Rapid Micro Biosystems Inc (RPID) 2025 Q1 法說會逐字稿

Thank you for standing by. My name is RG, and I will be a conference operator today. At this time, I would like to welcome everyone to the Rapid Micro Biosystems first-quarter 2025 earnings conference call. (Operator Instructions)

I would now like to turn the call over to Mike Beaulieu. Please go ahead.

Good morning, and thank you for joining the Rapid Micro Biosystems first-quarter 2025 earnings call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer. Rob is feeling under the weather today, and his voice is quite strained, so Sean will deliver all of our prepared remarks, and Rob will then join for Q&A.

Earlier today, we issued a press release announcing our first-quarter 2025 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under Investors in the News and Events section.

Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements, including, but not limited to, statements relating to Rapid Micro's financial condition, assumptions regarding future financial performance, anticipated future cash usage, guidance for 2025, including revenue, expenses, gross margins, system placements, and validation activities, expectations for and planned activities related to Rapid Micro's business development and growth, including the expected benefits from our distribution and collaboration agreement with MilliporeSigma, customer interest and adoption of the Growth Direct System and the impact of the Growth Direct system on their businesses and operations and statements regarding the potential impact of general macroeconomic conditions on our business and that of our customers.

Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors, including our ability to meet publicly announced guidance, our ability to deliver products to customers and recognize revenue and market and macroeconomic conditions. For a more detailed list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission as updated from time-to-time in our subsequent filings with the SEC. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 9, 2025. Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise.

And with that, I'll turn the call over to Sean.

Thank you, Mike. Good morning, everyone, and thank you for joining us. I'll begin with an overview of our first-quarter 2025 performance and key highlights, followed by insights from recent customer visits. I'll then provide a brief update on the MilliporeSigma collaboration. Following that, I'll move on to my CFO commentary, including a more detailed review of our first-quarter results and our Q2 and full year 2025 outlook. As Mike mentioned, Rob will join for Q&A after our prepared remarks.

Total first quarter revenue increased 28% to $7.2 million, marking our 10th consecutive quarter of meeting or exceeding guidance. We experienced double-digit growth in both product and service revenue. Notably, service revenue increased 64% year over year and was a quarterly record.

We placed three Growth Direct systems in Q1 and now stand at 165 cumulative global placements, including 146 fully-validated systems. First-quarter gross margins were 6%, representing a 33 percentage point improvement compared to the prior-year quarter. We're pleased with our strong start to the year, meeting or exceeding each component of our first-quarter guidance.

Multiple revenue streams drove this performance, including a growing base of durable recurring revenue, which totaled $4 million in the quarter. Equally encouraging is our continued progress in achieving product cost reductions, manufacturing efficiencies and service productivity, which drove significant gross margin expansion compared to the prior-year quarter.

Over the past 2 months, Rob spent considerable time meeting with customers, and these conversations yielded highly encouraging insights. Both current and prospective customers made it clear that demand for the Growth Direct continues to be robust. This feedback, in addition to recent customer success stories and the announcement of our collaboration with MilliporeSigma, demonstrates the strength of our products and technology and our continued leadership in the market. In fact, we're currently working on multisystem Growth Direct deployments with several customers who recognize its robust value proposition, including its ability to standardize workflows across their global organizations.

As for the broader market, a recent and notable trend involves planned investments in the US by global pharma and biotech companies, many of which are current customers to expand their manufacturing capacities. Estimates for these investments over the coming years exceed $150 billion. New construction often incorporates the latest technologies, and we believe based on the Growth Direct's value proposition and prior examples of supporting new customer facility expansions, Rapid Micro is well positioned to take advantage of this multi-year trend.

Turning now to a brief update on our progress with MilliporeSigma. We're off to a strong start with our key work streams. As a reminder, this collaboration includes global co-exclusive rights to sell the Growth Direct system and related consumables into pharmaceutical quality control and manufacturing as well as sizable adjacent segments such as personal care products.

The agreement also includes a joint commitment to identify opportunities to bring efficiencies to our supply chain, reduce product costs and accelerate our goal of improving gross margins as well as collaborating on existing products and new development. Project teams from both organizations are working well together, and we have held joint meetings both in our Lexington, Massachusetts offices and MilliporeSigma's offices in Europe.

We are excited about the opportunity this partnership provides to advance our priorities of accelerating Growth Direct System placements, improving gross margins, and developing innovative products. And we look forward to updating you on future calls.

