Alpha Teknova Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

There are 9 speakers on the call.

Operator

Hello, and welcome to Alpha Technova Third Quarter 20 24 Financial Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to Jennifer Henry, Technova's Senior Vice President of Marketing. You may begin.

Speaker 1

Thank you, operator. Welcome to Technova's Q3 2024 earnings conference call. With me on today's call are Stephen Gundstream, Technova's President and Chief Executive Officer and Matt Lowell, Technova's Chief Financial Officer, who will make prepared remarks and then take your questions. As a reminder, the forward looking statements that we make during this call, including those regarding business goals 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 these risk factors is included in the press release the company issued earlier today, and they are more fully described in the company's various filings with the SEC.

Speaker 1

Today's comments reflect the company's current views, which could change as a result of new information, future events or other factors, and the company does not obligate or commit itself to update its forward looking statements, except as required by law. The company's management believes that, in addition to GAAP results, non GAAP financial measures can provide meaningful information about the company's financial performance and the effectiveness of its business strategy. We will therefore use non GAAP financial measures of certain of our results during this call. Reconciliations of GAAP to non GAAP financial measures are included in the press release that we issued this afternoon, which is posted on both Technova's and the SEC's website. Non GAAP financial measures should always be considered only as a supplement to and not as a substitute for or as superior to financial measures prepared in accordance with GAAP.

Speaker 1

The non GAAP financial measures in this presentation may differ from similarly named non GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of Technova's website and on today's webcast. And now, I will turn the call over to Stephen.

Speaker 2

Thanks, Jen. Good afternoon, everyone, and thank you for joining the call today. We reported strong results in the Q3 with 17% revenue growth compared to the same period last year and quarterly free cash outflow of $2,400,000 our lowest level in over 3 years. I am pleased with how we're advancing our strategy while continuing to manage our costs and I believe we're on track to achieve our long term goal of sustainable above market growth. Let me start by talking about the biopharma market environment.

Speaker 2

Even though some of our biopharma customers continue to rationalize their clinical pipeline and reduce headcount, we believe the market has now stabilized and we expect modest growth in 2025. Notwithstanding that market environment, our growth in the 3rd quarter was driven by sales of custom research and clinical grade reagents to biopharma customers. We are also encouraged by the fact that the number of our active clinical customers again increased in the Q3. The growth in the number of accounts and our sales to these biopharma customers is encouraging because we expect these customers to increase their annual spend with us as their therapies move closer to commercialization. Outside of sales of custom products to biopharma, we were also pleased with the underlying performance of the broader business.

Speaker 2

Our lab essentials catalog our lab essentials catalog sales returned to high single digit growth, offset primarily by lower sales of custom products to a few large life science tools companies, which we believe were either timing related or account specific. Our ability to achieve high rates of revenue growth in spite of headwinds associated with a few customers is a testament to the diversity of our business and customer base with no single direct customer representing more than 4% of our total revenue in the trailing 12 months. When it comes to managing our costs, we are seeing the benefit of the difficult decisions we've made over the past 2 years. We have reduced our operating expenses by more than $9,000,000 on an annualized basis at the end of 2023 $19,000,000 since the end of 2022. Lower operating expenses have combined with operational improvements to deliver our lowest free cash outflow since we began investing in our growth strategy in the first half of twenty twenty one.

Speaker 2

In summary, I feel confident that we'll achieve our long term goal of sustainable above market growth for several reasons. First, the biopharma market environment has stabilized in 2024 and we expect modest growth in 2025. 2nd, we continue to build a strong pipeline of clinical customers, which we expect will drive additional revenue growth as their therapies move towards commercialization. 3rd, our business is prepared to scale with the infrastructure and facilities in place to support up to approximately $200,000,000 in revenue. 4th, we have successfully reduced our costs while executing on our core strategy.

Speaker 2

And finally, we have the liquidity necessary to reach profitability without additional capital. I will now hand the call over to Matt to provide additional color on the financials.

Speaker 3

Thanks, Stephen, and good afternoon, everyone. Results for the Q3 of 2024 from a revenue perspective were up 17% from the same quarter prior year. Excluding the impact of a $2,800,000 non recurring non cash charge that we will discuss in further detail later in our prepared remarks, we delivered solid financial results for the Q3 of 2024. Total revenue for the Q3 of 2024 was $9,600,000 a 17% increase from $8,200,000 for the Q3 of 2023 and a level similar to the Q2 of 2024. Lab Essentials products are targeted at the research use only or RUL market and include both catalog and custom products.

