Alpha Teknova (TKNO) 10 May 232023 Q1 Earnings call transcript

Good day, and welcome to the Teknova First Quarter 2023 Financial Results Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker, Senior Vice President of Marketing at Teknova, Jennifer Henry. Please go ahead.

Thank you, operator. Quarter Earnings First Call. Teknova's to of Conference XXXX Welcome who Gunstream, call and Lowell, With remarks Officer, today's your Stephen then Teknova's make Teknova's take and Financial Matt me on and are President questions. prepared Officer; Chief Chief will Executive

reminder, of that we to the uncertainties subject risks the including company, this make for expectations that statements goals actual and results business are differ. regarding and forward-looking events may the a during call, As those financial or cause performance to

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

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

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

therefore use non-GAAP call. of this during will of measures results our certain financial We

GAAP. Reconciliations we measures Non-GAAP which always this to and not considered in for as are measures posted substitute of at or is with issued and Teknova's only superior to financial website afternoon, a financial press release in measures to supplement to GAAP www.sec.gov/edgar. non-GAAP the financial should as that be included accordance as a prepared

the on deck website section this webcast. today's presentation has advised by Relations remarks. company measures to Teknova's differ that in used be slide today's other of and accessed can non-GAAP be prepared a non-GAAP The also measures supplemental accompany posted on It similarly Please Investor financial may from named companies. financial the

call And will turn the over to now Stephen. I

us Thank quarter our first XXXX Good and joining for for afternoon, thank of you, earnings everyone, call. you, Jen.

help people molecular reagents customers a their positioned and will custom live are to with with high-quality times of introduction lives. We products to life vaccines for therapies, and of as sciences is commercialization. discovery healthier the diagnostics scale Teknova manufacture novel advance industry from producer critical to reagents leading turnaround they that the accelerate short longer, our

We a the good year. had start to

Our environment by our plan, delivering with increasing revenue in results a line dynamic by team in manage continued including XX%. to sequentially

particularly the are we tracking key pleased well also executing our but to only are for that financial company to the accelerated We sustainable metrics initiatives not are for growth. ahead to on we position our plan on or expected year,

believe stabilization an the customers, saw remain we markets. in and in customers demonstrates growth Solutions target quarter demand increase First, from overall the our potential the of optimistic the Clinical our long-term first about in we and

our to continue also full commercial in line guidance remain the confident top our We funnel and see strength year. in for

production facility new by GMP-grade track state-of-the-art our modular for on Second, is manufacturing mid-XXXX.

product of early approximately we for addition, indications plus third audits are when schedule the In who to by of quarter. certain deliver give to us interest annual early the facility fully infrastructure believe capacity million this revenue from our We begun will existing $XXX operating our in new customers encouraged have in utilized.

believe say with ever therapy collaboration for am improve processes. announced can we help purification our of set bioprocessing as Sartorius reagents, time the they BIA last on In AAV their gene we save our Building this news, to development first schedule. our workflows. months on customers launched of pleased customers week, R&D front, of develop proprietary we pipeline which March, to I ahead progressing a product Third, separations is new AAV

commercialization. supplier As their proprietary even customers their therapies production an clinical into to critical advance as towards incorporate processes, reagents these expect become we they more

the corresponding the cost tracking And in while quarter when sequentially $XX down onetime excluding Operational reduction are plans. cash expenses to million, we were outflow Lastly, well costs. our was expenses approximately $XX primarily planned our towards outflow fiscal qualification previously of the to total communicated and approximately related our cash for were facility. target we new and tracking are million of completion XXXX. Thus,

of financials. I will for call hand to now the Matt a the over discussion

good and everyone. afternoon, Stephen, Thanks,

was quarter of quarter XX% early-stage an first continued of $X.X XXXX, lower in the demand associated reflecting $XX.X in from million XXXX, million for the observed of revenue we which Total with headwinds third the first customers, biopharma the from decline quarter first XXXX.

