Repligen Corp Q4 FY2024 Earnings Call

Good day, ladies and gentlemen. And welcome to Repligen Corporation's Fourth Quarter of 2024 Earnings Conference Call. My name is MJ, and I will be your coordinator. All participants will be in listen-only mode. (Operator provided instructions.) I would now like to turn the call over to your host for today’s call, Sondra Newman, Head of Investor Relations. Please go ahead.

Thank you. And welcome to our fourth quarter of 2024 report. On this call, we will cover business highlights and financial performance for the three and 12-month periods ending December 31, 2024, and we will provide financial guidance for the full year of 2025. Joining us on the call today are Repligen's President and Chief Executive Officer, Olivier Loeillot, and our Chief Financial Officer, Jason Garland. As a reminder, the forward-looking statements that we make during this call, including those regarding our 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 risks related to our business is included in our quarterly reports on Form 10-Q, our annual report on Form 10-K, and other current reports on Form 8-K, including the report that we're filing today as well as other filings that we make with the Securities and Exchange Commission. Today's comments reflect management's current views, which could change as a result of new information, future events or otherwise. The company does not obligate or commit itself to update forward-looking statements, except as required by law. During this call, we are providing non-GAAP financial results and guidance, unless otherwise noted. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Repligen's website and on sec.gov. Adjusted non-GAAP figures in today's report include the following: non-COVID and organic revenue and/or revenue growth; cost of goods sold, gross profit and gross margin; operating expenses, including R&D and SG&A; income from operations and operating margin; tax rate on pretax income; net income; diluted earnings per share; EBITDA and adjusted EBITDA and adjusted EBITDA margins. These adjusted financial figures should not be viewed as an alternative to GAAP measures, but are intended to best reflect the performance of our ongoing operations. Now, let me turn the call over to Olivier.

