Q2 2025 Maravai Life Sciences Holdings LLC Earnings Call
Speaker #4: We're about to begin. Good afternoon, everyone, and welcome to the Maravai Life Sciences second quarter 2025 earnings results conference call. At this time, all participants are in a listen-only mode.
Speaker #4: Later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a estion at any time by pressing star one on your telephone.
Speaker #4: Also, today's call is being recorded, and if you should need any operator assistance during the call today, please press star zero at any time.
Speaker #4: Now, at this time, I'd ike to turn things over to Deb Hart, Senior Director, Investor Relations. Please go head, ma'am.
Speaker #5: Good afternoon, everyone. Thanks for joining us on our second quarter 2025 earnings call. The press release and slides accompanied today's call are posted on our website and available at investors.maravai.com.
Speaker #5: During today's call, management will make forward-looking statements and refer to GAAP and non-GAAP financial measures. It is possible that actual results could differ from management's expectations.
Speaker #5: We refer you to slide three for more detail on forward-looking statements and our use of non-GAAP financial measures. The press release provides reconciliations to the most directly comparable GAAP measures.
Speaker #5: And we also post reconciling schedules to the IR website. Please also refer to MARAVI's SEC filings for additional information on the risks and uncertainties that may impact our operating results, performance, and financial condition.
Speaker #5: Now, I'll turn the call over to our Chief Executive Officer, Bernd Brust.
Speaker #6: Good afternoon, and thank you all for joining. I'm Bernd Brust, and I'm very ased to be hosting my first earnings call as MARAVI's CEO.
Speaker #6: I'd like to begin with my reasons for accepting the role as CEO, and in this context, frame for investors the incredible opportunities I see ahead for the company.
Speaker #6: Over the past 30 years, I've been a leader many successful life sciences companies that have experienced both growth and transformation. My approach centers around alignment, strategic clarity with operational discipline, to drive meaningful, measurable results.
Speaker #6: I've had the rare opportunity to work directly on a long list of breakthrough technologies in the life sciences sector, including in multiple CEO roles.
Speaker #6: Most recently, I was the Executive Chairman and, prior to that, the CEO of Antilia Scientific, a global provider of tools and solutions for diagnostic testing, sample preparation, biological monitoring, and environmental analysis.
Speaker #6: I've known MARAVI as a technology leader that delivers meaningful innovation to market. When I was approached about the CEO role, I took a close look at what stood out to me was how rare it is to find a company in the life sciences tool space where this combination of proprietary technologies, trusted brands, and untapped market opportunity.
Speaker #6: And one I was excited to help shape. I came into this role with a clear understanding that realizing MARAVI's full potential would require change.
Speaker #6: There's important work ahead to position the company for sustainable, profitable growth. I've spent my first 60 days understanding where we stand and where we can go next.
Speaker #6: We completed a top-to-bottom review of our strategy, structure, and financial plans to sharpen our focus and reallocate resources toward initiatives, with the greatest potential for impact and return.
Speaker #6: Through direct engagement with global customers and competitive benchmarking, we gained a clear view of where we lead and where we must sharpen our focus to win.
Speaker #6: I spent time with team members across the organization and gained a clear view of what's working and where we face challenges. I've been encouraged by the expertise and dedication of our people, but to move forward, we need to build a stronger culture of accountability, and help our teams execute with focus and purpose.
Speaker #6: From these learnings, we've established a three-part plan to put the business on the strongest footing to deliver on MARAVI's full potential. Let's turn to slide six.
Speaker #6: First, we are making a commitment to improve operational excellence and execution. On Friday, we initiated a restructuring plan designed to significantly reduce our operating costs.
Speaker #6: Through reductions in headcount and non-headcount-related expenses across all functions in our organization, we expect to lower our annualized expenses by more than $50 million.
Speaker #6: These reductions will be phased in and should be complete over the next 12 months. With the majority of the savings actioned on in the next two quarters.
Speaker #6: As part of the restructuring, we're evolving from a more complex structure with higher overhead to a streamlined, functional operating model. This includes consolidating executive roles and removing layers to accelerate decision-making, reduce duplication, and foster greater accountability and cross-functional collaboration.
Speaker #6: One key change is to provide centralized oversight for trialing R&D projects to ensure ongoing innovations are providing impactful value to our customers, and the largest returns for MARAVI.
Speaker #6: These decisions are never easy. Especially when they affect valued colleagues. But the challenges MARAVI has faced post-pandemic call for urgency and clarity in how we move forward.
Speaker #6: We're approaching this process with care and respect, focused on minimizing disruption to our ustomers and positioning the company for long-term profitability. I'm confident these organizational changes will strengthen the business.
Speaker #6: Raj will provide more details on these changes later in the call. Second, we are focused on strategic levers for long-term value creation, starting with revenue diversification and growth across each of our businesses.
Speaker #6: For biologic safety testing, or BST, this includes maintaining and building on our market leadership. We are investing in the development and launch of new analytical products, tailored to the evolving needs of our biologics and cell-engine therapy customers.
Speaker #6: This investment not only supports our existing base of global biopharma customers but also opens the doors to emerging players who require scalable and compliant testing solutions early in development through commercialization.
Speaker #6: We believe this business represents a highly valuable standalone platform. It has high penetration across monoclonal antibody-based products. We're common in vaccines, and all FDA and EMA-approved CAR T cell and gene therapies.