So to summarize, our performance in the first quarter was strong, and we continue to demonstrate consistent execution. Customer feedback reinforces our positive outlook on the market opportunity for system placements. Our funnel of sales opportunities is expanding year over year.

Cost reduction efforts, manufacturing efficiencies, and service productivity improvements continue to drive meaningful margin improvement. We are excited about the MilliporeSigma collaboration and remain confident that there are significant opportunities to advance our key priorities. And finally, we are well positioned to benefit from the expected build-out of US-based pharmaceutical manufacturing capacity by top global pharma and biotech companies.

Now, I'd like to turn to a more detailed review of our Q1 performance and outlook. First-quarter revenue increased 28% to $7.2 million compared to $5.6 million in Q1 2024. During the first quarter, we placed three Growth Direct systems, which was consistent with the first quarter last year. We completed nine validations in the quarter, including several we previously expected to complete in Q2 compared to three in Q1 last year.

Product revenue, which is comprised of systems and consumables, increased 10% to $4.1 million in the first quarter compared to $3.7 million in Q1 2024. While system placements were consistent between the periods, higher sales of software drove an increase of over 20% in systems revenue. Consumable revenue grew in the mid-single-digits compared to Q1 last year, which was our highest revenue quarter for consumables at the time.

Service revenue increased 64% to $3.1 million in the first quarter compared to $1.9 million in Q1 2024. The growth compared to the prior-year quarter was driven by significantly higher validation activity, one-time services for previously validated systems and higher service contract revenue due to the increase in the number of validated Growth Direct systems.

First-quarter recurring revenue, which consists of consumables and service contracts increased 6% to $4 million. Non-recurring revenue, which is comprised mainly of systems and validation revenue increased 73% to $3.2 million.

Turning to gross margins. Product margins were negative 23% or negative $0.9 million in the first quarter compared to negative 39% or negative $1.5 million in Q1 2024. We continue to execute effectively against our product cost reduction and manufacturing efficiency initiatives. Service margins were 43% or $1.3 million in the first quarter compared to negative 3% or negative $0.1 million in Q1 last year.

The 46 percentage point improvement was driven by higher revenue and productivity as well as lower headcount and other service-related costs. On a combined basis, the first-quarter gross margins were 6% or $0.4 million compared to negative 27% or negative $1.5 million in Q1 last year. The 33 percentage point improvement compared to Q1 last year continues to demonstrate the significant progress we're making in expanding gross margins across our business.

Moving down the P&L. Total operating expenses were $12.1 million in the first quarter, representing a decrease of 5% from $12.8 million in Q1 2024, largely due to benefits from the operational efficiency program we announced in August 2024. As anticipated, the full benefit of the actions we took under this program have been realized as of the end of the first quarter.

Within OpEx, R&D expenses were $3.6 million, representing a decrease of 6%. Sales and marketing expenses were $2.8 million, representing a decrease of 16% and G&A expenses were $5.7 million or essentially flat.

Net loss was $11.3 million in Q1 compared to a net loss of $13.3 million in Q1 last year. Net loss per share was $0.26 in Q1 compared to net loss per share of $0.31 in the prior-year quarter. With respect to non-cash expenses and capital expenditures, depreciation and amortization expenses were $0.8 million, stock compensation expense was $1 million, and capital expenditures were $0.3 million in the first quarter. We ended the first quarter with approximately $42 million in cash.

Before I review our second quarter and full-year 2025 outlook, I'll make a few comments about the current macroeconomic environment. With respect to tariffs, we are closely monitoring the evolving landscape, but do not currently expect a material impact from tariffs on our 2025 results. While certain materials we use in our products do have some tariff exposure, we expect our ongoing cost reduction and manufacturing efficiency initiatives, combined with current inventory levels and proactive supply chain strategies to limit any impact this year.

From a revenue standpoint, our guidance continues to account for ongoing uncertainty around the timing and scale of customer purchase decisions, particularly with respect to larger multisystem opportunities, which often involve more complex purchasing considerations and processes. The tariff environment adds incremental uncertainty to this.

Now turning to guidance. We are reaffirming our full year 2025 total revenue guidance of at least $32 million with between 21 and 25 system placements. We expect Q2 revenue to be in a range of $6.75 million to $7.75 million, which assumes a range of between 4 and 7 system placements in the quarter. These ranges account for system orders that we have in hand or expect to receive in Q2.

Delivery of a few of these systems, which triggers placement and revenue recognition, is dependent on progress against ongoing construction activities at customer sites. Given potential variability in construction timing, we believe it's prudent to incorporate a range of outcomes into our quarterly guidance. In the event these systems aren't placed in Q2, we expect them to be placed in the second half of the year.