Thank you, Sondra. Good morning, everyone and welcome to our 2024 fourth quarter and year-end results. We are happy with the way we finish 2024 and in addition to reporting our financial results in detail, we will share our 2025 strategic priorities and provide financial guidance for the new year. We have a lot of reasons to be positive about 2025 as we put specific 2024 headwinds behind us, and we see a return to growth for the bioprocessing market. I'm pleased to share that we achieved the midpoint of our November guidance, the reinforced quarter revenue of $167.5 million and full year revenue of $634.4 million despite a $3.5 million exchange rate headwind in the quarter. Product differentiation, excellent execution by our team and better market conditions have enabled us to deliver a 13% revenue growth ex-COVID in the fourth quarter versus the previous year. Our orders were also very strong in the fourth quarter with the highest order intake we've had since quarter two of 2022, and it was the sixth straight quarter that orders outpaced non-COVID revenue. In quarter four, we were delighted by the strong performance from CDMOs and equipment, key market sectors that have been slower to recover. With this momentum, and as our funnel continues to grow, we are well positioned as we enter 2025. After a great rebound in quarter three, our CDMO business had an even better quarter with sales and orders up high double digits sequentially. In fact, thanks to that very strong CDMO finish, our full year 2024 sales growth was similar at CDMO and pharma, both up high single digits. We saw a similar pattern for equipment. Following a solid quarter three, equipment was another important standout in the fourth quarter with both sales and orders up more than 30% sequentially. Thanks to that strong equipment finish, our full year 2024 sales growth was similar for consumables and equipment, both up 8% and 10% respectively. At the franchise level, Filtration had another excellent quarter, both from a revenue and order point of view, and Analytics had a record quarter both in sales and orders since we acquired C Tech in 2019. And finally, 2024 has been a great year for new modalities with low double digit growth in both sales and orders as we build momentum with key accounts and new technology launches. Before entering into more detail, I would like to say that managing to deliver 3% revenue growth in 2024 excluding COVID and considering the huge headwinds in protein and China demonstrate the fantastic execution of our teams and the uniqueness of our portfolio. And in fact, our full year revenue was in line with our initial outlook in February 2024, adjusting for the restatement and additional currency headwinds. When I reflect on the full year, in addition to the forward momentum of the market and our results, I'm also very pleased with how the Repligen team executed on the five strategic priorities we set at the beginning of 2024. First, our high probability funnel has increased through the year, driving fourth quarter orders to their highest level over the last 10 quarters. And even with very strong Q4 orders, we replenished the funnel. At the end of December, our greater than 50% probability funnel was up 16% versus the end of 2023. Our sales organization, including our extended key account management team, have done well in 2024, training new leads at our top pharma and CDMO accounts and improving our portfolio visibility. Next, we launched several differentiated new products in 2024. Of note, in May, we launched our game-changing KrosFlow RS 10 RPM system, the first and only single-use TFF system for bench-scale GMP production with inline fully automated protein concentration measurements. In December, we launched the AVIPure double-stranded RNA resin sold through our OPUS pre-packed columns. This resin, using beads from our newly acquired Tantti business, is remarkable in that it is the first affinity resin to remove the double-stranded RNA impurity from transcribed RNA without heat or solvents. These and other launches in 2024 are offering innovative solutions for customers' unmet needs and add to our differentiated portfolio. We estimate that about 80% of our business comes from highly differentiated technologies, which are a cornerstone in helping to grow above the market. Our third priority was to further build on our wins in new modalities. Our sales in new modalities have increased low double digits and now represent approximately 20% of our total revenue. We now have 25 accounts with sales above $1 million. The next priority was the successful integration of Metenova and preparing for the launch of new single-use mixer technologies. We successfully integrated Metenova with our fluid management team and we are planning to formally launch our single-use mixers in quarter two of 2025. And finally, we further strengthened our discipline in cost control and expanded margin. Through select rooftop consolidation and additional restructuring actions, our operation teams have achieved targeted productivity gains. This has enabled us to finish the year with Q4 adjusted gross margin at 50.7%, adjusted operating margin at 14.9%, and adjusted EBITDA margin at 20.9%. For the full year, we successfully expanded our adjusted gross margin by 140 basis points. Jason will discuss this further. In addition to our stated priorities in 2024, we have onboarded several experienced leaders from across the industry to strengthen our bench and position us well for years of growth. This includes but is not limited to quality, services, product management, and sales. We believe the diversity of talents and experience Repligen has today will enable us to become further fit for growth. So moving now to our fourth quarter and full year revenue and orders performance. As you saw in our press release this morning, fourth quarter 2024 sales stepped up from third quarter by nearly $13 million to reach $167.5 million and $634.4 million for the full year. Excluding COVID, this was our highest quarter in sales since quarter three of 2022, even with the higher than anticipated currency headwinds of $3.5 million in quarter four and $5.7 million for the year. Excluding COVID, we delivered Q4 revenue of 13% and 8% sequential growth. For the full year, 2024 non-COVID revenue growth came in as expected at 3%. Moving to orders, our opportunity funnel delivered. Orders were exceptionally strong in quarter four, up 11% both sequentially and year-over-year. As I mentioned, this was the highest order intake we've had since the second quarter of 2022. For the full year of 2024, total orders were up 9% with all franchises except proteins up over 10%. During the quarter, orders outpaced sales by 6% and for the full year, orders outpaced non-COVID sales by 4%. As it relates to customer segments, quarter four was another strong quarter for pharma supported by our key account focus. In quarter four, pharma sales were up mid-single digit sequentially and up high single digit excluding COVID year-over-year. Quarter four pharma orders reached a record level and were up approximately 20% versus quarter four of 2023. While pharma revenue was similar between H2 and H1, orders were up about 15% and landing 17% for full year 2024. Within pharma, the remaining challenge is small biotech. Though our sales in quarter four were on par with lower quarter three sales, orders increased over 10% sequentially. We are hoping this will continue in the first half of 2025, though we will need to continue to monitor the funding environment. Where pharma as a whole has been going very well for several quarters, we now see confirmation that CDMO business has improved more durably and was a standout in the quarter. This is the case for both Tier 1 and Tier 2 CDMOs. CDMO revenue was up 20% sequentially and more than 40% year-over-year. Orders in quarter four also grew more than 15% sequentially and 11% year-over-year. Quarter four orders from CDMOs were the highest since quarter one of 2022, excluding COVID. We saw activity accelerate through the year with H2 CDMO sales about 40% higher than H1 and