Speaker 3

Lab Essentials revenue was $7,200,000 in the Q3 of 2024, a 2% decrease from $7,300,000 in the Q3 of 2023. The decrease in Lab Essentials revenue was attributable to lower average revenue per customer, partially offset by increased number of customers. Consistent with the last two quarters, we saw a sequential increase in the number of Lab Essential customers during the Q3. Clinical Solutions products are made according to good manufacturing practices or GMP quality standards and are primarily used by our customers as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $2,000,000 in the Q3 of 2024, a 2 29% increase from $600,000 in the Q3 of 2023.

Speaker 3

The increase in Clinical Solutions revenue was primarily attributable to an increased number of customers and to a lesser extent higher average revenue per customer. Consistent with the previous three quarters, we saw a sequential increase in the number of Clinical Solutions customers during the Q3. We expect revenue per customer to increase over time as customers ramp up their purchase volumes. However, this metric can be affected by the mix of newer clinical customers who typically order less. Just as a reminder, due to the larger average order size in clinical solutions compared to our lab essentials, there can be quarter to quarter revenue lumpiness in this category.

Speaker 3

On to the income statement, gross profit for the Q3 of 2024 was $100,000 compared to $1,500,000 in the Q3 of 2023. Gross margin was 0.9% in the Q3 of 2024, which was down from 18.0% in the Q3 of 2023. The decrease in gross profit percentage was attributable to a $2,800,000 non recurring non cash charge related to the disposal of expired inventory and write down of excess inventory created in the second half of 2022 when we increased production in anticipation of persistent high demand. Instead, demand dropped abruptly to which we responded by decreasing production and ending both our second and third shifts. We have now determined that it is appropriate to write down the remaining inventory manufactured during that period to its net realizable value.

Speaker 3

Excluding the impact of this charge, gross margin would have been 29.8% in the Q3 of 2024. Operating expenses for the Q3 of 2024 were $7,500,000 compared to $10,200,000 for the Q3 of 2023. Excluding the non recurring charges of $400,000 recorded in the Q3 of 2023 related to the write off of at the market facility costs, operating expenses were down 2,300,000 dollars The decrease was driven primarily by reduced headcount and spending in particular on professional fees. Operating expenses continued to decline in the Q3 of 2024 and were at the lowest level since our IPO in the Q2 of 2021. Net loss for the Q3 of 2024 was $7,600,000 or $0.15 per diluted share compared to a net loss of $10,200,000 or $0.34 per diluted share for the Q3 of 2023.

Speaker 3

Adjusted EBITDA, a non GAAP measure was negative $5,000,000 for the Q3 of 2024 or negative $2,200,000 excluding the impact of the $2,800,000 charge related to inventory, compared to negative $5,500,000 for the Q3 of 2023. On to cash flow and balance sheet. Capital expenditures for the Q3 of 2024 were $300,000 compared to $1,000,000 for the Q3 of 2023. In 2023, we completed our large investments in production capacity. In 2024, we are focusing our capital expenditures on projects with a shorter payback period.

Speaker 3

Although our capital expenditures have been limited in the last three quarters, we expect a moderate increase in the last quarter of 2024. Free cash outflow, a non GAAP measure that we define as cash used in operating activities plus purchases of property, plant and equipment was $2,400,000 for the Q3 of 2024 compared to $5,400,000 in the Q3 of 2023. This decrease compared to the year ago quarter was due to lower amounts of cash used in operating activities and reduced capital expenditures. Free cash outflow continued to improve in the Q3 of 2024

Speaker 2

and

Speaker 3

was at its lowest level since our IPO in the Q2 of 2021. Turning to the balance sheet. As of September 30, 2024, we had $31,700,000 in cash, cash equivalents and short term investments and $12,100,000 in gross debt. Moving on to our 2024 guidance and outlook. We reiterate our 2024 total revenue guidance of $35,000,000 to $38,000,000 At the midpoint, this implies revenue for the year approximately flat when compared to 2023.