$X.X $X.X offset both products revenue research quarter quarter primarily XXXX, average the driven first X% are million a the market XXXX. and was include Essentials targeted RUO revenue at customer, the and quarter number products. in customers. catalog the Lab first of use increase a decreased was from partially or by per first higher by only of Growth of million Lab for custom Essentials in

quarter, Clinical million in diagnostic of and therapeutic from Solutions products. components decrease good customers inputs quality the a used to practices, standards our GMP, $X.X was the made of $X.X development manufacturing in or by or XX% the products according primarily are Solutions first and first XXXX. in as manufacture quarter million revenue Clinical

The Solutions attributable offset revenue lower customers. an number customer, revenue per increased by decrease partially to in of Clinical was average

per volumes. ramp over their We to up increase expect purchase revenue customer time they as

metric by less. the typically be of who mix affected can newer order customers this However, clinical

quarter-to-quarter clinical be compared there category. Just Essentials, reminder, lumpiness to as average can this due in to order the large a revenue in solutions sizes Lab

by million in quarter compared for first fixed manufacturing including the of was quarter XXXX, XXXX. depreciation the $X.X our quarter was from Gross million XXXX. to XX.X% associated The XX% lower XXXX the of down the lower primarily and of in labor which first $X.X of quarter is from profit in absorption XXXX facility. of margin first and quarter revenue of Gross new revenue quarter XXXX first in of of gross the for first the revenue driven the decrease overhead costs, a margin first of to was compared

the first were million of quarter Operating million $XX.X to $XX.X first for for XXXX XXXX. compared expenses quarter the of

compared of of $X.X incurred million to first the of nonrecurring first the XXXX. quarter reduction quarter of decreased workforce the operating onetime charge the Excluding expenses related during to XXXX,

approximately The was expected decrease by in reduction spending, professional higher partially to fees reduced compensation of generate and and primarily workforce costs, in occupancy savings approximately annualized positions driven is XX expense. million. stock-based $X offset of by wages The

currently for of of net minimal against against Net carryforwards. quarter compared to million million of a valuation or operating recorded as incremental $X.XX quarter pretax first XXXX $X.X is XXXX. losses loss share net $X.XX the diluted $X.X this for diluted was first quarter allowances its The loss it or per company loss the tax recording benefit per share

of the first EBITDA, Adjusted a measure, XXXX. quarter first XXXX to negative $X.X of non-GAAP $X.X million for for the compared negative quarter was million

increased million sequentially. $X more However, by than adjusted EBITDA

of GMP for completion XXXX to capital $X.X of of new first XXXX. expenditures of the the and quarter third in million first quarter the of Capital spending the compared the Most straight towards our for quarter qualification quarter were $X.X marks the of production first went expenditures. declining This facility. XXXX million

measure by operating compared million expenditures. primarily XXXX. used Free $XX.X a of operating year cash This purchases $XX.X decrease to period to due activities, we for capital cash prior equipment, partially was and negative the in a million cash property, the less flow, higher as offset for quarter activities, define or of was non-GAAP negative compared used XXXX the quarter first of in plant which decrease in to provided by first

sheet. balance the to Turning

debt. cash and equivalents we March XX, $XX.X $XX.X XXXX, gross and in million cash of in had million As

and our XXXX outlook. Now on to guidance

XX% expect We are categories, of midpoint, total to includes million. XXXX. roughly Essentials to million this shifts to products Clinical between revenue continue XXXX. flat product to the XXXX in Solutions $XX At growth revenue This a compared assumes XXXX to Lab to reiterating we XX% category compared growth $XX that compared X% be significant guidance product and customer Clinical grow XXXX. to assumption to Lab of to Essentials revenue Solutions revenue to the from respect approximately With guidance

of At March, XXX to down aggressively XXX of company the company the associates, expenses. at The from manage had continues XXXX. end end the

Excluding in nonrecurring for the which time the not XXXX, company reflect completed below the in the million since operating force benefit February. posted first full reduction did of charges, expenses $XX

first consistent cash the year we saw trend expenditures Similarly, the course continue downward expectations during lower and to the outflow over quarter third and of the of anticipate with quarter for the XXXX. the capital reduction of free straight as cash to outflow marks losses This operating year. is company a the company's in

to In made without and already execute addition revolver million to and investment. million. cash up facility additional significant on investments $X have ATM Further, scale up needed growth our our to $XX.X hand, we strategy access have can we to believe the we to step-up

