

Then extract revenue and placements in Q2, and Q3 to be higher than Q1, and then peak in Q4 looking.

Shaun: Looking at consumables, we expect Q1 revenue to step down slightly from Q4, we then expect consumables revenue to be higher than Q1, and the remaining quarters with variability driven by the timing of customer orders and shipments.

Shaun: Thereafter based on our revenue outlook, we expect to maintain positive gross margin in each succeeding quarter of 2025 with variability driven by progress on our product cost reduction and service productivity initiatives overall revenue volumes and the revenue mix between systems consumables and service in each period.

Shaun: For the full year 2025, we expect gross margin as a percentage of revenue to be in the range of high single digits to low teens.

Shaun: We expect to complete at least 18 validation in 2025 with at least five in the first quarter.

Shaun: We expect operating expenses to be between $44 million and $48 million for the full year, which reflects the full effect of savings from the operational efficiency program, We announced in August 2024.

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

Shaun: We expect depreciation and amortization expense of $3 million stock compensation expense of $4 million capex of $2 million and other income which is comprised primarily of interest income of $2 million.

Shaun: Finally, we expect to burn roughly $30 million in cash for the full year, 2025, which would be a roughly $14 million reduction compared to our cash burn in 2024.

Shaun: For the full year 2025, we expect gross margin as a percentage of revenue to be in the range of high single digits to low teens.

Shaun: Looking further ahead, our strategic priorities of accelerating system placements, improving gross margins innovating new products and prudently managing our cash remain unchanged.

Shaun: We expect operating expenses to be between $44 million and $48 million for the full year, which reflects the full effective savings from the operational efficiency program, we announced in August 2024.

Shaun: Building on our momentum, we believe that our distribution and collaboration agreement with Millipore Sigma has the potential to further accelerate progress on these strategic priorities over the coming years, including a meaningful contribution to system placements beginning in 2026.

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

Shaun: Finally, we expect to burn roughly $30 million in cash for the full year, 2025, which would be a roughly $14 million reduction compared to our cash burn in 2024.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pass where Joseph Goldman to compile the Q&A roster.

Shaun: Looking further ahead, our strategic priorities of accelerating system placements, improving gross margins innovating new products and prudently managing our cash remain unchanged build.

Speaker Change: We ask that you. Please limit your questions one for one and one follow up.

Speaker Change: Your first question comes from the line of Dan Arias with Stifel. Please go ahead.

Dan Arias: Hi, Good morning, guys. Thanks for the questions.

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

Rob: Rob do you think that the <unk> relationship.

Rob: Accelerates our entry into new areas that maybe you are not focused on now I mean, it seems like some of these nontraditional corners of the opportunities that could be open to you sooner. If you have those guys, helping you out but I'm not sure whether you see that is the right move strategically when you just think about <unk>.

Shaun: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker Change: We'll pause for Joseph Goldman to compile the Q&A roster.

Rob: Resources and focus.

Rob: Hitting the ground running on some of the things that you are currently doing.

Speaker Change: Ask that you. Please limit your questions one to one and one follow up.

Rob: Okay I appreciate the question and the quick answer is yes, I do so as we've discussed in previous calls there is adjacent markets such as personal care and cosmetics and med device data.

Speaker Change: First question comes from the line of Dan Arias of Stifel. Please go ahead.

Dan Arias: Hi, Good morning, guys. Thanks for the questions Rob do you think that the <unk> relationship.

Rob: Meaning full in size, but given our focus and pharmaceutical.

Rob: Manufacturing, we've been we've been focusing and farm in biologics and <unk> et cetera. So the millipore Sigma team is well positioned in those adjacent markets and that is a.

Dan Arias: <unk> accelerates our entry into new areas that maybe you are not focused on now I mean, it seems like some of these nontraditional corners of the opportunities that could be open to you sooner. If you have those guys, helping you out but I'm not sure whether you see that as the right moves strategically when you just think about <unk>.

Rob: I would say a fundamental plank and the strategy behind the relationship.

Dan Arias: Resources and focus.

Rob: Okay.

Rob: And then Sean on the instrument placement outlook for the year. The low end of the guide has actually been better than what you did in 2024 and even at the midpoint is only two systems higher most people think the spending situation and pharma is better than it was last year.

Dan Arias: Hitting the ground running on some of the things that you are currently doing.

Dan Arias: Okay I appreciate the question and the quick answer is yes, I do so as we've discussed in previous calls there is adjacent markets such as personal care cosmetics and med device that are meaningful in size, but given our focus and pharmaceutical.

Speaker Change: It looks like you have a nice win here with longer you've got millipore. The picture at least in the picture that they are not helping in 'twenty five the or at least there. So help me with the 'twenty one to 'twenty five.

Dan Arias: Manufacturing, we've been we've been focused in pharma biologics and <unk> et cetera. So the millipore Sigma team is well positioned in those adjacent markets and that is a I'd say.

Rob: Crude is a good idea here, but it seems like the certainly got the components.

Rob: Something for something more I, just want to make sure im not missing an element here that would be material to the outlook.

Dan Arias: Fundamental.

Dan Arias: Tank and the strategy behind the relationship.

