Repligen Corporation

Ladies and gentlemen, and welcome to Repligen Corporation's fourth quarter of 2024 earnings conference call. My name is MJ and I will be your coordinator. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note, there will be a question and answer session following the company's formal remarks. To ask a question, you may press star one on your telephone keypad. The company would like to note there will be a limited timeframe for Q&A, and as such, management kindly requests that each individual ask one question to try to accommodate all. I would now like to turn the call over to your host for today's call, Sondra Newman, Head of Investor Relations. Please go ahead.

Thank you, and welcome to our fourth quarter of 2024 report. On this call, we will cover business highlights and financial performance for the three and 12-month periods ending December 31st, 2024, and we'll provide financial guidance for the full year 2025. Joining us on the call today are Repligen's President and Chief Executive Officer, Olivier Leyaux, and our Chief Financial Officer, Jason Garland. 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 10-Q, our annual report on Form 10-K, and our current reports on 8-K, including the report that we are filing today, as well as other filings that we make with the Securities and Exchange Commission. 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. Non-COVID and organic revenue and or revenue growth, cost of goods sold, gross profit and gross margin, operating expenses including R&D and SG&A, income from operations and operating margin, tax rate on pre-tax income, net income, diluted earnings per share, EBITDA and adjusted EBITDA, as well as adjusted EBITDA margins. These adjusted financial figures should not be viewed as an alternative to gap measures, but are intended to best reflect the performance of our ongoing operations. Now, let me turn the call over to Olivier.

Thank you, Sandra. Good morning, everyone, and welcome to our 2024 fourth quarter annual end reports. We are happy with the way we finished 2024 and in addition to reporting our financial results in detail, we will share our 2025 strategic priorities and provide financial guidance for the new year. We have a lot of reasons to be positive about 2025 as we put specific 2024 headwinds behind us and we see a return to growth for the bioprocessing market. I'm pleased to share that we achieved the midpoint of our November guidance. delivering fourth quarter revenue of 167.5 million and full year revenue of 634.4 million, despite a 3.5 million exchange rate headwind in the quarter. Product differentiation, excellent execution by our team, and better market conditions have enabled us to deliver a 13% revenue growth ex-COVID in the fourth quarter versus the previous year. Our orders were also very strong in the fourth quarter, with the highest order intake we've had since quarter two of 2022, and it was the sixth trade quarter that orders outpaced non-COVID revenue. In quarter four, we were delighted by the strong performance from CDMOs and equipment, key market sectors that have been slower to recover. With this momentum, and as our funnel continues to grow, we are well positioned as we enter 2025. After a great rebound in Q3, our CDMO business had an even better quarter with sales and orders up high double digits sequentially. In fact, thanks to that very strong CDMO finish, our full year 2024 sales growth was similar at CDMO and Pharma, both up high single digits. We saw a similar pattern for equipment. Following a solid Q3, equipment was another important standout in the fourth quarter, with both sales and orders up more than 30% sequentially. Thanks to that strong equipment finish, our full year 2024 sales growth was similar for consumables and equipment, both 8% and 10% respectively. At the franchise level, filtration had another excellent quarter, both from a revenue and order point of view, and analytics had a record quarter both in sales and orders since we acquired CTEK in 2019. And finally, 2024 has been a great year for new modalities with low double-digit growth in both sales and orders, as we built momentum with key accounts and new technology launches. Before entering into more detail, I would like to say that managing to deliver 3% revenue growth in 2024, excluding COVID, and considering the huge headwinds in Protein and China, demonstrates the fantastic execution of our teams and the uniqueness of our portfolio. And in fact, our full-year revenue was in line with our initial outlook in February 2024, adjusting for the restatement and additional currency headwinds. When I reflect on the full year, in addition to the forward momentum of the market and our results, I'm also very pleased with how the Repligen team executed on the five strategic priorities we set at the beginning of 2024. First, Our high probability funnel has increased through the year, driving fourth quarter orders to their highest level over the last 10 quarters. And even with very strong Q4 orders, we replenished the funnel. At the end of December, our greater than 50% probability funnel was up 16% versus the end of 2023. Our greatest sales organization, including our extended key account management team, have done well in 2024, training new leads at our top pharma and CDMO accounts and improving our portfolio visibility. Next, we launched several differentiated new products in 2024. Of note, in May, we launched our game-changing cross-flow RS10 RPM system, the first and only single-use TFF system for bench-scale GMP production, with in-line, fully automated protein concentration measurements. In December, we launched the Avipure double-stranded RNA resin sold through our Opus prepack columns. This resin, using beads from our newly acquired Tanti business, is remarkable in that it is the first affinity resin to remove the double-stranded RNA impurity from transcribed RNA without heat or solvents. These and other launches in 2024 are offering innovative solutions for customers' unmet