Q2 2026 Alpha Teknova Inc Earnings Call

August 5, 2026

Operator: Good day. Thank you for standing by. Welcome to the Teknova Q2 2026 financial results. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the conference to the first speaker today, Jennifer Henry, Senior Vice President of Marketing. Please go ahead.

Speaker #1: After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one (*) 1 1 on your telephone.

Speaker #1: You will then hear an automated message advising that a hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #1: All right, to end the conference with your first speaker today, Jennifer Henry, Senior Vice President of Marketing, please go ahead.

Speaker #2: Thank you, operator. Welcome to TechNova's second quarter 2026 earnings call. With me on today's call are Stephen Gunstream, TechNova's President and Chief Executive Officer, and Matt Lowell, TechNova's Chief Financial Officer.

Jennifer Henry: Thank you, operator. Welcome to Teknova's Q2 2026 earnings call. With me on today's call are Stephen Gunstream, Teknova's President and Chief Executive Officer, and Matt Lowell, Teknova's Chief Financial Officer, who will make prepared remarks and then take your questions. As a reminder, the forward-looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning these risk factors is included in the press release the company issued earlier today. They are more fully described in the company's various filings with the SEC.

Speaker #2: We will make prepared remarks and then take your questions. As a reminder, the forward-looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ.

Speaker #2: Additional information concerning these risk factors is included in the press release the company issued earlier today, and they are more fully described in the company's various filings with the SEC.

Speaker #2: Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors. The company does not obligate or commit itself to update its forward-looking statements except as required by law.

Jennifer Henry: Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors. The company does not obligate or commit itself to update its forward-looking statements except as required by law. The company's management believes that in addition to GAAP results, non-GAAP financial measures can provide meaningful insight when evaluating a company's financial performance and the effectiveness of its business strategies. We will therefore use non-GAAP financial measures of certain of our results during this call. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to Teknova's website and at www.sec.gov/edgar. Non-GAAP financial measures should always be considered only as a supplement to, not as a substitute for, or as superior to, financial measures prepared in accordance with GAAP.

Speaker #2: The company's management believes that, in addition to GAAP results, non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies.

Speaker #2: We will therefore use non-GAAP financial measures of certain of our results during this call. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to Teknova's website and at www.sec.gov/edgar.

Speaker #2: Non-GAAP financial measures should always be considered only as a supplement to, and not as a substitute for or as superior to, financial measures prepared in accordance with GAAP.

Speaker #2: The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks.

Jennifer Henry: The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the investor relations section of Teknova's website and on today's webcast. Now I will turn the call over to Stephen.

Speaker #2: It can be accessed in the Investor Relations section of Teknova’s website and on today’s webcast. And now, I will turn the call over to Stephen.

Speaker #3: Thank you, Jen. Good afternoon, and thank you, everyone, for joining us for our second quarter 2026 earnings call. We were very pleased with our performance in the second quarter.

Stephen Gunstream: Thank you, Jen. Good afternoon, and thank you everyone for joining us for our Q2 2026 earnings call. We were very pleased with our performance in the Q2. Revenue grew 18% compared to the Q2 of 2025, exceeding $12 million for the quarter, the highest quarterly revenue in Teknova's 30-year history. This growth contributed to our lowest free cash outflow since before our IPO in June 2021. Considering our performance this year to date and our confidence about the H2 of the year, we have increased our revenue guidance, which at the midpoint raises expected revenue growth from 6% to 14% for the year. I will start by providing a little more color on the Q2 growth drivers. We are particularly encouraged because once again, revenue growth was not driven by a single order for a single customer.

Speaker #3: Revenue grew 18% compared to the second quarter of 2025, exceeding $12 million for the quarter—the highest quarterly revenue in Teknova's 30-year history. This growth contributed to our lowest free cash outflow since before our IPO in June 2021.

Speaker #3: Considering our performance this year to date, and our confidence about the back half of the year, we have increased our revenue guidance, which at the midpoint raises expected revenue growth from 6% to 14% for the year.

Speaker #3: I will start by providing a little more color on the second-quarter growth drivers. We are particularly encouraged because, once again, revenue growth was not driven by a single order or a single customer.

Speaker #3: Rather, it was broad-based, with our largest direct customer representing less than 7% of total revenue in the quarter. In addition, we achieved growth in sales of our products across all of our major target segments.

Stephen Gunstream: Rather, it was broad-based with our largest direct customer representing less than 7% of total revenue in the quarter. In addition, we achieved growth in sales of our products across all of our major target markets, with the exception of cell and gene therapy-related accounts, which were down in part due to order timing. Excluding cell and gene therapy, biopharma, generally, including biotech, large pharma, and CDMOs, grew significantly, led by sales of our custom products. We are also encouraged by our continued strength in supporting our customers in the liquid biopsy market, and we drove catalog sales through improved engagement with our distributors. All in all, it was a great quarter, and it puts us in a strong position as we enter the H2 of 2026. As we look to 2027, we believe there are a number of potential tailwinds that will further support our growth.

Speaker #3: Target markets, excuse me. With the exception of selling gene therapy-related accounts, which were down in part due to order timing. Excluding selling gene therapy, biopharma generally—including biotech, large pharma, and CDMOs—grew significantly, led by sales of our custom products.

Speaker #3: We are also encouraged by our continued strength in supporting our customers in the liquid biopsy market, and we drove catalog sales through improved engagement with our distributors.

Speaker #3: All in all, it was a great quarter, and it puts us in a strong position as we enter the second half of 2026. As we look to 2027, we believe there are a number of potential tailwinds that will further support our growth.

Speaker #3: First, our products are used to manufacture more than 70 therapies or diagnostics currently in clinical trials, at least one of which we expect will be commercial by the end of next year.

Stephen Gunstream: First, our products are used to manufacture more than 70 therapies or diagnostics currently in clinical trials, at least one of which we expect will be commercial by the end of next year. As a reminder, we believe that once a therapy reaches commercialization, the dollar value of a customer's purchases from us increases approximately tenfold compared to when the therapy is in phase III clinical trials and approximately thirtyfold compared to phase I clinical trials. Second, there has been an increase in total biotech funding over the past 3 quarters compared to the same period in the prior year. Given that we have historically seen an approximately 4-quarter lag from funding changes to revenue recognition, we believe there may be a positive revenue impact from this additional funding at the end of this year or in early 2027.

Speaker #3: As a reminder, we believe that once a therapy reaches commercialization, the dollar value of a customer's purchases from us increases approximately tenfold compared to when the therapy is in Phase 3 clinical trials, and approximately thirtyfold compared to Phase 1 clinical trials.

Speaker #3: Second, there has been an increase in total biotech funding over the past three quarters compared to the same periods in the prior year. Given that we have historically seen an approximately four-quarter lag from funding changes to revenue recognition, we believe there may be a positive revenue impact from this additional funding at the end of this year or in early 2027.

Speaker #3: Third, leading indicators show that the investments we began to make in our commercial organization in January are producing results on or ahead of plan.

Stephen Gunstream: Third, leading indicators show that the investments we began to make in our commercial organization in January are producing results on or ahead of plan. The new lead generation resources and systems we've put in place, together with the additions to our field sales organization, are enabling us to reach high-profile accounts and create opportunities that would have been much harder to come by a year ago. We expect these opportunities to start translating to revenue by early 2027. Taken together, the progression through clinical trials of therapies supported by our products, the increasingly favorable biotech funding environment, and our recent commercial investments provide us with the confidence that we will continue to deliver sustainable above-market growth. Lastly, I want to shift and talk about how we are leveraging AI to enable our customers to quickly and efficiently design and order custom products.

Speaker #3: The new lead generation resources and systems we've put in place, together with the additions to our field sales organization, are enabling us to reach high-profile accounts and create opportunities that would have been much harder to come by a year ago.

