Alpha Teknova, Inc.

Good day and thank you for standing by. Welcome to the Technova Second Quarter 2026 Financial Results. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the 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. Henry, Senior Vice President of Marketing. Please go ahead.

Thank you, Operator. Welcome to Technova's second quarter 2026 earnings 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 the company issued earlier today and they are more fully described in the company's various filings with the SEC. 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 a 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. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to Technova's website and at www.sec.gov. 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 on today's webcast. 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 2026 earnings call. We were very pleased with our performance in the second quarter. Revenue grew 18% compared to the second quarter 2025, exceeding $12 million for the quarter, the highest quarterly revenue in Technova's 30-year history. This growth contributed to our lowest free cash outflow since before our IPO in June 2021. Considering our performance this year to date and our confidence about the back half of the year, we have increased our revenue guidance, which at the midpoint raises expected revenue growth from 6% to 14% for the year. I will start by providing a little more color on the second quarter growth drivers. We are particularly encouraged because, once again, revenue growth was not driven by a single order or a single customer. Rather, it was broad-based with our largest direct customer representing less than 7% of total revenue in the quarter. In addition, we achieved growth in sales of our products across all of our major target markets, with the exception of cell and gene therapy-related accounts, which were down in part due to order timing. Excluding cell and gene therapy, biopharma generally, including biotech, large pharma, and CDMOs, grew significantly. led by sales of our custom products. We are also encouraged by our continued strength in supporting our customers in the liquid biopsy market, and we drove catalog sales through improved engagement with our distributors. All in all, it was a great quarter, and it puts us in a strong position as we enter the second half of 2026. As we look to 2027, we believe there are a number of potential tailwinds that will further support our growth. First, our products are used to manufacture more than 70 therapies or diagnostics currently in clinical trials, at least one of which we expect will be commercial by the end of next year. As a reminder, we believe that once a therapy reaches commercialization, the dollar value of a customer's purchases from us increases approximately tenfold compared to when the therapy is in Phase 3 clinical trials, and approximately 30-fold compared to Phase 1 clinical trials. Second, there has been an increase in total biotech funding over the past three quarters compared to the same period in the prior year. Given that we have historically seen an approximately four-quarter lag from funding changes to revenue recognition, we believe there may be a positive revenue impact from this additional funding at the end of this year or in early 2027. Leading indicators show that the investments we began to make in our commercial organization in January are producing results on or ahead of plan. The new lead generation resources and systems we've put in place, together with the additions to our field sales organization, are enabling us to reach high-profile accounts and create opportunities that would have been much harder to come by a year ago. We expect these opportunities to start translating to revenue by early 2027. Taken together, the progression through clinical trials of therapies supported by our products, the increasingly favorable biotech funding environment, and our recent commercial investments provide us with the confidence that we will continue to deliver sustainable above-market growth. I want to shift and talk about how we are leveraging AI to enable our customers to quickly and efficiently design and order custom products. Today, we efficiently launched BuildPet, our new AI-powered custom order configurator, which is an evolution of the buffer configurator we introduced back in 2024. Designed to build custom product quote requests, This interactive personal AI reagent assistant engages with customers so that they can create complex custom products in minutes, leveraging standard formulations, published literature, or specifications that they supply. Before BuildTech, designing a complex custom product required multiple rounds of back and forth between our manufacturing science and technology team and the customer, which could take weeks and be error-prone. With our new BuildTech Custom Configurator, a customer simply engages with the assistant and starts with as much, or as little, information as they have, and the assistant provides guidance on product type, formulation, container format, manufacturing grade, QC testing, and more. BuildTech, which is trained on 30 years of Technova's manufacturing experience and know-how, defines and finalizes the product specifications and allows the customer to submit a request for quotes. It also supports the ability to upload existing files, formulations or literature for reference and to design multiple custom products in one session. Our customers can now complete the entire process in a few business days rather than weeks. We soft launched the BuildTech service last quarter and we're already receiving quote requests from customers who have previously only ordered catalog products. and this is only the beginning. We will continue to build out new features such as the ability to customize existing catalog products, to save custom product requests to an online account, to get instant quotes and more. We're excited to see how this tool evolves over time. In summary, we had a great quarter. We feel good about where we are today and we're excited about what we think is yet to come. I will now hand the call over to Matt to talk through the financials.

