Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems First Quarter 2022 Earnings Conference Call. Please be advised today's conference may be recorded. I'd now like to hand the conference over to your host today, Mike Beaulieu with Investor Relations.

Good morning, and thank you for joining the Rapid Micro Biosystems First Quarter 2022 Earnings Call. Joining me on the call are Rob Spignesi, Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer. Earlier today, we issued a press release announcing our first quarter financial results. A copy of the release is available on the company's website at rapidmicrobiome.com under Investors in the News and Events section. Before we begin, I'd like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements, including, but not limited to statements relating to Rapid Micro's financial condition, expectations for business development and growth, customer interest and adoption of the Growth Direct System and the potential impact of COVID-19 on Rapid Micro's business. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the risk factor section of our Form 10-K filed with the Securities and Exchange Commission on March 24th, 2022. We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also, the company's contract with the U.S. Biomedical Advanced Research and Development Authority, or BARDA, was completed in the fourth quarter of 2021. Throughout our quarterly performance discussions, we'll be excluding the non-commercial revenue impact from BARDA by comparing total 2022 revenue to commercial revenue in 2021. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 10, 2022. Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements because of new information, future events or otherwise. And with that, I will turn the call over to Rob.

Thank you, Mike. Good morning, everyone, and thank you for joining us to review our first quarter 2022 business performance and financial results. While we were very pleased with most elements of our business performance in Q1, system placements were weaker. Access to customer sites continued to be limited, which resulted in the placement of 2 Growth Direct Systems, which was consistent with the guidance we provided in March, but nonetheless still disappointing. Both systems were placed in March as trends with customer access and in-person meetings began to improve marginally later in the quarter. While interest in our Growth System remains high, we are not satisfied with these results and are focused on improving system placements enterprise-wide at Rapid Micro. Excluding system placements, our performance in the first quarter met or exceeded our expectations. Recurring revenue grew more than 65%, led by Consumables growth of nearly 100%. And we completed 9 system validations in the quarter. Additionally, Systems and Consumables gross margins both improved significantly compared to Q1 last year, reflecting the progress our Operations team is making in advancing our manufacturing efficiency initiatives. Finally, I'm also pleased with the performance of our Product Development team, which is achieving key milestones as we progress our pipeline of innovative new product offerings. Over the last few months, we began to see a gradual improvement in customer site access. As we have discussed in the past, site access and in-person selling is important to our system sales process because it allows us to work more closely with our customers to understand their manufacturing and quality control challenges and opportunities. We are also able to better showcase the differentiated capabilities of the Growth Direct, which allows our team to demonstrate how we can improve existing workflows and deliver the value customers expect. I recently had the opportunity to visit some customers and would like to provide you with some real-world examples of the importance of being onsite with customers. In April, I traveled to Europe and along with Andy Keys, our Chief Commercial Officer, spent about 2 weeks meeting with existing and prospective customers. Most of the existing customers we met were top 20 pharma customers who have multiple systems at multiple sites. This trip underscored the importance of customer site access and reinforced customer interest in deploying our technology across our operations. Specifically, there were 3 important points I came away with from these visits. First, customer site access is starting to improve. For many of our customers, we were the first onsite visitors that had welcomed into their facilities in over 2 years. These meetings included senior leaders substantive strong customer interest in the Growth Direct System and RMB. While this was encouraging, we were also reminded that there are still some customers who are not ready for in-person meetings due to ongoing COVID precautions. We will continue to pursue virtual meetings where appropriate as we look forward to increasing onsite meetings with new and existing customers over the coming months. Second, and consistent with our commercial land and expand strategy, we spoke with multiple customers who shared their vision to make follow-on purchases to expand their global rollout of the Growth Direct platform. These discussions reinforce a strong value proposition and our ability to positively impact our customers' complex operations. And third, there was a broad level of excitement about our future new product launches. We took this opportunity to discuss our upcoming rapid sterility and mold detection products and received strong, positive feedback on the benefits these innovative products will have on our customers' manufacturing and quality operations. In summary, it was a highly productive 2-week trip that we expect will be the beginning of improved site access and in-person collaboration with our customers. The benefits of our Growth Direct technology are resonating with our existing customers and many are looking to adopt our technology more broadly across their organizations. To drive growth with this opportunity, we are making the right investments in building a world-class commercial and service and support organization, as well as new product innovation. I'm personally excited to be back out working with our teams and meeting current and prospective customers as we remain intensely focused on placing Growth Direct Systems. And while our system placements may be variable in the near term, our total addressable market is large, our value proposition is resonating and our systems are providing value for our customers once they are in routine use. I'll wrap up my prepared remarks with a brief update on some of our key initiatives for 2022. It's important to note that, first and foremost, we are intensely focused on new system placements as an organization. To this end, we have strengthened our commercial team by hiring multiple leadership and field-based roles in sales and marketing across North America and Europe, as well as Asia where our new team is ramping and we see meaningful future opportunity. We are very excited about the pace at which we are developing our global commercial capability and view it as the most critical component of our growth strategy. Also, we remain on track with the development and commercialization plans of our mold detection and rapid sterility products, which, as discussed, are resonating strongly with customers. As a reminder, our mold detection products will enable customers to differentiate mold from other categories of microorganisms, such as bacteria. This is an important capability that supports our goal of giving customers information sooner so they can make decisions and respond to contamination events more quickly. Over the coming months, we plan to begin enrolling customers in beta testing. Our rapid sterility beta system has been placed and installed with one of our existing top 20 global pharmaceutical customers, with beta testing expected to commence later in the second quarter. Our rapid sterility product offers compelling differentiation versus existing sterility products and will be especially important for time-sensitive products, such as vaccines, biologics, sterile injectables, and cell and gene therapies. We are excited to be working closely with one of our top customers on this important new application and look forward to providing you updates as we move forward. We remain laser-focused on executing against our growth plan. With over half of the global top 20 pharmaceutical manufacturers as our customers and our value proposition resonating strongly; a ramping high-quality commercial team focused on new system placements; an exciting new product pipeline and significantly improving gross margins, I remain as excited as ever about the future of Rapid Micro. With that, I will turn the call over to Sean to discuss our financial results.

