Rapid Micro Biosystems, Inc. Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Conference Call. Please advise that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Beaulieu of Investor Relations. Please go ahead.

Good morning, and thank you for joining the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 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 fourth quarter and full year 2025 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under Investors in the News & 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, assumptions regarding future financial performance, anticipated future cash usage, statements relating to the company's term loan facility, guidance for 2026, including revenue, expenses, gross margins, system placements and validation activities expectations for and planned activities related to Rapid Micro's business development and growth, including the expected benefits from our distribution and collaboration agreement with MilliporeSigma. Customer interest and adoption of the Growth Direct system and the impact of the Growth Direct system on their businesses and operations and statements regarding the potential impact of general macroeconomic conditions on our business and that of our customers. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors, including our ability to meet publicly announced guidance the impact of our existing and any future indebtedness on our ability to operate our business, our ability to access any future tranches under our debt facility and to comply with all of its obligations thereunder. Our ability to deliver products to customers and recognize revenue and market and macroeconomic conditions. For a more detailed list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission as updated from time to time in our subsequent filings with the SEC. 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. Please note that today's remarks include certain non-GAAP financial measures. These non-GAAP measures should not be considered in isolation or as a substitute for or superior to financial information presented in accordance with GAAP. They have provided supplemental information to enhance investors' understanding of our operating performance and may differ from similarly titled measures used by other companies. Reconciliations between these non-GAAP measures and the most directly comparable GAAP measures are available in our earnings release issued this morning. We encourage you to review these affiliations carefully. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 12, 2026. The 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. I will start with a brief overview of our fourth quarter performance and recent commercial successes, as well as an update on our key priorities. I'll then share some insights on our 2026 outlook before handing the call over to Sean for a detailed review of our Q4 financial results and 2026 expectations. Before delving into our fourth quarter results, I'd like to mention the press release we issued this morning, which announces that Samsung Biologics is expanding its use of the Growth Direct platform with a new multisystem order received for the first quarter of 2026. This follow-on order enhances our already strong partnership, and we are proud to support Samsung's next-generation manufacturing strategy. This expansion further emphasizes the impact that Growth Direct has on leading pharmaceutical manufacturers as they strive to automate and modernize their critical quality and manufacturing processes. Now, turning to our performance, this morning we reported total fourth quarter revenue of $11.3 million, showcasing a 37% year-over-year growth and setting a quarterly record. These results went beyond the increased guidance we provided in November, marking our 13th consecutive quarter of meeting or surpassing expectations. We installed 16 Growth Direct systems during the quarter, concluding the year with 190 systems deployed globally, of which 155 are fully validated. A standout achievement for the quarter was a record multisystem order from Amgen, reflecting our ongoing commitment to the global rollout of the Growth Direct platform. Amgen is implementing systems across various sites in North America, Europe, and Asia, fully utilizing all applications, including environmental monitoring, bioburden, and water testing. Additionally, Amgen will host our inaugural North American Growth Direct Day in the second quarter. Product revenue surged by 78% in the fourth quarter, driven by robust system placements. Throughout the full year, consumable revenue rose by 17%, indicating strong utilization across our installed base. The growth in consumables is one of the clearest indicators that customers are actively engaging with their systems and gaining meaningful returns on their investments. Importantly, this strength in consumables supports recurring revenue, which increased by 15% for the full year and accounted for 53% of total revenue, showcasing the stability and predictability of our business model. Regarding gross margin, the fourth quarter gross margin was affected by inventory-related charges that Sean will elaborate on shortly. However, this