Rapid Micro Biosystems Inc - Ordinary Shares - Class A Stock

Thank you. Good day and thank you for standing by. Welcome to the Rapid Microbiosystems Second Quarter 2026 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. and made a message advising your hand is raised. To withdraw your question, please press star one one again. be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Bollier with Investor Relations.

Please go ahead, sir.

Good morning, and thank you for joining the Rapid Microbiosystems second quarter earnings call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer, and Shawn Wurchis, Chief Financial Officer. This morning we issued a press release announcing our second quarter results. A copy of the release is available on the company's website at rapidmicrobio.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 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, 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 Millipore Sigma, customer interest in 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 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 achieve the milestones necessary to access any future tranches under our existing debt facility and to comply with all of its obligations thereunder. our ability to access additional capital such as through the exercise of our recently issued warrants, 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 factor 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 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 are provided as 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. I encourage you to review these reconciliations carefully.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 7, 2026. 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 begin my discussion this morning with a review of our second quarter performance and highlights. I will then discuss our execution against our 2026 full-year objectives some tips from my interactions with customers across North America, Europe, and Asia. I will then turn the call over to Sean, who will provide a more detailed review of our second quarter results and second half outlook. Today, we reported second quarter total revenue of $8.1M, representing 11% year-over-year growth and exceeding the guidance we provided in May. During the quarter, we placed four growth direct systems and completed nine system validations.

I'm also pleased to announce that we achieved a significant milestone during the quarter, with the placement of our 200th growth direct system. Product revenue increased 10 percent, driven by more than 20 percent growth in consumables. Recurring revenue increased 14 percent, reflecting continued expansion of both our installed base and strong system utilization. Consumable revenue and units reached new quarterly records, and in the third quarter, we expected ship our 10 millionth consumable, another significant milestone that highlights the growing adoption and routine use of the GrowthDirect platform across our customer base. Service revenue increased 13%, driven by higher validation activity year over year. We ended the quarter with 169 fully validated systems globally and have a strong validation pipeline entering the second half of the year. This growing validation pipeline provides increasing visibility into future consumable revenue growth and further strengthens the recurring revenue profile of the business.

Based on this momentum and our outlook, we are increasing our full-year validation guidance to at least 27 systems. Turning to margins, we delivered a record 15% gross margin in the second quarter, reflecting strong execution against our margin expansion strategy. Our first half performance reinforces our confidence in achieving our full-year margin targets, and we currently anticipate fourth quarter gross margin in the mid to high 20% range. Now turning to our commercial activities and customer engagement. In June, Amgen hosted our first North America Growth Direct Day, bringing together a strong mix of existing users and prospective customers. As with our prior events, the program featured high-value peer-to-peer discussions focused on the operational, financial, and regulatory benefits of automating and standardizing microbial QC. A key theme was how leading biopharma companies approach global growth direct deployments from internal decision making and cross-functional alignment to implementation, validation, and successful operation across multiple sites and geographies.

We are grateful to Amgen for hosting the event and sharing their experience as a leading global biopharmaceutical company, including their approach to deploying the Growth Direct across their global manufacturing network. This marked the second of three regional growth direct day events planned for 2026. We will conclude this year's series in October with a European event hosted by Merck Millipore Sigma at its Innovation Center in Darmstadt, Germany. By making these events reasonably accessible, we are enabling a broader group of prospective customers to engage directly with experienced Growth Direct users. In biopharma, peer-to-peer validation remains one of the most effective ways to build confidence, accelerate adoption, and advance purchasing decisions. Effectively, these events continue to strengthen both our direct commercial pipeline and the opportunities generated through our collaboration with Millipore Sigma. Following Growth Direct Day, I spent time meeting with customers across North America, Europe, and Asia.