Thanks, Stephen, and good afternoon, everyone. As Stephen explained, total revenue was up 18% for the second quarter of 2026 compared to the same quarter prior year. This was also the highest quarterly revenue the company has achieved in its history. You're also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered excellent financial results for the second quarter of 2026. By way of reminder, we target our Lab Essentials products at the Research Use Only, or RUO, market, and they include both catalog and custom products. Lab Essentials revenue was $9.2 million in the second quarter of 2026, up 18% compared to $7.8 million in the second quarter of 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer and to a slightly lesser extent and increased number of customers. We make our clinical solutions products according to good manufacturing processes or GMP quality standards and our customers use them primarily as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical solutions revenue was $2.4 million in the second quarter of 2026, an 18% increase from $2.1 million in the second quarter of 2025. The increase in clinical solutions revenue was attributable to an increased number of customers, partially offset by lower average revenue per customer. We expect revenue per customer to increase over time when a subset of these customers ramp up their clinical purchase volumes as they move through clinical trial phases and ultimately to commercialization. However, This metric can be affected by the addition of newer clinical solutions or GMP catalog customers who typically order less. Just as a reminder, due to the larger average order size in clinical solutions compared to lab essentials, there can be more quarter-to-quarter revenue lumpiness in this category.

On to the income statement.

Gross profit for the second quarter 2026 was $4.9 million. compared to 4.0 million in the second quarter 2025. Gross margin was 40.1% in the second quarter 2026, up from 38.7% in the second quarter 2025. The increase in gross margin was primarily driven by higher revenue, partially offset by higher fixed cost absorption into cost of goods sold from faster finished goods inventory terms. Operating expenses for the second quarter of 2026 were $7.8 million compared to $7.4 million in the second quarter of 2025. The increase in 2026 was primarily driven by investments in our sales and marketing capabilities, resulting in higher headcount and increased marketing expenses, partially offset by lower general administrative expenses attributable to lower stock-based compensation expense. At the end of the second quarter, 2026, we had 156 total associates compared to 171 a year earlier. Net loss for the second quarter, 2026, was $3.2 million or negative $0.06 per diluted share compared to a net loss of $3.6 million or negative $0.07 per diluted share for the second quarter, 2025. Adjusted EBITDA, a non-GAAP measure, was negative $0.7 million for the second quarter of 2026 compared to negative $0.8 million for the second quarter of 2025. Now, cash flow and balance sheet highlights. Capital expenditures were $0.1 million in the second quarter of 2026 compared to $0.2 million in the second quarter of 2025. Precash outflow, a non-GAAP measure that we define as cash used in operating activities, less purchases of property, plant, and equipment, was $0.6 million for the second quarter of 2026 compared to $2.3 million for the second quarter of 2025. This decrease compared to prior year was due to lower cash used in operating activities. Turning to the balance sheet, as of June 30th, We had $17.4 million in cash, cash equivalents and short-term investments, and $13.2 million in total borrowings. On to 2026 outlook. Based on the strength of our revenue in the first half of 2026 and our confidence about the second half of 2026, we are increasing our 2026 total revenue guidance to between $45 million and 47 million, up from 42 million to 44 million previously. At the midpoint, this implies approximately 14% revenue growth compared to 2025. As our underlying end markets continue to recover, we have seen improvement in orders for our custom products, in particular from life science tools and diagnostics customers, driven by our exposure to the liquid biopsy, spatial biology, and Genetic Sequencing Markets, among others. However, biopharma revenue has been muted so far this year due to softness in orders from cell and gene therapy customers. And while biotech funding has been strong for the last three quarters, as Stephen mentioned earlier, our experience is that there's an approximately four-quarter lag before that funding begins to flow through to revenue for Tecnova. Nevertheless, revenue from our catalog products across all end markets grew in the low double digits rate compared to the quarter a year ago. Despite raising our revenue guidance for 2026, our outlook for 2027 remains unchanged, and we continue to target revenue in the range of the low $50 million. As we have indicated before, due to the high percentage of fixed costs associated with our operations, we estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70%, with some variability quarter to quarter in reported results due to GAAP accounting. While gross margin improved in the second quarter of 2026 year over year, we remind investors that the second quarter of 2025 included unusually favorable manufacturing efficiencies, making for a difficult comparison. We now expect gross margin to land in the mid to upper 30s percentage range for the full year 2026. The company posted operating expenses of $7.8 million in the second quarter of 2026, reflecting our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026. Our belief is that these investments will pay off as soon as the end of 2026, but more likely in 2027. We forecast that operating expenses will be at least $8 million per quarter through the end of 2026. Taking account of this spending level, we expect to become adjusted EBITDA positive in the range of $52 to $57 million in annualized revenue. If our end markets are stronger in 2027 and our stepped-up commercial investments bear fruit as anticipated, then we should report a positive adjusted EBITDA quarter before the end of 2027. As I noted earlier, the company achieved a significant reduction in free cash outflow during the second quarter of 2026 compared to the same quarter in the prior year, although we don't expect that figure to be as low in the next two quarters. We now anticipate free cash outflow of less than $8 million for the full year of 2026 even with the increased investment in our commercial capabilities and potentially higher capital expenditures in the second half of 2026. With that, I will turn the call back to Stephen.