Speaker #3: We expect these opportunities to start translating to revenue by early 2027. Taken together, the progression through clinical trials of therapies supported by our products—the increasingly favorable biotech funding environment and our recent commercial investments—provide us with the confidence that we will continue to deliver sustainable above-market growth.

Speaker #3: Lastly, I want to shift and talk about how we are leveraging AI to enable our customers to quickly and efficiently design and order custom products.

Speaker #3: Today, we officially launched BuildTek, our new AI-powered custom order configurator, which is an evolution of the buffer configurator we introduced back in 2024. Designed to build custom product quote requests, this interactive, personal AI reagent assistant engages with customers so that they can create complex custom products in minutes.

Stephen Gunstream: Today, we officially launched BuildTech, our new AI-powered custom order configurator, which is an evolution of the buffer configurator we introduced back in 2024. Designed to build custom product quote requests, this interactive personal AI reagent assistant engages with customers so that they can create complex custom products in minutes, leveraging standard formulations, published literature, or specifications that they supply. Before BuildTech, designing a complex custom product required multiple rounds of back and forth between our manufacturing science and technology team and the customer, which could take weeks and be error-prone. With our new BuildTech custom configurator, a customer simply engages with the assistant and starts with as much or as little information as they have, the assistant provides guidance on product type, formulation, container format, manufacturing grade, QC testing, and more.

Speaker #3: Leveraging standard formulations, published literature, or specifications that they supply. Before BuildTek, designing a complex custom product required multiple rounds of back-and-forth between our Manufacturing Science and Technology team and the customer, which could take weeks and be error-prone.

Speaker #3: With our new BuildTek custom configurator, a customer simply engages with the assistant and starts with as much or as little information as they have, and the assistant provides guidance on product type, formulation, container format, manufacturing grade, QC testing, and more.

Speaker #3: BuildTek, which is trained on 30 years of TechNova's manufacturing experience and know-how, defines and finalizes the product specifications and allows the customer to submit a request for quote.

Stephen Gunstream: BuildTech, which is trained on 30 years of Teknova's manufacturing experience and know-how, defines and finalizes the product specification and allows the customer to submit a request for quote. It also supports the ability to upload existing files, formulations, or literature for reference, to design multiple custom products in one session. Our customers can now complete the entire process in a few business days rather than weeks. We soft launched the BuildTech service last quarter, we're already receiving quote requests from customers who have previously only ordered catalog products. This is only the beginning. We will continue to build out new features, such as the ability to customize existing catalog products, to save custom product requests to an online account, to get instant quotes, and more. We're excited to see how this tool evolves over time. In summary, we had a great quarter.

Speaker #3: It also supports the ability to upload existing files, formulations, or literature for reference and to design multiple custom products in one session. Our customers can now complete the entire process in a few business days rather than weeks.

Speaker #3: We've soft-launched the BuildTek service last quarter, and we're already receiving quote requests from customers who have previously only ordered catalog products. And this is only the beginning.

Speaker #3: We will continue to build out new features, such as the ability to customize existing catalog products, save custom product requests to an online account, get instant quotes, and more.

Speaker #3: We're excited to see how this tool evolves over time. In summary, we had a great quarter. We feel good about where we are today, and we're excited about what we think is yet to come.

Stephen Gunstream: We feel good about where we are today, we're excited about what we think is yet to come. I will now hand the call over to Matt to talk through the financials.

Speaker #3: I will now hand the call over to Matt to talk through the financials.

Speaker #2: Thanks, Stephen, and good afternoon, everyone. As Stephen explained, total revenue was up 18% for the second quarter of 2026 compared to the same quarter in the prior year.

Matt Lowell: Thanks, Stephen, good afternoon, everyone. As Stephen explained, total revenue was up 18% for Q2 2026 compared to the same Q2 prior year. This was also the highest quarterly revenue the company has achieved in its history. We're also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered excellent financial results for Q2 2026. By way of reminder, we target our Lab Essentials products at the research use only, or RUO, market, they include both catalog and custom products. Lab Essentials revenue was $9.2 million in Q2 2026, up 18% compared to $7.8 million in Q2 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer, to a slightly lesser extent, an increased number of customers.

Speaker #2: This was also the highest quarterly revenue the company has achieved in its history. We are also very pleased with our progress on key profitability measures and cash usage.

Speaker #2: Overall, we delivered excellent financial results for the second quarter of 2026. By way of reminder, we target our lab essentials products at the Research Use Only, or RUO, market, and they include both catalog and custom products.

Speaker #2: Lab Essentials revenue was $9.2 million in the second quarter of 2026, up 18% compared to $7.8 million in the second quarter of 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer and, to a slightly lesser extent, an increased number of customers.

Speaker #2: We make our Clinical Solutions products according to Good Manufacturing Practices, or GMP, quality standards, and our customers use them primarily as components or inputs in the development and manufacture of diagnostic and therapeutic products.

Matt Lowell: We make our Clinical Solutions products according to good manufacturing processes, or GMP, quality standards, and our customers use them primarily as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $2.4 million in Q2 2026, an 18% increase from $2.1 million in Q2 2025. The increase in Clinical Solutions revenue was attributable to an increased number of customers, partially offset by lower average revenue per customer. We expect revenue per customer to increase over time when a subset of these customers ramp up their clinical purchase volumes as they move through clinical trial phases and ultimately to commercialization. However, this metric can be affected by the addition of newer Clinical Solutions or GMP catalog customers who typically order less.

Speaker #2: Clinical solutions revenue was $2.4 million in the second quarter of 2026, an 18% increase from $2.1 million in the second quarter of 2025. The increase in clinical solutions revenue was attributable to an increased number of customers, partially offset by lower average revenue per customer.

Speaker #2: We expect revenue per customer to increase over time when a subset of these customers ramp up their clinical purchase volumes, their purchase volumes, excuse me, as they move through clinical trial phases, and ultimately to commercialization.

Speaker #2: However, this metric can be affected by the addition of newer Clinical Solutions or GMP Catalog customers, who typically order less. Just as a reminder, due to the larger average order size in Clinical Solutions compared to Lab Essentials, there can be more quarter-to-quarter revenue lumpiness in this category.

Matt Lowell: Just as a reminder, due to the larger average order size in Clinical Solutions compared to Lab Essentials, there can be more quarter-to-quarter revenue lumpiness in this category. On to the income statement. Gross profit for Q2 2026 was $4.9 million, compared to $4.0 million in Q2 2025. Gross margin was 40.1% in Q2 2026, up from 38.7% in Q2 2025. The increase in gross margin was primarily driven by higher revenue, partially offset by higher fixed cost absorption into cost of goods sold from faster finished goods inventory turns. Operating expenses for Q2 2026 were $7.8 million compared to $7.4 million in Q2 2025.

Speaker #2: And to the income statement, gross profit for the second quarter of 2026 was $4.9 million, compared to $4.0 million in the second quarter of 2025.

Speaker #2: Gross margin was 40.1% in the second quarter of 2026, up from 38.7% in the second quarter of 2025. The increase in gross margin was primarily driven by higher revenue, partially offset by higher fixed cost absorption into cost of goods sold from faster finished goods inventory turns.

Speaker #2: Operating expenses for the second quarter of 2026 were $7.8 million, compared to $7.4 million in the second quarter of 2025. The increase in 2026 was primarily driven by investments in our sales and marketing capabilities, resulting in higher headcount and increased marketing expenses, partially offset by lower general and administrative expenses attributable to lower staff-based compensation expense.

Matt Lowell: The increase in 2026 was primarily driven by investments in our sales and marketing capabilities, resulting in higher head count and increased marketing expenses, partially offset by lower general administrative expenses attributable to lower stock-based compensation expense. At the end of Q2 2026, we had 156 total associates, compared to 171 a year earlier. Net loss for Q2 2026 was $3.2 million, or -$0.06 per diluted share, compared to a net loss of $3.6 million, or -$0.07 per diluted share for Q2 2025. Adjusted EBITDA, a non-GAAP measure, was -$0.7 million for Q2 2026, compared to -$0.8 million for Q2 2025. Now, cash flow and balance sheet highlights. Capital expenditures were $0.1 million in Q2 2026, compared to $0.2 million in Q2 2025.