Thanks, Rob, and good morning, everyone. This morning, we reported first quarter 2022 revenue of $4.2 million. This compares to the $4.8 million of commercial revenue that we reported in Q1 2021. Product revenue, which consists of Systems and Consumables, was $2.6 million in Q1 compared to $3.7 million in the first quarter last year. The decline was due to fewer placements of Growth Direct Systems but was partially offset by continued strong growth in Consumables. As we discussed on our Q4 earnings call, pandemic-related customer site access limitations and customer-specific timing issues continued to impact our ability to sell and ship systems in the first quarter. As a result of these headwinds, Q1 placements were limited to 2 systems, which was consistent with the guidance we provided in March, but still disappointing. From a comparison standpoint, we placed 8 systems in the first quarter last year, including 3 systems that were originally scheduled for placement in Q4 2020, but were pushed into Q1 2021 as a result of extended holiday shutdowns due to the pandemic. Revenue from Consumables exceeded our expectations, increasing nearly 100% in the first quarter compared to Q1 last year, as we continue to benefit from our growing base of validated systems and increased utilization at existing customers. Over the past 4 quarters, the cumulative number of validated systems in the field grew from 52 to 93, an increase of 79%. And Consumables revenue per average validated system increased 15%. As a reminder recently, validated systems go through a transition period that typically lasts several months before they move into full commercial routine use. Looking only at those systems we considered to be in routine use, Consumables revenue per average system increased both year-over-year and sequentially in Q1 and was well over $100,000 on an annualized basis, with several individual customer systems at annual run rates while over $200,000. These metrics are important factors in our forecasting and give us confidence in the contributions we expect recurring revenue to make to our long-term growth. While we expect these metrics to continue to trend up over time, they can and do vary from quarter to quarter due to several factors, including the pace and timing of validations and the transition to routine use for new systems. Service revenue was $1.6 million in Q1 compared to $1.1 million in the first quarter of 2021. The growth in service revenue was driven primarily by a higher volume of validations completed during Q1, as well as higher revenue from service contracts attached to our growing base of validated systems. We completed the validation process on 9 new systems in Q1, bringing our cumulative total of validated systems to 93. Recurring revenue, which continues to be a bright spot in our business, grew 66% to $2.7 million in the first quarter, driven by strong growth in both Consumables and Service Contracts. Non-Recurring revenue was $1.5 million in Q1 with lower system placements and higher validation revenue compared to Q1 last year. Turning to gross margins, product margins were negative $1.8 million in both Q1 this year and last year, despite lower revenue this quarter. We are successfully executing against a number of manufacturing efficiency initiatives across both Systems and Consumables and are seeing tangible benefits, particularly in Consumables, where year-to-date progress is ahead of plan. Service margins were negative $0.1 million in both Q1 this year and last year, with the benefit of higher revenue this year offset by the cost of recent investments in personnel and travel-related costs associated with field service and validation activity to support our growing base of Growth Direct Systems. We continue to expect efficiency initiatives we currently have underway to drive meaningful productivity improvements as we work our way through the remainder of 2022 and our activity volumes continue to increase. On a combined basis, gross margins declined slightly in Q1 compared to the first quarter last year, with the negative impact of relative product mix in Q1 this year largely offset by progress on our product manufacturing efficiency initiatives. We continue to actively manage inflationary headwinds in some materials, freight, and labor costs, as well as our supply chain and logistics operations. We did not experience any material business impact from either in the quarter. Moving down the P&L, total operating expenses were $13.1 million in the first quarter, consisting of $3.5 million in sales and marketing, $3.5 million in R&D, and $6.1 million in G&A. This compares to total operating expenses of $7.6 million in the first quarter of 2021. This increase was largely due to investments in commercial and product development, as well as higher G&A expenses incurred to operate as a public company. Net loss in the