Thanks, Matt. Overall, we were very pleased with the second quarter of 2026 and the progress we've made against our strategic priorities. We believe the outlook for our end markets remains positive and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies Diagnostics, and other products that improve human health. We will now take your questions.

Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. So now our first question comes from the line of Brandon Smith of TD Colony. Your line is now open.

Great. Thanks for taking the questions, guys, and congrats on the strong quarter. Excuse me. I appreciate all the color on the growth drivers in particular here. So I guess maybe first, can you speak a bit more to just whatever visibility you have kind of on the order funnel in Q3 and Q4, especially in that, you know, biotech, pharma, CDMOs bucket? and you spoke about that three to four quarter lag between funding and revenue, but just wondering if you, it's fair to say this is maybe coming a bit early there or just anything to know on the dynamic specifically in second half and what kind of growth assumptions underpin the new guidance there.

Great. Thanks, Brendan. So, you know, our funnel looks strong. It is not due to what we believe the biotech funding flowing through yet, right? So we have not yet seen that happen. We have seen some nice growth and some of the large pharma, CDMOs, and just general biotech. But cell and gene therapy has been muted. We did have an order push out from Q2 to Q3. But outside of that, it's still pretty muted. We do expect to see this increase. We're getting some nice engagement from customers, and the funnel's going really nicely. But at this point in time, we're not factoring any of that into the back half. I'm sorry. We're not factoring in the biotech funding roll-through into the back half of the year.

Got it. Okay. Okay, I understand. And then maybe just quickly on the BuildTech launch, I guess, is this something you're kind of able to monetize in the sense that, you know, customers pay to use it up front as kind of part of the order, or is the value kind of largely to your kind of product team on consultation and, you know, time savings and just kind of wondering how we should think about potential impact there on either revenue or optics? Thanks.

Yeah. Yeah, I wouldn't expect that you'd see, you know, a First of all, we're not going to charge people to use it. This is about building our capability around custom manufacturing and enabling our customers to get those custom products faster. The configurator is really built upon training data for 30 years of manufacturing. How do we do it to get all the right specifications up front? The users are putting those in electronically. The formats are for us so we can quickly quote. And as you heard me say, we're going to get to so that this quote is done online at some point in the future. There's very much about increasing the brand strength but then bringing more of these customers into custom products with Tecnova and enabling them to do that than it is around charging where you do use of the tool.

Got it. Understood. All right. Thanks, guys.

