Maravai LifeSciences Holdings, Inc.

Good afternoon and thank you for standing by. At this time, I would like to welcome everyone to the Q4 2023 Miravai Life Sciences Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, please press the star one. I would now like to turn the conference over to Deb Hart, Head of Investors Relations.

Please go ahead. Good afternoon, everyone.

Thanks for joining us for our fourth quarter and year-end 2023 earnings call. Our press release and the slides that accompany today's call are posted on our website. and are available at investors.maravai.com. As you can see on our agenda for today on slide two, Trey will first provide you with a business update, and Kevin will review our financial results and guidance. Drew Burch, President of Nucleic Acid Production, will join the call for the question and answer session following our prepared remarks. We remind you that management will make forward-looking statements and refer to GAAP and non-GAAP financial measures during today's call. It is possible that actual results could differ from management's expectations. We refer you to slide three for more detail on forward-looking statements and our use of non-GAAP financial measures. Our just-issued press release provides reconciliations to the most directly comparable GAAP measures. Please also refer to Maravai's SEC filings for additional information on the risks and uncertainties that may impact our operating results, performance, and financial condition. Now I'll turn the call over to Trey.

Thank you, Deb, and good afternoon, everyone. We appreciate having you join us for our call today. Let's start with our financial results on slide five. Today, we reported $289 million in revenue for the full year and adjusted EBITDA of $65 million. Our fourth quarter results of $74 million in revenue were stronger than anticipated due to outperformance in our base nucleic acid production segment, specifically for clean cap and custom chemistry. Turning to slide six, our nucleic acid production segment had revenue of $59 million in Q4. This includes an estimated $18 million of COVID clean cap revenue. For the full year, total nucleic acid production revenue was 225 million, with the base NAP revenue at 164 million. COVID clean cap revenue was $61 million for the year. Our biologic safety testing segment contributed $15 million in Q4 and $64 million for the full year. Our Q4 base non-COVID revenue company-wide was 56 million, up from our Q3 total of $52 million. As we exit the 2023 calendar year and begin 2024, we're entering a new era for Marabai, which we are referring to as Marabai 3.0. Let me provide some context for that on slide 7. As many of you know, Marabai was originally founded nearly 10 years ago by Carl Hall and Eric Tardif, along with the support and backing of GTCR. This was Maravai 1.0, a private equity-backed company with a strategy to consolidate differentiated founder-based life science tools companies with industry-leading technologies and very strong brands. From 2016 through 2020, Maravai acquired five companies, including TriLink Biotechnologies and Cygnus Technologies in 2016, Glenn Research in 2017. Each of these acquisitions served unique niches in the industry, and this roll-up strategy was extremely successful. As the pandemic hit in 2020, we entered a new phase. Many of our existing customers pivoted their focus to develop a COVID vaccine, including BioNTech, which was already using Trilink's CleanCap technology for its mRNA vaccine and therapeutic development. Marvi 2.0 was primarily focused on the scale of nucleic acid products, specifically on the CleanCap product needed to meet global pandemic vaccine demands. We scaled our production of CleanCap from grams to kilos, transitioned from RUO grade to GMP quality, and moved to running 24-hour shifts seven days a week. This was an important period for Marabai as it allowed us to prove our ability to scale and demonstrate CleanCap's clinical potential in the form of billions of safe and effective vaccine doses. During this period, we decided to take the company public in November of 2020. Throughout the pandemic period, we were able to leverage our profitability and strong cash flows to reinvest into scaling our operations and expanding our footprint. We finished the build out of our Water Ridge facility well ahead of plan, started building our Flanders 1 and 2 GMP facilities, and moved our biologic safety testing team into a brand new state of the art facility in Leland, North Carolina. We also made additional complimentary acquisitions including MyChem, a nucleic acid chemistry leader, and AlphaZyme for specialized enzymes, each of which is also part of our nucleic acid production segment. So an incredible amount of capability, capacity, and infrastructure came from the pandemic era that will serve us today and throughout the next decade. Let's turn to slide eight and Marvi 3.0. Marvi 3.0 is the post-pandemic phase for our company, our new normal. The capability and infrastructure additions that came from pandemic-era investments give us a foundation for exceptional operating leverage going forward. We're not trying to replace COVID vaccine revenue with a single program or a single customer. We are focused on bringing innovation to the entire mRNA production workflow, building on capabilities in emerging adjacent product and service areas where we can differentiate ourselves and diversify the business for long-term sustainable growth. In fact, we believe that 2024 will be the most diversified customer base we've had in the last five years. More on that in a moment. We are organized with two main reporting segments, nucleic acid production and biologic safety testing. Within NAP, we have Trilink Biotechnologies, Glenn Research, and AlphaZyme. And BST is our Cygnus brand, including the Mach-V technology acquisition. Each of our brands have very strong histories and customer relationships. They act not only as product suppliers, but technical experts who consult and help customers through their development and scale-up challenges. Acquisitions remain a key component of our strategy moving forward. We believe we're in the right markets, specifically all mRNA platforms, as well as CRISPR gene editing in cell and gene therapy. It starts in the discovery market for each of our businesses, and we have a unique ability to translate discovery products and services all the way through to GMP. Our value proposition of winning customers in discovery and supporting them through commercialization is stronger than ever. Marvi 3.0 is about being a leading innovator, playing a key role in the future of genomic and personalized medicine. We believe we will continue to differentiate ourselves as a technology leader and the first choice partner for our customers. I think we are privileged to have the opportunity to be part of this next generation of medicines with the goal of helping to improve human health. Turning to slide nine, let me share an update from a third party analysis we commissioned specific to our CLEAN CAP programs. You may recall that we first did this exercise in February 2022 and identified over 180 preclinical and clinical trials using CLEAN CAP. We updated that research in December 2022 and saw overall growth of over 70 programs. Our annual refresh of that work was recently completed And we have now identified over 350 programs that use CleanCap or more than 100 new programs in the last 12-month period. This includes preclinical through commercialized programs for a variety of different conditions. Note that three different CleanCap analogs are used in the production of three different mRNA products that have received full regulatory approval, which is really exciting. CleanCap AG3-primomethyl is in the Pfizer-BioNTech vaccine. CleanCap AU is used in a self-amplifying vaccine approved for use in Japan, and CleanCap AG is also in a vaccine approved for use and marketed in Japan. Looking at the pipeline by clinical phase, you'll note that three out of four of the identified programs are in the preclinical or early discovery phase. This supports our strategy to win in discovery and grow with our customers as they advance through the clinic into approval. This is true for CleanCap and for many of our other products and services. Let's turn to slide 10. Specific to the clean cap analysis, growth in the mRNA pipeline was seen across multiple modalities, as shown in the left ring chart, and for multiple applications, including cancer vaccines, infectious disease vaccines, and cell therapies that use mRNA. This reflects the widespread interest of big pharma in the mRNA platform technologies and foreshadows what we believe will be a sustained future investments in the field. And as the heat map on the right shows you, the top disease targets of these programs are cancer and infectious disease. Within the infectious disease programs, 16% are COVID-related. So what we're really pleased with in this latest data is twofold. First, we see a notable increase in the programs headed to the clinic, and the discovery pipeline is accelerating. Second, phase three programs that moved into the clinic three to five years ago use CleanCap less often than the phase one programs that moved into the clinic last year, suggesting that our strategy to win in discovery is playing out. We intend to support these customers through the lifespan of their developmental programs. One important note, this data does not yet reflect CleanCap M6, which we introduced just last May in 2023. Our long-term history with mRNA manufacturing process provides a smooth pass for our early phase customers looking for ways to move quickly into scale-up and clinical manufacturing without having to do a tech transfer. We provide these customers with a faster route by plugging into our platform workflow technology called CleanScript. Our CleanScript platform gets at the heart of what these customers need, like reducing double-stranded RNA in the manufacturing process, instead of trying to remove it downstream. Working with an established partner like TriLink reduces the time and risk for clinical stage production. Specific to TriLink, in Q4, we provided a limited set of customers with early access to a small-scale mRNA offering for screening and sequence optimization. We have received multiple orders from industry-leading organizations, early evidence that we're on the right track with how we evolve our mRNA portfolio to enable early-stage discovery programs. Through this offering, we expect to expand into key screening markets upstream from the current marketplace, providing cross-selling opportunities and adding to our customer base. And after launching CleanCap M6 last year, we have over 170 discovery customers working with it, several of whom have shared their intent to incorporate M6 into their preclinical and clinical studies over the next several quarters. reinforcing our strategy of winning in discovery. We are also pleased to share that AlphaZyme now sells enzymes used in the IVT process for mRNA production. We believe we can gain both market share and share of wallet here through continuous innovation, new product development, and exceptional service. We are in a truly unique commercial position in this market because a very large number of biopharma innovators of all sizes come to us first. at the earliest stage of their programs for our products and services. Our customer pipeline reflects the future contours of the industry. Let's move to slide 11. 2023 was another record year of FDA approvals, and the development pipeline is meaningfully higher than at any point in history. In fact, the FDA approved nearly 50% more novel drugs in 2023 than in 22, putting it back on pace with historically high levels. The FDA approved 55 new innovative therapies containing an active ingredient or molecule not previously approved in 2023, up from 37 in 2022 and 51 in 2021. The agency also approved seven new cell and gene therapies in addition to the 55 novel drugs. You've no doubt seen in the news and heard commentary from some of our peers that the FDA is increasing staff and aiming to improve the drug approval process and expedite drug approvals for orphan diseases, in particular establishing an accelerated approval for gene therapies. This bodes well for our products and service offerings now and in the future as we work to support our customers' programs from discovery to late phase development. Let's move to slide 12 in a facilities update. We are poised to achieve late-phase manufacturing capabilities for cGMP mRNA in 2024 and continue the acceleration of our innovation across all businesses. Specific to our Flanders 1 site, we've had several requests for GMP CleanCap M6 and plan to start producing it in Flanders 1 by mid-year. For Flanders 2, we received our first booking from a customer to produce late-stage mRNA drug substance in 2024. and other customers are showing strong interest. The pipeline for IMD enabling clinical materials is strong, and the moves we made in early 23 to upgrade our commercial teams and our facilities are getting us in front of customers in their RFP processes. Our customers have confidence in our operational readiness plans and our technical and manufacturing teams to meet their clinical timelines. With both of our Flanders facilities coming online, and our new Analytical Sciences Center of Excellence in San Diego, we will be well positioned to be our customer's partner of choice as the number of mRNA drugs moving into clinical phases continues to accelerate. Our commercial strategy under Becky Buzio's leadership is to win in discovery with the right products and services and to continue to support the unique needs of our mRNA and cell and gene therapy customers during their clinical development programs through to full commercialization. The strategy also includes fostering key academic and industry partnerships to enhance innovation and accelerate market adoption of the latest technology. Our 2024 return to growth requires that we protect and grow the unique core capabilities we currently have in each business. There are also markets for us to disrupt and differentiate ourselves, such as the evolution of our enzyme capabilities at AlphaZyme, Mach-V viral clearance testing at Cygnus, and custom MRNA at Trilink Discovery. As we look to 2024 and beyond, the need for MaraVice products and services for these early-stage programs is greater than ever. Let's move to slide 13 and an update on our intellectual property. Our recent patents issued in China and Canada reinforce the global strength and protection of Trilink's intellectual property, adding new jurisdictions of enforcement to the clean cap patent estate. which already includes the United States, European Union, Australia, Japan, Korea, and Hong Kong. We now hold the IP for clean cap materials and methods in major markets across the globe. Importantly, drug developers in China will now have expanded access to licensed authentic clean cap technology. Now please turn to slide 14 and some further exciting developments for Maravai. We signed key licenses in Q4 that would strengthen our position and advance the number of CleanCap mRNA programs in clinical trials. We have enabled Fujifilm Toyama Chemical as a CDMO with the ability to manufacture CleanCap mRNA to further enable our global customers with access to an in-country CDMO of choice in Japan. The agreement includes all forms of CleanCap, including our latest CleanCap M6. As we continue to focus on new product innovation, Glenn Research, our high-quality provider of fluorophores, quenchers, labels, and modifiers for oligonucleotide synthesis, published Glenn Report 35.2. The Glenn Report has been in publication since 1987 and serves as a well-regarded resource for the many scientists engaged in DNA and RNA research and oligonucleotide synthesis. Three new phosphoramidide products were announced in our latest issue, including M6AM. The M6AM phosphoramidide is the same monomer that is found in CleanCap M6, affording access to the modification in RNA oligos for future biologic study. Our Cygnus team recently signed a strategic partnership with Dyadic to provide a new C1 host cell protein ELISA assay, extending our product leadership in HCP detection. The kit has been qualified with many drug substances and in-process samples, providing the specificity and sensitivity to detect C1 host cell protein impurities with reproducibility that supports the downstream purification monitoring, product lot release, and regulatory compliance. And Cygnus continues to shine in the cell and gene therapy market, supporting all 19 of the 19 CAR-T gene and cell therapy approvals for lot release. Cygnus is with the drug developers all the way from process development through commercialization. Now turning to slide 15. You saw in our press release that we're introducing our 2024 revenue guidance of $265 to $285 million. As I mentioned earlier in the call, we believe our 2024 revenue will be the most diversified since 2019. Prior to the pandemic, our top 10 customers represented about a third of the overall business. Then during the pandemic, our top 10 customers jumped up to represent over 80% of total revenue. Last year, our top 10 customers accounted for less than 50% of overall revenue. We believe our top 10 revenue concentration will continue to decline over time as we expand our customer base, increase our product offerings, and take advantage of cross-selling opportunities. We believe we will continue to build stronger customer intimacy and drive sustainable, durable growth as Marabai 3.0. We are in a unique position to provide a concierge-level experience for customers that makes it easy to do business with us, whether through enabling faster turnaround time, incorporating novel chemistries, or creating flexible partnerships. We are viewed as a high-quality, experienced partner that can manage a very challenging technology, which many others in the industry are not equipped to do. I couldn't be more excited for Marvi 3.0. and I know that we can continue to make significant contributions to improving human health. We are energized for a new year, and our renewed focus on supporting our customers to accelerate their discoveries to provide life-changing medicines for patients worldwide. I'll now ask Kevin to cover our fourth quarter and full year performance, along with more details on our guidance and our model assumptions. Kevin?