first quarter of 2022 was $14.9 million. This compares to a net loss of $22.1 million in the first quarter of 2021, which included an $11.4 million charge to adjust the fair value of our outstanding preferred stock warrants prior to their conversion into Class A common stock warrants in connection with our IPO last July. Excluding the impact of the warrant valuation adjustment last year, the increase in net loss was primarily due to the higher operating expenses I just discussed. Net loss per share attributable to common shareholders was $0.35 in Q1 2022 as compared to $37.89 in the prior year quarter. With respect to noncash expenses and CapEx, depreciation and amortization expense was $0.6 million, stock compensation expense was $1.0 million, and capital expenditures were $0.4 million in the first quarter of 2022. As of March 31, we had $184.2 million in cash, cash equivalents, and investments, which we continue to deploy to invest in our growth initiatives. We are actively managing our cash plan to account for business performance and continue to expect full year 2022 cash burn to be comparable to 2021, excluding the impact of financing activities last year. I'll now shift to guidance and our outlook for Q2 and the full year. We are reaffirming our full year revenue guidance range of between $27 million and $32 million. As a reminder, system placements represent roughly 80% of the potential variability between the high end and low end of this range. As Rob mentioned earlier, we've started to see access to customer sites improve a bit over the past few months. On a relative basis, the improvement appears to be moving at a slightly faster pace in the U.S. compared to Europe, with Asia lagging behind. While this is very encouraging for the full year, we do not expect it to benefit our Q2 system placements, which we currently expect to be in line with Q1. Having said that, we have a number of additional placement opportunities that our teams are working on that could provide upside to our system placement outlook in Q2. Looking forward to the second half of the year, we are optimistic that our customers will continue to open up more fully around the world and that system placements will accelerate as a result. Over that same timeframe, we also expect our recent commercial investments to continue to mature and deliver increasing productivity. This includes advancing our second half funnel, which contains a number of potential multi-system placements with existing customers, as well as many placement opportunities with new customers. All of these factors give us confidence that system placements will be significantly higher in the second half of the year. As a result, we expect that roughly 15% of our full year system placements will be made in the first half of the year, and roughly 85% in the second half, with placements peaking in Q4. As a reminder, our system placements are typically back-end loaded, taking place in the latter stages of each quarter in the year. For example, 64% of our system placements in 2019 and 81% of placements in 2020 took place in the second half of the year. Moving to revenue, we continue to expect quarterly sequential increases as the year progresses, driven by system placements, as well as increasing recurring revenue from Consumables and Service Contracts as we continue to grow our base of validated systems and move them into routine commercial use. Looking at the year in halves and based on our Q1 performance, our 2022 outlook assumes that roughly 30% of our revenue will be delivered in the first half of the year, with the remaining 70% in the second half. We are expecting the number of new systems validated in 2022 to be roughly in line with the 33 we did in 2021. From a quarterly standpoint, we expect new validations in Q2 and Q3 to be lower than the 9 we did in Q1, due mainly to the number of system placements over the past few quarters. We then expect new validations in Q4 to be higher than Q1. In Consumables, we are expecting sequential quarterly revenue growth with year-over-year growth rates in the mid-double digits starting in Q2 due to tougher prior year comps. In Service, we are expecting average sequential revenue growth of approximately 10% over the period from Q2 to Q4, with some variation between the quarters driven by the timing of validation services. From an overall gross margin standpoint, we are expecting continued improvement on a sequential basis reaching positive gross margins in Q4, driven by continued progress on our manufacturing efficiency initiatives, as well as increasing sales volume leverage and a more favorable product mix. Finally, we are expecting operating expenses to be relatively consistent with Q1 on a quarterly basis over the balance of the year. That concludes my comments on our 2022 outlook. So at this point, we'll open the call up for questions.