Dan Arias: Yes, sure Dan Yeah. So I think you said one of the key words here I think prudent and achievable Thats. Our goal. Our philosophy is we kind of come into the new year and set our guidance.

Okay.

Speaker Change: Okay, and then Sean on the instrument placement outlook for the year. The low end of the guide is actually better than what you did in 2024 and even the midpoint is only two systems higher most people think the spending situation and pharma is better than it was last year.

Rob: I think.

Rob: The broader environment I don't think we are seeing meaningful changes from what we've seen in 'twenty four in terms of how customers are operating around the purchasing process the bar.

Speaker Change: It looks like you have a nice win here with longer you've got millipore. The picture at least in the picture that they are not helping in 'twenty five or at least they're so help me with the 'twenty one to 'twenty five great obviously.

Rob: Still tends to be a little higher than it was at certain times in the past. So we are continuing to monitor that monitor that but I don't think we've seen any meaningful improvement in that at this point and that's that assumption is baked into this guidance.

Speaker Change: Good idea here, but it seems like the certainly got the components.

Speaker Change: Something for something more I, just want to make sure im not missing an element here that would be material to the outlook Yeah sure Dan Yeah. So I think you said one of the key words here I think prudent and achievable. That's our goal. Our philosophy is we kind of come into the new year and set our guidance.

Rob: We touched on it in the script I think very importantly, we are not including anything for Millipore Sigma. We do think there is an opportunity there, but it's going to take some time to get them up to speed, obviously, our sales cycle.

Rob: Can be 12 months, plus so factoring that in that kind of the rationale for the approach that we took there and then I think with given the environment and what we're seeing and not seeing there.

Speaker Change: And in the broader environment I don't think we are seeing meaningful changes from what we've seen in 'twenty four in terms of how customers are operating around the purchasing process the bar.

Rob: We have a number of large multi system orders in the funnel and we're not baking those into the guide right now just given the environment and the time that we expect it will take to bring those resolutions so to the extent, we're able to convert those during the year that will be upside as well so.

Speaker Change: Still tends to be a little higher than it was at certain times in the past. So we are continuing to monitor that monitor that but I don't think we've seen any meaningful improvement in that at this point.

Speaker Change: And Thats that assumption is baked into this guidance.

Rob: That's kind of how we approached it coming into the new year in 2025.

Speaker Change: I think we touched on it in the script I think very importantly, we are not including anything for Millipore Sigma. We do think there is an opportunity there, but it's going to take some time to get them up to speed, obviously, our sales cycle.

Speaker Change: Is there maybe I can just add on <unk>.

I'm sorry.

Doug: No go ahead Doug.

Doug: Yes, just wanted to add him just given quarters.

Doug: You got algo second half.

Sure Okay here I go.

Doug: Are there some number of systems that you expect to go to longwall through its collaboration.

the approach that we took there.

Doug: This year so.

Dan Arias: I'll speak more broadly this was the point I was going to make Dan. So it's an important it's important note our feature.

Dan Arias: It bears repeating so are our guide for 'twenty five as Sean mentioned does not include.

Dan Arias: Any contribution from our new collaboration with Millipore Sigma nor does it include the.

Dan Arias: The more meaningful multi system orders.

Dan Arias: That we have in our funnel that we are we are quite excited about.

Dan Arias: And there are multiple.

Dan Arias: And the reason why we have not <unk>.

Speaker Change: Included those again consistent with our prudent approaches while exciting they can and they are moving they can also be tough to put a pin in with regard to timing. These are typically global in nature multi site multi region multi stakeholder and as you may imagine that they can be a little more.

Dan Arias: Complex.

Dan Arias: And a bit more a bit more time consuming to.

Dan Arias: After close and ship that's why we haven't.

Dan Arias: Included the conclude those that all being said we reserve the right offer upside here on both the Millipore Sigma relationship in 'twenty, five as well as our direct selling against some of these large multi system orders and as I mentioned in the remarks.

Speaker Change: And there are multiple and the reason why we have not.

Speaker Change: Included those again consistent with our prudent approaches while exciting and.

Dan Arias: We will keep everyone updated as the year unfolds.

Speaker Change: They are moving they can also be tough to put a pin in with regard to timing. These are typically global in nature multi site multi region multi stakeholder and as you may imagine that they can be a little more complex.

Dan Arias: Okay I appreciate it thank you.

Dan Arias: Sure.

Speaker Change: Your next question comes from the line of Paul Knight with Keybanc. Please go ahead.

Speaker Change: A bit more a bit more time consuming to.

Paul Knight: Hey, Rob on the <unk>.

Speaker Change: After close and ship that's why we haven't.

Speaker Change: Pour all collaboration.

Paul Knight: Or are they going to sell into biopharma.

Speaker Change: Included the concluded those that all being said we reserve the right offer upside here on both the Millipore Sigma relationship in 'twenty, five as well as our direct selling against some of these large multi system orders and as I mentioned in the remarks.

Paul Knight: Sure.

Paul Knight: Or is it biopharma in a particular region <unk> JMP.

Paul Knight: Same people in the same building.

Paul Knight: And then the other is what do you think that goes for gross margin.

Paul Knight: With <unk> involved do you have on the margin pickup goal, maybe in even 2026 from them getting involved may be in supply.