orders nearly 20% higher. This really illustrates the recovery of a critical market segment that reflects the overall health of the ecosystem. Moving now to product type, whereas consumables have had a positive trend for several quarters, equipment showed strong improvement and was another standout in the fourth quarter. Consumable performance was consistently healthy through the year and remained strong in the fourth quarter with non-COVID revenues up more than 20% year-over-year and at the highest level since quarter two of 2022. Quarter four was also the highest order quarter for consumables in the last 12 quarters, up nearly 10% sequentially and 25% year-over-year. We are particularly excited by the traction we have due to our increased design-in ATF in late phase and commercial products as well as single-use consumables attached to our systems. Moving to equipment, the rebound we saw in quarter three accelerated in quarter four with both sales and orders up more than 30% sequentially and more than 10% year-over-year. Excluding COVID, our Q4 equipment orders reached a record level and while it was a slower start to the year for equipment, we saw a rebound with H2 orders approximately 25% higher than in H1. This reflects our success implementing ATF controllers at the majority of large pharma and CDMO companies as well as starting to platform our TFF and Chromatography systems. Our top quality systems coupled with our inline PAT flow technology are really disrupting the market and we're excited about the future considering that every system placement can generate a flow of consumable sales. Moving now to franchise-level business highlights, the top performers in the fourth quarter were Filtration and Process Analytics. While Filtration continued its positive trends through the year, in Analytics, we saw a strong turn-up in the fourth quarter having been impacted by equipment softness in the prior periods. Proteins played out a bit better than we anticipated and we expect a return to growth in 2025 after this year's reset. Finally, Chromatography saw a nice sales pickup in the fourth quarter. Drilling down in each franchise and starting with filtration, our year-over-year filtration revenues ex-COVID were up 30% in the fourth quarter and 14% for the full year. The strong sales performance was across the portfolio, our largest and most diverse. Filtration revenue exceeded $370 million for the year, up 9% and representing nearly 60% of our total revenue. Within the portfolio, XCell ATF had a great year and finished with top-line growth above 50%. Filtration orders in the fourth quarter were up about 30%, both sequentially and year-over-year, setting us up well for 2025. Excluding COVID, Q4 Filtration orders were the highest of the last 12 quarters. Systems and flow kit orders were also at a record level in quarter four. So overall, great performance in quarter four for the different components of our filtration business and with strong contributions from new product launches. As we see continued strength and momentum exiting 2024, our expectation for 2025 is that this franchise will be up 9% to 12% on a reported basis and up 12.5% to 15.5% excluding COVID. In Chromatography, our year-over-year revenues were up 10% in the fourth quarter and down 3% for the full year. Chromatography revenue of $123 million represented approximately 20% of total revenue in 2024. As mentioned previously, the full year decline was impacted by the higher mix of columns versus resin sales. On orders, Chromatography was slightly down for the quarter but up mid-double digit for full year 2024. In 2025, we'll focus on converting more large pharma companies to OPUS Pre-Packed Column and Chromatography systems, capitalizing on our powerful sales organization and leveraging technology differentiation. For 2025, we expect chromatography revenue growth in the range of 10% to 15%. In 2024, our Protein revenue was $74 million, a decline of 28% which was actually better than our initial expectations. For the full year, we collected almost 10% more Protein orders than sales. It has been a reset year with OEM ligand demand down to the minimum level, we had numerous custom ligand and resin wins in 2024 that we believe will become a true tailwind for the future. We are already seeing healthy demand for the AVIPure double-stranded RNA resin launch in December and look forward to introducing additional resins for unmet purification needs in 2025. Our close collaboration with Purolite on monoclonal antibodies and our Avitide-Tantti combined offering for emerging modalities should enable us to get back to 10% to 15% growth in 2025 with more control and ownership of this franchise future. Finally, our Process Analytics sales in quarter four were up 11% sequentially and up 8% year-on-year. For the full year, analytics sales were $59 million, an increase of 4% to 2023. We are seeing good order traction for analytics, which were up 10% for the year. In an overall very challenging environment for analytical equipment, and thanks to our fast-growing FlowVPX and RPM product lines, we had a solid year overall. We are happy to have experienced the highest quarter in the history of that business for both orders and sales in Q4. And with this momentum, we expect analytics revenue growth of 5% to 10% for 2025. Jason will speak to the regional performance in his section, but I will comment that China was one of our key headwinds in 2024. We are currently planning on China sales being flat to 2024, and we remain optimistic about our long-term growth potential in this region. On the upside, the rest of Asia-Pac performed well in 2024 with full year sales up 12%. Transitioning to our 2025 outlook, we expect our revenue to grow low double-digit excluding COVID and potential foreign exchange impact. Pacing is expected to track to our historical norms, that is second half stronger than first half, with Q1 being the weakest quarter and Q4 the strongest. Our full year guidance for 2025 is in the range of $685 million to $710 million, up 8% to 12% on a reported basis, and up 10% to 14% excluding COVID. The great order traction we had over the last two quarters, combined with our stronger product management and commercial team and a better market environment gives us high confidence in achieving our targets. To deliver this result, our 2025 strategic priorities will center on the following. Number one is accelerating and maintaining above market growth by further improving customer experience and focusing on accelerated growth at key accounts and in Asia. Number two is capitalizing on our best-in-class innovation with increased investment in R&D. We already launched Solo PLUS in our analytics business at the beginning of this year. We will also be particularly focused on our single-use mixers launch as well as several new ligands and resins for new modalities. Number three is increasing our margins by 100 to 200 basis points, combining pricing discipline and achieving our RPS activity targets. Number four is maintaining our ambition to acquire one to two businesses to further strengthen our position with a focus on new modalities and PAT. And finally, number five is becoming further fit for growth and positioning ourselves to be a significantly bigger business in the not-too-distant future. We'll focus on implementing key tools for our human resources management and also creating a project management office to manage our key strategic program, including M&A integration, site consolidation, and other key EBITDA-generating projects. In summary, we're excited as we enter 2025. We have a great combination of the right team, products, and market environment to deliver upon our priorities and goals. Our strong balance sheet will enable us to act on our M&A ambition as we identify unique technologies that can complement our differentiated portfolio. We have a clear plan for delivering long-term reward for our shareholders and look forward to updating you on our progress through this new year. Now, I'd like to turn the call over to Jason for a report on our financial performance.