I remain highly encouraged by the value proposition of the Growth Direct platform and how it addresses customers' needs. Initially, what stands out is how these conversations and emerging industry trends continue to evolve. customers are spending more time discussing how to integrate the GrowthDirect platform into broader automation, digital, and data enablement strategies and workflows across their manufacturing and quality operations. A consistent message is emerging from these discussions. Manufacturers that can improve speed, consistency, accuracy, data integrity, and productivity will create meaningful, competitive advantages. Full workflow automation is at the core of these strategies, and in some cases, the growth directives view as a critical enabling technology to activate these transformations. Accordingly, we're increasingly seeing customers focus on broader deployment strategies and more integrated and automated quality and manufacturing systems. We also continue to see encouraging activity related to U.S. reshoring and biomanufacturing capacity expansion, which we believe will become an increasingly meaningful contributor to growth beginning in 2027.

Our commercial pipeline continues to expand across all regions, but is especially robust in North America, where strong customer demand and engagement are contributing to the growth of our enterprise deployment and multi-system opportunity funnel. Turning to Millipore Sigma, we remain encouraged by the progress of the partnership. Their commercial organization is active globally and their opportunity funnel continues to meaningfully expand as they leverage their broad reach and deep customer relationships. In June, the Rapid Micro and Millipore Slegma leadership teams met in Europe to advance several strategic initiatives supporting the collaboration. In addition to progress on our joint commercial activity, discussions included plans to leverage Millipore Sigma's manufacturing, supply chain, and technical expertise to support and accelerate gross margin expansion goals, as well as current and future product innovation opportunities. While we remain in the earlier stages of the partnership, Millipore Sigma contributed to system placements during the first half of 2026, and we expect their contribution to increase meaningfully during the second half of the year and continue into 2027. So, looking ahead, we remain confident in the outlook for growth direct placements and revenue growth.

We believe a combination of compelling customer value proposition, growing system utilization, increasing validation activity, expanding enterprise deployment opportunities, strong demand globally, and a growing contribution from Millipore Sigma provide a strong foundation for continued growth. More broadly, we believe the fundamentals of our business are stronger today than at any other point in our history. Growing installed base and higher system utilization are driving record consumable revenue, increasing recurring revenue, and improving visibility into future growth. At the same time, our margin expansion initiatives are gaining traction, resulting in a clear positive inflection in gross margins and contributing to a larger and increasingly profitable business. Importantly, the business today has fundamentally improved from just a few years ago with a larger install base, higher incurring revenue, greater margin visibility, and broader commercial reach. Additionally, the drivers of our future growth remain firmly in place. Customer engagement remains high. Enterprise deployment discussions continue to expand.

Our collaboration with Millipore Sigma is gaining traction. The industry tailwinds around automation, AI, data integrity, U.S. restoring and biomanufacturing capacity expansion are accelerating. As we pursue these opportunities, we remain disciplined in our approach to investment, profitability, and capital allocation, balancing growth and profitability in a manner that we believe supports long-term shareholder value creation. Based on our second quarter performance and outlook, we are reaffirming our full year 2026 revenue, placement, and gross margin guidance, while increasing our full year validation guidance to at least 27 systems. With that, I'll turn the call over to Sean to discuss our second quarter performance and 2026 outlook in more detail.

Sean? Thanks, Rob, and good morning, everyone. I'll begin with an overview of our second quarter 2026 results, followed by our outlook for the third quarter and full year. We'll then open the call for questions. Total revenue for the second quarter increased 11% to $8.1 million, compared to $7.3 million in the prior year period. We placed four growth direct systems in the quarter. Product revenue, which includes systems and consumables, increased 10% to $5.3 million, compared to $4.8 million in Q2 2025. was driven by continued strong consumable growth of more than 20% as new customers move into routine use and existing customers increase the consumable pull through across their systems. Service revenue increased 13% to $2.8 million compared to $2.5 million in Q2 2025.

We completed nine validations in the second quarter compared to two in the prior year period. Validation activity exceeded our expectations and contributed to stronger than expected service revenue growth. Recurring revenue increased 14% to $5 million compared to $4.4 million in Q2 2025. Non-recurring revenue, which is primarily comprised of systems and validation revenue, was $3 million compared to $2.8 million in the prior year period. Turning to margins, total second quarter gross margin and gross margin percentage were $1.2 million and 15% compared to $0.3 million and 4% respectively in Q2 last year. This was in line with our guidance. Within this, Q2 product margin, which includes systems, software, and consumables, improved by 8 percentage points to negative 3% compared to negative 3%. negative 11% in Q2 last year.