Speaker #2: At the end of the second quarter of 2026, we had 156 total associates compared to 171 a year earlier. Net loss for the second quarter of 2026 was $3.2 million, or negative $0.06 per diluted share, compared to a net loss of $3.6 million, or negative $0.07 per diluted share, for the second quarter of 2025.

Speaker #2: Adjusted EBITDA, a non-GAAP measure, was negative $0.7 million for the second quarter of 2026, compared to negative $0.8 million for the second quarter of 2025.

Speaker #2: Now, cash flow and balance sheet highlights. Capital expenditures were $0.1 million in the second quarter of 2026, compared to $0.2 million in the second quarter of 2025.

Speaker #2: Free cash outflow, a non-GAAP measure that we define as cash used in operating activities less purchases of property, plant, and equipment, was $0.6 million for the second quarter of 2026, compared to $2.3 million for the second quarter of 2025.

Matt Lowell: Free cash outflow, a non-GAAP measure that we define as cash used in operating activities less purchases of property, plant, and equipment Was $0.6 million for Q2 2026, compared to $2.3 million for Q2 2025. This decrease compared to prior year was due to lower cash used in operating activities. Turning to the balance sheet, as of 30 June 2026, we had $17.4 million in cash equivalents, and short-term investments, and $13.2 million in total borrowings. On to 2026 outlook. Based on the strength of our revenue in H1 2026 and our confidence about H2 2026, we are increasing our 2026 total revenue guidance to between $45 million and $47 million, up from $42 million to $44 million previously. At the midpoint, the supply implies approximately 14% revenue growth compared to 2025.

Speaker #2: This decrease, compared to the prior year, was due to lower cash used in operating activities. Turning to the balance sheet, as of June 30, 2026, we had $17.4 million in cash, cash equivalents, and short-term investments, and $13.2 million in total borrowings.

Speaker #2: On our 2026 outlook, based on the strength of our revenue in the first half of 2026 and our confidence about the second half of 2026, we are increasing our 2026 total revenue guidance to between $45 million and $47 million, up from $42 million to $44 million previously.

Speaker #2: At the midpoint, this implies approximately 14% revenue growth compared to 2025. As our underlying end markets continue to recover, we have seen improvement in orders for our custom products, in particular from life science tools and diagnostics customers, driven by our exposure to the liquid biopsy, spatial biology, and genetic sequencing markets, among others.

Matt Lowell: As our underlying end markets continue to recover, we have seen improvement in orders for our custom products, in particular from life science tools and diagnostics customers, driven by our exposure to the liquid biopsy, spatial biology, and genetic sequencing markets, among others. However, biopharma revenue has been muted so far this year due to softness in orders from cell and gene therapy customers. While biotech funding has been strong for the last three quarters, as Stephen mentioned earlier, our experience is that there's an approximately four-quarter lag before that funding begins to flow through to revenue for Teknova. Nevertheless, revenue from our catalog products across all end markets grew in the low double-digits rate compared to the quarter a year ago.

Speaker #2: However, Biopharma revenue has been muted so far this year due to softness in orders from cell and gene therapy customers. And while biotech funding has been strong for the last three quarters, as Stephen mentioned earlier, our experience is that there is an approximately four-quarter lag before that funding begins to flow through to revenue for Teknova.

Speaker #2: Nevertheless, revenue from our catalog products across all end markets grew at a low double-digit rate compared to the quarter a year ago. Despite raising our revenue guidance for 2026, our outlook for 2027 remains unchanged, and we continue to target revenue in the range of the low $50 million.

Matt Lowell: Despite raising our revenue guidance for 2026, our outlook for 2027 remains unchanged, and we continue to target revenue in the range of the low $50 millions. As we have indicated before, due to the high percentage of fixed costs associated with our operations, we estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70%, with some variability quarter-to-quarter in reported results due to GAAP accounting. While gross margin improved in Q2 2026 year-over-year, we remind investors that Q2 2025 included unusually favorable manufacturing efficiencies, making for a difficult comparison. We now expect gross margin to land in the mid to upper 30s% range for the full year 2026.

Speaker #2: As we have indicated before, due to the high percentage of fixed costs associated with our operations, we estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70%, with some variability quarter to quarter in reported results due to GAAP accounting.

Speaker #2: While gross margin improved in the second quarter of 2026, year over year, we remind investors that the second quarter of 2025 included unusually favorable manufacturing efficiencies, making for a difficult comparison.

Speaker #2: We now expect gross margin to land in the mid- to upper-30s percentage range for the full year 2026. The company posted operating expenses of $7.8 million in the second quarter of 2026, reflecting our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026.

Matt Lowell: The company posted OpEx of $7.8 million in Q2 2026, reflecting our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026. Our belief is that these investments will pay off as soon as the end of 2026, but more likely in 2027. We forecast that OpEx will be at least $8 million per quarter through the end of 2026. Taking account of this spending level, we expect to become adjusted EBITDA positive in the range of $52 to $57 million in annualized revenue. If our end markets are stronger in 2027 and our stepped-up commercial investments bear fruit as anticipated, we should report a positive adjusted EBITDA quarter before the end of 2027.

Speaker #2: Our belief is that these investments will pay off as soon as the end of 2026, but more likely in 2027. We forecast that operating expenses will be at least $8 million per quarter through the end of 2026.

Speaker #2: Taking account of this spending level, we expect to become adjusted EBITDA positive in the range of $52 million to $57 million in annualized revenue. If our end markets are stronger in 2027, and our stepped-up commercial investments bear fruit as anticipated, then we should report a positive adjusted EBITDA quarter before the end of 2027.

Speaker #2: As I noted earlier, the company achieved a significant reduction in free cash outflow during the second quarter of 2026, compared to the same quarter in the prior year, although we don't expect that figure to be as low in the next two quarters.

Matt Lowell: As I noted earlier, the company achieved a significant reduction in free cash outflow during Q2 2026 compared to the same quarter in the prior year. Although we don't expect that figure to be as low in the next two quarters. We now anticipate free cash outflow of less than $8 million for the full year 2026, even with the increased investment in our commercial capabilities and potentially higher capital expenditures in H2 2026. With that, I will turn the call back to Stephen.

Speaker #2: We now anticipate free cash outflow of less than $8 million for the full year 2026, even with the increased investment in our commercial capabilities and potentially higher capital expenditures in the second half of 2026.

Speaker #2: With that, I will turn the call back to Stephen.

Speaker #3: Thanks, Matt. Overall, we were very pleased with the second quarter of 2026 and the progress we've made against our strategic priorities. We believe the outlook for our end markets remains positive, and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies, diagnostics, and other products that improve human health.

Stephen Gunstream: Thanks, Matt. Overall, we were very pleased with Q2 2026 and the progress we've made against our strategic priorities. We believe the outlook for our end markets remains positive, and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies, diagnostics, and other products that improve human health. We will now take your questions.

Speaker #3: We will now take your questions.

Speaker #1: Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you'll need to press star one-one on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes to the line of Brendan Smith of TD Cowen. Your line is now open.

Speaker #1: To withdraw your question, please press star one-one again. Please stand by while I compile the Q&A roster. And our first question comes from the line of Brandon Smith of TD Cowen; that line is now open.

Speaker #4: Great. Thanks for taking the questions, guys, and congrats on the strong quarter. Excuse me—I appreciate all the color on the growth drivers in particular here.

Brendan Smith: Great. Thanks for taking the questions, guys, and congrats on a strong quarter. Excuse me. I appreciate all the color on the growth drivers in particular here. I guess maybe first, can you speak a bit more to just whatever visibility you have on the order funnel in Q3 and Q4, especially in that biotech pharma CDMOs bucket? You spoke about that three to four-quarter lag between funding and revenue, but just wondering if it's fair to say this is maybe coming a bit early there? Or just anything to note on the dynamics specifically in H2 and what kind of growth assumptions underpin the new guidance there?