Thank you, Olivier, and good morning, everyone. Today, we are reporting our financial results for the fourth quarter and full year of 2024 and providing financial guidance for 2025. Unless otherwise noted, all financial measures discussed reflect adjusted non-GAAP measures. As shared in our press release this morning, we delivered fourth quarter revenue of approximately $168 million and full year revenue of $634 million, achieving the midpoint of our guidance despite a $3.5 million exchange rate headwind in the quarter. This is a reported increase of 1% for the fourth quarter or up 3% on an organic basis, which excludes the impact of acquisitions and currency headwinds. As Olivier mentioned earlier, our fourth quarter non-COVID revenue growth was up 13%, which we believe is more representative of our performance. There was no COVID-related revenue during the fourth quarter of 2024 versus $19 million in 2023. Our full year 2024 revenue was flat and up 3% on a non-COVID basis. FX was a net headwind of one point for the year, and acquisitions contributed approximately two points of growth. As Olivier shared color on our product franchise performance, I'll provide more detail on the performance across the global regions, starting with revenue, where North America represented approximately 50% of our total full year revenue, Europe represented 34%, and Asia-Pacific and the rest of the world represented 16%. North America had a great fourth quarter, being up 20% in revenue. Asia was equally strong in 4Q with 20% revenue growth, inclusive of China, while Europe was down 25% due to COVID and protein headwinds. For the full year 2024, it was encouraging to see our largest region, North America, delivering 12% revenue growth. Asia, excluding China, was also up 12%, and for Europe, non-COVID revenue growth was a 2% decline, while our orders was down 6%. And finally, China was a $25 million headwind for the year, and represented about 3% of our 2024 full year revenue, down from about 7% in 2023. On regional orders for the full year, North America was up 14%, Europe was flat for the full year, and fourth quarter orders were up 24%, and Asia, excluding China, was up 30% for the year. As Olivier shared, we are very excited about our ability to grow further in Asia, and will be making investments to support growth. Finally, China orders were down about 20% for the year. However, second half orders were up 6% versus the first half, supporting our view that we have hit bottom. Transitioning to profit and margins, the fourth quarter 2024 adjusted gross profit was $85 million, and we delivered 50.7% adjusted gross margin. This is down 1.8 percentage points versus last year, driven by a 3.5 point headwind from COVID sales last year. Volume, price, and productivity all drove net margin improvements. In fact, 50.7% is higher than the implied guide in November, as we delivered more productivity than expected, and have strong momentum carrying into 2025. For the full year of 2024, adjusted gross profit was $320 million, up $10 million year-over-year, and adjusted gross margin was 50.4%, again, slightly above implied guidance with the upside from the fourth quarter. Gross margin increased 140 basis points year-over-year, and 200 basis points, excluding the drag from lower COVID volume than 2023. Outside COVID, the year-over-year increase was driven by strong productivity and net realized price. We'll continue to see COVID headwind on the year-over-year margin growth for 2025. In 2024, we continue to evaluate our operations and assets to ensure we are well positioned to grow. As a result, we have continued to execute activities under the restructuring plan started in the middle of 2023. In the fourth quarter, we incurred approximately $45 million in nonrecurring restructuring and other inventory-related charges. The majority was noncash inventory write-offs from further product rationalization. It was also a result of further evaluation of the inventory positions of certain materials secured in turbulent supply conditions during the pandemic. The evaluation also considered the market conditions of the last 18 months and incorporated updated product strategies developed with new senior product management. Incorporating all of this, demand and product mix projections were revised as a part of the company's annual strategic planning and budget sessions in 2024. Where inventory exceeded the projected requirements to be used before reaching their expiration date, they were written off. These charges are nonrecurring in nature and, therefore, are reflected as expenses only in our GAAP P&L for the fourth quarter and full year and not in our non-GAAP adjusted results. We believe the restructuring plan started in 2023 is essentially complete, and we are well positioned to continue margin expansion in 2025. That said, we will continuously execute cost savings initiatives under our RPS productivity program and evaluate our site footprint especially as we continue to make acquisitions. Continuing through the P&L, our adjusted income from operations was $25 million in the fourth quarter and $82 million for the full year down approximately $5 million and $6 million versus 2023 respectively. The full year reduction is driven by $11 million of 2023 COVID-related sales and $12 million from the impact of bonuses returning to normal levels for 2024. Partially offsetting these impacts was income growth through price, manufacturing productivity, and operating expense management. Our full year adjusted operating expenses are up approximately $16 million versus last year, almost entirely driven by an increase in performance-based bonuses we paid in 2024. Fourth quarter operating expenses are up about 4% year-over-year and were essentially higher than the third quarter primarily due to the nature of year-end expenses, sales investment, and some additional costs for Tantti for the month of December. The team has done a good job in 2024 balancing cost management while ensuring we are positioned to support growth and making necessary investments. We delivered fourth quarter 2024 adjusted operating income margins of 14.9% consistent with the third quarter and with that ended the full year with 12.9% adjusted operating income margin near the midpoint of our prior guidance. This was down 100 basis points from 2023, which as mentioned earlier includes about 300 basis points of headwind from prior COVID business and bonuses returning to normal levels. Our full year