Speaker #6: With high contribution margins and a foundation of recurring demand, Cignis is not only a core strength; it's a strategic asset. We recognize the standalone value this segment represents, and we're committed to ensuring that this value is more clearly appreciated by the market.
Speaker #6: While the nucleic acid production or NAP business navigates a period of macro and political headwinds, our BST segment provides visibility, diversification, margin stability, and capital allocation flexibility.
Speaker #6: Within the NAP business, we are building on our GMP consumables capabilities. We see this as an area where we hold a distinct advantage. Our large-scale GMP capabilities are unmatched, and we are actively expanding our product portfolio to support future mRNA applications, particularly in therapeutic categories such as oncology, autoimmune conditions, and rare diseases.
Speaker #6: This is a vast, evolving market, and our ability to deliver reliable high-quality and scalable GMP products positions us as a key partner to our pharma, biotech, and CDMO customers.
Speaker #6: For our CDMO business, we continue to make strong progress supporting customers from preclinical through commercialization. We're not just a supplier, but an extension of our customers' teams, working side by side with them every day.
Speaker #6: This trust and partnership lead to stickier relationships, helping us win follow-on contracts as our customers' programs advance. It's a key driver of both near-term revenue and long-term customer relationships.
Speaker #6: Increasing the likelihood that we'll support programs from early research through commercial launch. And for our research customers, we are broadening access to our technologies through innovation, and expanding our consumables portfolio.
Speaker #6: We are also investing in our e-commerce infrastructure and AI capabilities to provide a more streamlined commercial experience for our research customers. This month, are launching a new version of the mRNA builder, our online ordering tool for custom mRNA, that allows customers to design, order, and build RNA using our products.
Speaker #6: This tool is the first of several planned upgrades to our e-commerce platform. These initiatives are central to our future growth and position us well for long-term success.
Speaker #6: Third, with these actions in place, we will get the benefit of the margin flow-through to return to sustainable, positive-adjusted EBITDA and free cash flow by the second half of 2026.
Speaker #6: As a CEO, I have to make the tough calls that are in the long-term best interest for MARAVI and our shareholders. We were structured for a much larger company than we are today.
Speaker #6: And these actions will align the business to our current reality and allow us to grow revenue and profitability from here. We have great science and technology, and I'm optimistic that we are going to have a great future.
Speaker #6: While there is more work ahead, and we continue our comprehensive business review and complete our budgeting process, I'm confident in our team's ability to execute and be energized by the opportunity to build a stronger, more focused company for our ustomers, employees, and shareholders.
Speaker #6: We have a clear plan, and we're moving quickly to return MARAVI to growth and profitability. Now, I'd like introduce Raj Atrapoda. Our new CFO, who joined MARAVI on June 30th, as you can see on slide seven, Raj brings over three decades of financial leadership experience across both public and private organizations, as they went through significant transformation and growth.
Speaker #6: I have personally worked with Raj at General Electric, Life Technologies, and Antilia Scientific, and I value his leadership and financial stewardship as we continue building MARAVI into a scalable, profitable, and free cash flow positive business.
Speaker #6: I will now hand the call over to Raj.
Speaker #7: Thank you, Bernd. I'm incredibly excited to join Maravai and partner with you as we embark on the next chapter for the company. I firmly believe we can unlock the full potential of what this company can deliver to both its customers and stakeholders.
Speaker #7: It's clear me that we have a world-class team and cutting-edge technology and the opportunity ahead of us is truly unique. We are laying the foundation to drive operational excellence and disciplined growth as we strategically size and scale the business.
Speaker #7: Now, let's turn to the Q2 financial results on slide nine. Revenue for the quarter was $47.4 million, compared to $69.4 million in Q2 of 2024.
Speaker #7: Excluding revenue for high-volume clean cap, base revenue was up 5% for Q2, versus 2024. The nucleic acid production or NAP segment had revenue of $31.1 million in Q2, the biologics safety testing segment or BST revenue was $16.3 million in the second quarter.
Speaker #7: I will discuss segment results a little later in the call. Revenues by customer type in Q2 were 28% biopharma, 30% life sciences and diagnostics, 8% academia, 7% CRO/CMO/CDMO, and 27% through distributors.
Speaker #7: Revenue by geography was 65% North America, 18% EMEA, 12% Asia Pacific, excluding China, and 5% in China. Turning to slide 10, our GAAP net loss before non-controlling interest was $69.8 million for the second quarter of 2025.
Speaker #7: This compares to a GAAP net loss before non-controlling interest of $18.4 million for the comparable second quarter of 2024. Adjusted EBITDA, a non-GAAP measure, was a negative $10.4 million for Q2 2025, compared to a positive $13 million for Q2 2024.
Speaker #7: Moving to slide 11 and EPS. Basic and diluted EPS for the second quarter was a loss of 27 cents per share, compared to a loss of 7 cents per share in the second quarter of 2024.
Speaker #7: Adjusted EPS in Q2 2025 was a loss of $0.08, compared to a loss of $0.01 in Q2 2024. Advancing to the balance sheet, cash flow, and other financial metrics on slide 12.
Speaker #7: The end of the quarter showed $270 million in cash and $297 million in long-term debt. For Q2 2025, cash used in operations was $10.3 million.