Speaker Change: We will keep everyone updated as the year unfolds.

Speaker Change: Okay I appreciate it thank you.

Speaker Change: Sure.

Paul Knight: Okay. Paul Thanks for the thanks for the question. So the first one it basically goes to.

Speaker Change: Your next question comes from the line of Paul Knight with Keybanc. Please go ahead.

Paul Knight: Channel conflict effectively yes, they will be.

Paul Knight: Hey, Rob on the <unk>.

Paul Knight: Selling into not only pharmaceutical.

Speaker Change: Poor collaboration.

Paul Knight: And biologics, but.

Paul Knight: Or are they going to sell into biopharma.

Paul Knight: More broadly segment show personal care cosmetics et cetera, which we consider a growth adjacency that we're not currently in with respect to.

Paul Knight: <unk>.

Paul Knight: Or is the biopharma in a particular region.

Paul Knight: Same people in the same building and then the other is what do you think that those will be gross margin with <unk>.

Paul Knight: With respect to our core market of pharmaceutical manufacturing.

Paul Knight: <unk> involved do you have on the margin pickup goal, maybe in even 2026 from them getting involved may be in supply.

Paul Knight: We have been diligently working with the team and are comfortable with our go to market approach and how we're going to manage our respective sales funnels.

Paul Knight: Okay. Paul Thanks, Thanks for the question. So the first one basically goes to.

Paul Knight: God to margin.

Paul Knight: Yes.

Paul Knight: The goal here again, the strategy as I touched on behind the Millipore Sigma relationship is to is to catalyze and accelerate our our core priorities of accelerating system sales, which we've touched on.

Paul Knight: Channel conflict effectively yes, they will be.

Selling into not only pharmaceutical.

Paul Knight: And biologics, but more broadly segment show personal care cosmetics et cetera, which we consider a growth adjacency that we're not currently in with respect to.

Paul Knight: Gross margin improvement, which will come through not only volume we anticipate but also as I mentioned a lot of the components, especially in our consumables, notably.

Paul Knight: With respect to our core market of pharmaceutical manufacturing, we have been diligently working with the team and are comfortable with our go to market approach and how we're going to manage our respective sales funnels.

Paul Knight: From a cost of materials standpoint, Millipore Sigma has in their portfolio, so theres definitely opportunities there to improve supply chain efficiencies.

Paul Knight: With regard to our factors of input and then of course downstream through.

Paul Knight: With regard to margin yes.

The goal here again.

Paul Knight: <unk> and shipping also there's meaningful opportunity. So we would anticipate and it is part of the core strategy here that margin improvement would feature prominently in our in our relationship and Paul we actually don't procure anything of substance from them. Today. So we have a relatively clean slate to go after and as Rob mentioned.

Paul Knight: Strategy as I touched on behind the Millipore Sigma relationship is to is to catalyze and accelerate our our core priorities of accelerating system sales, which we've touched on.

Paul Knight: Gross margin improvement, which will come through not only volume we anticipate but also as I mentioned a lot of the <unk>.

Paul Knight: Particularly with our consumables you kind of look at the major materials that go into those it's a pretty good match up in terms of what we use and what they can provide.

Paul Knight: Ponant, especially in our consumables, notably.

Paul Knight: From a cost of materials standpoint, Millipore Sigma has in their portfolio. So there is definitely opportunities there to improve supply chain efficiencies with.

Paul Knight: Right Okay.

Paul Knight: And then regarding the <unk> relationship.

Paul Knight: Obviously, they've been pretty vocal recently on your system.

Paul Knight: With regard to our factors of input and then of course downstream through logistics and shipping also there's meaningful opportunity. So we would anticipate and it is part of the core strategy here that margin improvement would feature prominently in our in our relationship and Paul we actually don't procure anything of substance from them.

Paul Knight: Are you seeing a pickup from loans with kind of encouraging the industry to adopt.

Paul Knight: And.

Paul Knight: D.

Paul Knight: It seems like Youre essential at launch is that fair to say.

Paul Knight: Yes, so in reverse order I'll, let Lisa too.

Speaker Change: Today, So we have a relatively clean slate to go after and as Rob mentioned.

Opine on how essentially our opinion is.

Speaker Change: Particularly with our consumables you kind of look at that as the major materials that go into those it's a pretty good match up in terms of what we use and what they can provide.

Paul Knight: We are clear.

Paul Knight: Clearly as we as our goal as you know is to build a new quality control infrastructure for pharmaceutical manufacturing globally and the lines. That example is a very very very good example of it but frankly, it's how a lot of our customers are are seeking to deploy not every customer.

Speaker Change: Alright, okay.

Speaker Change: And then regarding the <unk> relationship.

Speaker Change: Obviously, they've been pretty vocal recently on your system.

Paul Knight: Does a great job by <unk>.

Speaker Change: Are you seeing a pickup from loans with kind of encouraging the industry to adopt.

Paul Knight: On a white paper like this but this is really the.

Paul Knight: As planned to our forehand, if you will as far as how customers. When you hear us. These global deployments. This is how it looks to include the data benefits and Interconnectivity with the.

Speaker Change: And.