This was slightly below our expectations due to the timing of some softer revenue that we now expect in the second half. Consumable margins improved by 17 percentage points year-over-year, reflecting continued progress on our margin expansion initiatives. Q2 service margin was 49% in the second quarter compared to 32% in Q2 last year, also representing a 17 percentage point improvement and record quarterly margin for our service business. These results were driven by ongoing cost reduction initiatives, manufacturing efficiencies, and service productivity improvements across the business, as well as operating leverage from higher volumes. Moving down the P&L, total operating expenses were $13.5 million in the second quarter compared to $12.4 million in Q2 2025. Within OPEX, R&D expenses were $3.3 million, sales and marketing expenses were $3.4 million, and G&A expenses were $6.8 million. Increase in OPEX was mainly due to non-recurring corporate expenses in the period.

With respect to non-cash expenses and capital expenditures, depreciation and amortization expense was $0.7 million and stock-based compensation expense was $1.3 million. Capital expenditures were de minimis in the second quarter. Interest income was $0.1 million, and interest expense was $0.6 million in the second quarter. Q2 net loss was $12.9 million compared to a net loss of $11.9 million in the same period last year. Net loss per share was 27 cents in both periods. Starting this quarter, we are reporting adjusted EBITDA loss, a non-GAAP metric that adjusts our GAAP net loss to exclude interest, taxes, and non-cash items such as depreciation, amortization, and stock-based compensation. We believe adjusted EBITDA loss provides investors with a clearer view of the actual cash used by our core operations and the underlying performance of the business.

Adjusted EBITDA loss for the second quarter was $10.3 million compared to a loss of $10.1 million in Q2 last year. with the positive impact of higher gross margins offset by higher OPEX in the period. In Q3, we expect adjusted EBITDA loss to improve meaningfully from Q2 as gross margins continue to expand and OPEX returns to lower levels similar to those in Q3 last year. We then expect further sequential improvement in Q4. Now, I'll turn to our outlook for the third quarter and full year. For the full year 2026, we are reaffirming our total revenue guidance of $37 to $41 million, which assumes 30 to 38 system placements. For Q3, we expect revenue of at least $9.5 million, including at least seven system placements. We continue to expect revenue and system placements to peak in Q4 in line with typical seasonality.

Turning to consumables, we expect Q3 revenue to be relatively consistent with Q2 and then increase sequentially in Q4 subject to the timing of customer orders and shipments. Looking at service, we expect service revenue to step up sequentially in Q3 and then again in Q4 based on our current expectations with respect to the timing of installation and validation activities. We now expect to complete at least 27 validations in 2026 with at least 10 in the third quarter. Turning to margin, we expect our Q3 gross margin percentage to be at least 20%. This assumes product margin in the high single to low double digits, including slightly positive consumable margin. and service margin approaching 50%. We then expect Q4 margin in the mid to high 20% range with sequential expansion compared to Q3 across product and service. These expected improvements reflect the continued realization of material cost reductions, manufacturing and service productivity improvements, and operating leverage from higher volumes.

For the full year, we expect total gross margin of approximately 20%, product margin in the mid to high single digits, and service margin between 45 and 50%. Importantly, this margin expansion is a key driver of our expectation for significantly lower cash usage in the second half of the year. Continuing down the P&L, for the full year, we now expect operating expenses of between $51 and $53 million, and $8 million in non-cash expenses, including depreciation and amortization expense of $3 million, and stock compensation expense of $5 million. Of the $8 million in non-cash expenses, approximately $7 million is expected to be recorded in OPEX, and approximately $1 million in cost of revenue. We also expect CapEx of $1 million, interest income of $1 million, and interest expense of $2 million for the full year. With our 2026 guidance as a starting point, I'd now like to discuss the operating assumptions that support our objective of achieving positive cash flow by the end of 2028. From a revenue perspective, we see multiple growth drivers that should position us to deliver average annual revenue growth of greater than 20% over the next several years.