Speaker #7: Depreciation and amortization was 13.2 million, and interest expense net of interest income was 3.8 million in the quarter. Stock-based compensation or non-cash charge was 6.8 million for the quarter.
Speaker #7: Next to slide 13 and the discussion of segment performance, the NAP segment had revenue of $31.1 million in Q2. The base NAP business, excluding high-volume clean cap, was up 3% year over year, driven by demand for trialing GMP products.
Speaker #7: This was a sequential increase of 2.3 million from 28.7 million of base NAP revenue in Q1 of 2025 marking our second quarter of base revenue growth in NAP.
Speaker #7: Adjusted EBITDA for NAP was negative 7.3 million in Q2, highlighting the need for the cost reductions we have initiated. The BST revenue was 16.3 million in second quarter, up 10% year over year.
Speaker #7: Adjusted EBITDA for BST was $10.9 million, for an adjusted EBITDA margin of 67%. The strong year-over-year growth in the BST business was driven by demand for wholesale protein kits, quantification services, and increasing adoption of MOCV viral clearance products.
Speaker #7: Corporate shared service expenses impacting adjusted EBITDA totaled $14 million in the second quarter. These services include centralized functions such as human resources, finance and accounting, legal, information technology, and the incremental expenses associated with being a public company.
Speaker #7: This is another large pocket of costs within the organization that we are significantly reducing with the cost actions announced today. Turning to slide 14, our strategic realignment and cost reduction initiatives are focused on improving how we operate by transitioning to a consolidated and functional organizational structure.
Speaker #7: This approach reduces complexity, fewer layers, tighter team alignment, and enhances our ability to operate with greater focus, speed, and executional rigor. We anticipate more than $50 million in annualized savings allocated approximately as follows.
Speaker #7: 45 to 50 percent from labor, 15 to 20 percent from facilities, 15 to 20 percent from CapEx reductions, and 15 to 20 percent from other productivity initiatives.
Speaker #7: Importantly, these actions are not expected to impact customer programs or revenue. We remain fully committed to delivering the high-quality products service and innovation our customers rely on.
Speaker #7: As Bernd noted, we expect the majority of these savings to be in motion by year-end, with the full impact realized in 2026. While these are difficult decisions, they're essential to restoring the company's financial health and enabling us to reinvest in targeted, purposeful growth going forward.
Speaker #7: In connection with these actions, we anticipate incurring restructuring charges of approximately $8 million to $9 million in the second half of 2025. These costs will primarily consist of employee severance, benefits, and other related expenses.
Speaker #7: I would also like to take a moment to address our guidance philosophy for the balance of 2025. As a new leadership team, we are committed to providing guidance that reflects a high degree of confidence in our ability to deliver.
Speaker #7: Given that we are still in the midst of a comprehensive commercial deep dive, we have made the decision to withdraw our prior guidance range.
Speaker #7: We will look to reinstate guidance once we have completed a full business review and have a clear data-driven outlook. In 2025, we have no orders for high-volume clean cap.
Speaker #7: However, we are encouraged by early indications from a customer for high-volume clean cap for shipment that is anticipated in early 2026. Finally, before we move to Q&A, I'd like to share a few reflections from my first 40 days.
Speaker #7: What I've seen as a company with tremendous runway ahead, and that's exactly why I was excited to join Maravai. In addition to the immediate actions we've taken, we believe there are further levers we can pull to enhance profitability.
Speaker #7: The finance team is working closely with our new functional leaders and the sales organization to identify and execute on these opportunities as part of a robust budgeting process.
Speaker #7: As part of this effort, we're also upgrading our commercial metrics. Introducing bottom-up KPIs, to validate our top-down market assumptions and strengthen accountability across the organization.
Speaker #7: We'll provide more detail on this progress in our Q3 call. Additionally, I'm ressing some of the operational headwinds we've encountered in past, particularly around the audit process to ensure that areas within our control are managed with tighter execution and discipline.
Speaker #7: This includes onboarding a new controller and audit partner. I'm laser-focused on closing the year strong, and I'm confident we are on the right path.
Speaker #7: I'll now turn the call back to the operator to begin the Q&A session.
Speaker #4: Thank you. Ladies and gentlemen, at this time, if you do have any questions, please press star one on your telephone. You can always remove yourself from the queue if our question has been addressed by pressing star two.
Speaker #4: Additionally, we ask that you please limit yourself to one question and one follow-up. We'll go first this afternoon to Matt Stanton of Jeffries.
Speaker #8: Hey, thanks. maybe just to go back to kind of the the guidance philosophy, you know, it unds like you're still taking a loser look at the forecasting process.
Speaker #8: You know, on one hand, you're pulling the $25 guide. At the same time, you're talking about cost actions and pointing to positive adjusted EBITDA and free cash flow in the back half of '26.
Speaker #8: So I guess how should we think about, you know, how you're feeling about the visibility especially around the latter with the the '26 targets?
Speaker #8: And then you know, just given we said kind of midway through three Q here, was there thought to potentially shifting to some form of order to to quarter guidance in the near term?
Speaker #8: Thank you.
Speaker #9: Hey, Matt. This is Bernd. let me make a few comments on that, and then I'll see if Raj has anything to add to it.
Speaker #9: you know, first and foremost, you know, I think we've been on board now for, you know, me less than a couple of months here, and and our primary focus has been getting costs under control in this business.