needs and add to our differentiated portfolio. We estimate that about 80% of our business comes from highly differentiated technologies, which are a cornerstone in helping to grow above the market. Our third priority was to further build on our wins in new modalities. Our sales in new modalities have increased low double digits and now represents approximately 20% of our total revenue. We now have 25 accounts with sales above 1 million. The next priority was the successful integration of MetaNova and preparing for the launch of new single-use mixer technologies. We successfully integrated Metenova with our fluid management team, and we are planning to formally launch our single-use mixers in quarter two of 2025. And finally, we further strengthened our discipline in cost control and expanded margin. Through select rooftop consolidation and additional restructuring actions, our operation teams have achieved targeted productivity gains. This has enabled us to finish the year with Q4 adjusted gross margin at 50.7%, adjusted operating margin at 14.9%, and adjusted EBITDA margin at 20.9%. For the full year, we successfully expanded our adjusted gross margin by 140 basis points. Jason will discuss this further. In addition to our stated priorities in 2024, we have onboarded several experienced leaders from across the industry to strengthen our bench and position as well for years of growth. This includes but is not limited to quality, services, product management and sales. We believe the diversity of talents and experience Repligen has today will enable us to become further fit for growth. So moving now to our fourth quarter and full year revenue and orders performance. As you saw in our press release this morning, fourth quarter 2024 sales stepped up from third quarter by nearly 13 million to reach 167.5 million and 634.4 million for the full year. Excluding COVID, this was our highest quarter in sales in quarter three of 2022, even with the higher than anticipated currency headwinds of 3.5 million in quarter four and 5.7 million for the year. Excluding COVID, we delivered Q4 revenue of 13% and 8% sequential growth. For the full year, 2024 non-COVID revenue growth came in as expected, up 3%. Moving to orders, our opportunity funnel delivered. Orders were exceptionally strong in quarter four, up 11%, both sequentially and year over year. As I mentioned, this was the highest order intake we've had since the second quarter of 2022. For the full year 2024, total orders were up 9%, with all franchises except proteins up over 10%. During the quarter, orders outpaced sales by 6%, and for the full year, orders outpaced non-COVID sales by 4%. As it relates to customer segments, quarter four was another strong quarter for pharma, supported by our key account focus. In quarter four, pharma sales were up mid single digit sequentially and up high single digit excluding COVID year over year. Quarter four pharma orders reached a record level and were up approximately 20% versus quarter four of 2023. While pharma revenue was similar between H2 and H1, orders were up about 15% and landing 17% for full year 2024. Within pharma, the remaining challenge is small biotech. Though our sales in quarter four were on par with low-wish quarter three sales, order increased over 10% sequentially. We are hoping this will continue in the first half of 2025, though we will need to continue to monitor the funding environment. Where pharma as a whole has been going very well for several quarters, we now see confirmation that CDMO business has improved more durably and was a standout in the quarter. This is the case for both Tier 1 and Tier 2 CDMOs. CDMO revenue was up 20% sequentially and more than 40% year over year. Orders in Q4 also grew more than 15% sequentially and 11% year over year. Q4 orders from CDMOs were the highest since Q1 of 2022, excluding COVID. we saw activity accelerate through the year with H2 CDMO sales about 40% higher than H1 and orders nearly 20% higher. This really illustrates the recovery of a critical market segment that reflects the overall health of the ecosystem. Moving now to product type, whereas consumables have had a positive trend for several quarters, equipment showed strong improvement and was another standout in the fourth quarter. Consumable performance was consistently healthy through the year and remained strong in the first quarter, with non-COVID revenues up more than 20% year-over-year and at the highest level since quarter two of 2022. Quarter four was also the highest order quarter for consumable in the last 12 quarters, up nearly 10% sequentially and 25% year-over-year. We are particularly excited by the traction we have due to our increased design in ATF in late phase and commercial products, as well as single use consumable attached to our systems. Moving to equipment, the rebound we saw in quarter three accelerated in quarter four with both sales and orders up more than 30% sequentially and more than 10% year over year. Excluding COVID, Our Q4 equipment orders reached a record level, and while it was a slower start to the year for equipment, we saw a rebound with H2 orders approximately 25% higher than in H1. This reflects our success implementing ATF controllers at the majority of large pharma and CDMO companies, as well as starting to platform our TFF and Chrome systems. Our top quality systems, coupled with our inline PAT flow technology, are really disrupting the market, and we're excited about the future, considering that every system placed can generate a flow of consumable sales. Moving now to franchise-level business highlights, the top performers in the fourth quarter were filtration and process analytics. While filtration continued its positive trends through the year, in analytics, we saw a strong turn-up in the fourth quarter, having been impacted by equipment softness in the prior periods. Proteins played out a bit better than we anticipated, and we expect a return to growth in 2025 after this year's reset. Finally, chromatography