These include continued expansion with our existing top 20 pharma customers, new customer adoption across both top tier and core pharma accounts, growing recurring revenue driven by higher system utilization and an expanding install base, increasing contributions from our collaboration with Millipore Sigma across both core and adjacent markets, favorable industry trends, including accelerating use of full automation, U.S. reshoring, and biomanufacturing capacity expansion. Turning to gross margin, we continue to target gross margin of 50% or more exiting 2028, driven by ongoing material cost reductions, manufacturing efficiencies, service productivity improvements, and operating leverage from higher volumes. While we expect normal quarterly variability and seasonality to continue, we believe our execution to date, visibility into the business, and progress we are making against our growth and margin initiatives support these long-term objectives. Turning to our balance sheet and liquidity, we ended the second quarter with approximately $20 million in cash, cash equivalents, and short-term investments. As we discussed in May, we expect cash usage in the second half of the year to decline meaningfully, assuming revenue increases as anticipated, margin continues to expand, and working capital trends improve. As a reminder, cash usage is typically higher in the first half of each year due to normal revenue seasonality and margin improvement trends, as well as the increase in revenue. well as inventory stocking to support increasing production. In the first half of this year, these factors were exacerbated by two temporary working capital headwinds related to the record 16 system placements we made in Q4 2025.

First, we collected 100% of the cash from those placements within the fourth quarter last year rather than in Q1 this year as we normally expect. And second, the We use more cash than usual to replenish systems inventory in the first half of this year to support our 2026 manufacturing plan. We don't expect these factors to have a meaningful impact on cash usage in the second half of 2026. Separately, this week we executed a focused efficiency program designed to streamline certain functions and processes that will reduce employee and other expenses as well as cash usage. We expect these actions to reduce expenses and cash usage by around $1 million over the remainder of this year and approximately $3 million annually beginning in 2027. These actions do not impact our plans to continue to invest in key initiatives that are expected to drive future revenue growth and gross margin expansion, including customer sales and support, product development, and product cost reduction programs. Combined with our revenue growth and margin expansion initiatives, these actions further support our expectation for meaningfully lower cash usage in the second half of 2026 and beyond.

Looking forward, we believe we are on track to achieve the milestones necessary to access the next $10 million tranche under our debt facility with Trinity Capital later this year, with another $10 million tranche potentially available to us in mid-2027, subject to achievement of the applicable milestones. In addition, the warrants issued in connection with our May financial year are available to us in mid-2027. financing, would provide incremental capital if exercised. Based on our outlook for continued revenue growth, margin expansion, and meaningfully declining cash usage, we believe our existing liquidity and access to additional capital sources supports a pathway to positive cash flow. Looking ahead, we plan to maintain our proactive approach to balance sheet management and disciplined capital allocation, while also evaluating opportunities to enhance financial flexibility and maximize long-term shareholder value. Back to you. That concludes my remarks, so at this point we'll open the call up for questions. Operator?.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Thomas Flatton with Lake Street Capital Markets. Your line is open. Please go ahead.

Good morning, guys. Congrats on the quarter and all the progress. Just a couple quick questions. Rob, you mentioned you had some pretty positive commentary coming out of your meeting with the Merck, Millipore, Sigma folks, including having them, you know, contribute more meaningfully in the second half. If I remember, though, from the past commentary, one of the reasons that you you had the low end of guidance was because, you know, that was kind of assumed that they weren't going to be contributing. So can you walk us through the positive commentary and then not raising the bottom of the guidance range? Just kind of fill us in there if there's other caveats that at least I'm missing.

