Good morning, and thank you for joining the Rapid Micro Biosystems' Third Quarter 2023 Earnings Call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer. Earlier today, we issued a press release announcing our third quarter 2023 financial results. A copy of the release is available on the company's website. 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, anticipated year-end cash balance, cash runway, future revenue and system placements, expectations for and planned activities related to the company's business development and growth, customer interest and adoption of the Growth Direct System, expectations for RMBNucleus Mold Alarm and Rapid Sterility and the potential impact of macroeconomic uncertainty 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 Factors section of our annual report on Form 10-K filed with the Securities and Exchange Commission. 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. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 3, 2023. Rapid Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I'll turn the call over to Rob.

Thank you, Mike. Good morning, everyone, and thank you for joining us to review our third quarter 2023 results. I will begin this morning's call with an overview of our third quarter performance, followed by a review of the progress we have made in advancing our growth strategy. Total revenue was $6.1 million, representing a 30% increase compared to Q3 last year and above our guidance for the third consecutive quarter. The strength was broad-based with growth of approximately 30% in both product and service revenue for the second consecutive quarter. Based on our solid year-to-date results, and supported by a strong balance sheet, we are reaffirming our guidance of at least $22 million in revenue, representing approximately 30% growth for the full year. During the third quarter, we placed five Growth Direct systems, including at least one in each of North America, Europe and Asia. This included the placement of a system with a new top five global pharma customer. As a result, our customer base now includes two-thirds of the global top 20 pharmaceutical manufacturers. We also completed four validations in the quarter. With all three sales regions staffed, our funnel has expanded significantly since the start of the year and is well balanced geographically. Biologics and cell and gene therapy customers remain our largest opportunity, as Growth Direct is ideally suited for the high-volume testing, full automation, robust data integrity and fast turnaround time required in these segments. That being said, we also have meaningful opportunities in segments such as small molecule and sterile injectable manufacturing where our global commercial presence is providing insight and access to new opportunities. As many of you are aware, there are several thousand clinical trials for biologics and approximately 1,000 clinical trials for cell and gene therapies ongoing today. With the Growth Direct, customers can achieve faster time to results, improved data integrity, enhanced accuracy and greater sample capacity than current methods. The Growth Direct is currently being used in the manufacture of five of the six commercially approved CAR-T therapies and we expect to place a system with the one remaining therapy later this quarter. Notably, according to the FDA, there are close to 700 licensed biologic therapies currently on the market which creates a large growth opportunity. Our significant progress and penetration into the commercial cell and gene and biologics market, combined with our presence within the majority of the global top 20 pharma companies speaks to the value proposition of the Growth Direct. We are proud to be trusted partners on these critical life-saving therapies and believe that this level of success keeps us on a path to establishing the Growth Direct as the industry standard for pharma microbial QC testing globally. As we continue to focus on our commercial execution and specifically on accelerating system placements, one of our objectives is to increase opportunity generation and the velocity of our funnel through direct customer engagement. We recently opened a Growth Direct demonstration lab in our Lexington, Massachusetts facility and have already hosted several prospective customers. This new lab complements our automated consumable manufacturing line and provides a platform to showcase our comprehensive set of manufacturing and operations capabilities to customers. During these tailored customer interactions, we include detailed discussions about professional services, which include validation and system integration support. This high-touch approach to selling instills confidence in our customers and reinforces our position as a trusted long-term strategic partner of choice. Additionally, we continue to use our customer demonstration lab near Munich, Germany to host high-value events for our European customers. In early October, we again participated as a platinum sponsor at the annual PDA Pharmaceutical Microbiology Conference. We generated numerous high-quality leads over the three-day conference and including our customer event. In late November, Johnson & Johnson will host a multi-day Growth Direct event at their site in Schaffhausen, Switzerland. The purpose of this event is to facilitate collaboration and education by bringing together industry thought leaders, customers and prospective customers to discuss current business goals and to share best practices. We anticipate that over 60 customer participants will attend and the event will feature expert panel discussions on topics such as automation and regulatory approaches using the Growth Direct. New product development is another important component of our growth strategy. Our goal is to innovate new products that solve customer challenges, create meaningful differentiation and competitive advantage, strengthen partnerships and enhance the Growth Direct's value proposition. Additionally, we expect innovative products such as Mold Alarm and rapid sterility to become new sources of revenue growth and drive margin expansion. With respect to rapid sterility, we continue to increase focus on commercialization and expect to be able to provide a more significant update next quarter. In summary, we continue to make good progress against our growth strategy. Accelerating system placement remains our highest priority. Despite the ongoing challenges posed by the macroeconomic environment, we have achieved nearly 30% growth year-to-date through Q3, which demonstrates that the actions we have been taking to improve our commercial execution and enhance customer experience are gaining traction. Additionally, we are focused on leveraging internal cost initiatives, which combined with the scale we are beginning to achieve will continue to drive gross margin improvement. And with that, I'll now turn the call over to Sean to discuss our third quarter performance.

