Teknova(US:TKNO)2023-08-13 13:20Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $11.5 million, a slight decline from $11.7 million in Q2 2022, attributed to lower demand from early-stage biopharma customers, partially offset by a large order delivery [12][19] - Gross profit for Q2 2023 was $5.1 million, compared to $5.2 million in Q2 2022, with a gross margin of 43.9%, down from 44.9% in the previous year [25] - Net loss for Q2 2023 was $7.2 million or $0.25 per diluted share, compared to a net loss of $6.2 million or $0.22 per diluted share in Q2 2022 [28] - Adjusted EBITDA was negative $2.3 million for Q2 2023, an improvement from negative $4.9 million in Q2 2022 [29] - Free cash outflow was $6.2 million for Q2 2023, down from $16.8 million in Q2 2022, marking the fourth consecutive quarter of lower cash outflow [49] Business Line Data and Key Metrics Changes - Lab Essentials revenue was $7.6 million in Q2 2023, a 10% decrease from $8.4 million in Q2 2022, due to a decreased number of customers, partially offset by higher average revenue per customer [23] - Clinical Solutions revenue was $3.7 million in Q2 2023, a 24% increase from $2.9 million in Q2 2022, driven by an increased number of customers [45] Market Data and Key Metrics Changes - The company expects a mid-single digit percentage year-on-year decline in top-line revenue for 2023, with a return to year-on-year growth anticipated in Q4 2023 [42] - The emerging biotech segment, historically a growth driver, is currently focused on conserving capital by delaying or canceling clinical trials, though this is viewed as a temporary situation [41] Company Strategy and Development Direction - The company is committed to executing its long-term growth strategy, focusing on accelerating the introduction of novel therapies and diagnostics [20][32] - The new GMP-grade modular manufacturing facility is expected to unlock significant potential for the business, with a capacity to deliver approximately $200 million in annual product revenue when fully utilized [21][40] - The company is diversifying its offerings beyond early-stage biopharma to include life science tools and diagnostics [55] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term potential of target markets despite current challenges in the biotech sector [20] - The company has seen positive early feedback on its new product line, with expectations for increased customer engagement as they ramp up purchase volumes [22][45] - Management anticipates that operating expenses will remain stable or decrease, allowing for growth without significant additional investments [75] Other Important Information - The company had $23.7 million in cash and cash equivalents and $22.1 million in gross debt as of June 30, 2023 [30] - The company has reclassified some long-term debt into the current portion due to covenant compliance issues, but no notices have been issued by lenders [76] Q&A Session Summary Question: Insights on macro landscape and growth drivers - Management acknowledged the difficult market backdrop but highlighted the company's ability to deliver and the diversity of market segments [38] Question: Sales cycle for converting facility audits to customers - Management indicated that the sales cycle is lengthy, typically taking 12 to 24 months for customers to scale up after initial engagement [70] Question: Guidance on Clinical Solutions revenue - Management noted that while Q2 saw a boost from a large order, Q3 and Q4 are expected to return to more normal levels, with smaller orders and delays being observed [101][102] Question: Impact of new GMP facility on business - Management expressed confidence that the new facility will attract both large and small customers, enhancing the company's ability to meet diverse needs [82][96]