does not overshadow the significant progress we've achieved throughout 2025 in reducing product costs, enhancing manufacturing efficiencies, and increasing service productivity. Reflecting on the last three years, we have improved total gross margin by over 50 percentage points, and we are confident in our ability to maintain this trajectory. Turning to our collaboration with MilliporeSigma, our partnership is now in its second year, and we are pleased with the progress so far. To support their commercial growth strategy, we have completed specialist training, and MilliporeSigma has set up customer demo labs across Europe and Asia. These labs will play a vital role in the sales process, offering customers hands-on experience with the Growth Direct system. Additionally, Rapid Micro operates demo labs in North America, Europe, and Asia. We continue to collaborate with the MilliporeSigma team as they work to expand their customer base and drive sales, which we anticipate will significantly contribute to our 2026 system placements. Regarding our supply chain, we are identifying opportunities to reduce product costs and utilize MilliporeSigma's broader logistics network and other resources. Alongside our internal initiatives, we have already secured substantial benefits in consumable cost reductions that will positively affect product margins beginning in the first half and accelerating in the second half of 2026. Now, I’d like to briefly discuss our priorities and 2026 outlook. We have had a strong beginning to the year, and our priorities remain unchanged: accelerating system placements, enhancing gross margins, continuing to innovate new products, and managing our cash wisely, all while ensuring disciplined and consistent execution. Commercially, we are focused on expanding and converting our sales funnel. The multi-system global rollout at Amgen and today's announcement regarding Samsung Biologics' expansion of the Growth Direct platform highlight the significant opportunities we see within the global pharmaceutical market. Moreover, our partnership with MilliporeSigma continues to enhance our direct sales efforts by broadening our global reach in key pharmaceutical segments and providing access to valuable adjacent customer segments. As we work on expanding our sales funnel, our annual Growth Direct Day remains one of the most effective platforms for customer engagement. This year, we are enhancing its impact by adding events in North America and Asia, complementing our established recurring event in Europe. These sessions bring existing and potential customers together to demonstrate how our automation capabilities and improved data management through Growth Direct can lead to meaningful operational enhancements and compliance in manufacturing and quality control. We are particularly excited that Amgen will sponsor the North American event in Q2, showcasing their confidence in and commitment to the Growth Direct platform. Looking at the wider market landscape, we are seeing strong tailwinds supporting our solid commercial execution. This includes increased adoption of full automation, heightened focus on data integrity by the industry and regulators, advanced manufacturing practices driving the need for modernization, and rising investments in the onshoring of pharmaceutical manufacturing within the U.S. We believe these tailwinds will continue to be strong and persistent, placing us in a favorable position for sustained long-term growth. In addition to maintaining our strong focus on our priorities of accelerating Growth Direct placements and expanding gross margins, we are committed to innovating to bring new value-added solutions to our customers. To this effect, we anticipate the release of our next-generation cloud-native software platform in the second half of 2026, which will redefine the Growth Direct experience for our customers. Our AI engineers have dedicated 15 years to developing and refining the industry-leading algorithm for microbial growth detection. This new platform will harness that expertise to provide significant added value through AI-driven analytics and insights derived from our customers' global data. As the global installed fleet of Growth Direct systems grows and generates increasing volumes of digital data, this new software and data platform will be instrumental in providing customers with valuable insights and faster decision-making capabilities for their global quality and manufacturing operations. In this context, we are initiating our full year 2026 revenue guidance of $37 million to $41 million, which includes 30 to 38 system placements. We expect significant gross margin expansion and aim to achieve approximately 20% gross margin for the full year, with performance anticipated to accelerate in the second half. We believe this guidance is both prudent and attainable, reflecting our history of consistent execution. Sean will provide further details on the assumptions underpinning our outlook and discuss potential upside opportunities, and we look forward to updating you throughout the year. Now, I'll turn the call over to Sean to discuss our fourth quarter performance and 2026 outlook in greater detail.