saw a nice sales pickup in the fourth quarter. Breeding down in each franchise and starting with filtration, Our year-over-year filtration revenues ex-COVID were up 30% in the fourth quarter and 14% for the full year. The strong sales performance was across the portfolio, our largest and most diverse. Filtration revenue exceeded $370 million for the year, up 9%, and representing nearly 60% of our total revenue. Within the portfolio, XLATF had a great year and finished with top-line growth above 50%. Filtration orders in the fourth quarter were up about 30%, both sequentially and year-over-year, setting us up well for 2025. Excluding COVID, Q4 filtration orders were the highest of the last 12 quarters. Systems and flow kit orders were also at a record level in quarter four. So overall, great performance in quarter four for the different components of our filtration business and with strong contributions from new product launches. As we see continued strength and momentum exiting 2024, our expectation for 2025 is that this franchise will be up 9% to 12% on a reported basis and up 12.5% to 15.5% excluding COVID. In chromatography, our year-over-year revenues were up 10% in the fourth quarter and down 3% for the full year. Chromatography revenue of 123 million represented approximately 20% of total revenue in 2024. As mentioned previously, the full-year decline was impacted by the higher mix of columns versus resin cells. On orders, Chrome was slightly down for the quarter, but up mid-double digit for full-year 2024. In 2025, we'll focus on converting more large pharma companies to Opus prepack column and Chrome systems, capitalizing on our powerful sales organization and leveraging technology differentiation. For 2025, we expect chromatography revenue growth in the range of 10 to 15%. In 2024, our proteins revenue was 74 million, a decline of 28%, which was actually better than our initial expectations. For the full year, we collected almost 10% more protein in order than sales. It has been a reset year with OEM ligand demand down to the minimum level. We had numerous custom ligand and resin wins in 2024 that we believe will become a true tailwind for the future. We are already seeing healthy demand for the IV-Pure double-stranded RNA resin launch in December and look forward to introducing additional resins for unmet purification needs in 2025. Our close collaboration with PureLight on monoclonal antibodies and our Avitide Tanti combined offering for emerging modalities should enable us to get back to 10% to 15% growth in 2025 with more control and ownership of this franchise future. Finally, our process analytics sales in Qual4 were up 11% sequentially and up 8% year-on-year. For the full year, analytics sales were 59 million, an increase of 4% to 2023. We are seeing good order traction for analytics, which were up 10% for the year. In an overall very changing environment for analytical equipment, and thanks to our fast-growing FlowVPX and RPM product lines, we had a solid year overall. We are happy to have experienced the highest quarter in the history of that business for both orders and sales in quarter four. And with this momentum, we expect analytics revenue growth of 5% to 10% for 2025. Jason will speak to the regional performance in his section, but I will comment that China was one of our key headwinds in 2024. We are currently planning on China sales being flat to 2024, and we remain optimistic about our long-term growth potential in this region. On the upside, the rest of Asia pack performed well in 2024 with full year sales up 12%. Transitioning to our 2025 outlook, We expect our revenue to grow low double digits, excluding COVID, and potential foreign exchange impact. Pacing is expected to track to our historical norms, that is second half stronger than first half, with Q1 being the weakest quarter and Q4 the strongest. Our full year guidance for 2025 is in the range of 685 to 710 million US dollar, up 8 to 12% on a reported basis, and up 10 to 14% including COVID. The great order traction we had over the last two quarters combined with our stronger product management and commercial team and a better market environment gives us high confidence in achieving our targets. To deliver this resource, our 2025 strategic priorities will center on the following. Number one is accelerating and maintaining above market growth by further improving customer experience and focusing on accelerated growth at key accounts and in Asia. Number two is capitalizing on our best-in-class innovation with increased investment in R&D. We already launched SoloPlus in our analytics business at the beginning of this year. We will also be particularly focused on our single-use mixers launch, as well as several new ligands and raisins for new modalities. Number three is increasing our margins by 100 to 200 base points combining pricing discipline and achieving our RPS activity targets. Number four is maintaining our ambition to acquire one to two businesses to further strengthen our position with a focus on new modalities and PAT. And finally, number five is becoming further fit for growth and positioning ourselves to be a significantly bigger business in the not too distant future. We'll focus on implementing key tools for our human resources management, and also creating a project management office to manage our key strategic program, including M&A integration, site consolidation, and other key EBITDA generating projects. In summary, we're excited as we enter 2025. We have a great combination of the right team, products, and market environment to deliver upon our priorities and goals. Our strong balance sheets, will enable us to act on our M&A ambition as we identify unique technologies that can complement our differentiated portfolio. We have a clear plan for delivering long-term rewards for our shareholders and look forward to updating you on our progress through this new year. Now, I'd like to turn the call over to Jason for a report on our financial performance.