Maravai LifeSciences(MRVI) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q2 2023 revenue was $69 million, slightly below the previous quarter's guidance of around $70 million, impacted by inventory rebalancing and sluggish biotech market conditions [16][17][19] - Adjusted EBITDA for Q2 was $9.1 million, resulting in an adjusted EBITDA margin of 13% [44] - Adjusted free cash flow for the quarter was negative $18 million, reflecting net capital expenditures of $27 million [22] Business Line Data and Key Metrics Changes - Nucleic Acid Production revenues were $53 million, representing 77% of total revenue, with an adjusted EBITDA of $14 million and a segment margin of 27% [47] - Biologics Safety Testing segment revenues were $16 million, contributing 23% of total revenues, with an adjusted EBITDA of $10 million and a margin of 66% [23] - Non-COVID CleanCap sales increased by 21% year-over-year in Q2 [17] Market Data and Key Metrics Changes - The clinical pipeline for mRNA has accelerated, with 30 non-COVID programs entering the clinic in the first half of 2023, indicating a fourfold increase compared to pre-pandemic levels [12] - The company anticipates a decline in COVID-related CleanCap revenues from $100 million to $65 million for 2023, reflecting a 90% decrease from 2022 levels [24] Company Strategy and Development Direction - The new CEO emphasized leveraging technology leadership to expand in mRNA and adjacent growth areas, with M&A being a key part of the capital allocation strategy [9][19] - The company aims to strengthen commercial operations and drive long-term revenue growth through market share gains and product portfolio expansion [19][54] - The focus remains on operational excellence, innovation, and people as strategic pillars for sustainable growth [54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macro environment affecting customer spending priorities and R&D budgets, leading to longer decision-making processes [39][41] - Despite near-term headwinds, management remains confident in the long-term growth potential of target markets, expecting mid to high double-digit growth rates [62] Other Important Information - The company has a strong balance sheet with cash and cash equivalents of $580 million, allowing for flexibility in pursuing M&A opportunities [46][75] - The Flanders 2 facility expansion is nearing completion, expected to enhance capabilities for late-phase manufacturing and commercial GMP [34][108] Q&A Session Summary Question: What are the dynamics affecting demand in the industry? - Management indicated that the primary issue is general demand weakness across the sector, rather than inventory levels [56] Question: How should normalized margins be viewed given recent volatility? - Management noted that margins are closely tied to revenue changes, with expectations of around 22% EBITDA margin as revenues increase [58] Question: What is the long-term growth outlook for the nucleic acid market? - Management expressed confidence in the long-term growth of the nucleic acid market, despite current turbulence, believing growth will return [62] Question: How much of the revenue guidance cut is due to pushouts versus conservative views? - Approximately 35% of the revenue guidance cut was attributed to the services business, reflecting timing pushouts and budget prioritization [63] Question: What is the customer feedback on CleanCap M6? - Early feedback on CleanCap M6 has been positive, with interest from a broad range of customers including large pharmaceutical companies and smaller mRNA-focused firms [109]