Speaker Change: D.

Speaker Change: It seems like Youre essential at launch is that fair to say.

Speaker Change: Yes, so in reverse order I'll, let Lisa too.

Paul Knight: The fundamental technology systems, and we do anticipate that we will continue to grow with Liza and future deployments in future sites due.

Speaker Change: Opine on how essentially our opinion is.

Speaker Change: We are.

Clearly as we as our goal as you know is to build a new quality control infrastructure for pharmaceutical manufacturing globally and the lines. That example is a very very very good example of it but frankly, it's how a lot of our customers are are seeking to deploy not every customer.

Paul Knight: Through the coming quarters and years.

Paul Knight: Okay.

Paul Knight: Sure.

Speaker Change: Your final question comes from the line of Brandon <unk> with TD Carl Please go ahead.

Speaker Change: It does a great job by Kwanza.

Speaker Change: Hey, guys.

Speaker Change: In the quarter.

Speaker Change: A white paper like this but this is really the.

Speaker Change: A great deal of fantasy Thanks for taking my questions I wanted to actually first ask if youre able to tell us how many systems millipore actually committed to purchase over these first two years.

Speaker Change: As planned to our forehand, if you will as far as how customers. When you hear us. These global deployments. This is how it looks to include the data benefits and Interconnectivity with the.

Speaker Change: And then actually just given.

Speaker Change: Given all the automation work with one but I was just wondering if you have any updated thoughts on potential AI integration or any evolving strategy on that front again, just kind of given all the possibilities with the automation QC work.

Speaker Change: The fundamental technology systems, and we do anticipate that we will continue to grow with Liza and future deployments in future sites.

Speaker Change: Due to coming quarters and years.

Rob: Thanks, Brad it's Rob So we can't comment on the on the actual commitment.

Speaker Change: Okay. Thanks.

Speaker Change: Yes.

Speaker Change: Your final question comes from the line of Brandon <unk> with <unk>.

Rob: The commercial agreement, we can't quantify it but as I mentioned in the.

Karl: Karl Please go ahead.

In our remarks, and I think Sean followed it up as well.

Brandon: Hey, guys congrats on the quarter.

Rob: It will be significant beginning in 2026.

Rob: With regard to launch.

Rob: More broadly.

Rob: Our approach to data yet.

Rob: We view at least with regard to where we operate inside these large companies.

Speaker Change: And then actually just disconnect given all the automation work with Lance I was just wondering if you have any updated thoughts on potential AI integration or any evolving strategy on that front again, just kind of given all the possibilities with the automation QC work.

Rob: We're creating.

A large amount of digital data that didn't exist before so the opportunity as part of our innovation strategy.

Speaker Change: Thanks, Brian It's Rob So we can't comment on the on the actual commitment per the commercial agreement, we can't quantify it but as I mentioned in the.

Rob: This could intersect now in a collaborative way with Millipore Sigma how we how we manage that data how we can potentially pull it into an AI or cloud environment to provide enhanced insights.

Speaker Change: In the remarks, and I think Sean followed it up as well.

Speaker Change: It will be significant beginning in 2026.

Rob: And services for our global customers.

Rob: Let's just say it's a.

Speaker Change: Regard to launch more broadly.

Rob: Something on our radar and will be very exciting for not only our industry more broadly.

Speaker Change: Our our approach to data yet.

Speaker Change: We view at least with regard to where we operate inside of these large companies. We are creating a large amount of digital data that didn't exist before so the opportunity as part of our innovation strategy.

Rob: Okay, great. Thanks, guys.

Rob: Thank you.

Rob: Well thanks Brendon.

Speaker Change: Okay, all we're going to wrap up our call. This morning. Thank you for joining us today, and we look forward to speaking with many of you soon.

Speaker Change: This could intersect now in a collaborative way with Millipore Sigma how we how we manage that data how we can potentially pull it into an AI or cloud environment to provide enhanced insights and.

Speaker Change: Have a great weekend.

Speaker Change: Ladies and gentlemen, today's call. Thank you for joining you may now disconnect.

Speaker Change: And services for our global customers.

Speaker Change: I'll just say it's a.

Speaker Change: Something on our radar and will be very exciting for not only us but industry more broadly.

Speaker Change: Okay, great. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: Well thanks Brendon.

Speaker Change: Okay, all we're going to wrap up our call. This morning. Thank you for joining us today, and we look forward to speaking with many of you soon.

Speaker Change: Have a great weekend.

Speaker Change: Ladies and gentlemen.

Speaker Change: Today's call and thank you for joining you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Thank you for standing by my name is.

Speaker Change: Yeah, Lisa and I will be your conference operator today at this time I would like to welcome everyone to the rapid micro bio systems fourth quarter and full year 'twenty 'twenty four earnings conference call.

Speaker Change: Lines have been placed 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 simply press star followed by number one on your telephone keypad. If you would like to withdraw your question Press Star.

Speaker Change: It wasn't a good thing.

Speaker Change: Thank you.

Speaker Change: I would now like to turn the call over.

Mike Mueller: So Mike Mueller.

Mike Mueller: Please go ahead.

Speaker Change: Good morning, and thank you for joining the rapid micro biosystems fourth quarter and full year 2024 earnings call joining.