Speaker #9: It was just something that was an obvious issue we had. We had to deal with that. that meant some changes to the commercial organization.
Speaker #9: you ow, add to that the announcements last week from Kennedy on on some of the mRNA funding here. it's just important for us that we really get our arms around this and and bring confidence back to the to the street on the numbers that we share.
Speaker #9: are there any specific red flags that we see that say, well, guidance that's been given is is not correct? That's not it at all.
Speaker #9: It's just us having the right amount of time to really get our arms around this. You know, as far as running this company, in a positive growth and free cash flow and EBITDA point of view, regardless of where these revenue numbers sit, we're going to run that in a positive way.
Speaker #9: I think we've taken some great steps to take the right amount of costs out of this business. You know, last Friday, we took those first steps by reorganizing the organization.
Speaker #9: but one way or another, wherever revenue lands, if that means that there's additional things that have to happen, we'll take care of that. Although we have no indication that that's needs be done at this point.
Speaker #9: So I think this is just a result of us just needing a ittle bit more time. You know, the interesting part of MARAVI, it's a fairly lumpy business.
Speaker #9: Unlike the traditional life sciences tools and certainly even MARAVI, before COVID, very much a run-rate business. If you look at the business today, our average order sizes are materially greater than what a run-rate business would be.
Speaker #9: that means you just have a little bit more susceptibility to performance by quarter, and we just got to get our arms around that. It's nothing more than that.
Speaker #9: Raj, anything else?
Speaker #7: Yeah, I think I just kind of reemphasize that Bernd and I are both committed to operating the business for the next expense profile that can achieve positive EBITDA, you know, by the second half of 2026.
Speaker #7: as Bernd mentioned with the restructuring, we also had to change we had to change out on our sales leadership side, which also impacts kind of how we think about guidance.
Speaker #7: And then, Matt, your final question was around quarter-to-quarter guidance. We're not going to do that again until we have our arms around the whole business.
Speaker #7: We're not going to provide that quarter-to-quarter guidance for now.
Speaker #4: Thanks, that's helpful. And then maybe just on Q2, you know, BST had a nice quarter. I think typically Q1 is seasonally stronger there, but excluding Q1 the last few years, I think Q2 was the highest dollar amount in that business going back to the back half of 2022, if my math is right.
Speaker #4: So could you just talk about the the durability of kind of the improvement and solid trends you saw here in two Q? And then can you just clarify that you are not seeing any pull forward dynamics out of China or Asia in that business in two Q?
Speaker #4: I know some other folks in the bioprocessing chain have kind called that out. just level of visibility into, you know, no pull forward dynamics into that two Q number.
Speaker #4: Thank you.
Speaker #9: Sure. I'll take that. So you're right on the BST side. If you look at the different parts of the portfolio, so like on our wholesale protein kits, which is basically our gold standard, those kits grew by 7% in the quarter.
Speaker #9: which again demonstrates our position that you ow, customers are remaining loyal, even in this market uncertainty. MOCV, that's been a great story. So that portfolio continues to grow.
Speaker #9: That is super rapid rate. the adoption is really strong. and there's a of confidence in that product's performance. likewise on quantification services, it continues to grow.
Speaker #9: You know, we've got many, many repeat customers there. And our focus on tactical programs to engage our accounts is also starting to kind of work well.
Speaker #9: To our question around, you know, pull forward, we did have a little bit of that in China, but nothing too material. So right now, I think as far as the Cignis business goes, it's very healthy and showing a good growth rate.
Speaker #8: That said, though, I think 10% optimism is an incredible quarter. I don't think you should you model that in, right? I think this business should be mid-single-digit top line grower for the moment.
Speaker #8: And we'll continue to optimize this business as well.
Speaker #9: Yeah.
Speaker #4: Appreciate it. ank you. Thank you. With the next now to Matt Hewitt of Craig Hallam.
Speaker #10: Good afternoon. Thanks for taking the estions. Maybe first up, regarding China with kind of the easing that we're eing between the US and China, do you anticipate that that could become a growth driver?
Speaker #10: Do you think that that's a region that could start to scale as we get into '26?
Speaker #7: Yeah, I think so. I guess in one word, the answer is yes. We would expect that to be a good kind of growth lever.
Speaker #10: Great. And then maybe a follow-up, oops, go head.
Speaker #7: Yeah, I'm sorry. I ink just in general, right, if you look at the global markets, not just for biosafety, but just to MARAVI product lines, the US is going to see some obviously retraction given the defocus on mRNA.
Speaker #7: I think you're going to see continued increased investments in non-U.S. regions, and we're well positioned to take advantage of those. That includes China, but I think other non-U.S. regions as well.
Speaker #10: Excellent. And then maybe a follow-up question, and a little bit different here, but regarding the the CDMO business, how do the the prospects or or the the the potential for tariffs on imported drugs, how does that affect your business?
Speaker #10: Does that create incremental opportunity? And have you seen that in your pipeline, or is everyone kind of sitting on their hands waiting to see what's going to happen there?
Speaker #10: Thank you.
Speaker #8: I think it's more of the second at the moment. We haven't en a whole lot move from there yet. Is there certainly an opportunity that, you know, if if tariffs really settle in on this and make it economically beneficial for some of the non-US manufacturers, to move production to the US, for sure discussions we've had.