Thanks, Craig, and good afternoon, everyone. As Trey mentioned, we are pleased to have finished 2023 ahead of expectations, and we are excited to move forward into 2024. I will briefly cover our financial results for the fourth quarter and full year of 2023, and then discuss financial guidance for 2024. Before I get started on our results of core operations, I want to address the two large gap-based non-operating line items on slide 17 that likely drew some attention in our press release issued earlier today. As a result of shifting to a GAAP-based pre-tax loss in 2023 and assessing our forward-looking GAAP book income projections, we have recognized a valuation allowance against our deferred tax assets as of year end. The recent history of our pre-tax loss is considered a significant piece of objective evidence that is difficult to overcome and limits the ability to consider other subjective evidence, such as future growth projections. Thus, in consultation with our technical accounting and tax advisors, we believe it is appropriate to establish a full valuation allowance against our deferred tax assets. Given our up-to-date structure and the nature of the deferred tax assets, predominantly recognized as the result of our IPO in 2020 and subsequent exchanges in 2021, generally no partial valuation allowance is available. Additionally, as our long-term tax receivable agreement, or TRA, and related liability is tied to the usage of our deferred tax assets created via the FC structure. We have also removed that liability from our GAAP-based financial statements. The net impact of these two items is a non-cash, non-EBITDA, non-operating gap tax expense of $764 million to establish a full valuation allowance against our deferred tax assets and a corresponding $669 million non-cash, non-EBITDA, non-operating gap other income gain tied to the relief of the TRA liability. As many that understand the nature of this, the liability was approximately 85% of the underlying deferred tax asset, as is typical in an up-sea structure. To conclude on this matter, the underlying deferred tax assets are still available to the company to utilize to reduce taxable income in the future, and we may be able to release the valuation allowance once GAAP pre-tax income is substantiated. To the extent that deferred tax assets are utilized, the corresponding payment of approximately 85% of those benefits to the owners of the tax receivable agreement will be made and we will include the TRA liability again at the time we release the valuation allowance. The last item to note here is that our gap-based results are in a book loss primarily due to the extent of non-cash charges, such as depreciation and amortization tied to the accounting for our acquisitions and our facility build-outs, as well as stock-based compensation charges. If there are any questions on this technical accounting matter, I'll be happy to take them at a later time so we can focus this call on the operating results of Morabai. So now diving into the financial results for the quarter on slide 18. Our gap net loss before non-controlling interests was $110 million for the fourth quarter of 2023. This compares to net income of $87 million for the fourth quarter of 2022. Our gap net loss for the year was $138 million compared to income of $491 million for 2022. As noted in the consolidated statement of operations, we incurred a GAAP-based charge in the quarter of $6 million associated with our previously announced cost restructuring actions. Moving to slide 19. Adjusted EBITDA, a non-GAAP measure, was $21 million for 24-2023 compared to $130 million for Q4-2022. Our adjusted EBITDA margin was 28% in Q4 2023, above our expectations for the quarter as a result of the higher than anticipated revenues in the quarter and the efficiency of initiating our cost-restructured actions that also benefited Q4 2023. Adjusted EBITDA for the year was $65 million, an adjusted EBITDA margin of 23%. This was above the high end of our last updated four-year guidance for 2023 for adjusted EBITDA of $55 million to $60 million. I will discuss EBITDA by segment in a few slides. Moving to slide 20 in EPS. Basic and diluted loss per share for the fourth quarter was 80 cents, driven primarily by the net impact of the GAAP non-cash and non-operating charges associated with the net impact of the deferred tax asset valuation allowance expense and the change in the TRA liability. Adjusted fully diluted EPS and non-GAAP measure was a penny a share. For the year, our EPS metrics were basic and diluted loss per share of 90 cents and adjusted fully diluted EPS and on gap measure, 3 cents per share. Moving forward to the year and balance sheet cash flow and other financial metrics on slide 21. We ended the year with $575 million in cash and $533 million in long-term debt, resulting in a $42 million net cash position. Adjusted free cash flow was $8 million for the quarter and $13 million for the full year of 2023. That calculation of adjusted free cash flow and non-GAAP measure is based on our adjusted EBITDA less capital expenditures, which were $21 million and $13 million in the quarter, respectively, and $65 million and $53 million for the fiscal year, respectively. For fiscal year 2023, we generated $126 million in cash flow from operations. With that strong operational cash flow, we invested $122 million into expanding our offerings and capabilities to support future growth vectors with the acquisition of AlphaZyme and investment in our Flanders GMP facility. This includes the capital expenditures for 2023 of a net total of $53 million. Depreciation and amortization ended the year at $40 million in line with our expectations and previous guidance. Interest expense and net of interest income ended the year at $18 million, in line with our expectations and previous guidance. This represents an effective interest rate of about 3.4% for the year, reflecting strong execution on our treasury operations. Stock-based compensation and non-cash charge was $35 million for the year, also in line with our previous guidance range. We ended 2023 with 132 million Class A shares outstanding and 119 million Class B shares outstanding for a total of 251 million shares outstanding at the year end on an as if fully converted basis. Fully diluted weighted average share count for 2023 was also 251 million shares. I note that our total Class A plus Class B shares outstanding at the end of 2020 following our IPO was 258 million shares. and was 255 million shares at the end of 2022. Thus, our total shares have declined over the past three years. As a result of our bifurcated ownership structure, cash that accumulates at Pubco as a result of our equalization of tax distributions have been utilized to effectively retire B units outstanding, increasing the level of Class A ownership. These transactions occurred during 2021 and in conjunction with the acquisition of AlphaZyme in Q1 2023 and have effectively used around $180 million of cash to reduce overall Class B shares. This has more than offset the dilution associated with stock options and restricted stock issuances to employees and directors of Maravai since the IPO, leading to the reduction of overall shares outstanding over the past three-plus years. Simply put, while we've issued equity compensation and have seen the non-cash stock-based compensation charges increase annually, we have also reduced total shares outstanding by virtue of the tax distribution mechanism whereby Pubco has used excess cash received to retire total shares outstanding. Next is slide 22 in the discussion of segment performance in the quarter. Our nucleic acid production segment, which includes both our Discovery and GMP products and services market under our Trilink, Glenn Research, and AlphaZyme brands, had revenues in the fourth quarter of $59 million and adjusted EBITDA of $24 million, a margin of 41%. For the year, revenues for our NAP segment were $225 million with adjusted EBITDA of $83 million for a margin of 37%. Included in the revenues in the fourth quarter was our estimate of $18 million in revenues associated with CleanCap for COVID-19 related vaccine demand. This brings the total estimate of CleanCap for COVID-19 related vaccine demand to $61 million in line with our expectations and previous guidance statements. Now to slide 23. Biologic Safety Testing Segment, which includes products from our Cygnus brand, had revenues of $15 million in the fourth quarter and adjusted EBITDA of $12 million, a margin of 76%. For the year, revenue for this segment was $64 million, adjusted EBITDA was $47 million, for a margin of 73%. As detailed in these segment results, the combined adjusted EBITDA of just our operating segments prior to the corporate shared services expenses was $130 million for 2023, a combined margin of 45%, clearly highlighting the financial strength and health of our core operational segments. The corporate shared service expenses impacting total adjusted EBITDA includes centralized functions such as human resources, finance and accounting, legal, IT, and the incremental expenses associated with being a public company, and total $15 million in the quarter and $64 million in for the year. Now getting to our financial expectations for 2024 on slide 24. We are guiding 2024 total revenues to be in the range of $265 million to $285 million. Breaking down the anticipated revenue by segment, we see our nucleic acid production segment to be down about 8% at the midpoint, mostly due to anticipated declines in high-volume GMP clean cap demand. And we see the biologic safety testing business achieving low to mid-single-digit growth over 2023. Now, as we enter the MARAVI 3.0 era, we will no longer be carving out our estimates of COVID-related clean caps in our guidance or attempting to estimate it on a quarterly or annual basis prospectively. We understand that our customers use our GMP clean cap for a variety of end uses, including supporting commercially approved vaccines and in research and development programs. as our CleanCap is a platform technology that is not indication-specific and thus fungible in the hands of our customers. Now, our 2024 guidance does consider around $50 million in fiscal year 2024 contractual, non-cancellable GMP CleanCap commitments made by our customers. As for the cadence of estimated revenues, We have seen in each of our quarters over the past few years, less the impact of COVID related clean cap carrying between 23% to 29% of the annual total. So a little bit of variability within each year. As we look at 2024 revenues, you see the first quarter carrying about 22% of our 2024 revenues and the first half of the year carrying about 47% of the total for the year. so we see the second half weighting slightly higher than the first half, but consistent with our historical variability and consistent with many of our peers outlook for 2024. Moving to the rest of the P&L. We're on track to realize the previously targeted cost reductions of $30 million, of which about two-thirds were tied to the reduction in our labor force at our San Diego-based nucleic acid production and corporate headquarters that was substantially completed in the first quarter of 2024. These targeted reductions will be partially offset by annual cost increases associated with the remaining ongoing labor force and focused investments in our commercial and R&D teams to drive organic growth. Overall, we expect gross margins to be flat to slightly lower than 2023 levels based on an unfavorable product mix compared to 2023. R&D and sales and marketing expenses are estimated to be up slightly on an absolute dollar basis, reflecting our ongoing investment in these areas. expected to be down about 5% on an absolute basis versus 2023. Overall, we estimate 2024 adjusted EBITDA margins up between 23% to 25%. We see adjusted EPS in the range of 0 cents per share to a 6 cent per share loss. Our guidance also contemplates the following expectations in 2024. Interest expense and net of interest income between $25 million and $30 million. depreciation and amortization between $40 million and $50 million, equity-based compensation, which we show is a reconciling item from GAAP to non-GAAP EBITDA, to be between $45 million and $50 million, as a fully converted share count of 254 million shares, and adjusted effective tax rate of 24%. Lastly, as we have discussed, we are outfitting the final stages of our Flanders facility in the first half of 2024, which will result in us being substantially complete with all facility investments that we expect will be needed to support our business for the foreseeable future. As such, we anticipate total net capital expenditures to shift down to $30 million to $35 million in total for 2024. Subsequent to this completion, mainly over the first half of 2024, we anticipate capital expenditures moving down further to annual maintenance and growth investments, close to the 5% of total revenues over time. I'll now turn the call back over to Trey.

