Alpha Teknova, Inc.

Good day and thank you for standing by. Welcome to the Technova Second Quarter 2025 Financial Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jennifer Henry, Senior Vice President of Marketing. Please go ahead.

Thank you, operator. Welcome to Technova's Second Quarter 2025 Earnings Conference Call. With me on today's call are Stephen Gunstream, Technova's President and Chief Executive Officer, and Matt Lowell, Technova's Chief Financial Officer, who will make prepared remarks and then take your questions. As a reminder, the forward-looking statements that we make during this call, including those regarding 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 these risk factors is included in the press release that the company issued earlier today, and they are more fully described in the company's various items with the SE. Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors, and the company does not obligate or commit itself to update its forward-looking statements, except as required by law. The company's management believes that, in addition to GAAP results, non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies. We will therefore use non-GAAP financial measures of certain of our results during this call. Reconciliation of GAAPs to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted on both Technova's and the SEC's website. Non-GAAP financial measures should always be considered only as a supplement to, and not as a substitute for, or as superior to, financial measures prepared in accordance with GAAP. The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of Technova's website. And now I will turn the call over to Stephen.

Thank you, Jen. Good afternoon, and thank you everyone for joining us for our second quarter 2025 earnings call. This is our 16th quarterly earnings call since our initial public offering in June 2021, and I want to kick off by discussing the progress we've made in preparing Technova for long-term sustainable above-market growth. First, we designed, built, and validated a -the-art facility for the manufacture of custom clinical reagents in batch sizes smaller than 2,000 liters. This purpose-built facility has enabled us to grow the number of clinical customers we support from 13 in 2020 to 48 in 2024. With this new facility, we can not only generate more than $200 million in annualized revenue without significant additional capital investment, but also deliver custom clinical-grade reagents in weeks instead of months. Second, we developed and validated automated manufacturing processes, integrated new IT infrastructure, and implemented lean production methods to drive operational efficiency. These new capabilities will scale with the business, generating significant leverage in the P&L as revenue increases. Third, we established Technova as a recognized leader in custom research and clinical reagents through our commercial investments, which included rebranding and repositioning the company, website enablement, lead generation, and establishing an efficient and effective commercial organization. These investments have allowed us to attract in onboard customers developing new therapies across multiple modalities, including cell therapy, gene therapy, mRNA, and monoclonal antibodies. Much like our operational infrastructure, our commercial infrastructure is set up to scale with minimal additional investment. Finally, we've achieved all of that while reducing our headcount by about 40% from its peak, cutting our annual operating expenses by approximately $18 million over the past three years, and exceeding consensus revenue estimates 15 out of 16 reported quarters during one of the most tumultuous periods in our industry's history. So I'm very confident about what we've built here at Technova and about the value we're positioned to deliver for our customers and shareholders in the long term. Now, let's talk about the second quarter. We delivered strong results across both top and bottom line. Revenue increased by 7% compared to the same period last year, marking the fourth consecutive quarter of year over year growth. The growth was driven by strength in sales of our catalog products, revenue from which again grew in the low double digits. We also executed extremely well operationally, achieving an adjusted EBITDA of negative $0.8 million, which is our best quarterly result since we began reporting as a public company in mid-2021. Matt is gonna talk about the outlook for the year, but before I turn it to him, I would like to provide my perspective on the progress we're making with our growth strategy and an update on the current end markets we serve. Our strategy is built on two fundamental beliefs. First, we will continue to be a leader in essential research reagents by providing a diverse portfolio of catalog products that are critical to the life science community. And second, our ability to manufacture custom research and clinical grade reagents will enable us to acquire and support emerging therapeutic and diagnostic developers as they advance their products to commercialization. Revenue from sales of our catalog products, which contributes approximately 60% of our annual revenue from more than 3,000 accounts, increased low double digits from the same period last year and has grown in a high single digits on a trailing 12-month basis. The revenue growth from the first half of 2025 is now in line with our average historical growth rate from 2009 to 2019 of 12% for this portion of our business. While we serve nearly every end market with these reagents, the past quarter's growth was driven by key accounts in large pharma and life science tools. We do believe this growth is above market rates and we attribute that to the investments we've made in the past couple of years into portfolio optimization, integration with third-party purchasing systems, targeting marketing campaigns and channel management. With respect to custom products, our strategy is to engage with early-stage developers and support them as they move through clinical trials to commercialization. As a reminder, our market research suggests that the average spend by a technobot customer buying custom products increases approximately 30-fold between phase one and a therapy's commercialization. Of course, this increase in spend plays out over years, not quarters, because clinical trials typically take five to 10 years to complete. We therefore view the number of clinical customers as a leading indicator of our success. Recent market conditions have been challenging for our small to mid-size biotech customers with early-stage therapy, and unfortunately, we expect that to remain the case for the remainder of 2025. Under the circumstances, we find it promising that the number of clinical customers we support continues to grow, including several with therapies in later stages, and that we are also attracting clinical customers in adjacent markets like monoclonal antibody therapeutics and diagnostics. With the strong foundation in our catalog products, we therefore believe that Technova is well positioned for high-value creation as the more than 60 therapies we already support move closer to commercialization. Lastly, we believe we can drive additional scale and profitability by executing on inorganic opportunities we are pursuing that leverage our operational and commercial infrastructure. These opportunities include both collaborations, where we work closely with early-stage companies to bring products into our portfolio to build out robust bioprocessing workflows, and M&A, where we identify and integrate tuck-in acquisitions. We're excited about the progress of our pipeline and expect our further announcements in the coming quarters. Taken all together, we feel good about both our 2025 guidance and about how the company is positioned for long-term,