adjusted EBITDA margin rate was 18.5%, which reflects the impact of greater than 5 percentage point drag from depreciation on adjusted operating income. Adjusted net income for the fourth quarter was $25 million and the full year was $89 million, down about $4 million or 5% from 2023. Improved adjusted other income from higher interest income essentially offset the year-over-year reduction in adjusted operating income. That said, about $5 million of higher adjusted income tax provisions fell through to adjusted net income. Our full year adjusted effective tax rate was 20.4%, in line with our guidance, but more than four points higher than last year. Adjusted fully diluted earnings per share for the fourth quarter was $0.44 compared to $0.48 in the same period in 2023. For the full year 2024, adjusted fully diluted earnings per share was $1.58, about $0.07 lower than last year. Finally, our cash position at the end of 2024 was $757 million, down $27 million sequentially after using $55 million for the settlement of our Tantti acquisition as expected. This was partially offset by another strong quarter of strong cash flow from operations as we generated $42 million. For the full year, we generated $178 million of cash flow from operations, 56% more than 2023 on improved working capital management. I'll now move to an update on our guidance for the full year of 2025. I'll speak to adjusted financial guidance, but please note that our GAAP to non-GAAP reconciliations for our 2025 guidance are included in the reconciliation tables in today's earnings press release. And for further clarity, our guidance is fully inclusive of our December acquisition of Tantti. That said, we do not expect to report acquisition-related revenue for Tantti, as our products will be used as a component in our Avitide resin sales. As highlighted earlier by Olivier, our revenue for 2025 is expected to be in the range of $685 million to $710 million. This represents growth of 8% to 12% on a reported basis, or 9.5% to 13.5% organic growth and 10% to 14% growth for our non-COVID business. Given the volatility related to currency exchange, we have assumed about 150 basis points of year-over-year headwind. Any additional fluctuations, higher or lower, could change that view. We will report organic growth rates in our quarterly results, removing the impact of currency, and as mentioned earlier, we do not currently have acquisition sales to remove from our organic growth rates. As Olivier shared, we expect revenues in the second half of 2025 to be higher than the first half. We expect the first quarter will step down a bit sequentially from the fourth quarter, but with year-over-year growth roughly in line with the lower end of our full year guidance. We expect to deliver adjusted gross margins in the range of 51% to 52% with expansion from 2024. This is consistent with the 100 to 200 basis points of expansion that we have shared in our 2025 framework, now including roughly 50 basis points of headwind from foreign currency. We expect gross margin expansion will be driven by increased volume leverage, price improvements, manufacturing productivity, and strategic sourcing savings, offset primarily by inflation and some 2024 COVID sales drag. Manufacturing productivity will be driven by a Repligen performance system across all categories of cost of goods sold. We expect to see our price return to historic levels of low single digit given the current market environment. Our current outlook on gross margin reflects the net effect of assumed currency headwinds. However, it does not include any impact from potential tariffs being discussed in the current global trade environment. We believe we would have minimal impacts from changes in trade with China, Mexico, and Canada. That said, we continue to monitor the broader global trade environment as changes with Europe would have a much larger impact on Repligen. We expect our adjusted income from operations to be between $99 million to $106 million, or 14% to 15% adjusted operating income margin, which is up 100 to 200 basis points versus 2024. Inflation, Tantti, and investments in operating expenses will be the key headwinds. We expect to more than make up for that with gross margin improvements from volume leverage, price, and manufacturing productivity. Overall, we will continue to manage operating expenses to grow slightly less than sales as we continue to balance cost efficiency with investments that are critical for growth and necessary to be fit for growth. We plan to increase R&D spending versus 2024. We will invest in the sales team with more application support and added leadership in Asia, and we plan to make G&A investments in tools and processes. Adjusted EBITDA margins are expected to be in the range of 20% to 21% for the year. Continuing through the P&L, we expect our adjusted other income to be down year-over-year by an estimated $5 million to $6 million, or $23 million to $24 million. This reflects an estimated one percentage point of lower average interest rate versus 2024. This may fluctuate with actual Fed actions taken through the year, and it assumes minimal change in cash balance. Our 2025 adjusted effective tax rate is expected to increase to an estimated 22% to 23%. The increase versus 2024's ending rate of 20.4% is driven primarily by the absence of stock-based compensation windfall benefit that we have seen in the last several years. We will continue to evaluate tax planning options to improve from here. Incorporating all of these items, we expect our adjusted fully diluted earnings per share to be between $1.67 and $1.76, up $0.09 to $0.18 respectively, versus last year. We have entered 2025 with a strong balance sheet. We will remain prudent in our spending while maintaining flexible dry powder for potential acquisitions. Our CapEx spending is expected to be down another 20% to 25% versus 2024, with our spending back to pre-COVID levels. As we wrap, let me reiterate our excitement to move forward in 2025 and our optimism about the bioprocessing market improving through the course of the year. We will remain laser-focused on the execution of our strategic priorities, accelerating and maintaining above market growth, developing best-in-class innovation, expanding margins, maintaining our focus on strong M&A discipline, and ensuring our people, processes, and tools are fit and enabling our growth. With that, I will turn the call back to the operator to open the line for questions.