Thank you. One moment for our next question. Our next question comes from a line of Matt Laro of William Blair. Your line is now open.

This is Jacob Cranville on for Matt. Thanks for taking the questions. So maybe first, I mentioned a lot of tailwinds, you know, the customer therapy moving to commercialization next year, improving biotech funding, benefits from the commercial investments starting to flow through. But just as we kind of think to 2027, is I think you mentioned like low $50 million revenue expectation for next year, but just kind of wondering how you're viewing your expectations next year and maybe what elements do you see needing to continue improving the most as you work towards that level of growth?

Yeah, thanks for the question, Jacob. That's right. We did highlight the 2027 target at the low $50 million. That is basically the level that we indicated when we had our initial guidance and the 20% growth on top of that. We've left that essentially unchanged from a dollar perspective, primarily because at this point it's still middle of 2026 and we don't have visibility. Enough time has passed to see that this biotech funding and the impact of our Commercial Investments, as you mentioned, as well as the customer moving into commercial, how those things will impact us in 2027. So at this point, we're just being prudent about next year and setting that up. But if these things that I just mentioned do come to fruition and we start seeing those impacting our results, then there could be upside from there. But right now, that's what we're seeing.

That makes sense. I wanted to touch on just inter-quarter demand trends. Obviously, very strong growth in the quarter, but I'm just wondering how things are trending month over month and exiting the quarter in the third quarter. I understand that you know the back half you guys are being pretty prudent not embedding any of the improved biotech funding or anything like that but sounds like cell and gene therapy you had an order push out into the third quarter so I guess what's your level of confidence of that coming in the third quarter is there any risk you know can be pushed out and is there maybe anything else kind of embedded in the back half guide that we should be aware of in terms of just a timing dynamic

Yeah, I'll just mention on that order. I mean, it's still, you know, a relatively small part of our revenue that's selling gene therapy. I think it was 24% in 2025. And so, you know, when we talk in a quarterly perspective, that's a relatively small number. So these are not millions of dollars type of orders that's lived. And it's not something that's going to slide. It's happening in the future. There's no risk there whatsoever. But then from the guidance, you know, maybe, Matt, you want to comment on how we thought through Stackhouse?

Yeah, I'll just maybe make this more generally about 2026 guidance, Jacob. So the midpoint of the range being at $46 million, the way we thought about that was essentially mirroring the revenue that we've seen here in the first half of the year. So essentially, all things being the same in the environment and what we're seeing in our business, that's all obviously based on what we're seeing from the orders book and funnel and things like that. So with $23 million plus in the first half and now $23 million in the second half, we would expect it to play out as we have in the past couple of years where Q3 is a stronger quarter than Q4. Q4 is seasonally light for us typically because of the fewer business days in that year, and that's played out the last few years. So that is how we're seeing it. the rest of the year. Now, again, if some of these things like the commercial investment or things in biotech funding do start to come into play, that's something we'll revisit later. But right now, we're not seeing that yet. I got it. Thank you, guys.

Thank you. We'll move it for our next question. Our next question comes from the line of Matt Hewitt of Greyhound Capital Group. Your line is now open.

Good afternoon. Congratulations on the strong quarter. Maybe first up, just a clarification. Did you say that it was low double-digit growth for all modalities in the second quarter? Would that include cell and gene therapy?

No, the specific reference that I made to low double-digit growth was about our catalog business, Matt. So that catalog business does encompass all the modalities, but It only represents 60% approximately of our business, right? That's the rough amount of catalogs. So there are some nuances, different nuances on the custom side, but overall catalog, sorry, in the low double digits.

Got it. All right. Thank you for that. And then, and I don't know if you have visibility into this, but as you look at the clinical progress, I think you noted you've got 70% trials for biotherapeutics as well as diagnostics. But as you look at those, what kind of progression are you seeing from phase one to two and two to three? I mean, are you seeing some nice ramp there as you look towards particularly the later stage, especially given some of the improvement that we've seen in funding?