Thanks, Rob, and good morning, everyone. I'll begin my comments this morning with a review of our fourth quarter 2025 results and then discuss our first quarter and full year outlook for 2026. We'll then open the call up for questions. Fourth quarter revenue increased 37% to a record $11.3 million compared to $8.2 million in Q4 2024. During the fourth quarter, we placed 16 Growth Direct systems, which was also a record compared to 6 systems in the fourth quarter last year. We also completed 3 validations in the quarter compared to 4 in Q4 last year. Product revenue, which is comprised of systems and consumable revenue, increased 78% to $9.3 million in the fourth quarter compared to $5.2 million in Q4 2024. This was primarily driven by the increase in system placements. Consumable revenue grew 11% in the fourth quarter compared to Q4 last year. Service revenue was $2 million in the fourth quarter, which was in line with the guidance we provided in November, compared to $3 million in Q4 2024. As a reminder, the timing of validations tends to be the largest driver of quarter-to-quarter variability in service revenue and the validation revenue we generated in Q4 2024 remains a company record. Fourth quarter recurring revenue, which consists of consumables and service contracts increased 10% to $4.6 million compared to $4.2 million in Q4 2024. Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 65% to $6.7 million. Turning to margin. Product margin was negative 8% in Q4; this includes a $1.1 million or 12 percentage point impact related to the write-off of unusable consumable inventory in the period. Our manufacturing team has addressed the underlying situation and we do not expect any further charges related to this in 2026. Excluding the impact of this write-off, Q4 product margin was positive 4%, which was consistent with our guidance. Service margins were 22% in the fourth quarter compared to a record 47% in Q4 last year. The lower service margins in Q4 this year were due to the lower service revenue in the period, which more than offset the positive impact of service productivity improvements and cost reductions made during 2025. On a combined basis, fourth quarter gross margin was negative $0.3 million or negative 3% compared to positive $1 million or 12% in Q4 last year. Excluding the impact of the inventory-related charges we recorded in the period, total Q4 gross margin was positive 7%. This was in line with our guidance and slightly lower than the Q4 last year due to the impact of lower service revenue on service margins. Moving down the P&L. Total operating expenses were $11.9 million in the fourth quarter compared to $11.2 million in Q4 2024. Within OpEx, R&D expenses were $3.2 million, sales and marketing expenses were $3.3 million and G&A expenses were $5.3 million. For the full year, total operating expenses decreased by 3%, while revenue increased by 20%. Interest income was $0.5 million and interest expense was $0.8 million in the fourth quarter. Q4 net loss was $12.5 million. This compares to a net loss of $9.7 million in Q4 last year. The larger net loss in Q4 this year was primarily attributable to the inventory charges we recorded as well as the lower service margin and higher interest expense in the period. Net loss per share was $0.28 in Q4 compared to net loss per share of $0.22 in the prior year quarter. With respect to noncash expenses and capital expenditures, depreciation and amortization expenses were $0.8 million, stock compensation expense was $0.6 million and capital expenditures were $0.1 million in the fourth quarter. We ended the year with $39 million in cash and investments, which was in line with our guidance as well as $25 million of unused capacity under our debt facility with Trinity Capital. Our net cash burn was $3 million in Q4. As a reminder, Q4 is typically our lowest burn quarter, while Q1 is typically our highest burn quarter each year. Now I'll turn to our 2026 outlook. For the full year 2026, we expect total revenue to be in a range of $37 million to $41 million, which assumes we place between 30 and 38 systems. This system placement range reflects a few key variables. First, our guidance continues to account for some ongoing uncertainty around the timing and scale of customer purchase decisions, particularly with respect to larger multisystem opportunities which often involve more complex purchasing considerations. Second, the low end of our guidance range assumes we do not place any new large multisystem orders in 2026 other than the Samsung order announced this morning. And third, we continue to expect MilliporeSigma to contribute meaningfully to system placements in 2026. However, the low end of our guidance range does not assume they satisfy their full year 2 system commitment since some of those systems may be placed in Q1 2027. For Q1, we expect revenue of at least $7.5 million, including at least 5 system placements. Consistent with historical trends, we expect at least 30% of our system placements to be made in the first half of the year with the remainder in the second half. We also expect revenue and placements to peak in Q4, in line with typical seasonality. Turning to consumables. We expect revenue in Q1 and Q2 2026 to be slightly higher than Q4 2025 and then increase gradually over the remaining quarters with variability driven by the timing of customer orders and shipments. Looking at service, we expect revenue between $2.3 million and $2.6 million in Q1. We then expect service revenue to step down slightly in Q2, followed by meaningful increases in Q3 and again in Q4 based on our current expectations with respect to the timing of installation and validation activities. We expect to complete at least 25 validations in 2026 and with at least 3 in the first quarter. Turning to margins. We expect our Q1 gross margin as a percentage of revenue to be in the mid-single digits with product margin of negative single digits and service margin above 30%. Thereafter, we expect to reach and maintain positive product gross margin in each of the remaining quarters of 2026, led by improving consumable gross margin, which we expect to turn positive in the second half of the year as we fully realize the benefit of meaningful material cost reductions we recently locked in as well as benefits from other cost reduction and manufacturing efficiency initiatives. For the full year, we expect total gross margin of approximately 20% with a Q4 exit rate in the mid-20% range or better, product margin in the high single digits to low teens and service margin above 40%. Consistent with prior years, we expect quarter-to-quarter variability in gross margin to be driven by progress on our product cost reduction and service productivity initiatives, overall revenue volumes and the revenue mix between systems, consumables and service in each period. We expect operating expenses to be between $47 million and $51 million for the full year. We expect $10 million in noncash expenses, including depreciation and amortization expense of $3 million and stock compensation expense of $7 million. We also expect CapEx of $2 million, interest income of $1 million and interest expense of $2 million. Looking further ahead, our strategic priorities of accelerating system placements, improving gross margin, innovating new products and prudently managing our cash remain unchanged. We continue to build momentum in our business, including our partnership with MilliporeSigma, which we expect will further accelerate progress on these strategic priorities over the coming years, including the meaningful contribution to system placements we've incorporated into our guidance for this year. That concludes my comments. So at this point, we'll open the call up for questions.

