Rapid Micro Biosystems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Rapid Microbiosystems Q2 2023 earnings 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, Press the star 1. I would now like to turn the conference over to Mike Buley. Please go ahead.

Good morning, and thank you for joining the Rapid Microbiosystems Second Quarter 2023 Earnings Call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer, and Shawn Werches, Chief Financial Officer. Earlier today, we issued a press release announcing our second quarter 2023 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under investors in the news and events section. Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements including, but not limited to, statements relating to Rapid Micro's financial condition, anticipated year-end cash balance, cash runway, future revenue, and system placements, expectations for business development and growth, customer interest and adoption of the GrowthRx system, expectations for our new RMB Nucleus Mold Alarm and the potential impact of macroeconomic uncertainty and the public health crises on Rapid Micro's business. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the risk factors section of our annual report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2023, as amended, as such risks are updated in our subsequent filings with the SEC. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 4, 2023. Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Rob.

Thank you, Mike. Good morning, everyone, and thank you for joining us to review our second quarter 2023 results. I will begin this morning's call with a summary of our second quarter performance. followed by an update on the progress of our execution related to our growth strategy. I will then turn the call over to Sean for a more detailed review of our financial results and outlook. Total revenue was $5 million, representing a 30 percent increase compared to Q2 last year and above the guidance we provided in May. We placed two systems in the second quarter and completed three validations. Based on our strong performance in the first half of the year, We are reaffirming our full year 2023 total revenue guidance of at least $22 million, representing growth of at least 30%. Despite macroeconomic uncertainty leading to cautious customer spending, our teams are navigating these conditions and staying focused on strong execution to deliver our full year guidance. We were pleased once again with our execution across both products and services during the second quarter. I'd like to especially highlight the strong recurring revenue in the quarter, which increased over 40% compared to the second quarter last year. We had a record quarter in consumables revenue, which was driven by both higher pull-through per validated system and more validated growth directs in the field. Service revenue was also strong during the quarter, driven by annual contract renewals. While Sean will provide additional P&L details, I wanted to emphasize the importance of recurring revenue, which drives predictability and demonstrates the durability of our business model. It is also a strong indicator of the value we are providing to our customers, as evidenced by their increasing use of our growth direct systems in their worldwide manufacturing operations. With the benefit of two separate revenue streams, we believe solid double-digit recurring revenue growth is sustainable. And while our recurring revenue is subject to some quarterly variability due to order timing or other customer-specific decisions, most of our revenue comes from large, established global customers who are using the Growth Direct on commercially approved products. We continue to execute against our strategy to advance system opportunities through our sales funnel and accelerate Growth Direct placements. As an example, late in the second quarter, we close a multi-system order with one of the world's largest CDMOs based in Asia. As we discussed on our call last quarter, we are excited about the opportunity and demand for our technology in this important region. This was a significant and well-earned win for our commercial team and highlights that our technology continues to resonate with both large global biopharma as well as CDMO customers. With respect to high-impact customer activities, we partnered with the New England PDA, which is a local chapter of the Parental Drug Association, for an educational event in June. This event brought together existing and prospective customers, as well as industry peers, and highlighted quality control challenges in today's pharmaceutical manufacturing environment. These events are important opportunities for our rapid micro team members to facilitate collaborative discussions among local biopharma industry leaders and other professionals in the pharmaceutical quality control ecosystem. The event was hosted in our Lowell, Massachusetts manufacturing facility, and attendees were given a tour, an up-close look at the Growth Direct system, as well as our state-of-the-art automated media production line. The meeting also featured expert presentations and discussions on how the Growth Direct can enhance data integrity, improve quality, and minimize operating risks. As we move through the second half of 2023, we have a number of customer events planned, two of which I will highlight. First, in early October, we will present an exhibit at the PDA Pharmaceutical Microbiology Conference in Washington, D.C., where we will host three poster presentations and have a growth direct available for customer demonstrations. As a reminder, this is the largest annual microbiology conference that we attend and includes global industry professionals, representatives from academia, and regulatory authorities. And then in November, we have planned a combined growth direct day and customer advisory board event in Europe. Building on past successes, This event will feature multi-day sessions focused on customer testimonials, user group discussions, approaches to global adoption of the Growth Direct, and other high-value topics. These and similar events help us build and advance opportunities within our funnel, and importantly, allow us to engage with industry thought leaders, regulators, customers, and prospects to discuss the Growth Direct value proposition of faster time to result, data integrity, cost savings, patient safety, and automation. Now, I'll provide a brief update on our product development efforts. We are pleased to report that the commercial launch of our Mold Alarm software product is progressing on plan. Attachment rates to new systems, sales, and upgrades to existing growth directs are encouraging. Our teams are effectively leveraging onsite and virtual education and training programs to increase awareness. Customer engagement has been positive, and we are confident we are on the right track. While it is still early in the commercial ramp, we are pleased with our progress and expect to continue to build momentum over the balance of the year and into 2024. With respect to rapid sterility, we are on track with our development and are increasing our focus on commercialization. We look forward to sharing additional details on this important product later this year. Turning to a brief update on our manufacturing capabilities, I am pleased to announce this morning that our backup consumable manufacturing line in our Lexington, Massachusetts facility has been completed. This is an important milestone and demonstrates our global customers that we are committed to providing them with world-class service and continuity of consumable supply. In summary, through the first half of 2023, we achieved over $10 million in revenue, representing growth of 25 percent compared to the first half of 2022. This compares to our guidance for full year 2023 total revenue of at least $22 million. We continue to attract many of the best companies in the world to our GrowthDirect platform, and our existing customers continue to benefit from the significant value of our platform as they use more of our systems, consumables, and services in their mission-critical manufacturing operations. In the second quarter, we achieved an all-time high in consumable revenue. This, coupled with our service contract revenue, demonstrates strong customer satisfaction in use and validates our recurring revenue model. And finally, our commercial execution continues to improve as we remain laser focused on our growth strategy and specifically advancing growth direct opportunities through our sales funnel and accelerating system placements. And with that, I'll now turn the call over to Sean to discuss our second quarter performance. Sean?