Yeah, I would just say that the later stage customers that we're engaged with are we talk to regularly. They're planning these things out. This is happening, right? Assuming that they get approval. So, you know, the activity there is very structured. We're going to need this by this time and here's all the orders, you know, coming through. So those are kind of sort of timed out over the next, you know, say six, 12 months we have those conversations. The earlier stage ones, you know, there's still progression there and engagement. I don't think it's related to the biotech funding as much as that preclinical side is very much where we started to see some of the stuff perk up with biotech funding. And that we have not seen much of just yet. We're seeing higher engagement. We're seeing when we do a quote, it's not about, you know, okay, we just wanted to get the budget and then plan it. It's much more around, hey, we want a quote and we're going to order. So that's a very positive sign for us. But we have not seen the biotech funding roll into revenue yet.

Understood. And maybe just to follow on to that, and I don't know if you're able to disclose this, but how many phase three customers are you currently working with?

Yeah, I think we said at the end of 2025, we had five in phase two or phase three, and some of these are, you know, the accelerated pathway. That's why they put them together.

Got it. Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Mark Massaro of BTIG. Your line is now open.

Hey, guys. Thank you for taking the questions, and congrats on the strong, beaten race. So I wanted to start in the life science diagnostic tool space. You know, Stephen, you called out a bunch of areas, notably liquid biopsy. I guess If you could, could you kind of double-click in there? I mean, how much of this is from early detection or screening versus MRD or recurrence monitoring versus prenatal or rare disease or germline testing? I just wonder if you could just give us a flavor of where you're seeing the biggest signs of growth.

I'll give you a flavor. I don't want to go into all that detail, Mark, but The reality is we do sell to almost all of the companies that are doing some sort of formal liquid biopsy. Now, the amount they buy from us does vary by customers, sometimes by the application, as you know, and then sometimes by what we provide for them. So for some of them, we provide reagents and buffers in bulk or DNA purification or a next-gen sequencing library prep where they hook those up to their robots and go. And others, we actually do the full outsourced GMP manufacturing where we make the product with everything needed in it for sample preparation for sequencing. The latter, of course, is a larger account, the former smaller, but we're seeing growth across the board and we do play in each one of those segments that you mentioned.

Okay, that's great. And then in the lab essentials business, you've talked about an increase in average revenue per customer. If you could try to rank order what you think is driving that, is it just expanding some of the clinical trials work? Maybe could you just double-click it in there, please?

Sure. So LabEssentials, as you know, is our research-use-only product. So this is all in the research-use-only side. Some of those are purchased for preclinical work, but a lot of that's also in the tool of diagnostic space where we're making products for discovery and for OEMs. In this case, Matt mentioned that our catalog business grew low double digits. Overall revenue growth for Lab Essentials is 18%. So what that tells you is that the custom side grew significantly more than that. So the average revenue per customer is likely a lot more driven by the fact that these orders are larger and more of the business is based on the custom side. And we are seeing that in a little bit of pre-chronical, but I would say much more on the tools side where we're seeing some spatial and some and some of the liquid biopsy companies buy research use only products because they run as LVPs and things like that.

Okay, fantastic. Last one for me. Just looking at your balance sheet, you guys have a little over $17 million of cash. I'm just curious if you continue to look at the potential for inorganic growth and if so, what are the types of things that you're looking for? I think in the past you've talked about geographic distribution. or perhaps technology, but would be curious what your latest thinking is.

Yeah, I'll take that one, Mark. So you're right about the cash there. And as we've said for now for quite some time, we do believe that we have the liquidity between the cash and the access we have in our revolver to be able to fund the business to cash flow positive based on organic strategy, everything that we've just been talking about here. Now, we are... looking at M&A opportunities with opportunities to expand, as you pointed out, both geographically and also potentially our product portfolio. So there are a couple of areas that we've highlighted there, other complementary reagents, including those in the area of proteins and some other related categories. So we've... That part of the strategy is obviously subject to a lot more whims of what's happening out there with individual companies and their expectations, but we are active in looking and evaluating these opportunities, and I'm hopeful that we can find something that makes sense at the right price. Thank you.