Thanks, Rob, and good morning, everyone. I'll start with a recap of our third quarter 2023 results, followed by our updated outlook. Q3 revenue increased 30% to $6.1 million compared to $4.7 million in Q3 2022. We placed 5 Growth Direct Systems in the third quarter of this year compared to 3 in Q3 last year. Product revenue, which is comprised of systems and consumables increased 31% to $4.2 million in Q3 compared to $3.2 million last year. The growth in revenue was primarily driven by two additional system placements in the quarter. Consumable revenue increased on a year-over-year basis but was down slightly on a sequential basis following a record second quarter due mainly to the timing of customer shipments between Q2 and Q3, both this year and last year. Service revenue increased 27% to $1.9 million in the third quarter compared to $1.5 million last year. The increase was largely driven by higher recurring service contract revenue, which grew almost 40% in the quarter. Third quarter recurring revenue increased 17% to $3.4 million compared to $2.9 million last year, driven by the growth in both consumables and service contract revenue. Nonrecurring revenue was $2.7 million in Q3 compared to $1.8 million in the prior year quarter. Turning to gross margins. Product margins were negative $1.5 million in Q3 compared to negative $2.4 million in the third quarter last year. The improvement was mainly due to higher placements in production volumes and systems and favorable consumables product mix in Q3 this year as well as the one-time write-off of expired materials and consumables in Q3 last year. This improvement was partially offset by the impact of planned downtime on our automated consumables manufacturing line to implement enhancements that will benefit future margins. These enhancements are now substantially complete, and we expect them to start making a meaningful contribution to improved consumables margins beginning in the fourth quarter of this year. Service margins were negative $0.1 million in Q3 compared to negative $0.4 million last year; leverage from higher revenues and better productivity drove the improvement in service margins in the quarter. On a combined basis, our third quarter gross margin percentage was negative 27%, representing an 11 percentage point improvement on a sequential basis and a 32 percentage point improvement compared to the third quarter last year. Looking at margin improvement in another way, our total cost of revenue only increased 3% year-over-year compared to the 30% increase in total revenue we realized in the same period. This illustrates the progress we are making in implementing manufacturing efficiencies and cost reductions across both products and services as well as the benefits of higher revenue, increasing production volumes and tight control of overhead costs. We are laser-focused on the activities we believe will drive significant long-term and sustainable improvement in our gross margins. Continuing down the P&L, total operating expenses were $12.8 million in the third quarter consisting of $3.5 million in sales and marketing, $3.1 million in R&D and $6.2 million in G&A. This compares to total operating expenses of $14.1 million in the third quarter of 2022. The decrease was largely due to nonrecurring costs incurred in the third quarter of last year associated with the strategic review process initiated by our Board of Directors in that period. Net loss was $13.4 million in Q3. This compares to a net loss of $16.3 million in Q3 last year. This improvement was largely due to higher revenue, better gross margins and lower operating expenses in Q3 this year. Net loss per share was $0.31 in Q3 compared to a net loss per share of $0.38 in the prior year quarter. With respect to noncash expenses and capital expenditures, depreciation and amortization was $0.8 million, stock compensation expense was $1.3 million and capital expenditures were $0.5 million in the third quarter. I'll now turn to our outlook. We are once again reaffirming our previous full year 2023 revenue guidance of at least $22 million, which represents growth of at least 30% and assumes we will place at least 15 systems. Compared to Q3, we expect Q4 system revenue to be relatively consistent, consumable revenue to be slightly lower due mainly to shipment timing, and service revenue to be higher due to increased validation activity. We expect to complete at least five validations in the fourth quarter, which is consistent with our prior guidance. In light of the current macroeconomic environment, our customers continue to scrutinize the timing and scale of purchase decisions. While our guidance continues to reflect this uncertainty and our teams continue to effectively navigate this environment, we expect these headwinds to persist through the end of the year. Shifting to gross margins, we expect sequential improvement in Q4 as we benefit from higher production volumes and cost reduction activities in consumables as well as the benefit of higher revenue and increased productivity in service. Gross margin improvement continues to be a top strategic objective for us. We are focused on driving cost reduction and increasing manufacturing efficiency and products and increasing productivity in services. We continue to expect these actions as well as the benefit of higher sales volumes to lead us to positive gross margins in 2024 with expansion to 50% to 60% as the business continues to scale over time. We expect Q4 operating expenses to be between $12 million and $13 million. Finally, we finished the third quarter with approximately $104 million in cash, cash equivalents, and investments. Cash burn was approximately $9 million in the period. In the fourth quarter, we expect cash burn to be slightly less than Q3, as we realized cash benefits from working capital management. As a result, we expect to end 2023 with cash and investments slightly below $100 million and remain confident that this will provide us with cash runway at least into 2026. That concludes my comments.