Operator instructions. And our first question comes from the line of Tom Flaten of Lake Street Capital Markets.

I appreciate all the detail on the guide. The gap between placed and validated systems has widened since 2023. What are you guys doing to or are you doing anything to shrink that gap over time? Is that just more engineers to complete the validation? Can you help us think about that a little bit?

Yes, Thomas. I'll address that. A significant part of the gap relates to timing, as there can be differences between when we deliver a system and when the validation process begins, which depends on our customers' schedules and available resources. We expect to see that gap narrow. For example, regarding our work with Amgen, we mentioned earlier in the call that we anticipate most of that work will occur at the end of this year. Therefore, if you consider a deal like that, the expectation is that if the system was placed in Q4 of last year, we aim to complete most, if not all, of the validation work with them by the end of this year. This illustrates how these processes typically unfold, and there is a natural delay involved. We anticipate that the variance will reduce as we address this and other customer situations. It's not a concern for us, but we are monitoring it closely and aim to keep it as tight as possible. Rob, do you have any comments on this?

Yes. It's clearly a robust validation year as well. You can see that backlog being worked and some of this is to Sean's point, driven by order timing, size and timing of orders and just the sequencing of our team and our customers' teams and working through the validations.

That's great. I appreciate that insight. Regarding the Samsung announcement this morning, could you comment on the percentage of your placed systems that are with CDMOs and how you see that area developing over time compared to the drug originators?

Yes. So it's interesting. I don't know the exact percentage. So I don't want to put that out. But it's sizable. We've previously announced Lonza as a customer. Samsung, obviously, in other CDMOs as well. We have a very strong value proposition for CDMOs as well as probably call principal manufacturers. We're growing clearly, today is a good example of both Amgen and Samsung. So you've got both a principal manufacturer and a CDMO. But CDMO's in particular benefit from our ability to turn their lines faster or lease product faster. And also, to a certain extent, in some cases, market the use of advanced technologies and their quality control and manufacturing operations. So yes, quite strong in CDMOs and we plan to stay that way and grow with the CDMO space. We also have talked about it significantly on these calls. We also have small mid CDMOs globally as well. So generally, it's a very strong segment for us as well as the principal manufacturers. I can't say it's one stronger than the other. They're both strong right now, and we tend to be in both segments, as we've said, generally more in the advanced modalities, primarily biologics and also in the cell and gene categories within CDMOs and also principal manufacturers.