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

Speaker Change: Earlier today, we issued a press release announcing our fourth quarter and full year 2024 financial results.

Speaker Change: Additionally, last night in a separate release, we announced the distribution and collaboration agreement with the life Science business of Merck <unk> Darmstadt.

Speaker Change: Germany, which operates in the U S as Millipore Sigma.

Speaker Change: Copies of both releases are available on the Companys website at rapid micro bio dot com under investors and the news and events section.

Speaker Change: Before we begin I'd 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.

Speaker Change: Any statements contained in this call that relate to expectations or predictions, including but not limited to <unk>.

Speaker Change: Statements relating to rapid micro's financial condition assumptions regarding future financial performance.

Speaker Change: Anticipated future cash usage guidance for 2025, including revenue expenses gross margins system placements and validation activities.

Speaker Change: Expectations for and planned activities related to rapid micros business development and growth, including a recently announced distribution and collaboration agreement.

Speaker Change: Customer interest and adoption of the growth direct system and statements regarding rapid sterility.

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

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

Speaker Change: The conference call contains time sensitive information and is accurately only as of the live broadcast today February 28 2025.

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

Rob: Thank you Mike Good morning, everyone and thank you for joining us.

Rob: I will begin my prepared remarks with a brief overview of our fourth quarter 2020 for performance and highlights as announced in our press release. This morning.

Rob: Total revenue was $8 $2 million in the fourth quarter, representing 30% year over year growth and a quarterly record.

Rob: Recurring revenue was $4 2 million.

Rob: Representing growth of 27% compared to the prior year quarter.

Rob: We placed six growth direct systems in Q4, bringing our total to 21 system placements for the full year.

Rob: On a cumulative basis through the end of 2024, we have now placed 162 growth direct systems globally.

Rob: Including 137 fully validated systems.

Rob: Fourth quarter gross margins improved to 12% up sequentially from 8% in the third quarter, and a 15 percentage point improvement compared to the prior year quarter.

Rob: This reflects continued progress in improving our cost structure.

Rob: Enhanced operating leverage in the business.

Rob: The strong fourth quarter performance marks our ninth consecutive quarter of meeting or exceeding our revenue guidance and positions us well for 2025.

Rob: To begin I will provide some context around our decision to enter into this agreement and why we believe millipore Sigma is an excellent strategic partner.

Speaker Change: Rapid micro biosystems.

Speaker Change: As a longstanding global leader in life Sciences, Millipore Sigma shares a common customer base and the pharmaceutical segment with rapid microbiome.

Speaker Change: Offering a comprehensive and complementary product portfolio supported by an extensive commercial organization with deep relationships and experience selling into pharmaceutical quality control and manufacturing.

Speaker Change: Moreover, Millipore Sigma also serves adjacent segments.

Speaker Change: Such as personal care and medical devices among others.

Speaker Change: This aligned strongly with our top priority of accelerating growth direct system placements.

Speaker Change: Additionally, as a global supplier to the life Sciences industry. This partnership with Millipore Sigma presents opportunities to bring efficiencies to our supply chain to reduce product costs and accelerate our goal of improving gross margins.

Speaker Change: Finally, this partnership creates opportunities to drive innovation and develop new technologies and products.

Speaker Change: So with that as context for this partnership let me now provide more details of the agreement.

Speaker Change: Millipore Sigma has global co exclusive rights to sell the growth direct system and related consumables.

Speaker Change: Their extensive global commercial network, which reaches beyond traditional pharma and biologics manufacturing into key adjacent markets, such as personal care medical devices, cosmetics, and food and beverage aligns well with rapid micros long term growth objectives.

Speaker Change: By leveraging millipore Sigma scale and expertise, we expect they will significantly expand growth direct reach enhanced accessibility with existing customers and attract new customers.

Speaker Change: Additionally, access to these adjacent markets will substantially increase growth <unk> total addressable market.

Speaker Change: For the first two years of this five year agreement Millipore Sigma has committed to purchase a minimum number of both direct systems.

Speaker Change: This commitment is heavily weighted towards the second year.

Speaker Change: And we expect it to have a meaningful impact in 2026 at the same time as well as the full term of the agreement rapid micro will continue to utilize its existing global direct sales team and distribution channels to sell in place growth or X systems. Importantly, we will also continue to validate and service all growth.

Speaker Change: X systems to include the system's millipore Sigma cells.

Speaker Change: A key component of this agreement is a joint commitment between rapid micro and millipore Sigma to identify opportunities to bring efficiencies to our supply chain to accelerate our goal of gross margin improvement.

Speaker Change: Initial focus areas for this collaboration May include culture media plastic consumables, sterilization logistics and warehousing as well as packaging.

Speaker Change: We are confident that this collaborative approach we will build upon our recent progress and deliver incremental and sustainable improvements in gross margin.

Speaker Change: And lastly, the agreement enables opportunities for collaboration on joint development of new products enhancement of existing products and expansion of service offerings, we benefit customer workflows and create additional revenue and margin opportunities.

Speaker Change: We held a multi day planning and kickoff meeting with our Millipore Sigma colleagues. This week and we could not be more excited to partner, Okay recognize recognized and highly respected leader in the life Sciences industry.