(Operator provided instructions.) Today's first question comes from Dan Arias with Stifel.

Good morning, guys. Thanks for the questions here. Olivier, maybe a place to start would just be to ask how things have evolved here. I mean, last quarter, you felt good about CDMOs and capital equipment. You were cautious on China and emerging biotech. Is there anything that has shifted at all? It seems like order activity stepped up. But I would love to just hear what you think is most important here to start the year. And then I guess I would specifically be interested in those Tier 2 CDMO accounts that showed some good signs of life last quarter. How confident are you in the sustainability of the improvement that it looks like you are seeing here? Thank you.

Yes. So, thanks, Dan, for the question. You are absolutely right. What was really important for us in quarter four was a confirmation that both CDMO and capital equipment turnaround that we started to see in quarter three was really fully confirmed. In fact, we had a huge acceleration on both sides, particularly on the CDMO side where we had sales and orders increasing tremendously in quarter four. Our sales were up more than 40% and our orders were up more than 11%, which as mentioned in the script, has brought us back to almost the same amount of growth at CDMO as we had at pharma for the entire year. We like that because we think CDMOs are a reflection of the health of the entire ecosystem. Growth came from both Tier 1 and Tier 2 CDMOs. Particularly at the big companies, we see a lot of traction happening right now. They've announced a lot of big deals and the entire ecosystem is starting to benefit. On capital equipment, we saw improvement earlier than others and had an incredible confirmation in quarter four. Our sales were up more than 20% and our orders were up 25% versus quarter four of last year. We've seen a huge improvement and our state-of-the-art system offering is positioning us very well on that side.

The next question comes from Rachel Vatnsdal with J.P. Morgan.

Perfect. Good morning and thank you for taking the questions, you guys. So I wanted to dig into the opportunity with ATF here. You mentioned that ATF grew above 50% for the year. So could you walk us through how much revenue did you guys do in ATF in 2024? And then separately, you've talked about getting specced into a blockbuster drug for ATF. You've also alluded to the fact that you may get specced into a second blockbuster drug. So how should we think about the timing of that benefit of getting specced in? Is there anything assumed for these blockbuster opportunities into 2025 guidance or would that be upside at this point?

Thanks, Rachel. The filtration business is the biggest of all businesses, more than half, about 60% of our total business. It did about $373 million in 2024. We were never given the exact numbers of ATF, but it's the biggest part of the filtration business we have right now. We are benefiting from being designed into many late-phase, if not commercial, drugs over the last 12 to 18 months. The typical timeline when you get confirmation you're designed into a commercial drug is: you get the orders within a quarter, you deliver the hardware within the next six to 12 months, and then you start to see the consumable sales happening probably after a year or so. It's all about making sure we have wins quarter by quarter and growing the installed base because consumable share will increase. For the first time in 2024, our consumables ATF sales were above our hardware sales, which is a sign that the installed base is becoming significant. We've been successful getting designed-in with ATF at all CDMOs; nine of the top 10 CDMOs are using ATF broadly. Now a lot of pharma companies are also starting to use ATF. So the best is still to come and there is a lot of tailwind coming on the consumable side.

The next question is from Puneet Souda with Leerink Partners.