Speaker #4: So, I guess maybe first, can you speak a bit more to whatever visibility you have on the order funnel in Q3 and Q4, especially in that biotech, pharma, CDMOs bucket?

Speaker #4: And you spoke about that three- to four-quarter lag between funding and revenue, but just wondering if you think it's fair to say this is maybe coming a bit earlier there, or just anything to note on the dynamics specifically in the second half and what kind of growth assumptions underpin the new guidance there?

Speaker #3: Great, thanks, Brandon. So, our funnel looks strong. It is not due to what we believe is the biotech funding flowing through yet, right? So we have not yet seen that happen.

Stephen Gunstream: Great. Thanks, Brandon. Our funnel looks strong. It is not due to what we believe the biotech funding flowing through yet. Right? We have not yet seen that happen. We have seen some nice growth in some of the large pharma CDMOs and just general biotech, but cell and gene therapy has been muted. We did have an order push out from Q2 to Q3. Outside of that, it is still pretty muted. We do expect to see this increase. We're getting some nice engagement from customers, and the funnel's filling really nicely. At this point in time, we're not factoring any of that into the H2. I'm sorry. We're not factoring in the biotech funding roll-through into the H2 of the year.

Speaker #3: We have seen some nice growth in some of the large pharma CDMOs and in general biotech, but cell and gene therapy has been muted.

Speaker #3: We did have an order push out from Q2 to Q3, but outside of that, it is still pretty muted. We do expect to see this increase.

Speaker #3: We're getting some nice engagement from customers, and the funnel is flowing really nicely. But at this point in time, we're not factoring any of that into the back half.

Speaker #3: I'm sorry. We're not factoring any of the biotech funding roll-through into the back half of the year.

Speaker #4: Got it. Okay. Okay. Understood. And then maybe just quickly on the build tech lines, I guess, is this something you're kind of able to monetize in the sense that customers pay to use it upfront as kind of part of the order, or is the value kind of largely to your kind of product team on consultation and time savings and just kind of wondering how we should think about potential impact there on either revenue or opex?

Brendan Smith: Got it. Okay. Understood. Maybe just quickly on the Build Tech launch, I guess, is this something you are able to monetize in the sense that customers pay to use it upfront as part of the order, or is the value largely to your product team on consultation and time savings? Just wondering how we should think about potential impact there on either revenue or OpEx. Thanks.

Speaker #4: Thanks.

Speaker #3: Yeah, yeah. I wouldn't expect that you'd see—first of all, we're not going to charge people to use it. This is about building our capability around custom manufacturing and enabling our customers to get those custom products faster.

Stephen Gunstream: Yeah. I wouldn't expect that you would see a, first of all, we are not going to charge people to use it. This is about building our capability around custom manufacturing and enabling our customers to get those custom products faster. The configurator is really built upon training data for 30 years of manufacturing. How do we do it to get all the right specifications up front? The users are putting those in electronically. The formats are for us so we can quickly quote. As you heard me say, we are going to get to so that this quote is done online at some point in the future. This is very much about increasing the brand strength, but then bringing more of these customers into custom products with Teknova and enabling them to do that, than it is around charging for the use of the tool.

Speaker #3: The configurator is really built upon training data from 30 years of manufacturing. How do we do it so we get all the right specifications upfront?

Speaker #3: The users are putting those in electronically. It formats it for us so we can quickly quote. And as you heard me say, we're going to get to so that this quote is done online at some point in the future.

Speaker #3: So this is very much about increasing brand strength, but then bringing more of these customers into custom products with Teknova, and enabling them to do that.

Speaker #3: Then it is around charging for your use of the tool.

Speaker #4: Got it. Understood. All right, thanks, guys.

Brendan Smith: Got it. Understood. All right. Thanks, guys.

Speaker #1: Thank you. One more for our next question. Our next question comes from the line of Matt Larrow of William Blair. That line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matt Blair of William Blair. Your line is now open.

Speaker #5: Hi, this is Jacob Cramble on for Matt. Thanks for taking the questions. So maybe first, you mentioned a lot of tailwinds—the customer therapy moving to commercialization next year, improving biotech funding, and benefits from the commercial investments starting to flow through.

Jacob Krahenbuhl: Hey, this is Jacob Krahenbuhl on for Matt. Thanks for taking the questions. Maybe first, mentioned a lot of tailwinds, the cell and gene therapy moving to commercialization next year, improving biotech funding, benefits from the commercial investments starting to flow through. Just as we think to 2027, is 20% growth still on the table for next year? I know, I think you mentioned low $50 million revenue expectation for next year, just wondering how you're viewing your expectations next year and maybe what elements do you see needing to continue improving the most as you work towards that level of growth?

Speaker #5: But just as we kind of think to 2027, is 20% growth still on the table for next year? I know I think you mentioned low $50 million revenue expectation for next year, but just kind of wondering how you're viewing your expectations next year and maybe what elements you see needing to continue improving the most as you work towards that level of growth?

Speaker #3: Yeah. Thanks for the question, Jacob. That's right. We did highlight the 2027 target as a low 50s million. And that's because at this and that is basically the level that we indicated when we had our initial guidance and the 20% growth on top of that.

Stephen Gunstream: Yeah. Thanks for the question, Jacob. That's right. We did highlight the 2027 target at the low $50 million and that is basically the level that we indicated when we had our initial guidance and then the 20% growth on top of that. We've left that essentially unchanged from a dollar perspective, primarily because at this point it's still middle of 2026 and we don't have visibility and enough time has passed to see that this biotech funding and the impact of our commercial investments, as you mentioned, as well as the cell and gene therapy moving into commercial, how those things will impact us in 2027. At this point, we're just being prudent about next year and setting that up. If these things that I just mentioned do come to fruition and we start seeing those impacting our results, then there could be upside from there.

Speaker #3: So we've left that essentially unchanged from a dollar perspective, primarily because at this point, it's still the middle of 2026, and we don't have visibility.

Speaker #3: And enough time has passed to see that this biotech funding, and the impact of our commercial investments, as you mentioned, as well as the customer moving into commercial, how those things will impact us in 2027.

Speaker #3: So, at this point, we're just being prudent about next year and setting that up. But if these things that I just mentioned do come to fruition and we start seeing those impacting our results, then there could be upside from there.

Speaker #3: But right now, that's what we're seeing.

Stephen Gunstream: Right now, that's what we're seeing.

Speaker #5: Okay, that makes sense. And then I wanted to touch on just inter-quarter demand trends. Obviously, very strong growth in the quarter, but I'm just wondering how things were trending month over month and how we exited the quarter in Q3.

Jacob Krahenbuhl: Okay. That makes sense. Then I wanted to touch on just inter-quarter demand trends. Obviously, very strong growth in the quarter, I'm just wondering how things were trending month-over-month and kind of exiting the quarter in the third quarter. Understand that the back half you guys are being pretty prudent, not embedding any of the improved biotech funding or anything like that, sounds like cell and gene therapy you had an order push out into the third quarter. I guess what's your level of confidence of that coming in the third quarter? Is there any risk it could be pushed out? Is there maybe anything else kind of embedded in the back half guide that we should be aware of in terms of just a timing dynamic?

Speaker #5: I understand that for the back half, you guys are being pretty prudent, not embedding any of the improved biotech funding or anything like that. But it sounds like cell and gene therapy had an order push out into the third quarter.

Speaker #5: So, I guess, what's your level of confidence in that coming in the third quarter? Is there any risk it could be pushed out? And is there maybe anything else kind of embedded in the back half, Guy, that we should be aware of in terms of just a timing dynamic?

Speaker #3: Yeah, I'll just mention on that order, I mean, it's still a relatively small part of our revenue, that cell and gene therapy. I think we're at 24% in 2025.