Speaker Change: This agreement combined rapid micros market, leading growth direct technology platform with Millipore Sigma has global scale brand strength and industry leadership we.

We are confident this collaboration will enhance value to customers worldwide, while meaningfully advancing our priorities of accelerating growth direct system placements.

Speaker Change: Moving gross margins and driving innovation.

Speaker Change: Before turning the call over to Sean I would like to share my perspective on our outlook for 2025.

Speaker Change: Our priorities this year remain consistent with 2024.

Speaker Change: Our top priority remains accelerating growth direct system placements.

Speaker Change: Second we remain focused on improving gross margins.

Speaker Change: Third we are committed to developing and commercializing innovative new products.

Speaker Change: Lastly, we will continue to prudently manage our cash and maintain a strong balance sheet.

Speaker Change: Our successful collaboration with larger.

Which resulted an end to end automation other environmental monitoring QC process using the growth direct platform across our global cell and gene manufacturing network reinforces our confidence that we are the industry standard.

Speaker Change: And provides a clear blueprint for the industry to emulate.

Speaker Change: We have multiple customers in our sales funnel with plans for a similar global multi system rollouts.

Speaker Change: It also includes a growing sales funnel for rapid sterility, which is being driven by its value proposition for full automation and faster time to results for this critical end of line test.

Speaker Change: In 2025, we expect to improve gross margins by building upon our second half 2024 inflection we.

Speaker Change: Continuing our programs to reduce product costs enhance manufacturing efficiencies and improve service productivity.

Speaker Change: We expect further gains in operating leverage as we move forward and we will remain disciplined with cash management.

Speaker Change: While we believe there is potential for millipore segment to contribute to revenue in 2025, we are not assuming any contribution in our outlook.

Speaker Change: However, we expect this partnership to have a transformative impact on the business to include our system placement and margin improvement priorities.

Speaker Change: Driving meaningful benefits in 2026 and beyond.

Speaker Change: With this in mind, we believe our outlook is both prudent and achievable and look forward to updating you as the year progresses.

Speaker Change: In closing, we believe the strength of our underlying business the significant advantages of our partnership with Millipore Sigma and.

Speaker Change: Our continued focus on delivering value to customers position us to drive sustained shareholder value creation in 2025 and beyond.

Shaun: And with that I will now turn the call over to Shaun to discuss our fourth quarter performance and outlook in more detail John.

Shaun: Thanks, Rob and good morning, everyone.

Shaun: Ill begin my comments this morning with a review of our fourth quarter 2024 results and then discuss our first quarter and full year outlook for 2025.

Shaun: We will then open the call up for questions.

Shaun: Fourth quarter revenue increased 30% to a record $8 2 million compared to $6 3 million in Q4 2023.

Shaun: Product revenue, which is comprised of systems and consumables increased 27% to $5 2 million in the fourth quarter compared to $4 1 million in Q4 2023.

Shaun: Consumable revenue grew by over 30% in the fourth quarter compared to Q4 last year.

Shaun: Service revenue increased 35% to $3 million in the fourth quarter compared to $2 2 million in Q4 2023.

Shaun: This was driven by double digit revenue growth across validation services field service and service contracts.

Shaun: Fourth quarter recurring revenue, which consists of consumables and service contracts increased 27% to $4 2 million.

Shaun: Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 32% to $4 million.

Shaun: Turning to gross margins product margins were negative 8% in the fourth quarter compared to negative 14% in Q4 2023.

Shaun: The improvement was largely due to continued progress on product cost reduction initiatives and increased manufacturing efficiencies in our consumables business.

Shaun: Service margins were a record $1 4 million or 47% in the fourth quarter compared to zero point $4 million or 19% in Q4 last year the.

Shaun: The 28 percentage point improvement was driven by higher revenue and productivity as well as lower head count and other service related costs.

Shaun: On a combined basis fourth quarter gross margins were a record $1 million or 12% compared to negative <unk> 2 million or negative 3% in Q4 last year.

Shaun: Of note full year 2024, gross margins were effectively breakeven compared to negative 24% for the full year 2023 were.

Shaun: Within Opex R&D expenses were $3 4 million, representing an increase of 3%, which was mainly associated with new product development activities.

Shaun: Sales and marketing expenses were $3 million, representing a decrease of 6%.

Shaun: G&A expenses were $4 8 million, representing a decrease of 13% due mainly to lower head count related costs.

Shaun: Net loss was $9 7 million in Q4. This compares to a net loss of $11 2 million in Q4 last year.

Shaun: Net loss per share was <unk> 22.

Shaun: In Q4 compared to net loss per share of <unk> 26 in the prior year quarter.

Shaun: With respect to noncash expenses and capital expenditures.

Shaun: Depreciation and amortization expenses were <unk> 9 million stock compensation expense was <unk> 7 million and capital expenditures were <unk> 1 million in the fourth quarter we.

Shaun: We ended the year with approximately $51 million in cash and investments.

Shaun: Now I'll turn to our 2025 outlook.

Shaun: With that as context, we expect full year 2025 total revenue of at least $32 million with between 21% and 25 system placements.