Our next question comes from the line of Dan Arias of Stifel.

Sean, on gross margins, where is the confidence in the 20% number for 2026 kind of felt like a good 4Q number would be the jumping off point for what you're going to do this year. I understand it was due to the inventory charge, but the number is sort of the number. So what are the key moving pieces and risks when it comes to your own process? And then as we think about product gross margins being back to negative in 2Q, how do we get comfortable with the idea that as we start to feel better about placement momentum, which has been good, we can also feel good about gross margins that there doesn't have to be an offset there.

Yes, I’ll address that, Dan. Looking at it, there are a couple of key factors to consider from my perspective. First, we have recently secured significant product cost reductions from some vendors, which will start benefiting us in the second quarter and accelerate in the third and fourth quarters. This represents a substantial decrease in the costs for some key materials, particularly consumables. Secondly, I mentioned earlier how we anticipate the year will unfold in terms of validation and service revenue. Recent quarters have shown how lower service revenues can impact our service margins, but we expect that trend to reverse as we progress through the year. To achieve our target of 20%, these cost reductions in the second half and a return of service revenues to levels that generate meaningful margins are crucial. Volume is also an essential aspect; as the year advances, we will be manufacturing and selling more. I talked about an increase in placements, which will also contribute positively. It’s worth noting that we expect the exit for Q4 to be in the mid-20s or above, indicating a positive growth trend for total margins as the year progresses. These are the main factors that give us confidence in meeting our targets for the year and concluding the year strongly.

And Dan, just to put maybe an estimation point on one thing Sean said on the product cost, in particular. With regard to execution risk, we have contractual agreements in place with the supply base, which is meaningful with regard to how we get comfortable and confident in that cost reduction in addition to the other elements that Sean mentioned.

No. Okay. Okay. That's helpful. All right. And then maybe on the systems to Samsung and Amgen, how do you see utilization ramping there? And then just on overall utilization, can you maybe just talk about consumables pull-through per system consumables growth has been pretty good here. We all presumably have this placement and pull-through driven model. So Sean, we've talked a little bit about this. Can you just maybe set a baseline for where 2025 pull-through came in? And then to what extent that number might be higher in 2026.

Yes. Regarding your first question, Dan, I previously mentioned Amgen and, later this year, we expect to have validations in place. We don't have a specific timeline for Samsung yet, but I would expect it to follow a similar schedule. We anticipate that validations will be completed by 2026, but we expect them to start contributing to recurring revenue more in 2027. Recently, we have seen a consistent single-digit year-over-year improvement in pull-through, which I think will continue. With larger orders and a significant number of validations, we may see more substantial increases as those systems come online in short intervals. For now, we are looking at single-digit growth in 2026 and possibly a greater increase in 2027.

Our next question comes from the line of Anna Snopkowski of KeyBanc.

Congrats on the quarter and the exciting announcement with Samsung. Maybe to start do you think you could share more insight on the Samsung multisystem order? Maybe would you say it's fair that this is in the double-digit range and should we expect this to roll out over the course of 2026 or just Q1? And then just also on this more on the strategy. Is this one site? Is this part of the global rollout or maybe a therapeutic area? And then I have one follow-up.

Yes. Generally, Samsung. We won't get into the specific quantum of it, but it's the next phase of rollout. I think many of you may remember, we had the initial launch with Samsung a couple of years ago. This is a second wave, which is actually a larger order size. And it's focused primarily on their principal area in South Korea, although some of you may know that Samsung is also acquiring around the world. So also in scope. And as I mentioned a couple of years ago, we expect to grow at Samsung in the quarters and years ahead. And I'll say it again, we expect to grow at Samsung in the quarters and years ahead. Interestingly, which we didn't talk about in the prepared remarks, we are also discussing other collaboration opportunities with Samsung, which we're quite excited about. So more to follow on that. And part B, Anna?

