Company Overview - Teknova is a leading provider of research and clinical-grade reagents, supporting drug therapies, vaccines, and diagnostics[7] - The company has a strong competitive position with expertise in custom reagent manufacturing and short turnaround times[7] - Teknova produces bioprocessing tools critical to cell & gene therapy, creating a breakthrough growth opportunity[7] - The company has infrastructure in place to support growth, including investments in capacity expansion, marketing, sales, and R&D[8] - As of September 30, 2021, Teknova's TTM core revenue was $33.4 million with 37% TTM core growth, excluding $3.6 million of non-recurring Sample Transport revenue[9] - Clinical (GMP) TTM growth was 71%[9] Cell & Gene Therapy Market - The global Cell & Gene therapy market is expected to grow from $2.3 billion in 2020 to $45.4 billion in 2026, representing a 64% CAGR[31] - Teknova's portfolio addresses complex needs across the gene therapy production workflow[32] - Teknova is already a supplier to more than 65 leading Cell & Gene therapy organizations[41] Financial Performance - Total revenue increased by 41% year-over-year[54] - Total revenue of $33.4 million, excluding Sample Transport, increased by 37% year-over-year[54] - Clinical Solutions growth was strong, up 71% year-over-year[54]

Alpha Teknova, Inc. (NASDAQ:TKNO) Q3 2021 Results Conference Call November 10, 2021 4:30 PM ET Company Participants Sarah Mitchell - Investor Relations Stephen Gunstream - Chief Executive Officer Matthew Lowell - Chief Financial Officer Conference Call Participants Max Masucci - Cowen Sung Ji Nam - BTIG Jacob Johnson - Stephens Operator Good day and thank you for standing by. Welcome to the Teknova Third Quarter 2021 Financial Results conference call. At this time, all participants are in listen-only mode. ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(Unaudited)) Unaudited statements show revenue growth offset by higher operating expenses, resulting in a net loss following the IPO [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) Total assets and equity surged due to IPO proceeds, while liabilities grew from new long-term debt Condensed Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $98,013 | $3,315 | +$94,698 | | Total current assets | $111,079 | $16,414 | +$94,665 | | Total assets | $169,163 | $62,911 | +$106,252 | | **Liabilities & Equity** | | | | | Total current liabilities | $6,204 | $3,962 | +$2,242 | | Long-term debt | $11,826 | $0 | +$11,826 | | Total liabilities | $22,937 | $10,506 | +$12,431 | | Total stockholders' equity | $146,226 | $16,767 | +$129,459 | [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) Revenue grew but higher operating expenses led to a net loss in 2021, reversing the prior year's net income Statement of Operations Summary (in thousands) | Metric | Q3 2021 | Q3 2020 | YoY Change | Nine Months 2021 | Nine Months 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $9,392 | $8,984 | +4.5% | $26,783 | $21,140 | +26.7% | | Gross Profit | $4,263 | $5,088 | -16.2% | $12,642 | $12,186 | +3.7% | | (Loss) Income from Operations | $(3,888) | $2,152 | - | $(7,241) | $3,868 | - | | Net (Loss) Income | $(3,251) | $1,533 | - | $(6,156) | $2,993 | - | Net (Loss) Income Per Share | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $(0.12) | $0.07 | $(0.51) | $0.14 | | Diluted EPS | $(0.12) | $0.07 | $(0.51) | $0.14 | [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Financing activities, driven by IPO proceeds, funded cash used in operations and significant investing activities Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(5,987) | $71 | | Net cash (used in) provided by investing activities | $(10,109) | $923 | | Net cash provided by (used in) financing activities | $110,794 | $(1,599) | | **Change in cash and cash equivalents** | **$94,698** | **$(605)** | [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Notes detail the IPO's impact, revenue disaggregation, new credit facilities, and stock-based compensation plans - In June 2021, the company completed its IPO, issuing 6,900,000 shares and receiving **$99.1 million in net proceeds** after deducting underwriting discounts and offering expenses[34](index=34&type=chunk) - On June 28, 2021, all outstanding convertible and redeemable preferred stock was converted into **17,512,685 shares of common stock**[35](index=35&type=chunk) Revenue by Product Category (in thousands) | Product Category | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Lab Essentials | $7,195 | $5,815 | $20,440 | $15,494 | | Clinical Solutions | $1,690 | $1,354 | $4,354 | $3,141 | | Sample Transport | $73 | $1,593 | $1,035 | $1,767 | | **Total Revenue** | **$9,392** | **$8,984** | **$26,783** | **$21,140** | - In March 2021, the company entered into a new credit agreement for a **$27.0 million facility**, consisting of a $22.0 million term loan and a $5.0 million revolver[75](index=75&type=chunk) The company drew **$12.0 million** from the term loan on March 26, 2021[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth driven by core products, declining margins, and surging operating expenses [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Revenue growth was offset by a lower gross profit percentage and a significant increase in operating expenses Revenue by Product Category (Nine