Stephen Gunstream: Yeah. I'll just mention on that order, it's still a relatively small part of our revenue, the cell and gene therapy. I think we're 24% in 2025. When we talk from a quarterly perspective, that's a relatively small number. These are not $ millions type of orders that slid and it's not something that's going to slide. It's happening in Q3. There's no risk there whatsoever. From the guidance, maybe Matt you want to comment on how we thought through the H2.

Speaker #3: And so, when we talk in a quarter, we respect that that's a relatively small number. So these are not millions-of-dollars-type orders that slid in.

Speaker #3: It's not something that's going to slide out. It's happening in Q3. There's no risk there whatsoever. But then, from the guidance, maybe Matt, you want to comment on how we thought through the back half?

Speaker #2: Yeah. I'll just maybe make this more generally about 2026 guidance, Jacob. So, the midpoint of the range being at $46 million—the way we thought about that was essentially mirroring the revenue that we've seen here in the first half of the year.

Matt Lowell: Yeah. I'll just maybe make this more generally about 2026 guidance, Jacob. The midpoint of the range being at $46 million, the way we thought about that was essentially mirroring the revenue that we've seen here in the H1 of the year. Essentially all things being the same in the environment and what we're seeing in our business, that's all obviously based on what we're seeing from the orders book and funnel and things like that. With $23 million plus in the H1 and now $23 million in the H2, we would expect it to play out as we have in the past couple of years where Q3 is a stronger quarter than Q4. Q4 is seasonally light for us typically because of the fewer business days in that year and that's played out the last few years.

Speaker #2: So essentially, the environment and what we're seeing in our business—that's all obviously based on what we're seeing from the orders book, the funnel, and things like that.

Speaker #2: So, with $23 million plus in the first half and now $23 million in the second half, we would expect it to play out as we have in the past couple of years, where Q3 is a stronger quarter.

Speaker #2: Then Q4—Q4 is typically seasonally light for us because there are fewer business days in that quarter. That's been the case for the last few years.

Speaker #2: So that is how we're seeing the rest of the year. Now, again, if some of these things, like the commercial investment or things in biotech funding, do start to come into play, that's something we'll revisit later.

Brendan Smith: That is how we're seeing the rest of the year. Now again, if some of these things like the commercial investment or things in biotech funding do start to come into play, that's something we'll revisit later. Right now, we're not seeing that yet.

Matt Lowell: That is how we're seeing the rest of the year. Now again, if some of these things like the commercial investment or things in biotech funding do start to come into play, that's something we'll revisit later. Right now, we're not seeing that yet.

Speaker #2: But right now, we're not seeing that yet.

Speaker #6: I got it. Thank you, guys.

Jacob Krahenbuhl: Okay, got it. Thank you guys.

Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Matt Hewitt of Greyhound Capital Group. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matt Hewitt of Craig-Hallum Capital Group. Your line is now open.

Speaker #7: Good afternoon. Congratulations on the strong quarter. Maybe first up, just a clarification: Did you say that it was low double-digit growth for all modalities in the second quarter?

Matt Hewitt: Good afternoon. Congratulations on the strong quarter. Maybe first up, just a clarification. Did you say that it was low double-digit growth for all modalities in the second quarter? Would that include cell and gene therapy?

Speaker #7: Would that include cell and gene therapy?

Speaker #2: No, no, the specific reference that I made to low double-digits growth was about our catalog business, Matt. So, that catalog business doesn't encompass all the modalities.

Stephen Gunstream: No.

Matt Hewitt: No.

Stephen Gunstream: The specific reference that I made to low double-digit growth was about our catalog business, Matt. That catalog business does encompass all the modalities, it only represents 60% approximately of our business, right? That's the rough amount of catalog. There are some different nuances on the custom side, overall, the catalog grew 11%, or, sorry, in the low double digits.

Speaker #2: But it only represents 60% approximately of our business, right? That's the rough amount of catalog. So there are some nuances, different nuances in the custom side, but overall, the catalog grew 11 or sorry, in the low double digits.

Speaker #7: Got it. All right. Thank you for that. And then, and I don't know if you have visibility into this, but as you look at the clinical progress, I think you noted you've got 70 trials for biotherapeutics as well as diagnostics.

Matt Hewitt: Got it. All right. Thank you for that. I don't know if you have visibility into this, as you look at the clinical progress, I think you noted you've got 70 trials for biotherapeutics as well as diagnostics. As you look at those, what kind of progression are you seeing from phase I to II and II to III? Are you seeing some nice ramp there as you look towards particularly the later stage, especially given some of the improvement that we've seen in funding?

Speaker #7: But as you look at those, what kind of progression are you seeing from phase one to two and two to three? I mean, are you seeing some nice ramp there as you look towards, particularly, the later stage, especially given some of the improvement that we've seen in funding?

Speaker #3: Yeah, I would just say that the later-stage customers that we're engaged with—we talk to them regularly—they're planning these things out. This is happening, right?

Stephen Gunstream: Yeah, I would just say that the later stage customers that we're engaged with, we talk to regularly. They're planning these things out. This is happening, right? Assuming that they get approval. The activity there is very structured. We're going to need this by this time, and here's all the orders coming through. Those are sort of timed out over the next, say, six, 12 months, we have those conversations. The earlier stage ones, there's still progression there, and engagement. I don't think it's related to the biotech funding as much as that pre-clinical side is very much where we started. We would see some of the stuff perk up and with biotech funding, and that we have not seen much of just yet. We're seeing higher engagement.

Speaker #3: Assuming that they get approval. So, the activity there is very structured. We're going to need this by this time, and here's all the orders coming through.

Speaker #3: So those are kind of, sort of, timed out over the next, say, six to twelve months. We have those conversations. The earlier stage ones—there's still progression there.

Speaker #3: And engagement, I don't think it's related to the biotech funding as much, as that preclinical side is very much where we started moving some of the stuff, perk up, and with biotech funding.

Speaker #3: And that we have not seen much of just yet. We're seeing higher engagement. We're seeing when we do a quote, it's not about, "Okay, we just wanted to get the budget and then plan it."

Stephen Gunstream: We're seeing when we do a quote, it's not about, Okay, we just wanted to get the budget and then plan it. It's much more around, Hey, we want a quote, and we're going to order. That's a very positive sign for us. We have not seen the biotech funding roll into revenue yet.

Speaker #3: It's much more around, "Hey, we want a quote and we're going to order." So that's a very positive sign for us. But we have not seen the biotech funding roll into revenue yet.

Matt Hewitt: Understood. Maybe just to follow onto that, and I don't know if you're able to disclose this, but how many phase III customers are you currently working with?

Speaker #7: Understood. And maybe just a follow-on to that—and I don't know if you're able to disclose this—but how many Phase 3 customers are you currently working with?

Speaker #3: Yeah, I think we said at the end of 2025, we had five in Phase II or Phase III. And some of these are the accelerated pathway.

Stephen Gunstream: Yeah, I think we said at the end of 2025, we had five in phase II or phase III, and some of these are the accelerated pathway, that's why they put them together.

Speaker #3: That's why they put them together.

Speaker #7: Got it. Thank you very much.

Matt Hewitt: Got it. Thank you very much.

Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Mark Massaro of BTIG. Mark, your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Mark Massaro of BTIG. Your line is now open.

Speaker #8: Hey guys, thank you for taking the questions, and congrats on the strong beat and raise. So, I wanted to start in the life science diagnostic tools space.

Mark Massaro: Hey, guys. Thank you for taking the questions, and congrats on the strong beat and raise. I wanted to start in the life science diagnostic tool space. Stephen, you called out a bunch of areas, notably liquid biopsy. I guess if you could you double-click in there? How much of this is from early detection or screening versus MRD or recurrence monitoring versus prenatal or rare disease or germline testing? I just wonder if you could just give us a flavor of where you're seeing the biggest signs of growth.

