Repligen Corporation

Good day, ladies and gentlemen, and welcome to Ruffington Corporation's first quarter of 2024 earnings conference call. My name is Keith, and I will be your coordinator today. After today's presentation, there will be an opportunity to ask questions. To ask a question, you will press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded. Please note that in order to accommodate all individuals who wish to ask questions, there will be a limit of two questions at a time. We'll now turn the call over to your host for today's call, Sondra Newman, Head of Investor Relations. Please go ahead, ma'am.

Thank you, Operator, and welcome to our first quarter of 2024 report. On this call, we will cover business highlights and financial performance for the three-month period ending March 31, 2024, and we'll provide financial guidance for the year. Joining us on the call today, our Repligen CEO, Tony Hunt, our CFO, Jason Garland, and our Chief Commercial Officer, Olivier Lilliot. As a reminder, the forward-looking statements that we make during this call, including those regarding our business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning risks related to our business is included in our quarterly reports on Form 10Q, our annual report on Form 10-K, and our current report on Form 8-K, including the report that we are filing today and other filings that we make with the SEC. Today's comments reflect management's current views, which could change as a result of new information, future events, or otherwise. The company does not obligate or commit itself to update forward-looking statements except as required by law. During this call, we are providing non-GAAP financial results and guidance unless otherwise noted. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Repligen's website and on sec.gov. Adjusted non-GAAP figures in today's report include the following, book-to-bill ratios, organic revenue growth, base business revenue, which excludes COVID and M&A, non-COVID revenue, cost of sales, gross profit and gross margin, operating expenses, including R&D and SG&A, income from operations and operating margin, other income, pre-tax income, effective tax rate, net income, diluted earnings per share, as well as EBITDA, adjusted EBITDA, and adjusted EBITDA margins. These adjusted financial measures should not be viewed as an alternative to GAAP measures, but are intended to best reflect the performance of our ongoing operations. Now let me turn the call over to Tony Hunt.