So to wrap up on slide 26, we believe we have transitioned during a challenging 2023 to Mar of I3.0, and they're at a new normal, poised for a solid and more diversified 2024. From new combo vaccines to cell and gene therapies battling cancer, we believe that the transformative impact that mRNA has on global human health will only accelerate. We believe we are playing in the right target markets with strong leadership positions. We are building our product and services portfolio and expanding our strong brands in strategically important high-value areas to support genomic medicine. We are committed to building a strong foundation for long-term, sustainable, and profitable growth with a focus on innovation, scaling our commercial organization, leveraging our new manufacturing scale, and inorganic growth opportunities. We have this incredible opportunity still ahead of us to participate in the next generation of medicines that are going to better treat, and in some cases, literally cure disease. This is what fuels our team every single day. We at Maravai are proud of the key role that our customers, partners, and employees are playing in making that happen. Then finally, thank you for your attention. To our investors, thank you for your trust and support, and we look forward to continued collaboration around fulfilling our mission over the coming years. I would now like to turn the call back over to the operator and open the line for your questions.

Thank you. The floor is now open for your questions. To ask a question this time, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Question comes from the line of Matt LaRue with William Blair. Your line is now open.

Hey, good afternoon, and thank you for taking my question.

I wanted to ask just about the guidance. The first would be sort of on the top line. You referenced 50 million of non-cancellable orders. For the whole space, obviously, visibility has been an issue over the past year, year and a half. I'm just curious, as you thought about constructing the guidance for a year, if there's any difference in the way you thought about approaching and communicating guidance relative to internal expectations, or if you're just seeing more end market improvement, or just some general thoughts on sort of the guideposts around the guide.

Yeah, sure, Matt. Thanks. This is Kevin. I'll take that. Look, I think we feel good about the guidance range. I think as we sit here today versus where we were, say, a year ago, the overall percentage of our revenue that we see, either having been recognized throughout the course of the year, sitting in PO or sitting in some of these contractual commitments like you mentioned, is higher than it was. And that puts us on a good spot. It's near 40% of our full-year guidance, and it was closer to a third probably a year ago. that gives us some conviction that we do have a good grasp of the full year, and that's incorporated in our guide.

Okay, thank you, Kevin. And then just on the EBITDA guide, I think the midpoint of that sort of margin and revenue mix is around $66 million. You just reported about $20 million in the fourth quarter, and recognizing that there are things like incentives involved, cop reset in the first quarter. Just curious if I sort of look at the distinction between the annualization of Q4, which I know is a fool's errand, but if I do that relative to the midpoint of the guide, maybe it would help us understand the other moving parts beyond the top line here in 2024.

Yeah, well, I think if you take the 275 times the mid-range of the EBITDA, you get 66. And again, that's relatively consistent with where we ended the full year of 2023. You know, we do see certainly a step down in revenue versus where we ended up 23 in the midpoint of our guidance. So that's a big component of it. You know, I'll also tell you that, you know, we did put in, obviously, some cost actions. We did benefit probably about the tune of around $4 million in the fourth quarter of 23 of that $30 million overall target. So the year-over-year benefit there is about $26 million. So about half of that is coming down to the lower revenue at the midpoint, and the remainder are some of the things. One, you mentioned the normalization of compensation practices, and then certainly the continued investment in commercial and R&D. You know, as we sit here today, we have about 40% more sales heads than we did at the end of 2022. And that's been a concerted focus of us, particularly as we morph into Marabai 3.0 to have that strong sales force. So that's a reinvestment as we move forward. You know, as it relates to the margin cadence, you know, we're going to see some continued variability quarter by quarter, as we did in 2023. I think if you see the second and third quarter of 2023 in our EBITDA margins, we're in the mid-teen. We're down in the low 60s of revenue. And certainly given our implied guidance for the first quarter, based on the first quarter carrying roughly 22% of the full year, that's about a $60 million number for Q1. We expect the EBITDA margin for the first quarter to be relatively consistent with that mid-teen sort of level and then increasing from there. As it has done historically, our key toggle for margin expansion is really the top line, and we'll continue to see margin expansion as the top line grows, moving into that full-year estimate of 23% to 25%.

Okay. Thank you. Thanks, Matt.

Our next question comes from the line of Justin Bowers with Deutsche Bank.

Please go ahead. Justin, are you there? Yes.

Good afternoon. I was on mute. Sorry about that. So I just wanted to take a step back. At a high level, can you just talk about the demand environment and how that's evolved, let's say, over the last three to six months? It looks like you're sort of calling for an inflection and a bit of a return to growth when we strip out you know, some of the COVID clean caps. So just wanted to get a sense of sort of the drivers behind that as a starting point.

Yeah, thanks. This is Trey. We are seeing, I'd say first and foremost, willingness to make binding commitments again, which is something that is obviously a welcome change. As you identified, you know, and as we discussed in the material, We're coming off of a period, well, the pandemic period really was intensely weighted toward heavy customers with large orders. We're coming into a very nice diversification, growing the number of customers significantly and so on, seeing demand. But of course, these are smaller POs and smaller checks. Ultimately, it will lead to a much more diversified and I would say, stable and predictable business. But in this transition, you know, we are, I would say, for demand, seeing more customers come in. We are, they're unfortunately not, you know, massive customers of the pandemic era, but we've also seen, again, this recommitment to binding forecasts. And maybe I'll hand it to Drew for a little more color.

Yeah, thanks, Trey. I think Trey described it well. We've annualized some of the pandemic era commitments, so we'll move past that. We have seen a greater diversity of customers, and I think the chart that Trey showed on the number of clinical trials using CleanCap speaks to some of those dynamics as you see those numbers continuing to go up at a pretty significant rate. So, you know, we'll replace some of those larger commitments with a broader diversity of customers, and I think that augurs well for the future.

Thank you. And then just maybe just a quick follow-up. What's sort of the shelf life or the process to validate efficacy on CleanCap? There's been a question that we get a lot, and there's been, I guess, a wide range of Estimates out there.

So we'll just like to get your perspective on that Yeah, sure it's true I'll take that the the you know, it's it's a customer driven decision how how they will choose to use their inventory and you know, we support customers with with retest dates and also with retesting services and You know, we're pleased that CleanCap has held up well from a stability standpoint, and our customers work to make decisions about how they want to manage their own inventories.

That's it for me. Thank you.

Our next question comes from the line of Catherine Schultz from Beard. Please go ahead.

Great. Thanks for the questions.

In your prepared remarks, you mentioned that a larger portion of programs entering Phase 1 last year used CleanCap versus that stat a few years ago. What was that number in terms of the portion of programs entering Phase 1 last year that utilized CleanCap, just to try to get a sense for market share?

Catherine, we're looking at that stat.