Yes, hi, Olivier, Jason. Thanks for taking my questions here. I'll wrap up in one question. The question is in terms of how sustainable are the order trends that you are seeing, given the backdrop we've seen from peers, a recovery that hasn't been as smooth as one would have expected even back in '23 or '24. Just trying to get a sense of that and then wondering if you can elaborate if January and February order trends were comparable to Q4 and or maybe even stronger, if you could elaborate on that. Thank you.

Absolutely. In 2024, our order intake increased every single quarter after the previous one, from quarter to quarter. Between quarter four and quarter one, our order intake went up by 18%. We've seen progress in order intake quarter by quarter. We've had a book-to-bill ratio above one for six to seven quarters in a row, which supports our confidence the return to growth is sustainable. Excluding protein, our order intake in 2024 was double-digit across franchises, which is a strong signal and reflects our differentiated portfolio. Regarding current quarter commentary, we typically don't provide detailed comments on the current quarter, but I can say things are doing well so far and we're absolutely fine.

The next question comes from Matt Larew with William Blair.

Hi, good morning. It looks like based on recent order trends that there is pretty good visibility across the portfolio. Of course, the one area that really underperformed in '25 and '24 is proteins. You alluded to what that is. Could you speak to the visibility on the protein side to that 10% to 15% growth and maybe within that comment on any early traction you're seeing with the new product launch and anticipation of other product launches this year?

Thanks, Matt. We knew 2024 would be a tough year for protein and expected $30 million to $35 million of headwind; it played out a little better than expected. The top two OEM partners' business is almost down to zero now, so there is no more headwind coming from that side. In 2024 we progressed strongly on the rest of the portfolio, particularly Avitide and our Tantti business, where we won several deals for custom ligand or resin developments. We launched our first resin using Tantti beads, the double-stranded RNA resin, which has good traction. We have several product launches planned in 2025 focused on new modalities. We expect to return to double-digit growth in proteins, and importantly we have more control over this franchise since we can develop and commercialize more of our own resins and ligands. Collaboration with Purolite is doing well and we are working closely on monoclonal antibody opportunities.

The next question comes from Jacob Johnson with Stephens.

Hey, good morning, everybody. Maybe following up on Rachel's ATF question in a bigger picture way, Olivier, you mentioned CDMOs have adopted ATF and it seems you're seeing wins with pharma recently. Why are you seeing these wins with ATF now? It's a technology that's been around for a while. Are these seeds that were planted years ago? Is this key account strategy, good execution by the sales team? Just curious qualitatively what's been driving the ATF wins recently.

Great question. It's a combination of factors. We have a lab-scale ATF solution where people typically start testing the technology, and over the last three to five years companies have tested ATF at lab scale before scaling up. Once companies have proof of concept and operating successes at larger scale, adoption accelerates. For the last big win that became commercial, it moved very fast. Companies tell us they have proof of concept and the technology works well, so they can implement it more quickly than an entirely new, unknown technology. Some organizations have been testing ATF for several years, while others adopt more quickly today because the technology is better understood. We continue to see many new wins, not only for monoclonal antibodies but also for new modalities using ATF, which is why we're confident about the opportunity.

The next question is from Conor McNamara with RBC Capital Markets.

Hey, thanks for taking the questions and congrats on a solid quarter. Can you just talk about what end market assumptions you've incorporated in your fiscal 2025 guide to a Q1 that's going to be at the low end of your guidance range? That would assume there's an acceleration for you guys. Are you assuming end markets return to historic growth rates by year-end? Or is it more Repligen specific that's driving that acceleration throughout the year?

Good question. We see ourselves a bit different than others because about 80% of our portfolio is highly differentiated. For us, we expect a pattern similar to pre-COVID years where H2 is stronger than H1, with Q4 the strongest quarter. We believe we are returning to that pacing in 2025, seeing quarter-to-quarter acceleration with Q1 as the weakest and Q4 the strongest, consistent with historical seasonality and our view for 2025.

Yes, on pricing, we achieved low single-digit pricing, returning to historical levels. We expect a similar approach in 2025. Our product differentiation allows us to capture price modestly while balancing customer relationships and keeping our products cost-competitive. We'll continue on that same trend.

The next question comes from Matt Hewitt with Craig Hallum.

Good morning and congratulations on the strong finish to the year. A couple of questions regarding the equipment sales. Obviously, you're seeing a strong recovery there. Was there any budget flush impact in Q4? And another question: looking at your peers, some of them are still talking about headwinds on the equipment side. What do you think is the key differentiator for you versus some of the issues that your peers are still having? Thank you.