Thank you, Sandra, and good morning, everyone, and welcome to our Q1 earnings call. As you saw in our press release this morning, we delivered a solid first quarter on revenue and orders. With Q1 revenues coming in at $151 million, we are right on track to delivering $300 million to $310 million in the first half of 2024. Orders were in line with our expectations, resulting in a book to bill of 0.99 in the first quarter. and 1.03 over the past nine months. We're satisfied with these results, especially in light of top sequential and year-on-year comps and the known headwinds in COVID, proteins, and China. During the first quarter of last year, 2023, we realized 23 million of COVID-related revenue, none of which was recurring. And as we shared with you on our February call, we anticipate proteins headwinds of over 30 million in 2024, which we saw play out during the first quarter. Importantly, we continue to see signs of recovery in the market and feel confident that the destocking challenges are behind us for the most part. Our confidence is reinforced by what we are seeing in filtration performance, consumables demand, and humanality momentum. In filtration, our largest franchise, year-on-year non-COVID filtration orders were up 20% in Q1, and revenue was up by more than 10%. We also saw a nice sequential uptick in non-COVID filtration revenue of greater than 15%. Regarding consumable orders, where destocking has been the most pronounced, we've seen a positive uptick in demand outside of proteins. For the first quarter of 2024, these consumable orders increased by more than 10%, both sequentially and year on year. Both sales and orders from new modality accounts were another area of strength. at levels higher both sequentially and year-on-year. New modality revenue growth in the first quarter of 2024 was greater than 15% compared to the first quarter of 2023, and orders were up 8%. While encouraging, these positives were offset by the aforementioned weakness in proteins and capital equipment purchase constraints as reported across the industry. Our expectation is that markets will improve as we go through the year with stronger order trends in the second half, and so revenue guidance range is unchanged for 2024. For the quarter, our overall revenues were down $31 million or 17% year on year, driven primarily by the $23 million decline in COVID-related revenue. Our base business revenues were down approximately 9% in the first quarter, reflecting the anticipated decline in proteins and partially offset by filtration sales. where our ATF business had a very strong quarter. Overall, non-COVID orders were flat year on year. Within our franchises, protein orders were down 30% as expected, which was more than offset by an approximate 20% increase in filtration demand. Excluding proteins, orders as reported from our non-COVID filtration, chromatography, and analytics franchises were up 7% year on year, and up 13% when you compare the last six months' performance to the prior six-month period. Overall order dollars are consistent with what we observed in the second half of last year while covering the drop-off in proteins. At a customer level, pharma orders were in line with Q4 and up greater than 10% year-on-year. CDMO orders were down year-on-year and sequentially. some of the softness can be attributed to lumpiness in orders from a few of our larger accounts, but it's fair to say that at this point, we're not seeing a true sticky rebound from CDMOs. The good news here is that when we take a look at the last six months versus the previous six months, both CDMO orders and farmer orders are up about 10%. New modality orders were also strong, up high single digits in Q1 versus the corresponding period last year, As noted on our February call, strength and new modalities is directly tied to our top 20 to 25 accounts who are scaling with our technology. Strategically, Q1 was another good quarter for the company. Our latest acquisition in the fluid management mixing space, Metanova, had a strong quarter for revenues and orders. Our collective teams continue to work through the integration plan with the focus on managing the broader network of distributors and new product development. In fact, we just launched our first bag and film technology into the single-use bag market, paving the way for the launch of our single-use mixers in the second half of this year. In addition, our R&D team successfully developed and launched the industry's first fully automated GMP-ready filtration system called RS-10. The feedback at the Interfex conference earlier this month on these two new product launches was incredibly positive, and we expect the system for mRNA in cell and gene therapy processing to have a meaningful contribution in 2024. We are clearly executing on our strategy to differentiate ourselves in the market with best-in-class systems and follow-on consumables. So moving now to our quarterly performance. The story of the quarter was the performance of our filtration and fluid management businesses. Our filtration franchise had a very strong quarter with non-COVID revenue growth of more than 10%. As mentioned earlier, this was driven by the success of ATF, where we have been specified into nine late stage and commercial processes since mid-2023. The impact of these late stage wins drives more consistency in consumables and should be a key driver of growth for this business over the coming years, especially as many of these drugs are in the ramp-up phase. In addition, the fluid management business had a good quarter for both revenue and orders. We are seeing some very positive signs as our investments in this area are beginning to pay off. In chromatography, our Opus prepack column business had a solid quarter, slightly up on revenue versus Q4. The opportunity funnel is strong, and we expect further growth in revenues here in Q2 as this business continues to recover from the resin shortage challenges in prior years. A major driver of growth for us is the continued uptick in Opus demand in the new modality markets, as more customers switch to the convenience of pre-packed columns versus self-packed. Our analytics business had a slower start to the year, mainly driven by fewer dollars for capital equipment purchases. This is consistent with what we have seen for this franchise over the last few years. Again, our funnel of opportunities is strong. There continues to be strong demand for flow VPX and real-time process management or RPM. And we continue to see these technologies as the drivers of growth for analytics here in 2024. Finally, we had a weak quarter in proteins. Revenues were down both year on year and sequentially as Cytiva demand dropped to essentially zero. And as we noted in February, another partner is burning off inventory, which also impacts our performance. The Q1 decline in proteins is in line with our guidance for the year of 30% to 35% drop off in revenues. However, we continue to expect growth infiltration, chromatography, and analytics as previously guided. In summary, we're off to a good start here in 2024. We believe that destocking is essentially behind us. We see positive trends in consumables, and our orders are holding steady, staying 2% to 3% ahead of sales over the last nine months. Our guidance is based on our expectation to see orders pick up in the second half of the year. We remain confident in the medium to longer-term potential in bioprocessing with stronger growth in view for 2025. With that, I will hand it over to Jason for a financial update.