Yes, so first for context, we met with the Merck Miller Four Sigma team to do a strategic review of where we are across all our initiatives, not only commercial but supply chain slash gross margin improvement and technology. And we have another one follow-up in the U.S. coming up. So just in general, I'm incredibly encouraged with the... where the relationship is between the companies and how it's tracking. The low end of our guide did not include the full allocation of the Merck commitment for the year. That being said, what we do expect is a meaningfully increased contribution from Merck Millipore in the second half. They will not fulfill their full obligation in the calendar year, as we previously said, just given how the contract falls. It's possible they will. is a meaningfully strong increase from where they were in the first half.

And as I mentioned, they did contribute in the first half, but we expect that to accelerate meaningfully in the second half. And that's one of the – elements that underpins our confidence in the second half and the reaffirmation of our guide.

Got it. And then I don't know if you can characterize this yet, perhaps only qualitatively, as you look at the placements that you have made this year and the ones that you're projecting for the second half of the year, could you help us understand, you know, of those placements, what's breadth versus depth within your customers? How many new customers versus deepening your relationships with existing customers?.

Yes, so usually it's not the exact detail in front of me, but we always have a bias towards existing customers, as you may imagine. So just for a reminder, our land and expand strategy continues to be quite effective where we land with a customer and then those customers expand. And that expansion can take multiple different forms. As I mentioned before, it could be within existing sites, it could be new sites, it could be new applications. So there's no real hard rule there which we find is attractive because it doesn't limit us to to kind of a single threaded expansion. So the majority come from our existing customer base. But there are new customers, most periods as well.

And as we watch the Millipore Sigma funnel increase, we're also seeing an increase, as you may imagine, in new customers. So the portfolio, as it's coming together, as we look into the second half and into 2027, we see with regard to not only the trends I touched on in my remarks, but also how the actual funnels are building, new and existing multi-systems, and also geographically. So we've got good geographic representation. And then, of course, the Merck-Millipore-Sigma collaboration is starting to open up new geographies for us within pharmaceutical manufacturing, quality control, and even some adjacent markets, although the bias is currently pharma globally. And I think one of the exciting things, Thomas, on pharmaceuticals.

you look at over the next several quarters on our funnel, there are a number of potential new customers with multi-system deals right out of the gate.

So those are things we're looking for and we're seeing some of that potential in that funnel. And that's the evolution of the business. We could go a little long here, but I think it's important. To Sean's point, we're seeing new customers kind of jump out with new products. with more than one system. And that's telling us in the conversations that we're having with customers reinforces that the technology is becoming more of a standard in a lot of ways, and customers are seeing the benefit, and we're moving into what we expect to be a new phase of market development, which is very exciting.

That's great. Thanks, guys. Congrats again on all the progress. Thank you. Thanks, Thomas.

Thank you and one moment for our next question. Our next question is going to come from the line of Dan Arias with Stiefel. Your line is open please go ahead.

Good morning guys. Thanks for the questions. John, can you just maybe talk a little bit about consumables growth and how you're seeing that for the back half of the year? It was, I believe 30% last quarter, 20% this quarter. In my model, you step up a little bit from 2Q to 3Q in terms of dollars. So I'm just curious how you would have us think about growth levels in the back half of the year there.

Yes, sure, Dan. Now, comps are a little tougher in the second half. I talked in my remarks about we expect to be relatively flat from Q2 to Q3 sequentially, but still this quarter was a record quarter. So it's maintaining that, and we'll work to drive some upside to that. But the guide is to be relatively flat and then stepping up sequentially in Q4. So I think we expect to see, you know, good growth in the second half too. You know, we have historically talked from time to time about pull-through. I think if you look at Q2 pull-through, the, the year over year is high single digit growth.

If you look at it per validated system, So that is going well for us, and that can vary from quarter to quarter. I think overall, if you look at what we expect for the year, it would look something like that. So we're... We feel pretty good about where consumables and consumables growth are right now, and customers are continuing to both come online in terms of new customers that are getting validated and into routine use, and existing customers continuing to put their systems to higher use.

Okay, helpful. And then just on the gross margin line, you know, I know that the model will benefit from just some of the mechanical things that you have going for you, but can you just maybe sort of crystallize the things that on your end you need to do most in order to have this trajectory land where it needs to be by the end of the year? And then obviously, you know, we'll talk, I'm sure, about next year and a quarter or two. But just given that you're finishing the year so much higher than you were the beginning of the year, can you maybe talk about upside scenarios for gross margins next year? Is it at least fair to model gross margins up a little bit next year?.