We've got a table with all of them. So you're asking the number of phase one programs at the end of last year versus this year? Total in phase one at the end of 22 was 69 and total of phase one at the end of 23 was 86.

Okay, I was more referencing, you mentioned that a larger, you know, clean cap was used more frequently in programs entering phase one, if you had like a, what percent of the phase one utilized clean cap, but if you don't have that.

Oh, yeah, yeah, it's about 40%.

Okay, great. That's very helpful. And then maybe for the first quarter guide, you know, implies a decent sequential step down in revenue. How should we think about the outlook for biologic safety testing versus nucleic acid production in that first quarter number?

Yeah, so most of that anticipated decline versus the fourth quarter sequentially. Catherine's going to be on the NAP segment. Again, a lot of that is tied to the high-volume GMP clean cap. we actually see biologic safety testing stepping up in the first quarter, as it has done a lot historically, having strong first quarter performance. So they can see a step up in BST over Q4 and then offset by NAP coming down again, predominantly due to the high-volume GMP clean capital pattern that we're seeing for 2024.

All right, great. Thank you.

Our next question comes from the line of Michael Riskin. with Bank of America. Please go ahead.

Great. Thanks, guys. Got a couple quick questions here. Appreciate the Q&A. One was on the $50 million in contractual in 2024. I know you also just said you really don't want to talk about it, but still, I just want to make sure we're thinking about it correctly. You had about $60 million or $65 million, I believe, that was $60 million to $65 million that was contractual in 2023. You got $50 million in 2024. Anything you can say in terms of when that ends? I just want to make sure we're modeling correctly when that rolls off. just because that could be a pretty meaningful headwind in 2025 if that all comes to an end. And I've got a follow-up.

Yeah, well, I think, as you know, with under most of our license and supply agreements, you know, we work with our customers for kind of rolling annual, rolling 12-month forward-looking forecasts, right? So, you know, certainly as we sit here today, you know, we're very comfortable with our guidance and what we're speaking of related to those commitments. And, you know, as we go through the year, we'll be working with our customers as that rolls forward into 2025 and certainly thereafter. I think it's... I mean, that's sort of the mechanisms on how that works, but right now we're sticking sort of to that clear view that we have right now today.

Beautiful. Thanks. And then, sorry, go ahead. I was going to say the last year number, you know, that we, what we were publicly, you know, sharing was the carve out for COVID specific large committed programs. And that number was 61 as we had forecast before.

Okay, yep, thank you. And then my follow-up question I was going to ask on this Fujifilm partnership, I've gotten a bunch of questions over that in the last couple weeks. Anything, any additional comments you can make beyond what you had in the prepared remarks, and any way to possibly size that, because that seems like it could be pretty meaningful, just sort of how much for that is assumed in 2024?

Yeah, the key, that will depend on Fuji's customer signings as a CDMO. So that's sort of two degrees of separation for us that would be difficult to forecast, but really key partnership in country in Japan and notable because it includes the entire portfolio of CleanCap. But we have several CDMOs that have been enabled giving, hopefully, as customers, they have the opportunity to work with us, particularly in later phases as Flanders 2 opens later this year. But if they need more scale or they need a geographic choice, that's the reason for the in multiple jurisdictions like that. And this is, as you say, this could be very meaningful. But it does depend on the programs that they are able to book in Japan.

Okay. All right. Thanks. I'll get back in the queue.

Thanks, Dan. Our next question comes from the line of Connor McNamara with RBC Capital Markets. Please go ahead.

Hey, guys. Congrats on a solid quarter, and thanks for taking the question. Just if you do look at Q4 results, you came in about $5 million ahead of what you were expecting, if my math is correct. Was there anything in there as far as bulk purchases or anything pulled forward from 2024 that's worth calling out, or is that just execution?

Yeah, I would say – thanks, Connor.

I would say, one, nothing pulled forward. I think it was a pretty normal quarter for us in that regard. We did have what we kind of call some drop-in orders, meaning things that weren't really in our funnel that our customers came and that really provided the upside to what we were thinking for the quarter. And that happens occasionally, again, and mostly for CleanCap. Certainly as customers maybe enter a new phase or start a new program, they're going to order order in bulk and there was a larger order that came in, again, not in our funnel that we see, and that happens periodically and leads to some of that quarterly volatility. But, you know, it was just a strong quarter versus our internal estimates, and we were happy about that.

And it's true, I would add on, I think the efforts that have been undertaken in the past few quarters on our commercial execution bore fruit. So we saw some good traction with the commercial team and really just getting that clean cap opportunity And other offerings in front of the customer base in a more forward-leaning way.

I think we talked, you know, last year about how there was some reticence for these committed orders, the take-or-pay type arrangements, which may also, you know, largely dissipate with the pandemic. But this is a sort of an upside positive consequence of people not necessarily committing to take-or-pay but still needing the materials. And that's the reason, as Kevin said, that it was not in funnel, but we were able to take it and execute within the quarter.

Got it. Great.

And then as it relates to guidance, you know, looking at what you said about the first half or second half on revenue, you know, that implies the second half you'll do, you know, roughly, you know, 70 to 75 million a quarter in the second half. And, you know, should we expect then EBITDA margins would be roughly aligned in the second half of 2024 to what you guys did this year? Or is there any headwinds or tailwinds that would make that much different? And then just as a follow-on, is that a good place to start for as we think of beyond 2024?

Yeah, I think you got exactly right, Connor. Obviously, as we move up into the type of revenue performance that we saw in the fourth quarter of 23, you know, we had a strong EBITDA margin exiting the year, 28%. And, you know, I think as we're in and around that revenue level, that's certainly what you can expect. And that will, you know, pull up the slightly lower margin that we see here in the first half and average out to our guidance for the year.

Great. Thanks, guys. Appreciate it.

Our next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

Hi, this is Evie Kozlowski on for Matt. Thanks for taking my questions. The first one, how are customer conversations trending in terms of bioprocessing recovery within the different modalities that you called out on the slide? So basically, is there one modality where you're seeing more positive commentary relative to the others?

Well, yeah, that's an interesting question. The distribution of, you would be getting into, you know, cell platforms that people are using for production. And I would say we are returning back to normal for BST where there was some distortion, for example, in, I mean, this gets into the technical weeds, but in CHO versus E. coli and so on. where we had some platforms slow down, they have recovered, I would say, back to the normal proportion of sales. But there are multiple modalities that can be expressed in the different cell lines. And so that's really a couple of clicks further than we get. In particular, since many of the Cygnus products Customers are also CDMOs or distributors. Unfortunately, we don't have that level of visibility into which specific program they're in or how many kits they're using for a certain cell line for a certain expression of a map or things like that, if that's what you're asking.

Yeah, I think more in terms of like cell therapy versus mRNA vaccines and those types of modalities.

And how customer comments are trending within each of those modalities.

Yeah, it's true. Maybe I'll jump in on that. I think the, you know, I can't say we've seen a marked difference between cell therapy and mRNA. I think we've got engaged customer dialogues on both fronts. The data, you know, you saw the data in terms of growth of clinical trials. There's, you know, kind of a thousand, near a thousand clinical trials underway, clinical and preclinical trials underway for mRNA. You know, smaller number for gene editing, but both those numbers have grown quite a bit over the past year and both are forecasted to grow by, 30% or more over the upcoming few years. And our dialogues, I would say, are consistent with that. We're excited about the customer traction. We're excited to have a customer signed up to initiate production with us in Flanders, too. So overall, I would say it's kind of a balanced optimism across the portfolio.

Okay, great. That's super helpful. And then with your 2020 revenue target of $700 million and taking into consideration the new 2024 guide, how confident are you in the step-up of growth necessary in the 2025 through 2028 in order to reach this target? Thanks.

Yeah, sure. I think that, you know, if you just look at the math there, I think you're looking at a CAGR that would be...

Certainly, we're building this business out, making investments with those targets in mind, and that's the reason why we continue to be focused on things like planters to expansion of commercial R&D innovation, et cetera. And I think that is not a growth target that we're unfamiliar with. If you look back to our core business growth from 18 to 22, we grew at 23%. And I think as we sit here today, as we look forward under Mara by 3.0 versus those previous years, you know, you have a lot more programs, a lot more dollars flowing into this space, a lot more excitement in and around it, and we have a lot more, as Trey alluded to, capabilities, products, and opportunities and customers involved. So, you know, I think it's something that we continue to be focused on, certainly as we build up our footprint strategically. But that having been said, you know, our goal right now is really focused on delivering what we just put out there for 2024. and starting to get the business returning to growth.

Okay, great. Super helpful. Thank you.

Thanks, Edie. And operator, I think we have time for one last question, please.

Yes. And for our last question, this comes from the line of Paul Knight with KeyBank. Please go ahead.

Yeah, thanks for the time. You know, as we look at, you know, various biotechnology firms, are they dedicated to one capping technology or are they agnostic and do they really look at alternatives?

Yeah, I think when anyone, that's an insightful question, by the way, when anyone is starting a new program or ideally in discovery, they should be looking for the best technology at that time. So I think to that extent, as a given customer, you may be agnostic at a moment in time. They certainly have their favorites, and then it depends on whether they are producing themselves or have a partner. If we are the partner, as I mentioned in my comments, we have a standard workflow that really efficiently incorporates the co-transcriptional caps and sorry, we're sorry about the planes going overhead.

And that also is quite efficient and quick.

But I would say though we have people who are dedicated CleanCap customers, partly the reason that we're so excited to continue innovating and adding new options to the menu is that we think at a given stage of their clinical development, they should always try to incorporate all of the best technologies, with M6 being the most recent example.

What's the last stage? Are they limited? They really have to commit, what, at phase one? I'm guessing they commit at phase two, right?

I think that's usually the case that people are going to commit as they go into clinical trials, maybe switch a little bit later.

We see the greatest degree of switching as products and programs are entering the clinic. But I think to Trey's point, we continue to work hard to bring new options that are going to help customers optimize their programs. And so we're excited that CleanCap AG, CleanCap 3-Primomethyl, and CleanCap SA are all in, CleanCap AU are all in products that have been approved at this point. M6 is moving along nicely, and we have quite a bit of interest there to move that into GMP production. And so there's not one size fits all. We continue to try to bring innovation to customers to help their programs achieve as much as they can possibly achieve.

Thank you.

Great. Well, with that, we would just like to thank everyone for joining us today.

We'll be at several conferences over the coming months, so hope to catch up with some of you in person there. And feel free to contact us with any follow-up questions. Hope you have a great night.