Thanks, Matt. We should differentiate hardware into lab-scale small equipment (C Tech) and larger manufacturing equipment (ARTeSYN and large-scale systems). For the small-scale hardware, quarter four is typically strong due to seasonality and we had record orders and sales for C Tech. For manufacturing hardware, the improvement is due to our state-of-the-art products combined with PAT flow VPX technology, giving us a competitive advantage and helping us gain market share. The CDMO recovery has driven more CapEx spending, and we saw a meaningful amount in quarter four. In manufacturing hardware, our products are high-tech with features customers value, and we are focused on new modalities, where RS 10 and other launches have produced wins.

The next question is from Subbu Nambi with Guggenheim Securities.

Hey, guys. Thank you for taking my question. A follow up to the previous question: thank you for clearly laying out how you achieve your 2025 guidance. Outside of ATF, I wanted to get additional color on why you are focused on newer modalities and PAT in specific? Are there areas where you see unmet need making it easier to win accounts versus displacing larger players?

We like new modalities for several reasons. First, almost half of pharma pipelines today consist of new modalities, which increases complexity for R&D and manufacturing teams; they need customized, agile solutions. We are agile, fast to develop and launch new products, and can provide tailored solutions. Second, new modalities are diverse—CAR-T, viral vectors, ADCs, etc.—and require different manufacturing approaches; customers need partners who can support this diversity. We believe we can deliver in this space and bring solutions customers value. The long-term therapeutic opportunity is substantial and we are excited to support customers as these modalities mature.

The next question comes from Justin Bowers with Deutsche Bank.

Hi, good morning, everyone. Olivier, can you expand upon the strength you saw in hardware during the quarter? Did that include any platform wins, either expansions or new placements? And maybe talk about which franchises you saw some of the strength in. Also, on the strength ex and APAC ex-China and some of the growth initiatives there, is that currently being driven by CDMO or is the participation there in pharma and biotech as well? Where are you focusing the growth?

On hardware, ATF, ARTeSYN and large-scale systems all contributed. ATF hardware performed very well and systems more broadly, including filtration and chromatography systems tied to ARTeSYN, benefited from our PAT technology. We are getting platform adoption: three or four big pharma companies started platforming us in 2024 for their processing solutions. ARTeSYN systems are sticky with single-use consumable demand following systems placements for years. Regarding Asia, it's a mix. In countries like Korea there are large CDMOs and large pharma/biosimilar companies, so growth is balanced between CDMO and pharma. APAC excluding China grew 12% for the full year and orders grew around 16%—we see strong opportunity in Korea, Japan, Singapore, and expect acceleration in 2025. In China, we believe we hit the bottom with H2 orders slightly higher than H1 and expect improvement later in 2025.

The next question comes from Paul Knight with KeyBanc.

Thanks so much for the question. Regarding the recovery in CDMOs, what do you think is happening there? Are they getting past making material for COVID or are they seeing better financing from biotech? It's been odd that they've been really bullish, but now we're starting to see their orders for companies like Repligen. If you could comment on that first. Thanks.

Good question. For large CDMOs, their focus is securing long-term, multi-year commercial supply deals with big pharma. Several have announced very large deals recently which provide clarity and confidence for their business over 5-10 years and free them to pursue other opportunities. Tier 2 CDMOs also improved for us; they benefit from some spillover of products that may not fit at the largest CDMOs and some have benefited from legislation and government programs. For biotech funding, there was improvement in 2024 with total funding up about 45% versus 2023, but funding declined quarter by quarter through the year and January was weak. We continue to watch small biotech funding closely; that segment has not fully recovered.

The next question comes from Doug Schenkel with Wolfe Research.

Good morning, and thank you for taking my questions. There was an earlier question about your year-end instrument performance versus peers. We're hesitant to call share shifts in an increasingly sticky market. Are you seeing any pickup in customers swapping out existing lines for your products in an environment where build-out of new lines is still muted? Also, on guidance and pacing, given order strength in Q4 and the short lead times to fulfill orders, it seems Q1 commentary derisks things substantially. I want to make sure we're not missing anything: the size and duration of the orders, because it seems bias should be to the upside given how you guided and the strength of orders into year-end. Thank you.

For hardware market share, we are a relatively smaller player, so gains can look large when starting from a low share. We have had many wins over the last several quarters driven by competitive products combined with PAT technology. We're gaining share and seeing platform adoption at big pharma, where customers who bought systems in earlier years now purchase regularly. Regarding lead times, hardware lead times are typically three to six months, so orders placed today often fulfill over subsequent quarters. Consumables can be ordered and delivered in the same quarter. That dynamic explains some of the pacing and the expected H1/H2 pattern for 2025. With that, I think we'll wrap it up for today. Thank you for joining the call. We really appreciate the time you took. We are all excited about the year to come, and we'll talk soon together again. Thank you so much. Cheers.

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