Thank you. We'll move on to our next question. Our next question comes from the line of Matthew Parisi of KeyBank Capital Markets. Your line is now open.

Yes, congrats on the great quarter, and thanks for the questions. This is Matt Parisi on for Paul Knight at KeyBank Capital Markets. Last year you saw an increase of 25% in your GMP customer count, and I was wondering if you could provide any color on the GMP customer count in the first half of 26.

Yeah, Mass provides a little bit in the script around the number, not the actual number, but whether or not we're seeing an increase or decrease in the number of customers. In this case, it was an increase. We continue to engage with these customers. It's, you know, we're obviously front-loading, so some of them are small. That's why you see the average revenue per customer come down. But we still see traction there. We're still onboarding some. Some have either gotten acquired or gone out of business. So you have to go over that as a hurdle when we talk about year-on-year. but still feel good about that. And I think what we're also very excited about is actually the progression of those customers' therapies through the clinical trials, right, which is what we've really been building towards over time.

Appreciate the insight. And then just one last one around, you guys signed a collaboration agreement with Pluristics in the first quarter of 2025. I was wondering if there's been any update on that and if you still expect some revenue impact in the back half of 26.

This is a space where BioLife has been a preeminent player for a very long time, and they have a very strong position, particularly on the therapeutic side when they're commercial. We're not in that zone yet, let's put it that way, because it takes a long time to take a therapy from one side, from research all the way through. Right now, the strategy is to get in early with these customers, have them drive the product, and then migrate over the next five years. I wouldn't expect anything material significant as a growth driver in the near term.

Appreciate the call. Thanks again for the questions. Thank you. We'll move on for our next question. Our next question comes from the line of Mac Etoc of Stevens, Inc. Your line is now open.

Hey, this is Hannah on for Mac. Congrats on the quarter. It's good to see. It looks like the only pockets of weakness that you guys are still calling out is on the cell and gene therapy side. Is that right? I think maybe there was some like... and others. And then on the preclinical research pockets of weakness in lab essentials you called out last quarter, have we kind of moved past that or would there be anything else to call out there? And then on the CGT weakness, are there any differences in earlier stage customers versus late stage or any other nuances you would call out there?

Yeah, absolutely. Thanks, Hannah. Yeah, as I said before, first of all, of all the market the end markets we serve, I think the cell and gene therapy was the only one that was not growing pretty significantly this quarter. So part of that was, excuse me, due to timing of that order. But then another piece is just really in the early stages in the R&D side, discovery side for students there as well. So that has not come back for biotech funding. The second part of your question, so around the stage, obviously these later stage therapies that we're talking about that are in that phase two or even phase one, phase two, phase three area, those continue to move forward. And so we expect that to be a revenue growth driver going forward. And of course, we're loading the front end up as much as we can at the moment. So those right now are continuing to order. It's just there's more of a timing related thing.

Great. Thanks for the color. And then on the margin side, by our math, it looks like incremental margins might have trended a little bit lower than typical. I know you'd normally expect 70% contribution margins. Was there anything that impacted the quarter there or anything you would call out in terms of near-term gross margin trends?

Thanks, Hannah. I would just say you know first of all we did highlight some of this is a comparison issue where last year in Q2 we had a very strong kind of out of the ordinary gross margin for reasons due to manufacturing efficiencies so that it's a part of it is just the comparison we actually saw quite nice improvements when you exclude that impact basically So there is always going to be some fluctuation. I have to say, you know, the 70% is not a, you know, a strict formula. Because there's lots of other things that happen in the income statement, there's going to be, you know, quarters where it could be 50 or 80 or whatever. So I would say generally what happened is what we expected, and it's more of a comparison to the prior quarter, which I think is masking some of the real improvement there.

Great, thanks. That's helpful. I'll leave it there.

Thank you. Thank you. We'll move on to our next question. Our next question comes from the line of Max Masucci of Roth Capital Partners. Your line is now open.