With that, call will I back Stephen. to turn the

Matt. Thanks,

the The of with quarter markets for we're outlook first performance positive. Overall, our pleased long-term our end in remains XXXX.

health. human of introduction committed our are diagnostics customers and other to help executing We that our strategy products improve the on novel therapies, to accelerate

questions. now will We take your

line [Operator with Instructions] first from question. Stephens. One of will Johnson for moment come Jacob That our the

just on a to any seem just on it and given hesitation year this the from question, kind customers but cell versus maybe it to be kick just due like mixed Maybe because you're seeing space. or macro. you macro plan, the up Congrats start put -- macro. expectations, seems the kind if quarter. therapy I'd there's quarter and lazy of with just about this been lot commentary curious be gene of off of so there maybe ahead at to Certainly the prior doesn't your result the tracking of the least

Yes. Great.

aren't And custom not we called things destocking think space out are stocked, decrease players our them right? a unique the in a we have I little earnings different get are to seen to some our and not XXXX. that in manufacture bit of and have than ability what that sort after these We of a in from there other so quickly piece. the some prone reagents QX We

some of biotech tied, obviously, the are we But funding. to

a funding we impact the reiterated the happening those size half clinical before, biotech was the trials and year, of trials. or of the saw reduce had saw in in back which the of slowdown what we when is clinical in So what number shift that we've

working, new said building in And we to I first that and environment of half paying believe see as of this for is the that positive customers that said a clinical customers as we be and year the their is we're we off our they're as should indicated. increase operating quarter. the commercial talking funnel the that kind in earnings kind a year of we're in what seen in very call, normal And that can just sign up. where budget here strategy the have back see the we've script you have building a an the And last and in in from now we

today disclosures then formal testing been of you've launch. follow-up, with the [ That especially of the of reception, just seems chromatography And about the curious Got be launch I capsids so to I customers guess the given ]. commercial about some think kind the but that it. downstream on difficulties of the AAV-Tek product, I'm

Yes. it And it major think a time I started here is XXXX. the point from pain in

with first awesome therapy and customers. The and has empty these really we solution done was putting of gene together complete these AAV those developers separating talked the a some time an team full of for capsids, job

the couple We're AAVX response serotype more downstream, in to ready and us more and go they has us stock, first onboard in ago marks lot some customer as our time go they to through as bigger The what is then launched it's really reagents. a excited. Teknova's product of on products. We been into kit And the become get And really weeks excited. them of The help these proprietary go. reliant actually and customers launched favorable, commercialization. going they a very

most is of can to a we do clinic that identify save right this lot importantly get of the work faster. step, for last months them to time of set that in polishing and them, is of to work step buffers them probably But which into

for our from Larew line next with Matt that One will William And the moment of Blair. come question.

of about Madeline little guidance see step-down the Solutions? Mollman you Clinical actually incorporated trending Clinical you know Thinking bit And from part Solutions' is to is what your Matt. over talk how newer towards driven mix I year that year-over-year. This in you the about a was on year? the kind said for due of that that Can for customers.

number particular start. Yes, Particularly I'll the free I and in. on mid-stage have to the and talked impact therapy size affected trials funding a trial, their of overall about cell early us, in of that by the the and and changes Matt, we biotech. through gene they pipeline. mean, for and that, therapies were feel number number working customers jump of the clinical in we've clinical the biotech reduced space different are of

the for the pulled we it's obviously so and And forecast that year. built out into

line in with these And so we'd I are quarter. what not expect after if mean, be, ahead, surprising, not right to first

though, do we the up customers. commercial to the do have yes, going, the a a number that On that year, we're organization we our but this average into funnel to see back is the For excited clinical look and at XXXX. really down, do and spending's the year year-on-year, expected. remainder is of half of of lining think increased and we And well obviously then we up that as

that commercialization a way expansion, allow facility can but obviously we with through and that combine their be that And facility of the of onboard beyond. some can the will you all with customers Then us capacity facility new realize also our now lot allows to these look at and opening. them

half of things, think, two year sets So really of for XXXX. back a well in up us I the strong the mean, I combination those