This concludes today's conference call. You may now disconnect. Thank you. Thank you. Thank you. Thank you.

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Good afternoon and thank you for standing by. At this time, I would like to welcome everyone to the Q4 2023 Miravai Life Sciences Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, please press the star one. I would now like to turn the conference over to Deb Hart, Head of Investors Relations. Please go ahead.

Good afternoon, everyone. Thanks for joining us for our fourth quarter and year-end 2023 earnings call. Our press release and the slides that accompany today's call are posted on our website and are available at investors.maravai.com. As you can see on our agenda for today on slide two, Trey will first provide you with a business update, and Kevin will review our financial results and guidance. Drew Burch, President of Nucleic Acid Production, will join the call for the question and answer session following our prepared remarks. We remind you that management will make forward-looking statements and refer to GAAP and non-GAAP financial measures during today's call. It is possible that actual results could differ from management's expectations. We refer you to slide three for more detail on forward-looking statements and our use of non-GAAP financial measures. Our just-issued press release provides reconciliations to the most directly comparable GAAP measures. Please also refer to Maravai's SEC filings for additional information on the risks and uncertainties that may impact our operating results, performance, and financial condition. Now I'll turn the call over to Trey.

Thank you, Deb, and good afternoon, everyone. We appreciate having you join us for our call today. Let's start with our financial results on slide five. Today, we reported $289 million in revenue for the full year and adjusted EBITDA of $65 million. Our fourth quarter results of $74 million in revenue were stronger than anticipated due to outperformance in our base nucleic acid production segment. specifically for clean cap and custom chemistry. Turning to slide six, our nucleic acid production segment had revenue of $59 million in Q4. This includes an estimated $18 million of COVID clean cap revenue. For the full year, total nucleic acid production revenue was $225 million, with the base NAP revenue at $164 million. COVID clean cap revenue was $61 million for the year. Our biologic safety testing segment contributed $15 million in Q4 and $64 million for the full year. Our Q4 base non-COVID revenue company-wide was $56 million, up from our Q3 total of $52 million. As we exit the 2023 calendar year and begin 2024, we're entering a new era for Marabai, which we are referring to as Marabai 3.0. Let me provide some context for that on slide 7. As many of you know, Maravai was originally founded nearly 10 years ago by Carl Hall and Eric Tardif, along with the support and backing of GTCR. This was Maravai 1.0, a private equity-backed company with a strategy to consolidate differentiated founder-based life science tools companies with industry-leading technologies and very strong brands. From 2016 through 2020, Maravai acquired five companies, including TriLink Biotechnologies and Cygnus Technologies in 2016, Glenn Research in 2017. Each of these acquisitions served unique niches in the industry, and this roll-up strategy was extremely successful. As the pandemic hit in 2020, we entered a new phase. Many of our existing customers pivoted their focus to develop a COVID vaccine, including BioNTech, which was already using TriLink's CleanCap technology for its mRNA vaccine and therapeutic development. Marvi 2.0 was primarily focused on the scale-up of nucleic acid products, specifically on the CleanCap product needed to meet global pandemic vaccine demand. We scaled our production of CleanCap from grams to kilos, transitioned from RUO grade to GMP quality, and moved to running 24-hour shifts seven days a week. This was an important period for Marabai as it allowed us to prove our ability to scale and demonstrate CleanCaf's clinical potential in the form of billions of safe and effective vaccine doses. During this period, we decided to take the company public in November of 2020. Throughout the pandemic period, we were able to leverage our profitability and strong cash flows to reinvest into scaling our operations and expanding our footprint. We finished the build-out of our Water Ridge facility well ahead of plan, started building our Flanders 1 and 2 GMP facilities, and moved our biologic safety testing team into a brand new state-of-the-art facility in Leland, North Carolina. We also made additional complementary acquisitions, including MyChem, a nucleic acid chemistry leader, and AlphaZyme for specialized enzymes, each of which is also part of our nucleic acid production segment. So an incredible amount of capability, capacity, and infrastructure came from the pandemic era that will serve us today and throughout the next decade. Let's turn to slide eight and Marvi 3.0. Marvi 3.0 is the post-pandemic phase for our company, our new normal. The capability and infrastructure additions that came from pandemic era investments give us a foundation for exceptional operating leverage going forward. We're not trying to replace COVID vaccine revenue with a single program or a single customer. We are focused on bringing innovation to the entire mRNA production workflow, building on capabilities in emerging adjacent product and service areas where we can differentiate ourselves and diversify the business for long-term sustainable growth. In fact, we believe that 2024 will be the most diversified customer base we've had in the last five years. More on that in a moment. We are organized with two main reporting segments, nucleic acid production and biologic safety testing. Within NAP, we have TriLink Biotechnologies, Glenn Research, and AlphaSign. And BST is our Cygnus brand, including the Mach V technology acquisition. Each of our brands have very strong histories and customer relationships. They act not only as product suppliers, but technical experts who consult and help customers through their development and scale-up challenges. acquisitions remain a key component of our strategy moving forward. We believe we're in the right markets, specifically all mRNA platforms, as well as CRISPR gene editing in cell and gene therapy. It starts in the discovery market for each of our businesses, and we have a unique ability to translate discovery products and services all the way through to GMP. Our value proposition of winning customers in discovery and supporting them through commercialization is stronger than ever. Marvi 3.0 is about being a leading innovator, playing a key role in the future of genomic and personalized medicine. We believe we will continue to differentiate ourselves as a technology leader and the first-choice partner for our customers. I think we are privileged to have the opportunity to be part of this next generation of medicines with the goal of helping to improve human health. Turning to slide 9, let me share an update from a third-party analysis we commissioned specific to our Clean Cap programs. You may recall that we first did this exercise in February 2022 and identified over 180 preclinical and clinical trials using CleanCap. We updated that research in December 2022 and saw overall growth of over 70 programs. Our annual refresh of that work was recently completed, and we have now identified over 350 programs that use CleanCap or more than 100 new programs in the last 12-month period. This includes preclinical through commercialized programs for a variety of different conditions. Note that three different CleanCap analogs are used in the production of three different mRNA products that have received full regulatory approval, which is really exciting. CleanCap AG3-primomethyl is in the Pfizer-BioNTech vaccine. CleanCap AU is used in a self-amplifying vaccine approved for use in Japan. And CleanCap AG is also in a vaccine approved for use and marketed in Japan. Looking at the pipeline by clinical phase, you'll note that three out of four of the identified programs are in the preclinical or early discovery phase. This supports our strategy to win in discovery and grow with our customers as they advance through the clinic into approval. This is true for CleanCap and for many of our other products and services. Let's turn to slide 10. Specific to the clean cap analysis, growth in the mRNA pipeline was seen across multiple modalities, as shown in the left ring chart, and for multiple applications, including cancer vaccines, infectious disease vaccines, and cell therapies that use mRNA. This reflects the widespread interest of big pharma in the mRNA platform technologies and foreshadows what we believe will be a sustained future investments in the field. And as the heat map on the right shows you, the top disease targets of these programs are cancer and infectious disease. Within the infectious disease programs, 16% are COVID-related. So what we're really pleased with in this latest data is twofold. First, we see a notable increase in the programs headed to the clinic, and the discovery pipeline is accelerating. Second, phase three programs that moved into the clinic three to five years ago use CleanCap less often than the phase one programs that moved into the clinic last year, suggesting that our strategy to win in discovery is playing out. We intend to support these customers through the lifespan of their developmental programs. One important note, this data does not yet reflect CleanCap M6, which we introduced just last May in 2023. Our long-term history with mRNA manufacturing process provides a smooth pass for our early phase customers looking for ways to move quickly into scale-up and clinical manufacturing without having to do a tech transfer. We provide these customers with a faster route by plugging into our platform workflow technology called CleanScript. Our CleanScript platform gets at the heart of what these customers need, like reducing double-stranded RNA in the manufacturing process, instead of trying to remove it downstream. Working with an established partner like TriLink reduces the time and risk for clinical stage production. Specific to TriLink, in Q4, we provided a limited set of customers with early access to a small-scale mRNA offering for screening and sequence optimization. We have received multiple orders from industry-leading organizations, early evidence that we're on the right track with how we evolve our mRNA portfolio to enable early-stage discovery programs. Through this offering, we expect to expand into key screening markets upstream from the current marketplace, providing cross-selling opportunities and adding to our customer base. And after launching CleanCap M6 last year, we have over 170 discovery customers working with it, several of whom have shared their intent to incorporate M6 into their preclinical and clinical studies over the next several quarters. reinforcing our strategy of winning in discovery. We are also pleased to share that AlphaZyme now sells enzymes used in the IVT process for mRNA production. We believe we can gain both market share and share of wallet here through continuous innovation, new product development, and exceptional service. We are in a truly unique commercial position in this market because a very large number of biopharma innovators of all sizes come to us first. at the earliest stage of their programs for our products and services. Our customer pipeline reflects the future contours of the industry. Let's move to slide 11. 2023 was another record year of FDA approvals, and the development pipeline is meaningfully higher than at any point in history. In fact, the FDA approved nearly 50% more novel drugs in 2023 than in 22, putting it back on pace with historically high levels. The FDA approved 55 new innovative therapies containing an active ingredient or molecule not previously approved in 2023, up from 37 in 2022 and 51 in 2021. The agency also approved seven new cell and gene therapies in addition to the 55 novel drugs. You've no doubt seen in the news and heard commentary from some of our peers that the FDA is increasing staff and aiming to improve the drug approval process and expedite drug approvals for orphan diseases, in particular establishing an accelerated approval for gene therapies. This bodes well for our products and service offerings now and in the future as we work to support our customers' programs from discovery to late phase development. Let's move to slide 12 in a facilities update. We are poised to achieve late-phase manufacturing capabilities for cGMP mRNA in 2024 and continue the acceleration of our innovation across all businesses. Specific to our Flanders 1 site, we've had several requests for GMP CleanCap M6 and plan to start producing it in Flanders 1 by mid-year. For Flanders 2, we received our first booking from a customer to produce late-stage mRNA drug substance in 2024. and other customers are showing strong interest. The pipeline for IMD enabling clinical materials is strong, and the moves we made in early 23 to upgrade our commercial teams and our facilities are getting us in front of customers in their RFP processes. Our customers have confidence in our operational readiness plans and our technical and manufacturing teams to meet their clinical timelines. With both of our Flanders facilities coming online, and our new Analytical Sciences Center of Excellence in San Diego, we will be well positioned to be our customer's partner of choice as the number of mRNA drugs moving into clinical phases continues to accelerate. Our commercial strategy under Becky Buzio's leadership is to win in discovery with the right products and services and to continue to support the unique needs of our mRNA and cell and gene therapy customers during their clinical development programs through to full commercialization. The strategy also includes fostering key academic and industry partnerships to enhance innovation and accelerate market adoption of the latest technology. Our 2024 return to growth requires that we protect and grow the unique core capabilities we currently have in each business. There are also markets for us to disrupt and differentiate ourselves, such as the evolution of our enzyme capabilities at AlphaZyme, Mach-V viral clearance testing at Cygnus, and custom MRNA at Trilink Discovery. As we look to 2024 and beyond, the need for MaraVice products and services for these early-stage programs is greater than ever. Let's move to slide 13 and an update on our intellectual property. Our recent patents issued in China and Canada reinforce the global strength and protection of Trilink's intellectual property, adding new jurisdictions of enforcement to the clean cap patent estate. which already includes the United States, European Union, Australia, Japan, Korea, and Hong Kong. We now hold the IP for clean cap materials and methods in major markets across the globe. Importantly, drug developers in China will now have expanded access to licensed authentic clean cap technology. Now please turn to slide 14 and some further exciting developments from RFI. We signed key licenses in Q4 that would strengthen our position and advance the number of CleanCap mRNA programs in clinical trials. We have enabled Fujifilm Toyama Chemical as a CDMO with the ability to manufacture CleanCap mRNA to further enable our global customers with access to an in-country CDMO of choice in Japan. The agreement includes all forms of CleanCap, including our latest CleanCap N6. As we continue to focus on new product innovation, Glenn Research, our high-quality provider of fluorophores, quenchers, labels, and modifiers for oligonucleotide synthesis, published Glenn Report 35.2. The Glenn Report has been in publication since 1987 and serves as a well-regarded resource for the many scientists engaged in DNA and RNA research and oligonucleotide synthesis. Three new phosphoramidite products were announced in our latest issue, including M6AM. The M6AM phosphoramidide is the same monomer that is found in CleanCap M6, affording access to the modification in RNA oligos for future biologic study. Our Cygnus team recently signed a strategic partnership with Dyadic to provide a new C1 host cell protein ELISA assay, extending our product leadership in HCP detection. The kit has been qualified with many drug substances and in-process samples, providing the specificity and sensitivity to detect C1 host cell protein impurities with reproducibility that supports the downstream purification monitoring, product lot release, and regulatory compliance. And Cygnus continues to shine in the cell and gene therapy market, supporting all 19 of the 19 CAR-T gene and cell therapy approvals for lot release. Cygnus is with the drug developers all the way from process development through commercialization. Now turning to slide 15, you saw in our press release that we're introducing our 2024 revenue guidance of $265 to $285 million. As I mentioned earlier in the call, we believe our 2024 revenue will be the most diversified since 2019. Prior to the pandemic, our top 10 customers represented about a third of the overall business. Then during the pandemic, our top 10 customers jumped up to represent over 80% of total revenue. Last year, our top 10 customers accounted for less than 50% of overall revenue. We believe our top 10 revenue concentration will continue to decline over time as we expand our customer base, increase our product offerings, and take advantage of cross-selling opportunities. We believe we will continue to build stronger customer intimacy and drive sustainable, durable growth as Marabai 3.0. We are in a unique position to provide a concierge-level experience for customers that makes it easy to do business with us, whether through enabling faster turnaround time, incorporating novel chemistries, or creating flexible partnerships. We are viewed as a high-quality, experienced partner that can manage a very challenging technology, which many others in the industry are not equipped to do. I couldn't be more excited for Marvi 3.0. and I know that we can continue to make significant contributions to improving human health. We are energized for a new year, and our renewed focus on supporting our customers to accelerate their discoveries to provide life-changing medicines for patients worldwide. I'll now ask Kevin to cover our fourth quarter and full year performance, along with more details on our guidance and our model assumptions. Kevin?