Speaker #8: Stephen, you called out a bunch of areas, notably liquid biopsy. I guess, if you could, could you kind of double-click in there? I mean, how much of this is from early detection or screening versus MRD or recurrence monitoring versus prenatal or rare disease or germline testing?

Speaker #8: I just wonder if you could give us a sense of where you're seeing the biggest signs of growth.

Speaker #3: Yeah, I'll give you a flavor. I'm not going to go into all that detail, Mark. But the reality is, we do sell to almost all of the companies that are doing some sort of form of liquid biopsy.

Stephen Gunstream: I'll give you a flavor. I don't think I can go into all that detail, Mark. The reality is we do sell to almost all of the companies that are doing some sort of form of liquid biopsy. The amount they buy from us does vary by customer, sometimes by the application, as you know, and then sometimes by what we provide for them. For some of them, we provide reagents and buffers in bulk for DNA purification or next-gen sequencing library prep, where they hook those up to their robots and go. Others, we actually do the full outsourced GMP manufacturing where we make the product that with everything needed in it for sample preparation for sequencing. The latter, of course, is a larger account.

Speaker #3: Now, the amount they buy from us does vary by customer, sometimes by the application, as you know, and then sometimes by what we provide for them.

Speaker #3: So, for some of them, we provide reagents and buffers in bulk for DNA purification or next-gen sequencing library prep, where they hook those up to their robots and go. For others, we actually do the full outsourced GMP manufacturing, where we make the product with everything needed in it for sample preparation for sequencing.

Speaker #3: The latter, of course, is a larger account. The former is smaller. But we're seeing growth across the board. And we do play in each one of those segments, right, that you mentioned.

Stephen Gunstream: The former is smaller, but we're seeing growth across the board, and we do play in each one of those segments, right, that you mentioned.

Speaker #8: Okay, that's great. And then in the Lab Essentials business, you've talked about an increase in average revenue per customer. If you could try to rank order what you think is driving that—is it just expanding some of the clinical trials work? Maybe could you just double-click in there, please?

Mark Massaro: Okay. That's great. In the Lab Essentials business, you've talked about an increase in average revenue per customer. If you could try to rank order what you think is driving that, is it just expanding some of the clinical trials work? Maybe could you just double-click it in there, please?

Speaker #3: Sure. So, Lab Essentials, as you know, is our research-use-only product. So this is all on the research-use-only side. Some of those are purchased for preclinical work, but a lot of that's also in the tools diagnostic space, where we're making products for discovery and for OEM.

Stephen Gunstream: Sure. Lab Essentials, as you know, is our research use only products. This is all in the research use only side. Some of those are purchased for pre-clinical work, but a lot of that's also in the tools diagnostic space where we're making products for discovery and for OEM. In this case, Matt mentioned that our catalog business grew low double digits. Overall revenue growth for Lab Essentials is 18%, what that tells you is that the custom side grew significantly more than that. The average revenue per customer is likely a lot more driven by the fact that these orders are larger and more of the business is based on the custom side.

Speaker #3: In this case, Matt mentioned that our catalog business grew low double digits. Overall revenue growth for Lab Essentials is 18%. So, what that tells you is that the custom side grew significantly more than that.

Speaker #3: So, the average revenue for customers is likely a lot more driven by the fact that these orders are larger and more of the business is based on the custom side.

Speaker #3: And we are seeing that in a little bit of preclinical, but I would say much more on the tools side, where we're seeing some spatial and some of those liquid biopsy companies buy research-use-only products because they run as LDTs and things like that.

Stephen Gunstream: We are seeing that in a little bit of pre-clinical, but I would say much more on the tools side where we're seeing some spatial and some of those liquid biopsy companies buy research use only products because they run as LDTs and things like that.

Speaker #8: Okay. Fantastic. Last one for me. Just looking at your balance sheet, you guys have a little over $17 million of cash. I'm just curious if you continue to look at the potential for inorganic growth, and if so, what are the types of things that you're looking for?

Mark Massaro: Okay, fantastic. Last one for me. Just looking at your balance sheet, you guys have a little over $17 million of cash. I'm just curious if you continue to look at the potential for inorganic growth, and if so, what are the types of things that you're looking for? I think in the past you've talked about geographic distribution, or perhaps technology, but would be curious what your latest thinking is.

Speaker #8: I think in the past you've talked about geographic distribution, or perhaps technology, but I would be curious what your latest thinking is.

Speaker #3: Yeah, I'll take that one, Mark. So, you're right about the cash there. And as we've said, really now for quite some time, we do believe that we have the liquidity between the cash and the access we have in our revolver to be able to fund the business to cash flow positive.

Stephen Gunstream: Yeah, I'll take that one, Mark. You're right about the cash there. As we've said for now for quite some time, we do believe that we have the liquidity between the cash and the access we have on our revolver to be able to fund the business to cash flow positive based on our organic strategy, everything that we've just been talking about here. Now, we are looking at M&A opportunities with opportunities to expand, as you pointed out, both geographically and also potentially our product portfolio. There are a couple of areas that we've highlighted there, other complementary reagents, including those in the area of proteins, and some other related categories.

Speaker #3: Based on our organic strategy—everything that we've just been talking about here—now we are looking at M&A opportunities, with opportunities to expand, as you pointed out, both geographically and also potentially our product portfolio.

Speaker #3: So, there are a couple of areas that we've highlighted there: other complementary reagents, including those in the area of proteins, and some other related categories.

Speaker #3: So, we've—the part of that, part of the strategy is obviously subject to a lot more whims of what's happening out there with individual companies and their expectations, but we are active in looking and in evaluating these opportunities.

Stephen Gunstream: That part of the strategy is obviously subject to a lot more whims of what's happening out there with individual companies and their expectations, but we are active in looking and in evaluating these opportunities and I'm hopeful that we can find something that makes sense at the right price.

Speaker #3: And I'm hopeful that we can find something that makes sense at the right price.

Speaker #8: Thank you.

Mark Massaro: Thank you.

Speaker #1: Thank you. One more for our next question. Our next question comes from the line of Matthew Parisi of Cuban Capital Markets. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes on line of Matthew Parisi of KeyBanc Capital Markets. Your line is now open.

Speaker #9: Yes, congrats on the great quarter, and thanks for taking my questions. This is Matt Parisi on for Paul Knight at Cuban Capital Markets. Last year, you saw an increase of 25% in your GMP customer count.

Matthew Parisi: Yes. Congrats on the great quarter, thanks for the questions. This is Matt Parisi on for Paul Knight at KeyBanc Capital Markets. Last year, you saw an increase of 25% in your GMP customer count. I was wondering if you could provide any color on the GMP customer count in H1 2026.

Speaker #9: And I was wondering if you could provide any color on the GMP customer count in the first half of '26.

Speaker #3: Yeah. Matt provides a little bit in the script on the number—not the actual number—but whether or not we're seeing an increase or decrease in the number of customers.

Stephen Gunstream: Yeah. Matt provided a little bit in the script around the number, not the actual number, whether or not we're seeing an increase or decrease in the number of customers. In this case, it was an increase. We continue to engage with these customers. We're obviously front-loading, some of them are small. That's why you see the average revenue per customer come down. We still see traction there. We're still onboarding some. Some have either gotten acquired or gone out of business. You have to go over that as a hurdle when we talk about year-on-year. Still feel good about that. I think what we're also very excited about is actually the progression of those customers' therapies through the clinical trials. Which is what we've really been building towards over time.

Speaker #3: In this case, it was an increase. We continue to engage with these customers. We’re obviously front-loading, so some of them are small. That’s why you see the average revenue per customer come down.

Speaker #3: But we still see traction there. We're still onboarding some. Some have either gotten acquired or gone out of business, so you do have to go over that as a hurdle when we talk about year-on-year.

Speaker #3: But it still feels good about that. And I think what we're also very excited about is actually the progression of those customers' therapies through the clinical trials, right? Which is what we've really been building towards over time.