Yes, I mean, I'll start with that. Yes. You know, we talked about the goal of getting a 50% exiting 2028. So that's got to, we've got to continue to make progress every quarter effectively. Yes, so that is the plan. You know, if I go down, you know, the primary product and service lines. In systems, we have some things that are in flight from material cost reduction standpoint that we need to execute against that will drive most of the margin improvement there. from a cost down standpoint. In consumables, we're continuing to drive to get throughput continually increasing over time.

The line is, we're getting more and more efficient with the line, the line is putting more and more product through. Consistency is getting better and better, so we've got to continue to execute against that to hit our numbers. in terms of margins on consumables. And then service, I think we've said we have pretty good visibility into an increased level of validation activity in particular in the second half. And a lot of that's driven by volume. I'd say the vast majority of the margin expansion in the second half in service is driven by just pure revenue volume. So those would be the key ones. The other one, volume does matter, both in terms of what we're selling and obviously what we produce to meet that demand in both systems and consumables as well.

So that's also something that we, you know, if that were to change, that might have some impact up or down on margin. So that's another factor you should keep in mind. And Dan, it's Ron.

But one thing, too, to help the efficiency on the consumer lines, we've implemented a new technology on the line that gives management and operators real-time and near real-time performance metrics and the ability to spot any diversions quite quickly. So that's also helping what we call the OEE, which is essentially the throughput and quality of the system, which is also directly benefiting efficiencies and costs as well.

Okay. All right. Helpful Rob. Sorry, Sean. Just one more point of clarification on the way that I asked the question. Obviously gross margins will be up next year, year over year, but do you think gross margins can be up from where you're exiting the year in 26? Because obviously to get to 50 by 28, you know, two years from now, you're going to have to go.

To your point, you kind of need to be working higher, but I just wanted to get you to sign on to the idea that you might end up in high 20s in 4Q and then drop down to 20% or something like that and then have another grant. It's a good point. I mean, you got to keep typical quarterly seasonality in mind, but yes, the 2027 gross margin, we expect it to be higher than the exit rate for 2026. Okay.

Okay, super. Thank you. Thank you, and one moment for our next question. Our next question will come from the line of Brendan Smith with TD Cowan. Your line is open. Please go ahead.

Great. Thanks, guys. Just a couple quick ones from us. I guess, first, can you actually speak a bit more kind of to the customer breakdown now so far this year? Any kind of particular trends you're seeing with who you're replacing new systems with? Any visibility into maybe how that evolves or doesn't in the second half? I'm kind of just wondering what that mix of, you know, biotech, pharmacy. etc., placements may be looking like and how that could impact kind of the potential for multi-system orders?.

Yes, so as mentioned, Brendan, the general breakdown, first half generally included, tends to be biased towards our existing customers, but do include new customers. We expect to see something similar in the back half. We are seeing some interesting trends in our CDMOs, as you mentioned, in particular. We're starting to see significant interest in more fully automated integrated systems. As I touched on in my remarks, it seems to be a trend that's primarily impacting C2MOs, but we're also seeing some strong interest in our large existing customers as well. So what the bias is, the underlying bias seems to be be a focus on more integration sooner rather than later. And given that our system is the only fully automated system out there, it can integrate into other technologies quite readily in many cases.

So that's also driving, I would say, potential demand in the second half of this year and going into 2027 as well. So that would be a new trend. that's emerging that would likely impact the CDMO businesses before the principal manufacturers. We'll see how it turns out, but it's the leading edge of that. It's quite interesting. But generally, what we expect is a balanced, you know, placement trajectory, sales and placement trajectory across our principal regions of North America, Europe, and Asia. I would say increasingly flattered by contribution from Merck, Millipore, Sigma in, A, new customers, B, sites of our existing customer base that we just haven't had access to, and I would say see new geographies around the world. South America, parts of Asia, etc. So over time I see that portfolio balancing more and basically filling in the areas of the world and the segments that we are underrepresented right now.