Months Ended Sep 30, in thousands) | Product Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Lab Essentials | $20,440 | $15,494 | +$4,946 | | Clinical Solutions | $4,354 | $3,141 | +$1,213 | | Sample Transport | $1,035 | $1,767 | -$732 | | **Total Revenue** | **$26,783** | **$21,140** | **+$5,643** | - The gross profit percentage for the nine months ended September 30, 2021, **decreased to 47.2% from 57.6%** in the prior year, primarily due to a **$0.7 million reserve** against Sample Transport inventory and increased manufacturing overhead and labor costs[157](index=157&type=chunk) Operating Expenses (Nine Months Ended Sep 30, in thousands) | Expense Category | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $2,922 | $1,025 | +$1,897 | | Sales and marketing | $2,494 | $1,389 | +$1,105 | | General and administrative | $13,606 | $5,043 | +$8,563 | | **Total Operating Expenses** | **$19,883** | **$8,318** | **+$11,565** | [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA and Adjusted Free Cash Flow both turned negative due to operating losses and higher capital expenditures Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(3,251) | $1,533 | $(6,156) | $2,993 | | EBITDA | $(3,140) | $2,691 | $(5,143) | $5,314 | | **Adjusted EBITDA** | **$(2,698)** | **$2,722** | **$(4,216)** | **$5,345** | Adjusted Free Cash Flow (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $(2,698) | $2,722 | $(4,216) | $5,345 | | Less: capital expenditures | $(3,907) | $(1,016) | $(12,465) | $(1,969) | | **Adjusted Free Cash Flow** | **$(6,605)** | **$1,706** | **$(16,681)** | **$3,376** | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was substantially improved by IPO proceeds, which will fund operations and a new facility - The company's primary sources of liquidity are cash from the IPO (**$99.1 million net proceeds**) and a credit facility[171](index=171&type=chunk) As of September 30, 2021, cash and cash equivalents were **$98.0 million**[171](index=171&type=chunk) - A significant use of cash over the next 12 to 18 months is expected to be the **construction of a new manufacturing facility** in Hollister, California[172](index=172&type=chunk)[180](index=180&type=chunk) - The company entered into a credit agreement in March 2021 for a **$27.0 million facility** and has drawn **$12.0 million** of the term loan[174](index=174&type=chunk)[177](index=177&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, this disclosure is not required - The company is a **smaller reporting company** and is not required to provide quantitative and qualitative disclosures about market risk[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective due to a material weakness in accounting for complex transactions - Management concluded that **disclosure controls and procedures were not effective** as of September 30, 2021[204](index=204&type=chunk) - The ineffectiveness is due to a **material weakness** in the financial close and reporting process for complex, non-routine transactions, which led to an inappropriate accounting for the THP Transaction in 2019[205](index=205&type=chunk) - A remediation plan is underway, which includes **hiring accounting employees or consultants** with specific technical accounting experience[206](index=206&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently party to any material legal proceedings - As of the filing date, the company is **not a party to any material legal proceedings**[214](index=214&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Key risks include a history of losses, manufacturing challenges, reliance on trade secrets, and 'controlled company' status - The company has a history of operating losses, including a **net loss of $6.2 million** for the nine months ended September 30, 2021, and may incur losses in the future[216](index=216&type=chunk) - The company is a **"controlled company"** as THP controls approximately **62.5% of the voting power**, allowing it to control board elections and corporate decisions, and exempting the company from certain Nasdaq governance rules[354](index=354&type=chunk)[357](index=357&type=chunk) - A **material weakness in internal control** over financial reporting was identified related to the accounting for complex, non-routine transactions[366](index=366&type=chunk) - The company relies primarily on **trade secret protection** rather than patents, which is difficult to enforce and may not prevent competitors from developing similar technologies independently[320](index=320&type=chunk)[323](index=323&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=91&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred, and the use of IPO proceeds remains consistent with the prospectus - There were **no unregistered sales of equity securities** in the period[408](index=408&type=chunk) - The planned use of IPO proceeds has **not materially changed** from what was disclosed in the Final Prospectus[409](index=409&type=chunk)

Q3 2021 Financial Results Nasdaq: TKNO November 10, 2021 TEKNOVA Today's Agenda 2 1. Welcome 2. Business Highlights & Updates — Stephen Gunstream, CEO, Teknova 3. Financial Results — Matt Lowell, CFO, Teknova 4. Q&A Forward-Looking Statements and Use of Non-GAAP Financial Measures This presentation contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements relating to our fi ...