Speaker #8: I don't think there's anything we've actively seen. But in the event that were to happen, our facility expansions have happened here over the last years, positioning us incredibly well to take advantage of that.
Speaker #10: That's great. Thank ou.
Speaker #4: Thank you. With the next next now to Subu Nambi of Guggenheim Securities.
Speaker #11: Hey, guys. Thank you taking my question. as you were reviewing different aspects of the business, were there things that you were positively surprised by?
Speaker #11: And then, similarly, anything that you didn't anticipate would be very challenging but was challenging?
Speaker #8: Well, that's a good question. I think anytime you come into a new organization, as much diligence as you do, you will find surprises in the end.
Speaker #8: And and I think if I reflect for myself here, and I'll Raj maybe make some of his comments, I'll I'll lead us off with, again, saying it's fairly early days.
Speaker #8: I was quite surprised by the, you know, the amount of expenditure that's happened in this organization. It was really scaled for an organization so much bigger than we are.
Speaker #8: And and I ink that was a much greater extent than we even anticipated. I mean, the numbers that we are taking out of this business, and we feel we'll have fairly limited impact, if any, on our day-to-day operations kind of shows you how how heavy this organization was was layered.
Speaker #8: certainly, a big surprise there. I think on on the positive front, you know, I think if you look at the customer profile we are working with here particularly in this sort of preclinical through phase three, there's a ton of activity going on there.
Speaker #8: I mean, we talk a lot about, you know, COVID vaccines and the impact of capping and how that grew this business, and that's really at zero this year.
Speaker #8: But the fact that there is still so much activity going on with customers for that same portfolio, but again, primarily focused on oncology, autoimmune, and rare disease solutions, really positions the company incredibly well for, I think, where mRNA will go in the future.
Speaker #8: So, I think that was an incredibly positive direction. And then you've heard us talk about our biosafety business in Cignis. I think that organization, you know, has struggled a little bit in the past, but we're just starting to see that come around.
Speaker #8: There's some great innovation happening there, certainly a great brand. Around the world, we talk Asia a little bit ago. I think there's huge upside in in that region for this portfolio.
Speaker #8: So, I think there's a lot of good movement happening for the portfolio at large. We just need to get to the part where, you know, those all come to fruition, and we execute on those.
Speaker #11: Thank you for that. And thank you for the thoughtful response too. I know you said there's a lot of focus on acquiring cap, but could I just, if possible, add one?
Speaker #11: You said you had encouraging conversations with a customer for a shipment in early 2026. Could you provide some more color here, like just confirming you're defining high-volume clean cap the same way as before?
Speaker #7: Yeah, I'll I'll take that one. So yeah, we do have an, you ow, an indication and a binding order for high-volume clean cap in '26.
Speaker #7: We're not ing to give you the name of the customer or any additional color yet. So we've got things sorted out, but you know I think it's an encouraging sign.
Speaker #7: We don't expect high-volume clean cap to return to the 2024 levels. But having said that, this is at least a step in the right direction.
Speaker #7: we are basically going to run our business just like we have done this year in in, you know, thinking that anything that we get from high-volume clean cap is really going to be more upside.
Speaker #7: All of our business is going to be managed as if we had no clean cap in our in our model. So you ow to the extent that these orders come in, they'll they'll be a nice incremental kind of goodness to the business, but we're not counting on it.
Speaker #8: But maybe use this opportunity to set the stage of how we label things. So high-volume clean cap really is COVID clean cap, right?
Speaker #8: Let's call it that. We're going to get away from that kind of terminology. High-volume clean caps, in the end, hopefully, will be many other therapeutics that go to commercialization and will use our caps and other consumables to manufacture those therapeutics.
Speaker #8: So high-volume clean cap in this question is exactly how you would have thought it in the past. As we progress, assume that we'll be labeled differently.
Speaker #8: but that's just a sort of setting the stage for the future here. Yeah.
Speaker #11: Thank you for that, guys. Good luck.
Speaker #8: Thanks.
Speaker #4: Thank you. With the next, now to Kyle Cruz of UBS.
Speaker #12: Hey, thank you for taking questions. Some peers have talked about multi-year headwinds in scientific R&D spend going forward. You've achieved your own mid-single-digit based business growth. Not commenting on the current guidance, but looking forward, how should we think about the business over the midterm and how it should—how your growth outlook of the business is?
Speaker #12: Thank you.
Speaker #8: I’ll take a couple of comments here, and then I’ll hand it to Raj. I mean, clearly, you can feel great about the U.S. funding environment in research, specifically in mRNA.
Speaker #8: Now, our our business exposure today is is not that significant there. you know we we get most of our revenues from other parts of the business, including GMP and and CDMO at this point, certainly from biosafety.
Speaker #8: but I think I think at a much broader picture for for the US markets, we're going to continue to see material research investments outside of the US.
Speaker #8: And you know that it wouldn't be great to see where that leads for this country in the future, as it relates to a new therapeutics move to market with this technology.
Speaker #8: So I think our business directly won't have material impacts, but it would be a shame to see this market locally, here, not start coming back into mRNA research in the long term.
Speaker #7: Yeah, I think the only thing I'll add is, again, our Q2 base revenue growth was around 5%, and we are looking to accelerate that. Although, like Bernd mentioned, there is variability quarter to quarter.