Shaun: We expect Q1 revenue of at least $6 $5 million, including at least three system placements with a sequential decline from Q4 consistent with typical seasonality.

Shaun: We then extracted revenue and placements in Q2, and Q3 to be higher than Q1, and then peak in Q4 looking.

Shaun: We expect to complete at least 18 validation in 2025 with at least 5% in the first quarter.

Shaun: Turning to margins, we expect Q1 gross margins to be slightly positive, but lower than Q4 due to the revenue seasonality impact I mentioned earlier thereafter based on our revenue outlook, we expect to maintain positive gross margin in each succeeding quarter of 2025 with variability driven by progress on our product cost reduction and service.

Shaun: Productivity initiatives overall revenue volumes and the revenue mix between systems consumables and service in each period for.

Shaun: For the full year 2025, we expect gross margin as a percentage of revenue to be in the range of high single digits to low teens.

We expect operating expenses to be between $44 million and $48 million for the full year, which reflects the full effect of savings from the operational efficiency program, We announced in August 2024.

Shaun: Finally, we expect to burn roughly $30 million in cash for the full year, 2025, which would be a roughly $14 million reduction compared to our cash burn in 2024.

Shaun: Looking further ahead, our strategic priorities of accelerating system placements, improving gross margins innovating new products and prudently managing our cash remain unchanged.

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

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pause for Joseph Goldman to compile the Q&A roster.

Speaker Change: Ask that you. Please limit your questions one to one and one follow up.

Speaker Change: Your first question comes from the line of Dan Arias of Stifel. Please go ahead.

Hi, Good morning, guys. Thanks for the questions.

Rob: Rob do you think that the <unk> relationship.

Speaker Change: Accelerates your entry into new areas that maybe you are not focused on now I mean, it seems like some of these non traditional corners of the opportunities that could be open to you sooner. If you have those guys, helping you out but I'm not sure whether you see that as the rifle strategically when you think about <unk>.

Rob: Resources and focus.

Rob: Hitting the ground running on some of the things that you are currently doing.

Dan Arias: Hey, Dan I appreciate the question and the quick answer is yes, I do so as we've discussed in previous calls there is adjacent markets such as personal care cosmetics and med device that are meaningful in size, but given our focus and pharmaceutical.

Dan Arias: Manufacturing, we've been we've been focused in pharma biologics and cell and gene et cetera. So the millipore Sigma team is well positioned in those adjacent markets and that is a.

Dan Arias: I would say a fundamental plank in our strategy behind the relationship.

Dan Arias: Okay.

Dan Arias: And then Sean on the instrument placement outlook for the year. The low end of the guide is actually no better than what you did in 2024 and even the midpoint is only two systems higher most people think the spending situation and pharma is better than it was last year.

Speaker Change: Honestly treated as a good a good idea here, but it seems like the certainly got the components.

Speaker Change: Something for something more I, just want to make sure im not missing an element here that would be material to the outlook sure Dan Yeah. So I think you said one of the key words here I think prudent and achievable Thats. Our goal. Our philosophy is we kind of come into the new year and set our guidance I.

Speaker Change: I think.

Speaker Change: In the broader environment I don't think we are seeing meaningful changes from what we've seen in 'twenty four in terms of kind of how customers are operating around the purchasing process the bar.

Speaker Change: We touched on it in the script I think very importantly, we are not including anything for Millipore Sigma. We do think there is an opportunity there, but it's going to take some time to get them up to speed, obviously, our sales cycle.

Speaker Change: Can be 12 months plus so it's factoring that in that kind of the rationale for the approach that we took there and then I think with given the environment and what we're seeing and not seeing there.

Speaker Change: We have a number of large multi system orders in the funnel and we're not baking those into the guide right now just given the environment and the time that we expect it will take to bring those resolution so to the extent, we're able to convert those during the year that will be upside as well so.

Speaker Change: That's kind of how we approached it coming into the new year in 2025.

Yes, I can.

Speaker Change: Oh I'm sorry.

Speaker Change: No go ahead.

Speaker Change: Just wanted to add.

Speaker Change: You go ahead I'll go second half.

Speaker Change: Sure Okay here I go.

Speaker Change: Are there is some number of systems that you expect to go to law through this collaboration.

Speaker Change: This year, so I'll speak more broadly this is the point I was going to make that so it's an important it's important note our feature.

Speaker Change: It bears repeating so are our guide for 'twenty five as Sean mentioned does not include <unk>.

Speaker Change: <unk> contribution from our new collaboration with Millipore Sigma nor does it include.

Speaker Change: The more meaningful multi system orders.

Speaker Change: That we have in our funnel that we are we are quite excited about.

Speaker Change: And there are multiple.

Speaker Change: And the reason why we have not.

Speaker Change: Included though is again consistent with our prudent approach is while exciting they can and they are moving they can also be tough to put a pin in with regard to timing. These are typically global in nature multi site multi region multi stakeholder and as you may imagine they can be a little more.

Speaker Change: More complex.

Speaker Change: A bit more a bit more time consuming to.

Speaker Change: To close and ship that's why we have income.

Speaker Change: Included the concluded those that all being said we reserve the right.

