Repligen Corporation

Good day, ladies and gentlemen, and welcome to Repligen Corporation's first quarter of 2025 earnings conference call. My name is Dhawan and I will be your coordinator. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note that there will be a question and answer session following the company's formal remarks. The company would like to note that there will be a limited timeframe for Q&A, and as such, management kindly requests that each individual asks one question to try to accommodate all. I would like to turn the call over to your host for today's call, Jacob Johnson, Vice President of Investor Relations for Repligen.

Thank you, Operator, and welcome to our first quarter of 2025 report. On this call, we will cover business highlights and financial performance for the three-month period ending March 31st, 2025, and we'll provide financial guidance for the full year 2025. Joining us on the call today are Repligence President and Chief Executive Officer Olivier Louillaud 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 risk and uncertainties that may cause actual events or results to differ. Additional information concerning the risk related to our business is included in our quarterly reports on Form 10-Q, our annual report on Form 10-K for the year ended December 31st, 2024, and our current reports, including the Form 8-K that we are filing today and 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 on Rapplegens' 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 free tax income, net income, diluted earnings per share, 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, I'll turn the call over to Olivier.

Thank you and welcome to RepliGen, Jacob. Good morning, everyone, and welcome to our 2025 first quarter call. Before jumping into our overall business performance, I want to spend a few minutes on the current environment. It's obviously a very dynamic macro backdrop with new headlines emerging every day. As you saw in our release, we had a very good first quarter and are encouraged by the underlying trends and opportunities in our business. We acknowledge macro uncertainties exist and are working to adapt to an evolving environment. As it pertains to tariffs, at this point in time, we see a limited net impact on our EPS. Given the strengths we have been seeing in orders for the last few quarters, and with Q1-25 orders slightly above Q4-24, our organic full-year 25 guidance remains unchanged. This does not include specific impacts from tariffs. As it pertains to tariffs, I would first highlight that the majority of our manufacturing is in the U.S. In fact, more than 90% of our U.S. revenue is manufactured in the U.S. or currently exempt from tariffs. In an effort to frame the potential impact of tariffs, we estimate that approximately 10% of our cost of goods sold are from raw materials directly sourced outside of the manufacturing region. In addition, we estimate a low single-digit percentage of our revenue could be subject to U.S. tariffs. As it relates to Europe and Asia ex-China, This is where we could potentially have greater exposure in the case of retaliation as revenue manufactured in the U.S. for these regions represents about a quarter of our total revenue. So, based on the most recent proposal we have seen, tariffs would not apply to a sizable majority of these revenues. We are working to mitigate tariff impacts by leveraging our global manufacturing network, applying surcharges and pricing where appropriate. Finally, we would know China only represented 2% of our revenue in the quarter. In terms of financial impact, excluding the impact from China, given the unique nature of these tariffs, we believe the net result of these actions could be a tailwind for revenue, a modest headwind for margins, and have minimal impact on adjusted earning per share. Our job as a management team is to navigate through these environments. In the meantime, we remain focused on executing our strategic plan for 2025. Moving on to highlights from the quarter, we had a very strong start to 2025 with 11% organic revenue growth in Q125, which was 14% organic non-COVID. Proteins had the highest growth of all of our franchises, outperforming our expectations, while chromatography and analytics both grew double digits. Filtration revenues were slightly up, excluding COVID, due to a tough comp from a large customer sale in the prior year. Consumables were very strong in the quarter, and while we did see some softness in capital equipment due to timing, we have a backlog that supports solid growth in the back half of the year. Orders were up high teens year-on-year, with all franchises growing double-digit. In addition, our orders increase sequentially from the first quarter, which is impressive given the first quarter is typically a seasonally slower quarter. While there are macro uncertainties, we remain focused on delivering on our strategy in 2025 and beyond. We are encouraged by the many opportunities we are seeing across our portfolio as we sell into resilience and markets that have demonstrated healthy growth over the long term. In fact, our 50% plus probability opportunity funnel was at 30% year on year. These opportunities are broad-based, and we want to emphasize that we have a diversified customer base. Our largest monocular antibody customer represented 6% of revenue in full year 24, and our largest new modality customer was no more than 3%. Within our top customers, we are serving multiple programs. Finally, we made progress on many of our key strategic initiatives for 2025, including the acquisition of 908 devices bioprocessing portfolio, the launch of a new MetaNova mixer, and continuing our journey to be fit for growth. In short, we are encouraged by the momentum in our business as highlighted by our Q1 results. We are working to navigate through the current environment with a focus on delivering differentiated products for customers which we believe will drive successful performance for the company. Moving to performance by end markets. Q125 BioPharma revenues were at the highest level ever, excluding COVID, and grew more than 20% year-on-year. This was supported by strong execution from