Turning to consumables. We expect Q2 revenue to be relatively consistent with Q1. We then expect consumable revenue to step up in both Q3 and again in Q4 with variability driven by the timing of customer orders and shipments. With respect to service revenue, we expect to step down to between $2 million and $2.5 million in Q2 due mainly to the acceleration of certain validation activities into the first quarter.

We continue to expect that Q1 will be our highest service revenue quarter and that we will complete at least 18 validations in the full year 2025 with at least two in the second quarter.

Turning to margins. We expect Q2 gross margins to be relatively consistent with Q1, with better product margins due to progress on our product cost reduction and efficiency initiatives and higher revenue from our Mold Alarm software, but lower service margins due to lower service revenue. Based on our revenue outlook, we then expect gross margins to increase in the second half as product margins improve as a result of continued progress on our internal initiatives and higher product revenues.

For the full year 2025, we continue to expect total gross margins as a percentage of revenue to be in the range of high-single digits to low-teens. We also continue to expect operating expenses to be between $44 million and $48 million for the full year. We expect depreciation and amortization expense of $3 million, stock compensation expense of $4 million, CapEx of $2 million, and other income, which is comprised primarily of interest income of $2 million.

Finally, we continue to expect to burn roughly $30 million in cash for the full year 2025, which would be a roughly [$15] million reduction compared to our cash burn in 2024. That concludes my comments.

So at this point, we'll open the call up for questions. Operator?

(Operator Instructions)

Dan [Arias], Stifel.

Hey. Good morning, guys. Thank you. Sean or maybe Rob, maybe just can you start on the environment and just how you're feeling about business prospects right now relative to the last time we spoke, I mean, it's obviously a fluid situation right now in the marketplace.

Each company has their own set of sort of spending priorities. So what are you hearing from customers about the importance of Growth Direct? Are you sensing that there's either increased hesitancy on purchasing or maybe increased interest just because it plays into the efficiency angle that a lot of these companies are looking for right now?

Yeah. Hey, Dan, it's Rob. For obvious reasons, I'll keep my comments brief, but do a lot of traveling with customers. And takeaway is, key projects are being prioritized. In many cases, Growth Direct is part of that, which gives us confidence. I also heard, especially in Europe, some incremental, I would say, uncertainty around the tariff situation.

But net-net, the multisystem orders in our funnel that give us confidence in the guide in the year. We feel like they're being prioritized, and it's buttressed by conversations that we've had with senior leaders at these companies. So while the environment is, I would say, incrementally more uncertain from our last call, high-ROI key projects are being prioritized.

Okay. That's encouraging. I'll give you a break. Sean, maybe on the gross margin side, nice progress here. Obviously, the environment puts pressure on gross margin improvement for any company. So can you just talk to the trajectory given the tariff headwinds that are in the mix. It doesn't sound like that's going to be overly material for you, but it is in the picture.

What does an exit rate for margins look like now versus last quarter if we sort of balance the things that you're working on efficiencies, service productivity, et cetera, with just the overall pressures that the macro picture brings?

Yeah. Thanks, Dan. I think not very different, I would say. Just to give you a little bit of background on our tariff kind of layout on the inbound materials side, which is really where the potential impacts could be, we do source most of our materials within the US. Having said that, we do source some of our materials from the EU as well across both systems and consumables. It's at a meaningfully lower level, I'd say. And then another important one for us is we source all of our plastics for our consumables out of Canada.

The good news for us there is that that's significant, but it is subject to an exemption under the USMCA. So we're not seeing tariffs in that part of our cost structure right now. And then we do source a very, very small amount of material for our systems out of China, but I'd call it de minimis at this point. So we don't expect any meaningful impact from China at all based on where things stand right now. And even if things get worse in China, it shouldn't impact us just given the low-level of sourcing we're doing there.

So that's really what lies behind it. I think, Dan, as you know, we're doing a lot around cost reduction, manufacturing efficiency. There are things in that area that we're looking to potentially accelerate a bit to help offset the limited impact we do expect to see here.

Importantly, and we mentioned this on the prepared remarks, we've talked a lot in the past about the amount of inventory we have, safety stock across systems and consumables. That's very helpful in the current scenario in the sense that it means a lot of the materials that have some exposure to them, we don't need to buy right away, and we have the luxury of kind of waiting and seeing what happens here. So based on all that -- and we're not expecting to see the trajectory at the end of the year be very different than what we thought it was a couple of months ago.