We have a question from a line of Tejas Savant with Morgan Stanley.

This is Yuko on the call for Tejas. By our quick math, you will have -- we're seeing like single-digit placements in the first half and 4 to 5 times that amount in the second half. First of all, is that math about right? And second, what gives you confidence that placement cadence will pick up materially in the second half?

Yuko, it's Sean here. Yes, so your math is right. I mean, we're basically guiding the 4. We think there's upside in the second quarter to that we're working on, but we don't have clear visibility into that at this point. So we're being a little conservative on the quarter, but 15% of the year is represented by those 4. So I think that's the starting point for the math, which is consistent with your comment.

And Yuko, it's Rob. With regard to the confidence on the second half, multiple elements here give us confidence. First, as you heard a few times during the prepared remarks, site access is improving. We're starting to see -- we're not out of the woods yet, but certainly turning the corner. The recent trip to Europe, as I discussed, was very enlightening. The U.S. is improving as well, and even Asia has started to open up quite a bit. As you've heard us mention in the past, site access is a very strong contributor to our sales process. Another important element is our value proposition is resonating with customers. Again, the in-person meetings in Europe were a very strong reminder, but other evidence, as you can see in our business, our systems are being used. Our Consumables are being pulled through at or above our expectations. As customers do that, they'll likely purchase follow-on systems. And as Sean mentioned, the shape of our funnel, which is a third element that gives us confidence, is well balanced between new and existing customers across our geographies. Our funnel does include some sizeable multi-system deals with existing customers and a nice balance with new customers as well. The fourth element I would tell you that gives us confidence is a ramping, high-quality commercial team. As discussed previously, we onboarded a new Chief Commercial Officer last year. Our hiring's been good in Q1 and the tail end of last year for new direct selling and direct marketing people, and we expect increased productivity as they mature in their role to deliver against the sales plan.

Great. Thank you so much for that color. And then just a quick follow-up. With inflation on top of minds right now, could you comment on your ability to increase prices on instrument services or Consumables?

Sure. Yes. So I think we talked in a recent call about the fact that we were planning to take price increases across many of our products this year. We're seeing some benefits from that. I'd say it's not completely uniform, but in general, we are seeing some benefit from price this year in terms of the ASPs that we're charging out in the market.

We have a question from the line of Rachel Vatnsdal with JPMorgan.

This is Noah on for Rachel. Just digging in a little bit into the sort of end market applications of the system, can you provide any sort of additional color on how the mix shift might be changing, either in placements or any sort of funnel between larger and smaller customers? Yes, that would be my first point. And then I have a follow-up.

Yes. So with regard to customer end market -- and I can talk about applications as well with regard to our actual test applications. I think -- but I think you're more interested in the customer complexion. Okay, both. Yes, so the bulk of our current customer base and for the most part of our funnel tends to be the larger enterprises out there, top 20, top 30 principal manufacturing biopharma customers, as well as large CDMOs as well. Now, that being said, we do address all modalities in all sizes. So we do have small and mid-size companies, not only as current customers but also in our customer funnel. But we're generally weighted more towards large customers, both principal manufacturing and CDMO, and market modality mostly towards biologics and cell and gene therapy. But we also address other modalities such as sterile injectables. With regard to part B of your question, our end market funnel applications, in any -- in most manufacturing environments, environmental monitoring can be 70% or more of the routine test volume, at least across the waterfront that we cover. And our funnel reflects that. The majority of our funnel across those types of customers environmental monitoring, but we of course also have current customers using water applications and bioburden applications. And our funnel also consists of those applications as well. So we feel like we're balanced across the end markets, as well as our applications -- at least relative to the relative volume in the market. And just -- you didn't ask this but I'll add a little bit of color from a geography standpoint. We've historically been North America and Europe, pretty well balanced. But as our Asia team grows, our funnel is starting to show some health and progress there. Early days with that team being in place for a very short time. But we have an optimistic outlook generally with regard to what that market could yield and a good team just getting started out there.

Awesome. And maybe digging a little bit more into the cell and gene therapy side. How has your confidence in the cell and gene therapy market like sort of evolved since the IPO? And do you sort of see the funding being still consistent with how you felt when you IPO'd?

Yes, I think we are, generally speaking, as excited as ever about cell and gene therapy. We've got more customers up and running in that segment. We have an incredibly strong value proposition. We speak to those customers frequently. They have an unbelievable patient-centric and patient-passion approach to their business and are making a real difference. And our technology and our business is helping them do that. The pipelines of cell and gene therapies, with regard to how we look at them, are still quite healthy, certainly sizeable enough for us to continue to attract new customers and build our cell and gene therapy market, again, where our value proposition is especially strong.

Awesome. And then finally, do you have any potential sort of threats about medium throughput competition or anything sort of related?

Well, we -- as we've said, historically, we believe the competitive intensity is quite low in this market. Our largest competitor by far is the manual method, if you will, is converting the 100-year-old method to the 21st century is how we view the competitive landscape right now, the top competitor anyway.

I'm showing no further questions in queue at this time. I'd like to turn the call back to Robert Spignesi for closing remarks.

Well, great. Well, thank you for joining us today. We appreciate your interest in our company and look forward to speaking with many of you in the coming weeks.

This concludes today's conference call. Thank you for participating. You may now disconnect.