Speaker #9: Appreciate the insight. And then just one last one: you guys signed a collaboration agreement with Pluristix in the first quarter of 2025. I'm just wondering if there's been any update on that, and if you still expect some revenue impact in the back half of '26.

Matthew Parisi: Appreciate the insight. Just one last one, around you guys signed the collaboration agreement with Pluristyx in Q1 2025. I was wondering if there's been any update on that. If you still expect some revenue impact in H2 2026.

Speaker #3: Yeah. Matt, this is a space where BioLife has been the procurement player for a very long time, and they have a very strong position, particularly on the therapeutic side, when they're commercial, right?

Stephen Gunstream: Yeah, Matt, this is a space where BioLife has been the preeminent player for a very long time and they have a very strong position, particularly on the therapeutic side when they're commercial. We're not in that zone yet, let's put it that way, because it takes a long time to take a therapy from one side, from research all the way through. Right now the strategy is get in early with these customers, have them try the product, and then migrate over the next five years. I wouldn't expect anything material significant as a growth driver in the near term.

Speaker #3: And we are not in that zone yet—let's put it that way—because it takes a long time to take a therapy from one side, from research, all the way through.

Speaker #3: Right now, the strategy is getting in early with these customers, having them try the product, and then migrating over the next five years. So I wouldn't expect anything materially significant as a growth driver in the near term.

Speaker #9: Appreciate the color. Thanks again for the questions.

Matthew Parisi: Appreciate the color. Thanks again for the questions.

Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Mac Etoch of Stevens, Inc. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Mac Etoch of Stephens Inc. Your line is now open.

Speaker #10: Hey, this is Hannah on for Mac. Congrats on the quarter. It's good to see. It looks like the only pockets of weakness that you guys are still calling out are on the cell and gene therapy side.

[Analyst] (Stephens): Hey, this is Hannah on for Mack. Congrats on the quarter. It's good to see. It looks like the only pockets of weakness that you guys are still calling out is on the cell and gene therapy side. Is that right? I think maybe there was some preclinical research pockets of weakness in Lab Essentials you called out last quarter. Have we kind of moved past that, or would there be anything else to call out there? Then on the CGT weakness, are there any differences in earlier stage customers versus late stage or any other nuances you would call out there?

Hannah Raiford: Hey, this is Hannah on for Mack. Congrats on the quarter. It's good to see. It looks like the only pockets of weakness that you guys are still calling out is on the cell and gene therapy side. Is that right? I think maybe there was some preclinical research pockets of weakness in Lab Essentials you called out last quarter. Have we kind of moved past that, or would there be anything else to call out there? Then on the CGT weakness, are there any differences in earlier stage customers versus late stage or any other nuances you would call out there?

Speaker #10: Is that right? I think maybe there was some preclinical research—pockets of weakness in lab essentials—you called out last quarter. Have we kind of moved past that, or would there be anything else to call out there?

Speaker #10: And then on the CGT weakness, are there any differences in earlier-stage customers versus late-stage, or any other nuances you would call out there?

Speaker #3: Yeah, absolutely. Thanks, Hannah. Yeah, as I said before, first of all, of all the end markets we serve, I think cell and gene therapy was the only one that was not growing pretty significantly this quarter.

Stephen Gunstream: Absolutely. Thanks, Hannah. As I said before, first of all, of all the end markets we serve, I think the cell and gene therapy was the only one that was not growing pretty significantly this quarter. Part of that was, excuse me, due to timing of that order. The other piece is just really in the early stages in the R&D side, discovery side we are seeing some movement there as well. That has not come back for biotech funding. The second part of your question, around the stage, obviously these later stage therapies that we are talking about that are in that phase II or even phase I, phase II, phase III area, those continue to move forward. We expect that to be a revenue growth driver going forward.

Speaker #3: So, part of that was, excuse me, due to timing of that order. But then another piece is just really in the early stages, in the R&D side, the discovery side, we're seeing some weakness there as well.

Speaker #3: So, that has not come back for biotech funding. The second part of your question—so, around the stage, obviously, these later stage therapies that we're talking about, that are in that phase 2, or even phase 1, phase 2, phase 3 area—those continue to move forward, right?

Speaker #3: If so, we expect that to be a revenue growth driver going forward. And of course, we're loading the front end up as much as we can at the moment.

Stephen Gunstream: Of course, we are loading the front end up as much as we can at the moment. Those right now are continuing to order. It is just more of a timing related thing than anything else.

Speaker #3: So those, right now, are continuing to order. It's just more of a timing-related thing than anything else.

Speaker #10: Great, thanks for the color. And then on the margin side, by our math, it looks like incremental margins might have trended a little bit lower than typical.

[Analyst] (Stephens): Great. Thanks for the color. On the margin side, by our math, it looks like incremental margins might have trended a little bit lower than typical. I know you would normally expect 70% contribution margins. Was there anything that impacted the quarter there or anything you would call out in terms of near term gross margin trends?

Hannah Raiford: Great. Thanks for the color. On the margin side, by our math, it looks like incremental margins might have trended a little bit lower than typical. I know you would normally expect 70% contribution margins. Was there anything that impacted the quarter there or anything you would call out in terms of near term gross margin trends?

Speaker #10: I know you’d normally expect 70% contribution margins. Was there anything that impacted the quarter there, or anything you would call out in terms of near-term gross margin trends?

Speaker #3: Thanks, Hannah. I would just say, first of all, we did highlight some of this as a comparison issue, where last year in Q2 we had a very strong, kind of out-of-the-ordinary gross margin, for reasons due to manufacturing efficiencies. So, part of it is just the comparison.

Stephen Gunstream: Thanks, Hannah. I would just say, first of all, we did highlight some of this is a comparison issue where last year in Q2, we had a very strong out of the ordinary gross margin for reasons due to manufacturing efficiencies. Part of it is just the comparison. We actually saw quite nice improvements when you exclude that impact basically. There is always going to be some fluctuation. I have to say, the 70% is not a strict formula, because there is lots of other things that happen in the income statement. There is going to be quarters where it could be 50 or 80 or whatever. I would say generally, what happened is what we expected, and it is more of a comparison to the prior quarter, which I think is masking some of the real improvement there.

Speaker #3: We actually saw quite nice improvements when you exclude that impact, basically. So there is always going to be some fluctuation. I have to say, the 70% is not a strict formula.

Speaker #3: Because there are lots of other things that happen in the income statement, there will be quarters where it could be 50 or 80, or whatever.

Speaker #3: So I would say, generally, what happened is what we expected. And it's more of a comparison to the prior quarter, which I think is masking some of the real improvement there.

Speaker #10: Great, thanks. That's helpful. I'll leave it there.

[Analyst] (Stephens): Great. Thanks. That's helpful. I'll leave it there.

Hannah Raiford: Great. Thanks. That's helpful. I'll leave it there.

Speaker #3: Thank you.

Stephen Gunstream: Thank you.

Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Max Masucci of Royal Capital Partners. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Max Masucci of ROTH Capital Partners. Your line is now open.

Max Masucci: Hey, good afternoon. Nice quarter, guys. Build Tech. Appreciate the detail in the release this morning. Understanding that you're not charging for Build Tech, but I would assume it could more quickly shift some customers from catalog to custom, so just curious if that could become a light growth tailwind into 2027.

Speaker #11: Hey, good afternoon. Nice quarter, guys. Build Tech. I appreciate the detail in the release this morning. Just curious how the quote volume has trended since the June beta launch.

Speaker #11: Through early August here. And, yeah, understanding that you're not charging for Build Tech, but I would assume it could go from catalog to custom. So just curious if that could become a light growth tailwind into 2027.

Speaker #3: Yeah, we're obviously very excited about Build Tech. It's really fun. I encourage you all to go try it out, right? You can obviously say, "Hey, I want this particular formulation," and then it'll ask you through which type of container, and out of QC it.