Speaker 3

We typically see revenue soften in the Q4, primarily due to fewer business days. A customer also recently canceled a large clinical solutions order that we would have delivered in the Q4, although the customer may reorder in 2025. With respect to product categories, we now expect approximately 2% growth in Lab Essentials revenue for 2024. The company now expects free cash outflow to be less than $16,000,000 for the full year of 2024, down from our previous estimate of 18,000,000 dollars The company has continued to manage expenses aggressively while preserving the critical investments we believe will allow us to achieve our long term growth targets. The company posted 3rd quarter operating expenses of 7,500,000 below our $8,000,000 per quarter target, although we do expect these expenses to be somewhat higher in the Q4.

Speaker 3

We finished the Q3 of 2024 with 165 associates down 24% from a year ago. As shared during our last earnings call, we continue to believe that we have

Speaker 2

sufficient liquidity

Speaker 3

from cash on hand and the availability under our revolver to take us to cash flow positive. This belief relies on the following key four financial assumptions. 1, revenue grows on average at a minimum of 13% over the next few years. This is the actual compounded annual growth rate of total revenue between 2019 to 2023 excluding the impact of a large core order delivered in 2023. This is also similar to the total revenue CAGR from 2,009 to 2019.

Speaker 3

2nd, additional revenue in 2025 and beyond drops through at approximately 70% margin due to the high fixed cost nature of our business. 3rd, limited increases in operating expenses as the business grows and 4th, capital expenditures of $2,000,000 per year on average. Relying on these assumptions, we also believe that the company can achieve adjusted EBITDA breakeven when we get to between $50,000,000 to $55,000,000 in annualized revenue and will become cash flow positive shortly thereafter. Revenue growth upside will be possible over the next few years as some of our growing number of clinical solutions customers move through later clinical trial phases and ultimately into commercialization. In summary, we are excited about the future and the company's competitive position in a market with attractive long term fundamentals.

Speaker 3

And with that, I'll turn the call back to Stephen.

Speaker 2

Thanks, Matt. Overall, we were pleased with our performance in the Q3 of 2024. We believe the long term outlook for our end markets remains positive and we are committed to executing on our growth strategy to help our customers accelerate the introduction of novel therapies, diagnostics and other products that improve human health. We will now take your questions.

Operator

Thank you. Our first question comes from the line of Brendan Smith with TD Cowen. Your line is open.

Speaker 4

Hey, everyone. This is Chad Weitrasky on for Brendan. Could you just speak to the ongoing launches of ExpressTec and RUO Plus? Yes, how are they going? And is that an area where we're going to need any more investment in sales and marketing as they kind of scale?

Speaker 2

Yes. Thanks, Chad. So we launched those last quarter. We've seen some nice increase in engagement around some of those orders. If you remember, ExpressTec is the opportunity for customers to essentially jump the line and get their product sooner than they would otherwise, which is already in weeks.

Speaker 2

And so you're talking about just a handful of weeks to get a GMP product. And many of these are orders that are needed last minute for customers in the moment they're actually doing these builds. And so we've actually executed a couple of these already. These are essentially operating now full speed and there's some engagement from customers. Many of them are fine with the current turnaround times because we're in that 6 to 8 week timeframe, but this takes us to 4 to 6.

Speaker 2

So when they need it, they order and it's a margin increase for us and we've put the systems in place to make that happen. Same thing RUO plus has actually been a feature that I've talked to a number of customers about. They've been very responsive to it. They really like the idea that we're manufacturing in the new facility using the same equipment and processes, but do not have the constraint of the GMP change control and otherwise GMP environment. So that we've migrated a number of customers who are ready.

Speaker 2

It's a seamless transition to GMP. It's pretty obvious to them when they need RUO plus versus RUO and so we're seeing success there. So from a marketing sales perspective, it's something we bring up with every single one of our customers. It's a great fit for those in need of speed to jump to ExpressTec. For those in that sort of transitionary preclinical phase to get RUO plus I don't think there's significant more investment needed there.

Speaker 2

This is conversations that have with customers after we brought them on board.

Speaker 4

That's helpful color. And then just on the gross margin, I appreciate excluding the write down, gross margins were strong. Are you expecting any additional write downs? And this happening, did this change your perspective on kind of how you manage inventory going forward?