Good morning, guys. This is Edmond on for Tejas. Thank you for taking my questions. Just to start, with five systems placed in the quarter, your guidance implies a significant uptake in Q4. Just wondering what underlies your confidence in being able to deliver that in Q4? And what do you currently have baked into your guidance in terms of year-end budget flush?

Yes. So this is Rob Spignesi. Thanks for the question, Edmond. Really, our confidence in delivering our guidance comes from a couple of different areas, first of which we've got a full team staffed as I discussed in the remarks. Globally, we've got good penetration into the top customers of the global top 20. We've got increasing senior access into the senior leadership of the top 20. The conversations that we're having give us confidence and insight into the purchasing approaches and timing within these large customers. The funnel, notably and importantly, looks the way we want it to look to give us confidence in our outlook. Another strong leading indicator we look at is customer experience, which we measure closely and is quite high. So the combination of these elements is what gives us confidence in our outlook for Q4. Now with regard to Q4 budget flush, we are not seeing it nor do we expect a traditional budget flush, however, we are not seeing what I would call a budget freeze. It has been fairly consistent with what we've seen in previous quarters that we've mentioned. So it really is a customer-by-customer situation. In some cases, not all, the Growth Direct has been prioritized as a corporate-level initiative, which makes it a bit more resilient to the current budget environment. Although in some cases, we've seen customers push projects to later in 2024. The combined elements of all of the above is what gives us confidence in our outlook for Q4.

Great, Rob. Thank you for the detail. That's super helpful. And then in terms of Project Rapid for short validation platform. I was wondering if you could help us benchmark how the project is performing? Are you seeing the same magnitude of impact between both existing customers and new customers? Finally, if you could remind us, aside from dedicated project managers, what are some of the other areas of opportunities that you guys are leveraging to shorten the validation process?

Yes. So we are seeing broad-based performance with both new and existing customers. For those who aren't aware, Project Rapid is a project designation for an umbrella set of activities that we have to accelerate our validation processes. We have improved our capability in this regard. We have over 100 systems validated globally in GMP environments. We have learned with our customers to accelerate the process and harmonize the validation process. We have dedicated product managers and experienced validation personnel who go on-site with customers. We have improved our documentation and data to accelerate the process. We are down the learning curve and can address where validation processes can be accelerated and where customer challenges are. We believe it is one of our fulcrum capabilities and customers strongly appreciate our capabilities in this area.