Got it. Makes sense. Okay, that's helpful. And then maybe separately, I wanted to actually ask just a bit more about some of the customer feedback kind of on the US onshore dynamics. I know you mentioned it's playing more of a role next year, but I guess any more granularity maybe there either on timing or even just some of the build out versus ordering versus this kind of revenue recognition dynamics in that process that we should be aware of, just as we kind of think about the potential impact over the next 18 months?.

Yes, so it's, I know there's been a lot of headline announcements of the reshoring, and you know, can't speak to whether it's all happening and kind of the timing it's happening, but we are aware of within our customer base, you know, certainly a portion of it is happening because we've been contacted about, you know, getting ahead of that with regard to placements of growth direct systems more than likely starting in 2027. Probably say at this point mid to late 2027 based on how things are moving and just the pacing of the timing of the various projects. So while we're not pounding the table now, it's definitive, it looks constructive that we will benefit from some reshoring starting in 2027 and perhaps accelerating at 28 and 29. It's really hard to tell how fast things will ultimately move, but the trends and the conversations and in some cases the actual shovels in the ground that we're able to see are actually happening. So it's certainly, to a certain extent, real and we expect to benefit from it.

Yes, that makes sense. All right. Super helpful, guys. Thanks.

Thank you. Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone. And our next question is going to come from the line of Anna Snupton.

with KeyBank. Your line is open. Please go ahead. Hi, this is Anna Snopkowski on for Paul Knight. Congrats on the quarter. Maybe first I have a follow-up. on Dan's question about gross margins. Could you just talk to the visibility you have in the back half and whether any procurement or sourcing initiatives under Millipore have already been implemented and are contributing to that outlook?.

or if that's a longer-term runway. Yep. It's Sean and Anna. Hi. In addition to what I walked through in response to Jan's question in terms of key drivers in the second half, I think that stands. I think that stands. We are actively talking to Millipore Sigma about several different things on the procurement side, but I do not expect them to be significant contributors in the second half. I would think about that more in 2027, just as we've talked about before, getting a material validated into a point where we can actually use it in our products, for example, takes time and and we're working through that time. And those projects are ongoing, but we're not at the point where we can start to use them in any meaningful way in 2026. So I think about that more as a 2020 event.

Okay, makes sense. And then my second question is just on the CAR T market. That seems to be very strong. CARBIC had a good quarter and then I think yesterday Iovance had a really good quarter. really strong print so could you just tell us what you're seeing on that side of the market and remind us your involvement and on the cell and gene therapy side of the market.

Yes, so, and it's Rob. So, selling gene, well, our value prop resonates quite strongly in selling gene market, as we've said previously, and it's extremely strong in the CAR-T market. The majority of the CAR-T manufacturers are using the Growth Direct. You know, it's a very strong fit regarding the turnaround time, just to remind everyone why we're so strong. There's the speed, the test result, time to test result, the automation, the volume, the accuracy required. The growth direct is an extremely strong fit in our view for Cell Engine broadly and CAR-T in particular. We saw our consumable performance in part that is due to the cell and gene market and CAR T as well. So from our perspective, the market is healthy.

The manufacturers continue to see ROI and use our systems for CAR T manufacturing robustly and in some cases at an increased rate. East rate reflecting their business. Thank you, and congrats again. Okay, well thanks, Anna, and everyone on the call. We're going to wrap today's call up. I want to thank you all for joining us. I look forward to speaking with many of you soon, and have a great weekend.

This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Beaulieu, Investor Relations. Please go ahead.

Thank you, Shannon. Good afternoon, and thank you for joining the Rapid Micro Biosystems First Quarter Earnings Call. We apologize for the delay as we are experiencing some technical difficulties on our end. Joining me on the call are Rob Spignesi, President and Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer.