Thanks, Craig, and good afternoon, everyone. As Trey mentioned, we are pleased to have finished 2023 ahead of expectations, and we are excited to move forward into 2024. I will briefly cover our financial results for the fourth quarter and full year of 2023, and then discuss financial guidance for 2024. Before I get started on our results of core operations, I want to address the two large gap-based non-operating line items on slide 17 that likely drew some attention in our press release issued earlier today. As a result of shifting to a GAAP-based pre-tax loss in 2023 and assessing our forward-looking GAAP book income projections, we have recognized a valuation allowance against our deferred tax assets as of year end. The recent history of our pre-tax loss is considered a significant piece of objective evidence that is difficult to overcome and limits the ability to consider other subjective evidence, such as future growth projections. Thus, in consultation with our technical accounting and tax advisors, we believe it is appropriate to establish a full valuation allowance against our deferred tax assets. Given our up-to-date structure and the nature of the deferred tax assets, predominantly recognized as the result of our IPO in 2020 and subsequent exchanges in 2021, generally no partial valuation allowance is available. Additionally, as our long-term tax receivable agreement, or TRA, And the related liability is tied to the usage of our deferred tax assets created via the FC structure. We have also removed that liability from our GAAP-based financial statements. The net impact of these two items is a non-cash, non-EBITDA, non-operating gap tax expense of $764 million to establish a full valuation allowance against our deferred tax assets and a corresponding $669 million non-cash, non-EBITDA, non-operating gap other income gain tied to the relief of the TRA liability. As many that understand the nature of this, the liability was approximately 85% of the underlying deferred tax asset, as is typical in an UPC structure. To conclude on this matter, the underlying deferred tax assets are still available to the company to utilize to reduce taxable income in the future, and we may be able to release the valuation allowance once GAAP pre-tax income is substantiated. To the extent that deferred tax assets are utilized, the corresponding payment of approximately 85% of those benefits to the owners of the tax receivable agreement will be made and we will include the TRA liability again at the time we release the valuation allowance. The last item to note here is that our gap-based results are in a book loss primarily due to the extent of non-cash charges, such as depreciation and amortization tied to the accounting for our acquisitions and our facility build-outs, as well as stock-based compensation charges. If there are any questions on this technical accounting matter, I'll be happy to take them at a later time so we can focus this call on the operating results of Morabai. So now diving into the financial results for the quarter on slide 18. Our gap net loss before non-controlling interests was $110 million for the fourth quarter of 2023. This compares to net income of $87 million for the fourth quarter of 2022. Our gap net loss for the year was $138 million compared to income of $491 million for 2022. As noted in the Consolidated Statement of Operations, we incurred a GAAP-based charge in the quarter of $6 million associated with our previously announced cost restructuring actions. Moving to slide 19. Adjusted EBITDA, a non-GAAP measure, was $21 million for 2024-2023 compared to $130 million for Q4 2022. Our adjusted EBITDA margin was 28% in Q4 2023, above our expectations for the quarter as a result of the higher than anticipated revenues in the quarter and the efficiency of initiating our cost-restructured actions that also benefited Q4 2023. Adjusted EBITDA for the year was $65 million, an adjusted EBITDA margin of 23%. This was above the high end of our last updated four-year guidance for 2023 for adjusted EBITDA of $55 million to $60 million. I will discuss EBITDA by segment in a few slides. Moving to slide 20 in EPS. Basic and diluted loss per share for the fourth quarter was 80 cents, driven primarily by the net impact of the GAAP non-cash and non-operating charges associated with the net impact of the deferred tax asset valuation allowance expense and the change in the TRA liability. Adjusted fully diluted EPS and non-GAAP measure was a penny a share. For the year, our EPS metrics were basic and diluted loss per share of $0.90 and adjusted fully diluted EPS and on gap measure, $0.03 per share. Moving forward to the year and balance sheet cash flow and other financial metrics on slide 21. We ended the year with $575 million in cash and $533 million in long-term debt, resulting in a $42 million net cash position. Adjusted free cash flow was $8 million for the quarter and $13 million for the full year of 2023. That calculation of adjusted free cash flow and non-GAAP measure is based on our adjusted EBITDA less capital expenditures, which were $21 million and $13 million in the quarter, respectively, and $65 million and $53 million for the fiscal year, respectively. For fiscal year 2023, we generated $126 million in cash flow from operations. With that strong operational cash flow, we invested $122 million into expanding our offerings and capabilities to support future growth vectors with the acquisition of AlphaZyme and investment in our Flanders GMP facility. This includes the capital expenditures for 2023 of a net total of $53 million. Depreciation and amortization ended the year at $40 million in line with our expectations and previous guidance. interest expense, net of interest income, and at the year $18 million in line with our expectations and previous guidance. This represents an effective interest rate of about 3.4% for the year, reflecting strong execution on our treasury operations. Stock-based compensation and non-cash charge was $35 million for the year, also in line with our previous guidance range. We ended 2023 with 132 million Class A shares outstanding and 119 million Class B shares outstanding for a total of 251 million shares outstanding at the year end on an as-if fully converted basis. Fully diluted weighted average share count for 2023 was also 251 million shares. I note that our total Class A plus Class B shares outstanding at the end of 2020 following our IPO was 258 million shares. and was 255 million shares at the end of 2022. Thus, our total shares have declined over the past three years. As a result of our bifurcated ownership structure, cash that accumulates at Pubco as a result of our equalization of tax distributions have been utilized to effectively retire B units outstanding, increasing the level of Class A ownership. These transactions occurred during 2021 and in conjunction with the acquisition of AlphaZyme in Q1 2023 and have effectively used around $180 million of cash to reduce overall Class B shares. This has more than offset the dilution associated with stock options and restricted stock issuances to employees and directors of Maravai since the IPO, leading to the reduction of overall shares outstanding over the past three-plus years. Simply put, while we've issued equity compensation and have seen the non-cash stock-based compensation charges increase annually, we have also reduced total shares outstanding by virtue of the tax distribution mechanism whereby Pubco has used excess cash received to retire total shares outstanding. Next is slide 22 in the discussion of segment performance in the quarter. Our nucleic acid production segment, which includes both our Discovery and GMP products and services market under our Trilink, Glenn Research, and Alpazine brands, had revenues in the fourth quarter of $59 million and adjusted EBITDA of $24 million, a margin of 41%. For the year, revenues for our NAP segment were $225 million with adjusted EBITDA of $83 million for a margin of 37%. Included in the revenues in the fourth quarter was our estimate of $18 million in revenues associated with CleanCap for COVID-19 related vaccine demand. This brings the total estimate of CleanCap for COVID-19 related vaccine demand to $61 million in line with our expectations and previous guidance statements. Now to slide 23. Biologic Safety Testing Segment, which includes products from our Cygnus brand, had revenues of $15 million in the fourth quarter and adjusted EBITDA of $12 million, a margin of 76%. For the year, revenue for this segment was $64 million, adjusted EBITDA was $47 million, for a margin of 73%. As detailed in these segment results, the combined adjusted EBITDA of just our operating segments prior to the corporate shared services expenses was $130 million for 2023, a combined margin of 45%, clearly highlighting the financial strength and health of our core operational segments. The corporate shared service expenses impacting total adjusted EBITDA includes centralized functions such as human resources, finance and accounting, legal, IT, and the incremental expenses associated with being a public company, and total $15 million in the quarter and $64 million in for the year. Now getting to our financial expectations for 2024 on slide 24. We are guiding 2024 total revenues to be in the range of $265 million to $285 million. Breaking down the anticipated revenue by segment, we see our nucleic acid production segment to be down about 8% at the midpoint, mostly due to anticipated declines in high-volume GMP clean cap demand. And we see the biologic safety testing business achieving low to mid-single-digit growth over 2023. Now, as we enter the Mar of I 3.0 era, we will no longer be carving out our estimates of COVID-related clean caps in our guidance or attempting to estimate it on a quarterly or annual basis prospectively. We understand that our customers use our GMP clean cap for a variety of end uses, including supporting commercially approved vaccines and in research and development programs. as our CleanCap is a platform technology that is not indication-specific and thus fungible in the hands of our customers. Now, our 2024 guidance does consider around $50 million in fiscal year 2024 contractual, non-cancelable GMP CleanCap commitments made by our customers. As for the cadence of estimated revenues, We have seen in each of our quarters over the past few years, less the impact of COVID-related clean cap carrying between 23% to 29% of the annual total. So a little bit of variability within each year. As we look at 2024 revenues, we see the first quarter carrying about 22% of our 2024 revenues and the first half of the year carrying about 47% of the total for the year. so we see the second half weighting slightly higher than the first half, but consistent with our historical variability and consistent with many of our peers outlook for 2024. Moving to the rest of the P&L. We're on track to realize the previously targeted cost reductions of $30 million, of which about two-thirds were tied to the reduction in our labor force at our San Diego-based nucleic acid production and corporate headquarters that was substantially completed in the first quarter of 2024. These targeted reductions will be partially offset by annual cost increases associated with the remaining ongoing labor force and focused investments in our commercial and R&D teams to drive organic growth. Overall, we expect gross margins to be flat to slightly lower than 2023 levels based on an unfavorable product mix compared to 2023. R&D and sales and marketing expenses are estimated to be up slightly on an absolute dollar basis, reflecting our ongoing investment in these areas. G&A expenses are expected to be down about 5% on an absolute basis versus 2023. Overall, we estimate 2024 adjusted EBITDA margins up between 23% to 25%. We see adjusted EPS in the range of 0 cents per share to a 6 cent per share loss. Our guidance also contemplates the following expectations in 2024. Interest expense and net of interest income between $25 million and $30 million. Depreciation and amortization between $40 million and $50 million. Equity-based compensation, which we show is a reconciling item from GAAP to non-GAAP EBITDA, to be between $45 million and $50 million. As a fully converted share count of 254 million shares and an adjusted effective tax rate of 24%. Lastly, as we have discussed, we are outfitting the final stages of our Flanders facility in the first half of 2024, which will result in us being substantially complete with all facility investments that we expect will be needed to support our business for the foreseeable future. As such, we anticipate total net capital expenditures to shift down to $30 million to $35 million in total for 2024. Subsequent to this completion, mainly over the first half of 2024, we anticipate capital expenditures moving down further to annual maintenance and growth investments, close to the 5% of total revenues over time. I'll now turn the call back over to Trey.