Speaker 3

Hey, Chad, it's Matt. Yes, to the first part of your question, we're not anticipating any future write downs where we would have to be taking those right now. But and obviously, this is a key one here and provide a little bit of explanation in the script about that and this relates to some production patterns that we had back in 2022 when the market was in a different place. And to further answer your question, yes, we've done since that time frame now, which is now several years ago, we have made changes to how we build inventory inside the company and have different rules basically internally about how much we stock when to stock at all. And we've implemented those, I would say, in the last couple of quarters here.

Speaker 3

And that's certainly helping us better manage the inventory going forward.

Speaker 4

Thanks for the questions, guys.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Lucas Baranovsky with KeyBanc Capital Markets. Your line is open.

Speaker 5

Hi, this is Lucas on for Paul Knight at KeyBanc. When you look at cell and gene therapy relative to the rest of your customers, is there any difference in trend you've noticed in terms of revenue growth or pace of recovery with those customers?

Speaker 2

Yes. Thanks, Lucas. We obviously look at this really closely. And if you kind of go back through what we just talked about, our Q3 revenue growth was driven largely by biopharma in this case, right? So biopharma encompasses cell and gene therapy as well as CMOs, CDMOs, biotech companies and the like.

Speaker 2

And particularly we've seen it in the custom products, right, which is great. That's been our strategy from the beginning. We're getting those customers in and then they're going down that clinical pipeline over time. Now with respect to cell and gene therapy versus say other biotech companies doing monoclonal antibodies, I would say we've seen something different. I think what we're seeing is a broader stabilization in the space, right.

Speaker 2

And as you if you read through some of the comments we've made here, I feel like we're kind of definitely in the back half of the year stable, modest growth next year. But I wouldn't say it's specific to say a gene therapy versus a different type of therapy. There is maybe a little bit in the life science tools and large pharma that we've seen a slight slowdown from previous year or so. But it seems very account specific right now. And so that is in that part actually if you heard our catalog business for Lab Essentials actually grew in the high single digits in the Q3.

Speaker 2

We just had a couple of accounts that were down. So if anything, we're seeing just a slight pullback from there, but nothing significant.

Speaker 5

Yes. That's excellent color. And then just one last question for me. You've launched a lot of new products in recent quarters, whether it was RUO Plus or ExpressTECH. Do you feel like you now have all of the products you need in the portfolio?

Speaker 5

Or are there others that are still in development?

Speaker 2

So yes, ExpressTec and RUO Plus are a little bit more almost like service related products. And so we continue to find those and they really come stem from our customers who are saying we like this really fast or we wish we had something in between RUO and GMP. So we'll always continue to find those and drive operational improvements and add more value to customers. There are some previous products that we developed here around AAV in particular. Those kind of have been put on hold to focus more on short term investments that have or investments that have a shorter return on investment given the current or in the previous environment.

Speaker 2

I think there's opportunity here actually for us. We built the commercial organization, the infrastructure there that we could add more products to our portfolio over time. How we do that? When we do that, I think is probably much more of a 2025 conversation. But the fact that we're actually in a number of these customers talking to them provides us opportunity to maybe to see what other products they might need to purchase from us and see if we can help them there as well.

Speaker 5

Excellent. That's all I had.

Speaker 2

Great. Thanks Lucas.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Mark Massaro with BTIG. Your line is open.

Speaker 6

Hey, guys. This is Vivien on for Mark. Thanks for taking the questions. So I guess it's early to comment on 2025, but you're going off with relatively easy comps it seems. How do you think you're positioned for acceleration there?

Speaker 6

I heard you say modest growth in 2025. So would getting back to that historical mid teens growth be the right way to think about it? Thanks.

Speaker 2

Thanks, Vivien.

Speaker 7

Yes, we talked about modest growth,

Speaker 2

we're talking about the market. And as I said, we believe it's stabilized now in the back half of twenty twenty four. And you're absolutely right. There's some comps that are more sort of favorable compared to Q3, Q4. That said, those have historically been some of our lower quarters just because of the seasonality of the business and the number of business days.