Revenue Performance - Revenue for the three months ended June 30, 2021, was $8.3 million, an increase of 38.3% from $6.0 million in the same period of 2020[124] - Revenue for the six months ended June 30, 2021, was $17.4 million, up 42.6% from $12.2 million in the same period of 2020[124] - Total revenue for the three months ended June 30, 2021, was $8.3 million, representing a 37.5% increase from $6.0 million in the same period of 2020[147] - Lab Essentials revenue increased to $6.5 million for the three months ended June 30, 2021, up 46% from $4.4 million in the same period of 2020[148] - Clinical Solutions revenue rose to $1.6 million for the three months ended June 30, 2021, a 32.5% increase from $1.2 million in the same period of 2020[149] Operating Loss and Expenses - Operating loss for the three months ended June 30, 2021, was $2.5 million, compared to an operating income of $0.7 million in the same period of 2020[124] - Operating loss for the six months ended June 30, 2021, was $3.4 million, compared to an operating income of $1.7 million in the same period of 2020[124] - Total operating expenses for the three months ended June 30, 2021, were $5.9 million, significantly higher than $2.8 million in the same period of 2020[154] - Research and development expenses increased to $0.9 million for the three months ended June 30, 2021, compared to $0.3 million in the same period of 2020[154] - General and administrative expenses were $3.8 million for the three months ended June 30, 2021, up from $1.7 million in the same period of 2020[156] Net Loss and Cash Flow - Net loss for the three months ended June 30, 2021, was $2.3 million, compared to a net income of $0.5 million in the same period of 2020[157] - Adjusted EBITDA for the three months ended June 30, 2021, was $(1,527) thousand, compared to $1,176 thousand for the same period in 2020[164] - Adjusted Free Cash Flow for the six months ended June 30, 2021, was $(10,077) thousand, down from $1,670 thousand in 2020[164] - The company reported a net loss of $(2,250) thousand for the three months ended June 30, 2021, compared to a net income of $512 thousand in 2020[164] - Net cash used in operating activities was $(1,150) thousand for the six months ended June 30, 2021, compared to $1,696 thousand in 2020[174] Capital and Financing - As of June 30, 2021, the company had $112.4 million in working capital, including $108.0 million in cash and cash equivalents[165] - The company completed its IPO in June 2021, resulting in net proceeds of $99.1 million after deducting underwriting discounts and commissions[165] - The company entered into a $27.0 million credit facility with MidCap Financial, which includes a $22.0 million senior secured term loan[168] - Net cash provided by financing activities was $112.1 million for the six months ended June 30, 2021, mainly from the IPO proceeds[182] - The company has a Credit Agreement providing a $27.0 million credit facility, including a $22.0 million senior secured term loan and a $5.0 million working capital facility[186] Market and Growth Expectations - The global market for cell and gene therapies is expected to grow from $2.3 billion in 2020 to $45.4 billion by 2026[130] - Investment capital for companies developing cell and gene therapies increased from $9.8 billion in 2019 to $19.9 billion in 2020[130] - The company expects expenses to increase substantially due to hiring, manufacturing automation, R&D, and potential acquisitions[125] - The company expects to incur significant capital expenditures, including building a new manufacturing facility in Hollister, California, over the next 12 to 18 months[166] Certification and Production - The company has achieved ISO 13485:2016 certification, enabling it to manufacture products for diagnostic and therapeutic applications[121] - The company produced over 200,000 units of transport medium per week during 2020 due to increased demand from the COVID-19 pandemic[137] Customer Base - Only 3.0% of revenue for the three months ended June 30, 2021, was generated from customers outside the United States, compared to 5.1% in the same period of 2020[124] - Revenue from U.S. customers was $8.1 million for the three months ended June 30, 2021, accounting for 97.0% of total revenue, up from 94.9% in the same period of 2020[151] Tax and Accounting - The effective tax rate for the three months ended June 30, 2021, was 20.6%, compared to 29.2% in the same period of 2020[157] - There have been no material changes to critical accounting policies and estimates compared to previous disclosures[190] - The company did not have any off-balance sheet arrangements during the reporting periods[187] - Recent accounting pronouncements that may impact financial position and results are disclosed in the Quarterly Report[194] Company Classification - The company is classified as an "emerging growth company" under the JOBS Act, allowing it to delay adopting new accounting standards until certain conditions are met[191] - The company will remain an emerging growth company until it has total annual gross revenues of $1.07 billion or more, among other criteria[192] - The company is also classified as a "smaller reporting company," which allows it to take advantage of scaled disclosures until specific market value and revenue thresholds are met[193]

Financial Performance - Q2 2021 total revenue reached $8.3 million, a 41% increase compared to Q2 2020 when excluding Sample Transport revenue[11, 14] - Lab Essentials revenue increased by 46% year-over-year[15] - Clinical Solutions revenue increased by 32% year-over-year[15] - Q2 2021 gross margin was 57.4%, or 48.7% excluding a one-time inventory reserve, compared to 40.4% in Q2 2020[17] - Q2 2021 adjusted EBITDA was -$1.5 million, compared to $1.2 million in Q2 2020[17] - Q2 2021 diluted EPS was -$0.52, compared to $0.02 in Q2 2020[18] Cash Flow and Balance Sheet - The company's cash balance as of June 30, 2021, was $108.0 million[23] - Q2 2021 adjusted free cash flow was -$6.2 million, compared to $0.6 million in Q2 2020[23] Strategic Initiatives - The company completed its initial public offering, raising $99.1 million in proceeds[11] - Construction began on a new GMP manufacturing facility in Hollister, CA, expected to increase production capacity by five-fold when operational at the end of 2022[11]