Stephen Gunstream: Yeah, we're obviously very excited about Build Tech. It's really fun. I encourage you all to go try it out. You can obviously say, "Hey, I want this particular formulation," then it'll ask you which type of container and how to QC it and how soon you want it delivered, all the pieces that go into how we manufacture the product. You can also just say, "I want the most cited lysis buffer in the space in recent publications," then it will spit out some of the different options for you to pick from. In that example, we're really helping customers figure out what they need and then getting it into our system quickly. I do think it could be a tailwind. I think it's a big differentiator for us in the space.

Speaker #3: And if you want to, how soon you want to deliver, all the pieces that go into how we manufacture the product. But you can also just say, "I want the most cited license buffer in the space in recent publications." And then it will spit out some of the different options for you to pick from.

Speaker #3: And so, in that example, we're really helping customers figure out what they need and then get into our system quickly. And so, I do think it'd be a tailwind.

Speaker #3: I think it's a big differentiator for us in the space. It's much better than trying to sort of do these dropdowns and build your product online, like a lot of other historical configurators in the space.

Stephen Gunstream: It's much better than trying to do these drop-downs and build your product online like a lot of other historical configurators in the space. We're excited about that. We have seen some increase in usage, I think we were really excited when we put it out there and people were finding it, and there are customers that had not been typically ordering custom products from us or not had much engagement. I think we're going to get a wider audience with something like this.

Speaker #3: So we're excited about that. We have seen some increase in usage. And I think we were really excited when we put it out there, and people were finding it, and there were customers that had not been typically ordering custom products from us or had not had much engagement.

Speaker #3: So, I think we're going to get a wider audience with something like this.

Speaker #11: Okay. And so, yeah, you hired some field reps with existing relationships across tools, DX, pharma. Just curious how things are going there, and more broadly, on the heels of your commercial investments.

Max Masucci: Okay. You hired some field reps with existing relationships across tools, DX, pharma. Just curious how things are going there and more broadly on the heels of your commercial investments. Are you expecting to see the benefit show up more in new account wins, funnel conversion, or deal size?

Speaker #11: Are you expecting to see the benefit show up more in new account wins, funnel conversion, or deal size?

Speaker #3: Yeah, so we're very excited. I think we're executing really well. If you remember, there are two pieces—well, obviously, you mentioned the field sales team.

Stephen Gunstream: Yeah. We're very excited and executing really well. If you remember, there are two pieces. Obviously, you mentioned the field sales team, and they're on board and they're executing, the other piece is around lead generation. That's also going really well. That's support from people, but also new tools for lead generation, includes some AI stuff that we've been using. Those are all generating improvements in the funnel, more meetings with the right customers. We targeted this investment towards the biggest opportunities, but some of the more complex accounts that will take some time to play through. We'd expect to see that impact probably in the Q1 2027 timeframe, and it looks like we're on track for those. We see the opportunities added to the funnel, when those would close, and it's probably around that time when we'd start to see the benefit of that.

Speaker #3: And they're on board and they're executing. The other piece is around lead generation, and that's also going really well. That's both support from people, but also new tools for lead generation, including some AI stuff that we've been using.

Speaker #3: Those are all generating improvements in the funnel—more meetings with the right customers. We targeted these investments toward the biggest opportunities, but some of the more complex accounts will take some time to play through.

Speaker #3: So we'd expect to see that impact probably in the Q1 2027 timeframe. And it looks like we're on track to see those opportunities added to the funnel. When those would close, it's probably around that time when we'd start to see the benefit of that.

Speaker #11: That's great. Thanks.

Max Masucci: That's great. Thanks.

Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Christopher Hillary of Roubaix Capital. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Christopher Hillary of Roubaix Capital. Your line is now open.

Speaker #12: Hi. Good evening. Hey, Chris. A lot of great questions have already been asked, so I'll just ask a different one. Can you just remind us where you are with your utilization in your key facilities and how you think about that as you move through this year and into next year?

Christopher Hillary: Hi, good evening.

Stephen Gunstream: Hey, Chris.

Christopher Hillary: A lot of great questions already asked, I'll just ask a different one. Can you just remind us where you are with your utilization in your key facilities and how you think about that as you move through this year and into next year?

Speaker #3: Yeah, thanks, Chris. So, from a capacity utilization standpoint, I think—well, I know—we have a lot of room still to go. So we use revenue as an estimate of capacity, right?

Stephen Gunstream: Yeah. Thanks, Chris. From a capacity utilization, I know we have a lot of room still to go. We use revenue as an estimate of capacity, right? We say $200 million in revenue. Just to put it in perspective, we're operating between four and five days on one shift right now. Obviously we can add multiple shifts, we can go weekends, but even in some of these facilities, we're not at full utilization, even in those shifts. Where adding just a handful more people, we could ramp up work orders significantly. You combine that with some of the efficiencies that we're doing from our lean manufacturing and everything else. I think we're well within the 200 and are excited that we don't have to do another facility build or anything like that.

Speaker #3: We'd say $200 million of revenue. Just to put it in perspective, we're operating between four and five days on one shift right now. So, obviously, we can add multiple shifts.

Speaker #3: We can go weekends. But even in sort of some of these facilities, we're not at full utilization even in that even in those shifts.

Speaker #3: We're adding just a handful more people. We could ramp up work orders significantly. Then you combine that with some of the efficiencies that we're driving from our LEAN manufacturing and everything else.

Speaker #3: I think we're well within the 200, and are excited that we don't have to do another facility build or anything like that. So at this point in time, the projects for manufacturing are a lot more around driving efficiency.

Stephen Gunstream: At this point in time, the projects for manufacturing are a lot more around driving efficiency. How do we get more work orders with the same number of people, but also new capabilities around either automation or new vessel types and things like that can enable us to go after different opportunities that we're finding in the market. I feel very good right now, and we're ways away from needing to do another capital expenditure in that area. Major capital expenditure.

Speaker #3: How do we get more work orders with the same number of people, but also new capabilities around either automation or new vessel types and things like that, which can enable us to go after different opportunities that we're finding in the market?

Speaker #3: So I feel very good right now, and we're a ways away from needing to do another capital expenditure in that area.

Christopher Hillary: Great. Thank you. Following up on an earlier question of sorts, with the commercial investments, the Salesforce investments you made this year, with the progress you're seeing, does it start to inform you about how you might think about that for next year?

Speaker #12: Great, thank you. And then, following up on an earlier question of sorts: with the commercial investments—specifically the Salesforce investments—you made this year, with the progress you're seeing, does it start to inform you about how you might think about that for next year?

Speaker #3: Yeah, we'll be looking probably early Q4, late Q3, to see—does it make sense to make additional investments, right? What's the ROI on what we've made?

Stephen Gunstream: We'll be looking probably early Q4, late Q3 to see that it doesn't make sense to make additional investments, right? What's the ROI on what we've made? These things take a little bit of time to play out, so we always want to make sure we don't get too far ahead of our skis if we don't need it yet. Obviously, if we think we can drive additional growth with more investment, we will weigh that and make that decision. At this point in time, we have yet to see the first $2 million investment roll through in terms of ROI, and we're seeing some really nice growth as is. We're excited about where it's at, but certainly, this is one of those things we evaluate quite a bit and look for the next big moment will probably be at the end of Q3.

Speaker #3: These things take a little bit of time to play out, so we always want to make sure we don't get too far ahead of our skis, or move forward if we don't need to yet.

Speaker #3: But obviously, if we think we can drive additional growth with more investment, we will weigh that and make that decision. But at this point in time, we have yet to see the first $2 million investment roll through in terms of ROI.

Speaker #3: And we're seeing some really nice growth as well. So we're excited about where we sit, but certainly, this is one of those things we evaluate quite a bit, and the next big moment will probably be at the end of Q3.

Speaker #12: Great. Thank you.

Christopher Hillary: Great. Thank you.

Speaker #1: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Operator: Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Q2 2026 Alpha Teknova Inc Earnings Call

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