Speaker 2

We look to next year, obviously we're not going to give any guidance on that. I think what we'd like to do is get the business back to that historical annual growth rate and that's in that 12%, 13%. And then over time, we think modest growth next year in 2025, but then the market itself would probably return to normal historical bioprocessing growth rates in 2026. And at that point, maybe there's opportunity for higher growth in the future. And we certainly set that up now with all these therapeutic companies that we're working with.

Speaker 6

Perfect. Makes sense. And then just one on gross margins, just what additional levers do you think you have to pull for gross margins here? I think you've talked about in the past 55 gross margins at scale. I heard your comments on any additional revenue coming in at 70% dropdown.

Speaker 6

So could you just discuss the path to getting to that long term gross margin target?

Speaker 3

Yes, sure, Vivien. Thanks. I'll just say that our long term target, I mean, we think could be 60% plus. And there is a lot of leverage right now in the P and L at gross margin line and all the way to the bottom line, frankly. And it's really because of the high fixed cost structure that we have and we've done a very good job I think of managing any increases or even decreasing that fixed cost structure I should say.

Speaker 3

So, it's certainly going to be revenue growth on top of that, on top of where we are today to be able to make significant improvement in the gross margins. Of course, there are other levers and we're continuing to pursue other production efficiencies through automation or otherwise changing the way that we manufacture our products. There is the potential for some mix changes as we move more towards clinical solutions to help with that as well. But the real driver and the primary driver, I would say, is just achieving a higher revenue base, which we think we're now in the right direction towards.

Speaker 6

Perfect. Understood. Thanks for taking the questions.

Speaker 3

Thank you.

Operator

Please standby for our next question. Our next question comes from the line of Jacob Johnson with Stephens. Your line is open.

Speaker 8

Hey, thanks. Good afternoon, guys. Maybe first just on clinical solutions, ticked up sequentially a little bit better than we expected. It sounded like that was kind of new customers, not any lumpy orders, but I just wanted to confirm that. And then just looking to 4Q, you gave us 2% growth for lab essentials for the year, just and a $3,000,000 range for revenue guidance for the year.

Speaker 8

Just curious how should we think about clinical solutions in 4Q? It sounds like maybe that's where we'll see some seasonal weakness, but curious about that. Thank you.

Speaker 2

So why don't I start with the clinical solutions side?

Speaker 7

Yes, I

Speaker 2

mean, it's a combination of new and some larger orders, right? So it's pretty lumpy, Jacob, in general. But it's a combination of the 2. And there's not like a not an individual large order that's transforming the pure quarter for example, right. And like I said, 4% of our largest customer in the trailing 12 months is only 4% of our revenue.

Speaker 2

So now we're getting a little bit of a better mixture, but there's always timing of some of these large ones. And I know in the quarter, we're out some decent orders in there that we were able to accept and then ship. So but absolutely it's a combination of new and existing there. Nothing specific like we've had in the past like Q2, 2023, nothing of that size. So that's the answer on that piece.

Speaker 2

Do you want to?

Speaker 3

I'd just add looking at Q4 since that's where you were going. We and I did mention in the remarks that there was a large order, a clinical solutions order that we did have fall out of the quarter and move into next year. So, yes, I do expect that Q4 we will see lower Clinical Solutions revenue, just in general and also thanks to that particular situation. But we have pointed out for the back half of the year in general looking for double digit growth. And again, just because of this order and the general seasonality in Q4, we would expect Q4 to be lower than we're coming out for Q3.

Speaker 3

So hopefully that's helpful color for the year end.

Speaker 8

Yes, yes. Thanks for that, guys. And then just as a follow-up kind of bigger picture question, kind of struck in the comments, you guys are talking about a stable environment and modest growth next year. But you also mentioned customer additions in both segments sequentially. I'm guessing some of that's execution on your part or maybe that's all of it, just kind of the business development efforts.

Speaker 8

But I guess as we think about growth from here is what I'm trying to get at is, should we think about customer additions being kind of you're able to control that to some degree, obviously the macro plays a factor in it. And then kind of what we're really waiting on is kind of spending per customer to pick up and that's reliant on the macro. Is that a fair way to think about it?

Speaker 7

Yes. I think there's a lot

Speaker 2

of intertwined pieces here. So on the market stable, modest growth next year. Obviously, from my comments, you can see that the growth we had in Q3 was driven by these biopharma customers. So clearly, we're growing faster than market and taking share. And that's not efforts from Q4 specifically, it's efforts from the last 18 months to bring those customers on board and those are now kind of working their way through the pipeline.