Hey, good afternoon. Nice quarter, guys. BuildTech, so appreciate the detail in the release this morning. Just curious how the quote volume has trended since the June beta launch through early August here. And understanding that you're not charging for BuildTech, but I would assume it could more quickly shift some customers from catalog to custom. So just curious if that could become a light growth tailwind into 2027.

Yeah, we're obviously very excited about BuildTech. It's really fun. I encourage you all to go try it out right you can you know obviously say hey I want this particular formulation and then it'll ask you which type of container and how to QC it and if you want to you know how soon you want to limit all this all the pieces that go into how we manufacture the product but you can also just say I want the most cited lysis buffer in the space in recent publications and then it will spit out some of the different options for you to pick from and so you know like in that example we're really helping customers figure out what they need and then getting it into our system quickly and so I do think it'll be a tailwind. I think it's a big differentiator for us in the space. It's much better than trying to sort of do these drop downs and build your product online like a lot of other historical configurators in the space so we're excited about that. We have seen some increase in uses and I think we were really excited when we put it out there and people were finding it and there are customers that have not been typically ordering custom products from us or not had much engagement. So I think we're going to get a wider audience with something like this.

Okay. And so you hired some field reps with existing relationships across tools, DX, pharma. Just curious how things are going there and more broadly on the heels of your commercial investments. Are you expecting to see the benefit kind of show up more in new account wins, funnel conversion, or deal sizes?

Yeah, so we're very excited. I think it's executed really well. If you remember, there are two pieces. Obviously, you mentioned the field sales team, and they're on board and they're executing. And the other piece is around lead generation. And so that's also going really well. That's support from people, but also new tools for lead generation, including some AI stuff that we've been using. Those are all generating improvements in the funnel, more meetings with the right customers. We targeted this investment towards sort of the biggest opportunities, but some of the more complex accounts that will take some time to play through. So we'd expect to see that impact probably in the Q1, 2027 timeframe. And it looks like we're on track for those to see the opportunity to add it to the funnel when those would close. And it's probably around that time when we'd start to see the benefit of that.

That's great. Thanks. Thank you. One more for our next question. Our next question comes from the line of Christopher Hillary of Rube Capital. Your line is now open.

Hi. Good evening. Hey, Chris. A lot of great questions already asked, so I'll just ask a different one. Can you just remind us where you are with your utilization in your e-facilities and how you think about that as you move through this year and into next year?

Thanks, Chris. So from a capacity utilization, I think, well, I know we have a lot of room still to go. So we use revenue as an estimate of capacity, right? We'd say $200 million in revenue. Just to put it in perspective, we're operating between four and five days on one shift right now. So obviously, we can add multiple shifts. We can go weekends. but even in sort of some of these facilities, we're not at full utilization even in those shifts. We're adding just a handful more people. We could ramp up work orders significantly. Then you combine that with some of the efficiencies that we're doing from our lean manufacturing and everything else. I think we're well within the 200 and are excited that we don't have to do another facility build or anything like that. So at this point in time, the projects for manufacturing are a lot more around , how do we get more work orders with the same number of people, but also new capabilities around either automation or new vessel types and things like that that can enable us to go after different opportunities that we're finding in the market. So, you know, I'll feel very good right now, and we're ways away from needing to do another capital expansion. Great, thank you.

And then following up on an earlier question of sorts, with the and others. So, with the progress you're seeing, does it start to inform you about how you might think about that for next year?

Yeah, we'll be looking probably early Q4, late Q3 to see that, you know, it doesn't make sense to make additional investments, right? What's the ROI and what we've made? These things take a little bit of time to play out, so we always want to make sure we don't get too far ahead of our skis if we don't need it yet. But obviously, if we think we can drive additional growth with more investment, we will weigh that and make that decision. But at this point in time, we have yet to see the first $2 million investment roll through in terms of ROI, and we're seeing some really nice growth as is. So we're excited about where we sit, but certainly this is one of those things we evaluate quite a bit, and the next big moment will probably be at the end of Q3.

Great. Thank you.

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