Okay. Perfect. And then my second question, just more in general on repeat orders versus new customers. Do you expect these customers, repeat customers like Samsung to move through your pipeline quicker? And then just in terms of validation, is that usually a quarter lag? Or what should we expect both from Samsung and just repeat customers in general?

Yes. Generally, repeat customers move through the sales and validation processes more quickly. That's a key takeaway. For larger orders, like those from Amgen and other significant clients, the timing may vary depending on activities at specific sites globally, which could slow things down. However, our process is generally faster thanks to a modular validation approach that builds on knowledge from initial validations at starter sites, allowing for quicker rollout. While our land-expand strategy is focused on maximizing this speed, our team is also actively working to acquire new customers, which typically takes longer in both sales and validation.

And our last question comes from the line of Brendan Smith of TD Cowen.

I wanted to actually first ask about the kind of next-gen cloud-native software platform you referenced in the prepared remarks. Can you maybe just give us a bit more color on how this gets integrated into devices moving forward? Is this something that all new orders will automatically include some of these analytics capabilities? Is that software update push you can monetize into the existing installed base? Just kind of wondering how we should think about that contributing to growth.

Thank you for the question, Brendan. We see this as a phased approach. First and foremost, we have completely rewritten our application software for Growth Direct, with a new architecture. Immediately, customers will enjoy a modern user interface and simpler integration into their IT systems. Built on a cloud-native foundation, we expect customers to run it on their own cloud, but we also have the potential to offer cloud services in the future. Currently, the system is in a pre-launch phase with a major customer using it in their cloud, and the feedback has been exceptional, which is very encouraging. To summarize, a few benefits include easier navigation, improved integration, a modern UI, and the ability to access data from the cloud on any device instead of relying on their IT infrastructure. Over time, we aim to provide services utilizing that cloud data, leveraging the data generated by Growth Direct devices worldwide. Our vision includes making the Growth Direct an appliance that other technologies can connect to, feeding into the cloud infrastructure. This could enable services such as predictive analytics and insights on seasonality, quality failures, and identification services. We don't want to get too detailed on monetization plans yet, but this is the first step in a multiyear process to evolve from automation to more advanced AI-driven analytics within our business. Our goal is to drive high-margin recurring revenue over time. Interestingly, we've found that customers, especially in pharma, are receptive to discussions about how AI and cloud technologies can enhance their operations. We feel we're engaging with an open door, and in some cases, customers are actively seeking services in this area.

Got it. Super helpful. And then maybe just one last one on some of the consumable cost reduction benefits. I think you guys spoke to starting to see now. Can you maybe just expand a bit on what some of the moves you guys have made on your side, even within the Millipore network, I know you referenced maybe what else you're planning there this year to kind of drive that added production in the second half.

Brendan, it's Sean. We are still collaborating with MilliporeSigma on various opportunities. Some could yield benefits this year, while others are focused on the long term. We are exploring a wide range of options that could improve our margins, not only through material cost reductions. Currently, the savings we have secured for consumables in 2026 do not come directly from Merck Millipore, but rather from key inputs provided by other vendors. Our procurement team has excelled at leveraging our growth and existing relationships to achieve significant cost reductions for essential materials, which will benefit us this year. We are enthusiastic about this, as it will significantly contribute to the expansion of our gross consumable margin, and consequently our overall gross margin. We believe this strategy can serve as a model for driving future reductions in other areas and continue enhancing our consumable margins.

Thanks, Brendan. Well, thanks, everyone, for your time and attention. We'll wrap the call up at this point. Thanks again, and look forward to speaking with many of you shortly.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.