Speaker #7: but as we look at kind of what our peers are saying the long-term growth of this business is mid-single to high-single digits. whether it's Danaher at 7 to 9 percent, we've heard Thermo citing market growth at about 6%.
Speaker #7: Sartorius at 8 to 12 percent. And Lonza at 8 to, ou know, like 8 to maybe 10 percent. So that's kind of where we see this business heading.
Speaker #4: Great. Thank you.
Speaker #8: Yeah, I think the key eaway, guys, here is, you know when it relates to GMP and CDMO, I think the markets will continue to be healthy here.
Speaker #8: There's a lot of programs out there that we are involved with, and I think there's a high level of confidence that will help us out.
Speaker #8: I think our our emphasis to continue to focus on some of the non-US markets in research has become ever more important, you know, with the recent news that has happened.
Speaker #11: So can we go to the next question, please?
Speaker #4: We'll go next now to Brandon Couillard of Wells Fargo.
Speaker #13: Hey, thanks, guys. Good noon. Bernd, you talked a lot about e-commerce in your prepared remarks as part of the strategic review. It's not been a topic that's, I think, come up much in the past.
Speaker #13: Do you think you were missing out on revenues before? How much of the revenue base is currently e-commerce today? And where should that be over time, and what kind of investment do you need to make there?
Speaker #13: Thanks.
Speaker #8: Yeah, it's a great question. I am, for starters, do I think it's important? Yes, right? Today's revenue in Maravai is not very significant in the research world.
Speaker #8: And I think that's really where e-commerce helps you out. It's not that economically viable to put a large team of salespeople in the field for fairly small average order size opportunities.
Speaker #8: Particularly with a fairly narrow portfolio that we have here, it is very important. As you know, we bought a fish earlier this year.
Speaker #8: They really have a really nice AI engine that will help design custom RNA for research customers. We just brought that live on-site, I think last week, in sort of a beta version.
Speaker #8: We expect that to go prime time later in the year, and I think that will be a big driver in the uptick of research consumables, specifically custom mRNA and associated consumables.
Speaker #8: For the business, so critical, yes. At the moment, still a fairly small portion. You know, my personal background, I come out of sort of large life sciences tools companies with much higher number of order volumes a day, much broader portfolios.
Speaker #8: I think it's even more critical there than in our world. But for us, I think creating this custom mRNA world in an e-commerce fashion, without any real sales involvement, will become very valuable in the long term for the business.
Speaker #8: And today, yeah, it's a question I don't have these numbers offhand, but do we have what the total revenue coming in from e-commerce is today?
Speaker #8: It's a it's a irly small percentage. It's very small. Yeah, it's it's it's it's single digits, is my guess. Yeah.
Speaker #13: Okay. And then just one clarification. I mean, based on your comments about the strategic review, it sounds as if you're pretty committed to keeping the BST business in the portfolio.
Speaker #13: I just want to make sure that it would be safe to conclude that kind of based on your initial assessments. Thanks.
Speaker #8: Yeah, listen, our our goal as a leadership team is to create value for our shareholders. And and so you know what that means then in the long term, whether that is you know selling assets or or buying assets organically investing, we're not ready to make any comments on that.
Speaker #7: Yeah, what I would add is just, you know, basically us focusing on restructuring the company and making it profitable just gives us so much optionality and flexibility.
Speaker #7: So, all these decisions will be a lot easier once you have that optionality. Right now, we are focused on growth, and that's where we'll deliver value to the shareholders.
Speaker #7: So stay tuned on that.
Speaker #13: Thanks.
Speaker #4: We'll go next now to Katherine Schulte of Baird.
Speaker #14: Hey, guys. Thanks for the questions. Maybe first, just understand the need to take a fresh look at forecasting and budgeting. But is there anything you can talk to about near-term trends that have been so many policy headlines in mRNA and cell and gene therapy?
Speaker #14: You know, it could be helpful to hear what you've been seeing in July and August, and maybe how your customers are responding to some of those.
Speaker #8: Raj, I'd like to take a first step at that.
Speaker #7: I think trends right now are fairly positive. We are, you know, again, like I think we mentioned a little while ago, some of the CDMO business is kind of lumpy.
Speaker #7: So we are, you know, again, with new KPIs, around trying to look at customer detail, regional details, price volume; all those KPIs and metrics are what we are kind of diving into.
Speaker #7: But overall, it's a reasonably positive trend that we're seeing.
Speaker #8: Yeah. And again, you have to keep in mind that a lot of the news that’s coming through on funding is heavily tied to research, right?
Speaker #8: And and and we just don't have a big exposure there during during COVID. And we can debate right or wrong. But during the COVID years, this company was focusing purely on clean cap business for for COVID vaccine manufacturing.
Speaker #8: A lot of the emphasis on that research was taken away during those years. We're rebuilding that up. And, you know, it's just not a big part of our base anymore.
Speaker #8: I think if we sat in the world where a lot of our revenue was tied to academic research, we probably would have a position.
Speaker #8: But we haven't heard much from customers. There have been one or two customers that I think we've heard from who may have a little bit of a funding issue, but nothing material to the business.
Speaker #14: All right. Great. And then you're taking steps to right-size the organization. You know, if we look back at Maravai pre-COVID, the company had north of 40% EBITDA margins.