Great.

margin that Does in thinking perspective, full be margins around year? the -- expecting for change about this think from were margins changed year you're And anything piece about I you so a you past, thinking the Clinical Solutions XX%. said how the to just

Yes. contribution full I certainly guidance really certainly amount year, revenue year would considered clinical that the a not as margins. we've our range. again, for the just on for in of year. perspective margin about revenue XX% kind into say the the -- the We mentioned for the I from of here, changing reiterated we've That's mean,

gross margins. from So quarter. is when overall biggest contributor the help the think bigger see I is revenue But will at could help generally just the to times margins a be a we speaking, volume. revenue to It in Clinical

are the you we're level still still we're for this same result seeing margins to revenue -- Maddy. for last new similar type quarter full mentioned, this the looking the they So facility coming where with at of play. current the and year, But into

our Mah the for will next TD of Cowen. Steven with moment from come That One question. line

research Solutions guys of have big pain is ones couple market the this new? given other on AAV Congrats of in if product point so on A did, the to the that voice you Did customer, it's you follow-up guys the market sense this quarter. any you for AAV-Tek do kit. how a do And opportunity on bioprocessing? identify

solves new is a a it mean, for I a customers. product, a Yes. it's problem certainly number and our that of product

market So research also obviously, on did research, market yes, we to talking the product. but do customers directly, additional

coming and of use of term, months this driver get this done over formulation, of virus work find Again, figure really if the in buffer reagents they into with our specific the can the value a out solution long a and weeks. to to of they've Instead is very come purified right? right to couple right polished, us proprietary what to combination their

area actually this move they're increase. of we we feel about before the size that's also going at not you was if size, one way good company public this do some frame and and that, trials, our to beginning expansion the a reagents of they've so of the they And thirtyfold then I is through pretty that research number points. once the from was that bigger, therapies they pipeline even We pain took it, as look look time one in end of ultimately kind larger critical become and the And to the at think most commercialization. down about mean, in the using AAV, of of the but only did

think disclosed we've don't that yet the of size market. I

later on number at you go date. assume depends the do that's spend, and then obviously we on it could through think that something maybe I but trials that the of a

it for could many Okay. like sense you kit, assays give the through? me go would then how Got just it. And a

experiments we call design of The out kit a is here internally. number of itself done what built

hundreds this combinations evaluate. size of X-liter we basically to buffer about different bottles seven in a to total, to of So ran buffers, down XX set combination so customers for

So choosing may platform end transgene, the purification using, or you depending as the the up these the on buffers. using sort resin they're their seven serotype they're of of as well one for

this and then all which So in, you. will dip kit for the of is work you try those whole you seven idea combinations identify

us couple define, clinical larger things. through then and order can find and they scale. continue them to work also combination And between that into makes for We production us. there's in which order They some of then those of do can what out if them with them will And It's a them do of a sell Obviously, them then one to They come we forward, can a kind formats. even They individually. scale to can get can with give GMP those to order couple the can results. we them trials. up then really going unique. can better is in of customers back them them these

helpful. really And That's a Okay. the for Matt gross margin. about then question

about should out think you the your do overhead can begin gross margin new we expect and fixed comes to then the as facility how margin the When sort facility So impact and and as gross recover? to online, bottom you costs? of spread out scales

Yes.

overall, the XX%, over see we're pretty to that expecting is XX% the acceleration think, quite bit a that gross margin but the grow we for gross I next That's as to we're line good margin here as long-term expect targeting top are some above we several today, right? we years. in where story

going potential So we do forward. have that

of the the have In a year. you a as on with started portion that facility very the of on end the Depreciation to costs depreciation the we of there major P&L. at run, particular. out, short in facility one going impacting are be pointed is new that margins, some pressure last We gross is

results, of will more further depreciation QX we'll in later this a the parts full be of increase online facility which We load. the that and have year, quarter bringing

low these in. see of will because line, year, this -- some start costs I improvement the to going But think we grow added be 'XX, the top point And as FY it's we'll coming forward. material

questions at for time. queue This you participating. this the Thank no concludes showing further I'm in all today's program.

You may now disconnect.