So to wrap up on slide 26, we believe we have transitioned during a challenging 2023 to Mar of I3.0, and they're at a new normal, poised for a solid and more diversified 2024. From new combo vaccines to cell and gene therapies battling cancer, we believe that the transformative impact that mRNA has on global human health will only accelerate. We believe we are playing in the right target markets with strong leadership positions. We are building our product and services portfolio and expanding our strong brands in strategically important high-value areas to support genomic medicine. We are committed to building a strong foundation for long-term, sustainable, and profitable growth with a focus on innovation, scaling our commercial organization, leveraging our new manufacturing scale, and inorganic growth opportunities. We have this incredible opportunity still ahead of us to participate in the next generation of medicines that are going to better treat, and in some cases, literally cure disease. This is what fuels our team every single day. We at Maravai are proud of the key role that our customers, partners, and employees are playing in making that happen. Then finally, thank you for your attention. To our investors, thank you for your trust and support, and we look forward to continued collaboration around fulfilling our mission over the coming years. I would now like to turn the call back over to the operator and open the line for your questions.

Thank you. The floor is now open for your questions. To ask a question this time, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Question comes from the line of Matt LaRue with William Blair. Your line is now open.

Hey, good afternoon, and thank you for taking my question.

I wanted to ask just about the guidance. The first would be sort of on the top line. You referenced 50 million of non-cancellable orders. For the whole space, obviously, visibility has been an issue over the past year, year and a half. I'm just curious, as you thought about constructing the guidance for a year, if there's any difference in the way you thought about approaching and communicating guidance relative to internal expectations, or if you're just seeing more end market improvement, or just some general thoughts on sort of the guideposts around the guide.

Yeah, sure, Matt. Thanks. This is Kevin. I'll take that. Look, I think we feel good about the guidance range. I think as we sit here today versus where we were, say, a year ago, the overall percentage of our revenue that we see, either having been recognized throughout the course of the year, sitting in PO or sitting in some of these contractual commitments like you mentioned, is higher than it was. And that puts us on a good spot. It's near 40% of our full-year guidance, and it was closer to a third probably a year ago. that gives us some conviction that we do have a good grasp of the full year, and that's incorporated in our guide.

Okay, thank you, Kevin. And then just on the EBITDA guide, I think the midpoint of that sort of margin and revenue mix is around $66 million. You just reported about $20 million in the fourth quarter, and recognizing that there are things like incentives COP reset in the first quarter. Just curious if I sort of look at the distinction between the annualization of Q4, which I know is a fool's errand, but if I do that relative to the midpoint of the guide, maybe it would help us understand the other moving parts beyond the top line here in 2024.

Yeah, well, I think if you take the 275 times the mid-range of the EBITDA, you get 66. And again, that's relatively consistent with where we ended the full year of 2023. You know, we do see certainly a step down in revenue versus where we ended up 23 in the midpoint of our guidance. So that's a big component of it. You know, I'll also tell you that, you know, we did put in obviously some cost actions We did benefit probably at the tune of around $4 million in the fourth quarter of 23 of that $30 million overall target. So the year-over-year benefit there is about $26 million. So about half of that is coming down to the lower revenue at the midpoint, and the remainder are some of the things. One, you mentioned the normalization of compensation practices, and then certainly the continued investment in commercial and R&D. You know, as we sit here today, we have about 40% more sales heads than we did at the end of 2022. And that's been a concerted focus of us, particularly as we morph into Marabai 3.0 to have that strong sales force. So that's a reinvestment as we move forward. As it relates to the margin cadence, we're going to see some continued variability quarter by quarter, as we did in 2023. I think if you see the second and third quarter of 2023, our EBITDA margins were in the mid-teen. We're down in the low 60s of revenue, and certainly given our implied guidance for the first quarter, based on the first quarter carrying roughly 22% of the full year. That's about a $60 million number for Q1. We expect the EBITDA margin for the first quarter to be relatively consistent with that mid-teen sort of level and then increasing from there, as it has done historically. Our key toggle for margin expansion is really the top line, and we'll continue to see margin expansion as the top line grows, moving into that full-year estimate of 23% to 25%.

Okay. Thank you. Thanks, Matt.

Our next question comes from the line of Justin Bowers with Deutsche Bank.

Please go ahead. Justin, are you there? Yes.

Good afternoon. I was on mute. Sorry about that. So I just wanted to take a step back. At a high level, can you just talk about the demand environment and how that's evolved, let's say, over the last three to six months? It looks like you're sort of calling for an inflection and a bit of a return to growth when we strip out some of the COVID clean caps. So just wanted to get a sense of sort of the drivers behind that as a starting point.

Yeah, thanks. This is Trey. We are seeing, I'd say first and foremost, willingness to make binding commitments again, which is something that is obviously a welcome change. As you identified, and as we discussed in the material, we're coming off of a period, well, the pandemic period really was intensely weighted toward heavy customers with large orders were coming into a very nice diversification, growing the number of customers significantly and so on, seeing demand, but of course, these are smaller POs and smaller checks. Ultimately, it will lead to a much more diversified and I would say stable and predictable business. But in this transition, You know, we are, I would say, for demand, seeing more customers come in. We are, they're unfortunately not, you know, massive customers of the pandemic era, but we've also seen, again, this recommitment to binding forecasts. And maybe I'll hand it to Drew for a little more color.

Yeah, thanks, Trey. I think Trey described it well. We've We've annualized some of the pandemic-era commitments, so we'll move past that. We have seen a greater diversity of customers, and I think the chart that Trey showed on the number of clinical trials using CleanCap speaks to some of those dynamics, as you see those numbers continuing to go up at a pretty significant rate. So, you know, we'll replace some of those larger commitments with a broader diversity customers and I think that augurs well for the future.

Thank you. And then just maybe just a quick follow-up. What sort of the shelf life or the process to validate efficacy on CleanCap? There's been a question that we get a lot and there's been, I guess, a wide range of estimates out there. So we'll just... I'd like to get your perspective on that.

Yeah, sure. It's true. I'll take that. It's a customer-driven decision how they will choose to use their inventory, and we support customers with retest dates and also with retesting services. We're pleased that CleanCap has held up well from a stability standpoint. And our customers work to make decisions about how they want to manage their own inventories.

That's it for me. Thank you.

Our next question comes from the line of Catherine Schultz from Baird. Please go ahead.

Great. Thanks for the questions.

In your prepared remarks, you mentioned that a larger portion of programs entering phase one last year used CleanCap versus that stat a few years ago. What was that number in terms of the portion of programs entering phase one last year that utilized CleanCap, just to try to get a sense for our market share?

Catherine, we're looking at that stat.