our strategic accounts team, which is helping us to accelerate growth at our top 20 customers. Biopharma orders were also up approximately 20% versus Q124, as these key customers are more broadly adopting products across our portfolio. After two very strong quarters, CDMO revenues were down slightly year on year, with orders up more than 40% year on year. We expect revenue growth to accelerate throughout the rest of the year. Consumable revenues, which exclude proteins, grew greater than 20% year-on-year, a record quarter on a non-COVID basis, driven by ATF consumables, opus, and fluid management. Our recent design wins in late phase and commercial drugs are becoming a significant tailwind. Consumable orders were also at a record level and up more than 20% versus quarter 1-24. Capital equipment revenues declined year-on-year as we expected. Both our backlog and funnel are strong, so we expect capital equipment revenue to strengthen as the year progresses. So, given the current backdrop and normal Q1 seasonality, we have seen some delays in customer orders. New modalities revenues and orders were up in the quarter. While there may be some near-term challenges for this end market, we continue to believe this is a strategic end market for Repligen. Finally, From a geographic point of view, the Americas, Europe, APAC, excluding China, had a very strong quarter both for revenues and orders. China, on the other hand, continues to decline and represented about only 2% of our Q1 revenues and orders, a very small share of our total business. On our Q4 24 call, we outlined five key areas of strategic focus this year. I want to provide updates on some of the progress we made during the quarter. First, we stated our ambition to acquire one to two businesses to strengthen our position with a focus on new modalities and PAT. In March, we announced the acquisition of 908 device bioprocessing PAT portfolio. Jason will provide additional details around the financial impact of that transaction. Strategically, this acquisition accelerates our journey to enable the digitization of bioprocessing by adding key technologies which allow us to bring PAT integrated upstream solutions to the bioprocessing industry and complement our downstream capabilities. Looking ahead, 908 products will benefit from leveraging our commercial infrastructure, and we will continue to invest in product development to launch additional P&T technologies as we try to prepare for the next wave of industry digitization. Operationally, we are working to transition 908 Massachusetts manufacturing into a replicant facility and continue to assess additional footprint optimization. Secondly, we are working to capitalize on our best-in-class innovation and continue to invest in R&D. Recently, we launched a Proconnex Mix One, a single-use mixer based on MetaNova's mixing technology. This is a great example of the integration of RepliGens R&D and M&A strategy as this product combines components from a number of our fluid management acquisitions into a best-in-class single-use technology. feedback from the Interfex conference was positive, with multiple demos requested. We expect to receive the initial orders of the MixOne mixers in the second half of 2025. Finally, we continue to invest to become further fit for growth, positioning RepliChain to be a much larger business in the not-too-distant future. During the quarter, we made investments in finance and quality, which would help increase visibility in our business and improve our customer experience. Moving now to franchise-level business highlights. Non-COVID filtration revenue was up slightly year-on-year in Q1. The quarter played out largely as we expected. Freed management and Tangenix flagship cassettes led the way. ATF consumables were strong and at a record level, while ATF hardware was down year-on-year due to a tough comparison. We remain positive about the medium-term outlook for this product line as we continue to see new wins and applications for the technology across end markets given the differentiated performance, including customers' ability to scale up and down on the platform. Our fluid management products are getting traction with some significant recent wins with Pharma customers. Tangenix also has real momentum with multiple designing successes. Filtration orders grew low double-digit year-on-year, which sets us up well for double-digit non-COVID growth for the balance of the year. Chromatography grew double-digits, driven by growth in large-scale columns. Orders increased greater than 50%, the highest quarterly order intake in the last three years. Opus has long been successful with CDMO customers, and we are now getting more traction with large pharma customers, which is an encouraging development. We expect chromatography growth will be strong for the remainder of the year. Proteins had a great quarter with strong year-on-year growth. This was driven by a record quarter for chromatography resins as we benefited from the timing of commercial demand. During the quarter, we strengthened our collaboration with PureLite through joint customer discussions. Our chromatography custom resins had strong growth in the quarter, which highlights our strategy to develop our own content. While the quarter played out better than we expected, our full year outlook for the segment is unchanged. Process analytics grew 20% with $1 million of revenue from the 908 acquisition in the first quarter and 12% organically. This was mainly driven by consumable and service uptake. To summarize our Q1 performance, 14% organic non-COVID revenue growth is a very good start to the year. Our order and funnel trends highlight the momentum in the business. As a result, we are confident in our 2025 outlook and delivering above-market growth. We are focused on executing our strategy, delivering differentiated products to customers while being nimble to adapt to an evolving economic environment to best serve our customers and create value for shareholders. Before I turn the call over to Jason, I want to thank Sandra Newman, our outgoing Vice President of Investor Relations, for her many years of service to Repligen. We wish her the best in retirement.