Okay. I think at the end of the year, your gross margin -- the idea for gross margins for the full year was high-singles or low-teens. If we kind of balance out the puts and takes, what it is that you did in 1Q, which is pretty good and then some of these other factors? Is it okay to model a double-digit number for the year?

Yeah. I think we'd expect the exit rate for the year to be higher than the guide. So I think that's a fair assumption, Dan.

Paul Knight, KeyBanc Capital Markets.

You mentioned 18 validations this year. How many were last year?

In Q1? That's for the year Paul, right?

Yeah, and how should we -- yeah, that's my first question, yeah.

Yeah. We did 16 validations last year. So it's slightly up. I think we would expect to have some potential for upside on that guide number right now. We're still pretty early in the year. Some of these validations take some time to kind of -- for us to get clarity around the timing of them because they do involve high levels of customer engagement.

So I think we feel good about the guide at 18%. that would be up slightly from last year. I think there's opportunity for us to potentially do better than that as well.

And then the CapEx we're seeing, which is pretty massive of CapEx in the US, is this new? Or has this really just been on the books? And then a follow-on to that is, how quickly do you see this turn into business for you?

Hey, Paul, it's Rob. Yes. So whether it's new or existing, it's hard to tell. But what I can tell you is we often work with customers on expansions of new facilities or expansions to existing facilities, expansions to existing labs. So it's an ongoing effort by our customers.

This may signify a focused effort in the US, which we plan to benefit from. So generally, this feels to us like ordinary course of business with potentially projects being prioritized in the US. And we typically view this as good news because new projects, new buildings typically adopt newer technology, and we're obviously a great fit for those installations.

(Operator Instructions)

Chad Wiatrowski, TD Cowen.

Hey, guys. This is Chad Wiatrowski on for Brendan Smith. Just given the automation and sort of unique data generation that the Growth Direct provides, you sort of assume that maybe long term, there's ways that AI could kind of gain some value out of this machine. So sort of how material is AI as part of your long-term strategy? And is there anything that we could look at specifically as sort of updates on that front?

Yeah. So in the reverse order, updates will come in the future, but certainly, software advancements to include AI are part of our R&D road map. I think we chat about this at your conference, but our automation is creating an enormous amount of digital data and helping customers manage that data across a fleet of Growth Directs is something that's very high on our R&D radar.

So we are very bullish on the future of AI and how it could impact this business in the market, coupled with our software development pipeline as well.

Got it. And then just on the MilliporeSigma deal, is there any reason that that gives you some flexibility to sort of offset any tariff impact from a selling standpoint, working with a global distributor like them? And then are there any specific things to look for as you continue to progress through the year just on margin or efficiency front?

Yeah. I'll start with that. Rob may have some comments or two. I think on the question about MilliporeSigma and distribution, I don't think there's anything obvious to us, Chad. In terms of that, I think how they look at the market, how we look at the market hasn't changed because of tariffs. I think we both need to manage the situation as it evolves.

I think we've talked through kind of where we are. And on the revenue side, it's really incremental uncertainty. It's not direct impact from tariffs. As they look at their markets, they may have a different -- they probably would have a different picture to look at there because their distribution of revenue and their opportunities would look a little bit different than ours. But I don't think we see anything obvious in terms of mitigation strategy for us around that necessarily.

Then you had a second question. Could you repeat that?

Yes. Just you mentioned the progress you've made sort of through this year and the beginning of the year and through the remainder of the year, is there anything to highlight kind of from that collaboration that we could look at as signs of success?

Yeah. I think as we look at that, the activity that's happening there, a part of that does relate to supply. We talked on the last call about the fact that there's a very good match, for example, in consumables. A lot of the material that we use in our consumables, they are able to provide. And we're in active conversations about the potential of bringing that in and potentially driving cost reduction through sourcing those materials from MilliporeSigma.

I'd say the base case margin plan we have right now or the forecast we have right now does not assume that we have benefit from that. I think there's an opportunity to get some benefit late in the year from that potentially, but there's execution that has to happen to get there.

So I'd call that upside at this point. I think looking out a little bit longer into the next year or two, I think that there will be opportunity expansion in terms of our ability to leverage that relationship to drive incremental margin improvement.

That's helpful. Thanks for the questions.

Okay. Thanks, Chad. We're going to wrap up this morning's call. Thanks to everyone for joining us today. We look forward to speaking with many of you soon.

That ends our Q&A session, and we appreciate your participation. And ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.