Speaker #14: There's obviously been a lot of capacity expansion, investment since then, plus some public company costs. But just as we think about longer term, you know, is this still a business that can support those types of margins, or should we think about it as you know structurally different today?
Speaker #8: Well, I think it's too early for us to answer that question. I mean, for starters, we’d like to think we can get this business back to volume.
Speaker #8: And profitability, where it should be. I think for us, step one is to get free cash flow positive direction in our business and EBITDA growth.
Speaker #8: So, let's take that step first, and then we'll go from there. You know, sometimes, somebody asked me a question earlier here about, you know, some of the surprises of what I have seen coming in here in these first couple of months.
Speaker #8: An early indication for me was, well, prior to COVID, there was a certain cost base, and that is materially higher today. I do think that a lot of that cost is coming out.
Speaker #8: That's good. But you also have to keep in mind that we do have GMP manufacturing capabilities today that inherently are a little bit more expensive.
Speaker #8: They will have a little bit more cost basis. But it also sets you up for some really, really large deal opportunities and some high-margin consumables.
Speaker #8: So, it kind of lumpiness we've been talking about, I think we are right-sized. I think we are playing with a portfolio that is incredibly well-positioned for new mRNA therapeutics coming out in the future.
Speaker #8: How that will play out over the short term, I think that's what we're getting our arms around. First and foremost, again, getting this business back to profitability versus what we've seen in the last six months here is our first and foremost priority.
Speaker #4: Thank you. With the next now to Doug Schinkel of Wolf Research.
Speaker #15: Hi, this is Madeline Molman on for Doug. Regarding the risk, which is always a difficult decision in the process, can you break down where the cuts were being made and also where you didn't make cuts?
Speaker #15: We just want to better understand how you're balancing cuts versus working to reinvigorate growth. And then building off of that, regarding the elimination of the CCO position, what does that mean for changes in commercial strategy?
Speaker #8: All right. let take a couple of pieces here. Did you say chief technology officer or chief commercial officer?
Speaker #15: Chief commercial officer.
Speaker #8: Yeah. So on the "And I'm ry," the first part of the question?
Speaker #7: I'll take that one.
Speaker #8: On the Chief Commercial Officer side, we have a very, very large commercial organization that simply needs to be scaled back to where I think the focus should lie.
Speaker #8: Given the number of larger opportunities that exist, having a very strong field sales organization is critical. So, you know we have hired a new EVP of Sales, who will be responsible for selling all of our larger GMP manufactured products and CDMO products around the world.
Speaker #8: I think that there is a specific skill set required. Secondarily, having a Chief Marketing Officer who will take the lead in this e-commerce world that was brought up earlier becomes equally critical.
Speaker #8: I think those are two very, very different skill sets. At a company our size, you just kind of need to separate that out and focus on those separately.
Speaker #8: So, this is nothing more than just some organizational realignment: focus sales for larger deals, focus on e-commerce for some of this research business, and executing on that.
Speaker #8: I will also say that's primarily tied to Trilink and not to our Cignis business.
Speaker #7: I think the the other question, the other part of your question was around where this is where the reductions are coming from. So you know if ou think about the $50 million, there's you ow half of that is going to be 50% from GNA.
Speaker #7: We've got about 20 to 30 percent in sales and marketing, and then about 10 to 20 percent from R&D. So you owe a little bit more color around how we've consolidated these executive roles, like Bernd mentioned.
Speaker #7: We removed layers in the organization and centralized it to a functional alignment to improve how we work and strengthen the company's financial health.
Speaker #7: So these actions will basically streamline our decision-making, remove duplication of efforts that we've seen, and foster greater accountability as we execute and move forward.
Speaker #7: So to answer your question?
Speaker #15: Yeah, great. That was really helpful. And then just one more regarding the high-volume clean cap order. Do you think that might come in 2026? Do you need that order or other high-volume clean cap orders in 2026 to meet your goal of being EBITDA and free cash flow positive in H2 2026?
Speaker #7: No, you're only no. I I've made that clear. We are operating this business like we had no clean cap. And anything that we get is going to be upside to what we're ning.
Speaker #15: Great. Thank you.
Speaker #4: With the XT now to Matt Leroux of William Blair.
Speaker #16: Good afternoon. Thanks for taking my question. You highlighted a couple of times throughout the call the standalone value of BST.
Speaker #16: And also referenced working to create a vision for what a ractive lifetime tools asset would be. If we think back to how MARAVI was created by aggregating four independent assets in different parts of the country, some of them hidden products, like HCP, and some of them large fixed-cost reagents, offerings like the NAP business in San Diego.
Speaker #16: It was sort of, as you referenced, built to be a bigger, diversified company. Some of that you've paired off over the years, like the protein business. Now, as you think for the future, how do you think about right-sizing what you're doing from an operational standpoint, but then rescaling to your point that attractive lifetime tools would be?
Speaker #16: Do you think building around customers, as you did before, around capabilities, around geographies... I understand that it's early, but, you know, as you got together with the board and you just accepted these jobs, what was sort of the vision here?
Speaker #8: So for starters, I think it's a really good question. I I you know if you look at MARAVI when it started, you know honestly, I think it was a ittle bit more of a of a holding company setup.
Speaker #8: And buying good assets at good valuations and kind of trying to optimize those accordingly. I'm not 100% sure that I had a really well-thought-out exit strategy at the time, but this was 2018 or whatever, maybe even earlier.