Great, Rob. Thank you for the answers and the time today.

Good morning, guys. Thanks for the question. Rob, maybe just a follow-up on your new versus existing customer comment there. When you think about the sales funnel that will translate to orders and revenue next year, how does the mix look when it comes to placement at those new accounts versus repeat purchases? And as a follow-up to that, on the cell and gene therapy side, you sound kind of positive there. Can you just talk about how those conversations are going?

Yes, Dan, thanks for the question. With regard to new versus existing, it's balanced. It is weighted towards existing customers, as you may imagine, and we've brought new customers on. As we continue to chip away at some of the larger customers, our funnel, our outlook is weighted in that direction. That being said, we are generating new opportunities across segments that include both new and existing customers. On the cell therapy front, particularly with CAR-T, we've done well. Our value proposition resonates well with them. Our technology fits their manufacturing needs quite well, and it's really the only fully automated system that can serve their needs.

Got you. Okay. And then Sean, on consumables how do you think pull-through tracks on an annualized per system basis into year-end? And can you just touch on why consumables will be down next quarter?

Sure. Yes. We still expect to grow single digits in year-over-year pull-through effectively when we look at the full year. There are some headwinds that may keep us from getting quite to where we thought we'd get to a couple of quarters ago, primarily due to timing. If you kind of break down Q3 and Q4, Q3 had a couple of hundred thousand dollars' worth of shipments pushed from Q2 to Q3 last year. Given that we had record quarters, we pulled some amount from Q3 this year into Q2 this year. As for Q4, most of our customers tend to shut down in mid-December for new material deliveries. So it typically ends up being a lighter quarter on a relative basis. I'd say that and some transient timing issues in shipments are driving what we expect to see in Q4. We do expect that pull-through number to move up as we continue to work hard to engage customers through validation and routine use of those systems, which gives us confidence that we'll see sequential growth in 2024.

Okay. If I could sneak one more in here just on gross margins. Do you think the improvement that you see over the next couple of quarters will be driven more by the product side or the services side? Is the latest thought that you might not hit positive gross margins until the end of the year or could that happen sooner?

Yes. I expect improvement to be driven by both product and service. Productivity in service has improved this quarter. As placements increase, it will drive more validation opportunities for us. Service contracts are growing, and we expect these to drive growth in services. We expect the improvement to come from both areas within the business. We improved 11 percentage points from Q2 to Q3. That is a good way to think about what we expect to happen based on our current outlook. We also expect the later part of the year is more likely to see positive margins, and we will provide more guidance as we move forward.

Great. Thanks for taking the questions. Can you give us an update on the timelines on the rapid sterility offering? It's been in beta testing for some time now. Have you been getting any early inbounds on the rapid sterility offering from either new or existing customers? Could you discuss the impact on how you think about your sales funnel in 2024?

Yes, Steve, thanks for the question. Development of rapid sterility has gone well. We are increasingly focused on commercialization. Based on the feedback from our beta customers, we have confidence in the potential market for the system. While we haven't yet started to commercially market it, more updates will follow in the next quarter.

Yes. So I think while ASPs may have normalized in Q3 compared to Q2, we are generally satisfied with our pricing expectations. While we do consider promotional efforts in larger volume opportunities, we are committed to maintaining value and not reducing our standards for pricing.

As in many markets, pricing will be a topic of discussion, particularly with larger enterprise rollouts. We are happy with our ASPs and are focused on ensuring we are recognized for the value we provide to customers.

Year-over-year comparisons may show some flat growth due to past anomalies, but we are fully staffed now and expect to continue investing in sales and marketing efforts.

Thanks for the questions, Steve. We're going to wrap up the live call now.

This concludes today's call. We thank you for your participation. You may now disconnect.