We've got a table with all of them. So you're asking the number of phase one programs at the end of last year versus this year? Total in phase one at the end of 22 was 69. And total of phase one at the end of 23 was 86. Okay.

I was more referencing, you mentioned that a larger, you know, Clean Tap was used more frequently in programs entering phase one. If you had like a, what percent of the phase one utilized clean cap, but if you don't have that.

Oh, yeah, yeah, it's about 40%. Okay, great.

That's very helpful. And then maybe for the first quarter guide, you know, implies a decent sequential step down in revenue. How should we think about the outlook for biologic safety testing versus nucleic acid production in that first quarter number?

Yeah, so most of that anticipated decline versus the quarter sequentially, Catherine, is going to be the NAP segment. Again, a lot of that is tied to the high-volume GMP clean cap. We actually see biologic safety testing stepping up in the first quarter, as it has done a lot historically, having strong first-quarter performance. So they can see a step up in BST over Q4 and then offset by NAP coming down again, predominantly due to the high-volume GMP clean cap pattern that we're seeing for 2024.

All right, great. Thank you.

Our next question comes from the line of Michael Riskin with Bank of America. Please go ahead.

Great. Thanks, guys. Got a couple quick questions here. Appreciate the Q&A. One was on the $50 million in contractual in 2024. I know you also just said you really don't want to talk about it, but still, I just want to make sure we're thinking about it correctly. You had about $60 million or $65 million, I believe, that was $60 million to $65 million that was contractual in 2023. You got $50 million in 2024. Anything you can say in terms of when that ends? I just want to make sure we're modeling it correctly when that rolls off. just because that could be a pretty meaningful headwind in 2025 if that all comes to an end. And I've got to follow up

Yeah, well, I think, as you know, with under most of our license and supply agreements, you know, we work with our customers for kind of rolling annual, rolling 12-month forward-looking forecasts, right? So, you know, certainly as we sit here today, you know, we're very comfortable with our guidance and what we're speaking of related to those commitments. And, you know, as we go through the year, we'll be working with our customers as that rolls forward into 2025 and certainly thereafter. Okay. I think it's... I mean, that's sort of the mechanisms on how that works, but right now we're sticking sort of to that clear view that we have right now today.

Beautiful. Thanks. And then, sorry, go ahead. I was going to say the last year number, you know, that we, what we were publicly, you know, sharing was the carve-out for COVID-specific large committed programs, and that number was 61, as we had forecast before today.

Okay. Yep. Thank you. And then my follow-up question I was going to ask on this Fujifilm partnership. I've gotten a bunch of questions over that in the last couple weeks. Anything, any additional comments you can make beyond what you had in the prepared remarks? And any way to possibly size that? Because that seems like it could be pretty meaningful, just sort of how much for that is assumed in 2024?

Yeah, that will depend on Fuji's customer signings as a CDMO. So that's sort of two degrees of separation for us that would be difficult to forecast, but really key partnership in country in Japan and notable because it includes the entire portfolio of CleanCap. But we have several CDMOs that have been enabled giving, hopefully, as customers, they have the opportunity to work with us, particularly in later phases, as Flanders 2 opens later this year. But if they need more scale or they need a geographic choice, that's the reason for the in multiple jurisdictions like that. And this is, as you say, this could be very meaningful. But it does depend on the programs that they are able to book in Japan.

Okay. All right. Thanks. I'll get back to you.

Thanks, Dan. Our next question comes from the line of Connor McNamara with RBC Capital Markets. Please go ahead.

Hey, guys. Congrats on a solid quarter, and thanks for taking the question. Just if you do look at Q4 results, you came in about $5 million ahead of what you were expecting, if my math is correct. Was there anything in there as far as bulk purchases or anything pulled forward from 2024 that's worth calling out, or is that just execution?

Yeah, I would say – thanks, Connor.

I would say, one, nothing pulled forward. I think it was a pretty normal quarter for us in that regard. We did have what we kind of call some drop-in orders, meaning things that weren't really in our funnel that our customers came and that really provided the upside to what we were thinking for the quarter. And that happens occasionally, again, and mostly for CleanCap. Certainly as customers maybe enter a new phase or start a new program, they're going to order order in bulk and there was a larger order that came in, again, not in our funnel that we see, and that happens periodically and leads to some of that quarterly volatility. But, you know, it was just a strong quarter versus our internal estimates, and we were happy about that.

Yeah, and it's true, I would add on, I think the efforts that have been undertaken in the past few quarters on our commercial execution bore fruit. So we saw some good traction with the commercial team and really just getting that clean cap opportunity And other offerings in front of the customer base in a more forward-leaning way.

I think we talked last year about how there was some reticence for these committed orders, the take-or-pay type arrangements, which may also largely dissipate with the pandemic. But this is a sort of upside positive consequence of people not necessarily committing to take-or-pay, but still needing the materials. And that's the reason, as Kevin said, that it was not in funnel, but we were able to take it and execute within the quarter.

Got it. Great.

And then as it relates to guidance, you know, looking at what you said about the first half or second half on revenue, you know, that implies the second half you'll do, you know, roughly, you know, 70 to 75 million a quarter in the second half. you know, should we expect then EBITDA margins would be roughly aligned in the second half of 2024 to what you guys did this year, or is there any headwinds or tailwinds that would make that much different? And then just as a follow-on, I mean, is that a good place to start for as we think of beyond 2024? Yeah.

Yeah, I think you got exactly right, Connor. Obviously, as we move up into the type of revenue performance that we saw in the fourth quarter of 23, you know, we had a strong EBITDA margin exiting the year, 28%. And, you know, I think as we're in and around that revenue level, that's certainly what you can expect. And that will, you know, pull up the slightly lower margin that we see here in the first half and average out to our guidance for the year.

Great. Thanks, guys. Appreciate it.

Our next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

Hi, this is Evie Kozlowski on for Matt. Thanks for taking my questions. The first one, how are customer conversations trending in terms of bioprocessing recovery within the different modalities that you called out on the slide? So basically, is there one modality where you're seeing more positive commentary relative to the others?

Well, yeah, that's an interesting question. The distribution of, you would be getting into, you know, cell platforms that people are using for production. And I would say we are returning back to normal for BST where there was some distortion, for example, in, I mean, this gets into the technical weeds, but in CHO versus E. coli and so on. Where we had some platforms slow down, they have recovered, I would say, back to the normal proportion of sales. But there are multiple modalities that can be expressed in the different cell lines. And so that's really a couple of clicks further than we get. In particular, since many of the Cygnus products Customers are also CDMOs or distributors. Unfortunately, we don't have that level of visibility into which specific program they're in or how many kits they're using for a certain cell line for a certain expression of a map or things like that, if that's what you're asking.

Yeah, I think more in terms of like cell therapy versus mRNA vaccines and those types of modalities.

And how customer comments are trending within each of those modalities.

Yeah, it's true. Maybe I'll jump in on that.

I think the, you know, I can't say we've seen a marked difference between cell therapy and mRNA. I think we've got engaged customer dialogues on both fronts. You saw the data in terms of growth of clinical trials. There's near 1,000 clinical and preclinical trials underway for mRNA, a smaller number for gene editing, but both those numbers have grown quite a bit over the past year, and both are forecasted to grow by 30% or more over the upcoming few years. And our dialogues, I would say, are consistent with that. We're excited about the customer traction. We're excited to have a customer signed up to initiate production with us in Flanders, too. So overall, I would say it's kind of a balanced optimism across the portfolio.

Okay, great. That's super helpful. And then with your 2020 revenue target of $700 million and taking into consideration the new 2024 guide, how confident are you in the step-up of growth necessary in the 2025 through 2028 in order to reach this target? Thanks.

Yeah, sure. I think that, you know, if you just look at the math there, I think you're looking at a CAGR that would be...

Certainly, we're building this business out, making investments with those targets in mind, and that's the reason why we continue to be focused on things like planters to expansion of commercial R&D innovation, et cetera. And I think that is not a growth target that we're unfamiliar with. If you look back to our core business growth from 18 to 22, we grew at 23%. And I think as we sit here today, as we look forward under Mara by 3.0 versus those previous years, you know, you have a lot more programs, a lot more dollars flowing into this space, a lot more excitement in and around it, and we have a lot more, as Trey alluded to, capabilities, products, and opportunities and customers involved. So, you know, I think it's something that we continue to be focused on, certainly as we build up our footprint strategically. But that having been said, you know, our goal right now is really focused on delivering what we just put out there for 2024. and starting to get the business returning to growth.

Okay, great. Super helpful. Thank you.

Thanks, Edie. And operator, I think we have time for one last question, please.

Yes. And for our last question, this comes from the line of Paul Knight with KeyBank. Please go ahead.

Yeah, thanks for the time. You know, as we look at, you know, various biotechnology firms, are they dedicated to one capping technology or are they agnostic and do they really look at alternatives?

Yeah, I think when anyone, that's an insightful question, by the way, when anyone is starting a new program or ideally in discovery, they should be looking for the best technology at that time. So I think to that extent, as a given customer, you may be agnostic at a moment in time. They certainly have their favorites, and then it depends on whether they are producing themselves or have a partner. If we are the partner, as I mentioned in my comments, we have a standard workflow that really efficiently incorporates the co-transcriptional caps and sorry, we're sorry about the planes going overhead.

And that also is quite efficient and quick.

But I would say though we have people who are dedicated CleanCap customers, partly the reason that we're so excited to continue innovating and adding new options to the menu is that we think at a given stage of their clinical development, they should always try to incorporate all of the best technologies, with M6 being the most recent example.

What's the last stage? Are they limited? They really have to commit, what, at phase one? I'm guessing they commit at phase two, right?

I think that's usually the case that people are going to commit as they go into clinical trials, maybe switch a little bit later.

We see the greatest degree of switching as products and programs are entering the clinic. But I think to Trey's point, we continue to work hard to bring new options that are going to help customers optimize their programs. And so we're excited that CleanCap AG, CleanCap 3-Primomethyl, and CleanCap SA are all in, CleanCap AU are all in products that have been approved at this point. M6 is moving along nicely, and we have quite a bit of interest there to move that into GMP production. And so there's not one size fits all. We continue to try to bring innovation to customers to help their programs achieve as much as they can possibly achieve.

Thank you.

Great. Well, with that, we would just like to thank everyone for joining us today.

We'll be at several conferences over the coming months, so hope to catch up with some of you in person there. And feel free to contact us with any follow-up questions. Hope you have a great night.

This concludes today's conference call. You may now disconnect.