Speaker Change: Or upside here on both the Millipore Sigma relationship in 'twenty, five as well as our direct selling against some of these large multi system orders and as I mentioned in the remarks.

Speaker Change: We will keep everyone updated as the year unfolds.

Speaker Change: Okay I appreciate it thank you.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Paul Knight with Keybanc. Please go ahead.

Paul Knight: Hey, Rob on the <unk>.

Speaker Change: <unk> collaboration.

Speaker Change: Or are they going to sell into biopharma.

Speaker Change: Sure.

Speaker Change: Or is it biopharma in a particular region you would prevent JMP.

Same people in the same building.

Speaker Change: And then the other is what do you think that does for gross margin.

Speaker Change: With <unk> involved do you have on the margin pickup goal, maybe in even 2026 from them getting involved may be in supply.

Paul Knight: Okay. Paul Thanks for the thanks for the question. So the first one it basically goes to.

Speaker Change: Channel conflict effectively yes, they will be.

Paul Knight: Selling into not only pharmaceutical.

Speaker Change: And biologics, but more.

Speaker Change: More broadly I am segment show personal care, cosmetics et cetera, which we consider a growth adjacency that we're not currently in with respect to.

Speaker Change: With respect to our core market of pharmaceutical manufacturing.

Speaker Change: We have been diligently working with the team and are comfortable with our go to market approach and how we're going to manage our respective sales funnels.

Speaker Change: With regard to margin.

Speaker Change: Yes.

Speaker Change: The goal here again.

Speaker Change: Strategy.

Speaker Change: Touched on behind the Millipore Sigma relationship is to is to catalyze and accelerate our our core priorities of accelerating system sales, which we've touched on.

Speaker Change: Gross margin improvement, which will come through not only volume we anticipate but also as I mentioned a lot of the <unk>.

Speaker Change: Components, especially in our consumables, notably.

Speaker Change: From a cost of materials standpoint, Millipore Sigma has in their portfolio theres definitely opportunities there to improve supply chain efficiencies.

Speaker Change: With regard to our factors of input and then of course downstream through logistics and shipping also there's meaningful opportunity. So we would anticipate and it is part of the core strategy here that margin improvement would feature prominently in our in our relationship yes, and Paul we actually don't procure anything of substance from them.

Speaker Change: Today, So we have a relatively clean slate to go after and as Rob mentioned.

Speaker Change: Particularly with our consumables you kind of look at the major materials that go into those it's a pretty good match up in terms of what we use and what they can provide.

Speaker Change: Alright, Okay, and then regarding the <unk> relationship.

Speaker Change: Obviously, they have been pretty vocal recently on your system.

Speaker Change: Are you seeing a pickup from loans with kind of encouraging the industry to adopt.

Speaker Change: And.

Speaker Change: It seems like Youre essential at launch is that fair to say.

Speaker Change: Yes, so in reverse order I'll, let Lisa too.

Speaker Change: Upon on how essentially our opinion is.

Speaker Change: We are.

Speaker Change: Clearly as we as our goal as you know is to build a new quality control infrastructure for pharmaceutical manufacturing globally and the lines of example is a very very very good example of it but frankly, it's how a lot of our customers are are seeking to deploy not every customer.

Does a great job by <unk> in a white paper like this but this is really the.

Speaker Change: As planned to our forehand, if you will as far as how customers. When you hear us. These global deployments. This is how it looks to include the.

Speaker Change: The data benefits and Interconnectivity with the.

Speaker Change: The fundamental technology systems, and we do anticipate that we will continue to grow with Liza and future deployments in future sites.

Speaker Change: Due to coming quarters and years.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Your final question comes from the line of Brendan Smyth with Didi Carl Please go ahead.

Speaker Change: Hey, guys congrats on the quarter.

Speaker Change: A great deal of fantasy Thanks for taking my questions I wanted to actually first ask if you are able to tell us how many systems millipore actually committed to purchase over these first two years.

Speaker Change: And then actually just given.

Speaker Change: Given all the automation work with lines, but I was just wondering if you have any updated thoughts on potential AI integration or any evolving strategy on that front again, just kind of given all the possibilities with the automation QC work.

Speaker Change: Thanks, Brian It's Rob So we can't comment on the on the actual commitment.

Speaker Change: The commercial agreement, we can't quantify it but as I mentioned in the.

Speaker Change: In the remarks, and I think Sean followed it up as well.

Speaker Change: It will be significant beginning in 2026.

Speaker Change: With regard to launch.

More broadly.

Speaker Change: Our approach to data yet.

We view at least with regard to where we operate inside of these large companies.

Speaker Change: We're creating.

A large amount of digital data that didn't exist before so the opportunity as part of our innovation strategy.

Speaker Change: And services for our global customers.

Let's just say it's a.

Speaker Change: Something on our radar and will be very exciting for not only us but industry more broadly.

Speaker Change: Okay, great. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: Well thanks Brendon.

Speaker Change: Okay, all we're going to wrap up our call. This morning. Thank you for joining us today, and we look forward to speaking with many of you soon.

Speaker Change: Have a great weekend.

Speaker Change: Ladies and gentlemen, today's call. Thank you for joining you may now disconnect.

Q4 2024 Rapid Micro Biosystems Inc Earnings Call

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