Speaker #8: So, some time ago, we called out biosafety in our earnings call, you know, I think two or three times. I think it's just a reality.
Speaker #8: If you look at Maravai today and where it trades, that business is incredibly valuable as an asset. And, you know, 99% of the discussion we're having is on our Trilink business.
Speaker #8: So, I think we're just trying to call that out as an asset that we shouldn't overlook. We must understand the value that that brings.
Speaker #8: And you know whether we are going to sell that asset or not. As I said earlier, and Raj responded to, we're here to ultimately enhance shareholder value.
Speaker #8: And the decisions we're going to make, whether we divest or whether we acquire other assets, and leveraging our capabilities to put those together, well, that will happen.
You know, you're kind of beholden to the way fixed costs are set up for the company.
Yeah, I'll take them. I'll take a macro. Look at this. This maybe something we need to have as a follow-up call, to get exact numbers to you. But you know, obviously this business has built a ton of infrastructure over the last years and and that, that that does give you a bit of a hangover when your Revenue materially changes. Um, when we look at our cost savings, our old Corporate Offices, uh, in San Diego, that have not been used. Now, for some time that leases up, I think it's a September next year, so, that'll Fall Away.
Um, we have some other facilities we’re looking at, uh, potential other opportunities to work with, but right-sizing that part, although it’s not the largest part of our restructuring, I think it’s partially decided on other areas. We may think a little bit longer about.
Somebody asked a minute ago about, you know, are there, uh, potentially European or Asian pharmaceutical companies that need some U.S. footprint. You know, we have some facility space here that we could use for that.
As so instead of of of actively getting out of that, that type of infrastructure, you want to breathe a little bit to see what happens in the next 6 months or so. But I think in general we feel good about sizing the organization right with our infrastructure or within the next 6 months. Yeah. Which will give us more flexibility on uh, gross margin for sure and operating margin
Okay, thank you.
We'll go next. Now to Matthew Parisi at KeyBanc Capital Markets.
Hi. Yes, this is Matt Pisi on for Paul Knight at KeyBank. Um, I was wondering if you could kind of go into more detail on the, um, expanded CDMO enable strategy that you mentioned in your press release regarding the new license and supply agreement for Clean Cap with Pharaoh Fisher.
I'm not sure what this question is: CDMO and licensing on Creek Camp.
Example of, you know, Clean Cut being used not just by our own PDMO capabilities, but broader CDMO as well as pharmaceutical manufacturing. Um, yeah. Clearly, that's one of our. If you look at our consumable space, our GMT consumable space having as many targets out there, whether they are manufactured by a pharmaceutical company, or whether they are manufactured by CDMO ours, or somebody else's, we want Clean Cut to be used as much as possible. And the disagreement was just another licensing agreement with Thermo, and that will hopefully lead into a number of opportunities beyond what we have today.
Okay. Uh, thank you absolutely to both my questions.
Thank you. We'll go next now to Justin Bowers of Deutsche Bank.
Hi, good afternoon everyone just a 2-part for me. You talked about the pre-clinical market um earlier in the prepared, remarks can you discuss some of the trends um that you're seeing in, you know, either the order book or the RFP volume, over the last call at 6 to 12 months. And then part 2 would just be on the, the broader commentary on mRNA, are you, are you starting to see, um, opportunities X us as a result of, of some of the announcements and, and sort of the policy and Regulatory environment. Since last November
Yeah, I'll give you more of a macro answer and then maybe Rash, you have more specifics. I'm not sure what we have in front of us here, but I think if you look at the broader market, there's no question that...
The number of targets that are out there, that are appearing in preclinical, uh, moving their way through Phase 1, 2, 3, um,
New numbers, although still in research, indicate that it's mainly GMP and consumables that are picking up. So, I think there's good activity there. Much of it still sits in the U.S., quite frankly. But as we look at our funnels,
Uh, outside of that. Um,
I don't know the exact numbers here, but we're seeing great growth. As it relates to GMP-manufactured consumables, which all sit in clinical trial stages.
If I ever call him in, in Q2 our research growth primarily came from GMP consumables, right?
Thank you, gentlemen. It appears we have no further questions this afternoon. Mr. Breast, I'd like to turn things back to you, sir, for any closing comments.
Thank you. Um, again, thank you everybody for joining us today for my and Raja's first conference call since joining Maravai. As we outline in the prepared remarks, there's much work to do, but we're well underway. Through organizational restructuring and cost reduction initiatives, we are focused on driving speed, accountability, and operational excellence across the portfolio to fundamentally transform our business model. These are structural, wholesale changes to how Maravai operates, from headcount and organization design to cost-based and accountability.
The unique value we offer in our portfolio of our brands provides our customers with life-changing development of the next generation of medicines and diagnostics that is unmatched. We will focus on areas where we see the highest returns to drive growth and diversify our business.
I believe we can build a stronger, more focused company for long-term, sustainable growth, beginning with a return to positive, adjusted EBITDA and free cash flow in 2026. Thank you again for all your questions, your time, and your interest in Maravai. Take care, everybody.
Thank you, Mr. Bros. Again, ladies and gentlemen, I will conclude today's Maravai Life Sciences Holdings, Inc. second quarter earnings call. Thank you so much for joining us, everyone. We wish you all a great evening. Goodbye.