Speaker 2

When we talk about the future and how the market affects those two variables, obviously, if the market picks up, I think we should be able to acquire more customers, but they are also not have as sort of limited pipelines, right. So it's kind of a double hit there, which would be great, right. And so I'm happy with where we sit because we continue to add customers as we as you can see every quarter in clinical solutions, which is our goal, getting those customers on board and then supporting them as they go through the clinical trials. On the lab essential side, we really focus a little bit more on the wallet share, the average spend per customer. We're also seeing that increase now and the number of customers increase.

Speaker 2

But I think part of that is maybe some customers that fell off during the biotech funding drop in some of the environment that are now starting to come back. So this is kind of why we feel like, hey, things are in a good spot right now from a market perspective relative to where they were before, But it's going to be a build, right? 2025 is not bounced back. It's 2026 is my guess until we're back to where we were before.

Speaker 8

Got it. Thanks for taking the questions.

Operator

Thank you. Please standby for our next question. Our next question comes from the line of Matt Larew with William Blair. Your line is open.

Speaker 7

Good afternoon. Maybe going back to the margin question. If I think about the business today versus 2020 nearly doubled in size, obviously, clinical solutions, now $7,000,000 business maybe this year versus $1,500,000 or under $5,000,000 at least in 2020. So there's clearly a big drag from the recent capacity expansions on gross margins. And to your point, Matt, we should see some leverage there.

Speaker 7

We've seen 1,000 basis points of gross margin leverage in the last 4 quarters. And understanding you're not giving guidance, but just to help us think about how much of the drag is related to fixed capacity and how leverage can translate to margin expansion. Could you maybe tie some of those pieces together to help us think about the go forward expansion opportunity?

Speaker 3

Yes. I mean, you're right. There has been some pretty substantial increases in the margin over the last year. And we've pretty much got the assets in place that we need to be able to grow to a much larger business as we've talked about. In terms of the go forward opportunity for gross margin, as I said just a few minutes ago, I mean, I think there is substantial opportunity, especially if you use that 70% metric as an approximation of a drop through on additional revenue.

Speaker 3

So I mean you could almost you could use that math essentially to map out what the future progression is going to look like until we reach a point where there's some more step function investments, which I don't think will be for a while. But we've and as I said, there even are some margin accelerators possible if there are significant enough movements in terms of potential mix change or other things that we're always working on internally to increase the productivity of our production efforts here. So I do expect to see good margin improvement going into 2025. And I guess it's probably fairly commensurate with that 7% type metric.

Speaker 7

Okay. Thank you. And then last quarter you spoke to increasing customer engagement, number of active customers increasing, sort of communicating similar message here. As customers are reengaging or you're reengaging them and then maybe from an activity perspective more ready to order. Are you finding that the time to order, the competition if it's an RFP, is anything about either the competitive process or the sales process different, better, worse than sort of when you entered this sort of years long malaise in the market?

Speaker 7

Just kind of get that as a proxy, I guess, we're asking how you feel about the assets, capabilities you put in place relative to the competition over the last couple of years?

Speaker 2

Yes. As we expand over the last couple of years, it's different. We go back 2 or 3 years, it was customers were finding us and we were able to deliver for them when others could not. But really if you go back to even the last year, it has been almost the same in that we found customers and they've told us repeatedly, yes, we love Technova, we love the story, we love how you fit in our business, but we don't have we're not ordering right now. When we do, we're going to call you, right.

Speaker 2

And we're starting to see some of that dynamic changes you can see in from the comments and even from some of the data. So I still don't feel like there's not some big change in the way they think about how we fit in the space. In fact, I feel like there's quite a bit of validation in the fact that we've increased our customer count in clinical solutions every year really for the last 3 plus years despite this environment. So I think I still think the story is right. The smaller scale, which there's movement obviously in cell and gene therapy, but also just movement from going to single use for people who want smaller batches, smaller scale, custom and delivered really quickly.

Speaker 2

And what we've built, it feels like the right thing for what we expect a lot of these customers are going to want in the future in the bioprocessing space.

Speaker 7

Okay. Thank you.

Operator

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.

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Alpha Teknova Q3 2024
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