This afternoon, we issued a press release announcing our first quarter results. A copy of the release is available on the company's website at rapidmicrobio.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, assumptions regarding future financial performance, anticipated future cash usage, statements related to the company's term loan facility, guidance for the second quarter and full year 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 assess any future tranches under our debt facility and to comply with all 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.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 13, 2026. 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 afternoon, everyone. I'll begin today's call with a brief overview of our first quarter performance and then discuss our priorities for the year before turning the call over to Sean for a more detailed review of our first quarter results and our Q2 and full year 2026 outlook. Today, we reported total revenue of $8 million, representing 11% year-over-year growth, driven by continued momentum across system placements and recurring revenue. During the quarter, we placed 6 Growth Direct systems. And as of March 31, we had 196 systems placed globally, including 160 fully validated systems. Placement activity in the quarter was led by multisystem follow-on order from Samsung Biologics, highlighting continued success with larger key customers.

Product revenue increased 36% in the first quarter, driven by a record quarter for consumables, which grew more than 30%, reflecting increased utilization in a growing installed base. Service revenue was in line with the guidance we provided in March. Recurring revenue increased 28%, driven by strong growth across both consumables and service contract revenue and represented 63% of total revenue in the quarter. First quarter gross margin was 5%, consistent with our guidance, representing an 8 percentage point improvement from the fourth quarter of 2025.

With that overview, I'll now turn to our priorities and review our progress thus far in 2026, starting with accelerating Growth Direct system placements. We're off to a solid start in 2026. Our commercial team is expanding the funnel with continued momentum in multisystem opportunities and strong engagement, including global rollout discussions with large customers. In early April, we hosted a Japan Growth Direct Day event in Tokyo that brought together current users and prospective customers, the first of 3 regional Growth Direct Day customer events planned for 2026. The program enabled robust peer-to-peer discussions regarding implementation and validation and highlight the operational benefits of automating and standardizing microbial QC on the Growth Direct platform. Following Japan, I visited South Korea and met with customers to discuss their QC automation road maps.

Across these conversations, we discussed a clear intent in scaling Growth Direct deployments as customers accelerate their plans to adopt automation and enterprise-wide standardization of microbial QC. The Asia Pacific region is an important growth driver for Rapid Micro as we work to accelerate system placements and deepen relationships with large biopharma manufacturers. The engagement we're building in the region positions us well to become a long-term technology partner as the imperative to automate continues to broaden. We're also expanding our installed base across the region with system placements in markets such as Singapore and Australia. In addition, we placed our first Growth Direct system in China, where investment in advanced therapies, including cell and gene therapies, continues to increase and regulatory pathways are evolving to support accelerated review. Overall, our activities in Asia Pacific are strengthening customer relationships, building reference sites and supporting continued acceleration of system placements over time.

Looking ahead, in June, Amgen will sponsor our first North American Growth Direct Day. We expect the event to bring together existing and prospective customers and further support momentum in our core biopharma market. I look forward to providing an update on our second quarter earnings call. In addition to our direct commercial channel, our collaboration with MilliporeSigma continues to expand the opportunity for Growth Direct placements, not only in our core pharmaceutical market, but also adjacent markets such as personal care and medical devices. MilliporeSigma is prioritizing automation and digital technologies to help shape the future of the pharma QC lab. This effort centers on improving productivity, reliability and data integrity. These are areas where the Growth Direct excels and delivers clear customer value. The Growth Direct platform complements MilliporeSigma's product portfolio, and we are pleased to be included within this broader automation framework. We also entered into a services agreement with MilliporeSigma that makes Rapid Micro the exclusive provider of validation, qualification and maintenance services to their customers that purchase Growth Direct systems.

In parallel, we are progressing toward a supply agreement as part of our margin expansion initiatives and continue to collaborate on joint new product development opportunities and enhancements to existing products. Turning to our priority of expanding gross margins. Our performance in 2026 continues to track in line with our expectations and within the framework we've previously outlined. Our primary driver for our full year 2026 gross margin guidance of approximately 20% is a meaningful improvement of consumable margins. We have already begun to realize more favorable pricing from several key suppliers, which is lowering our cost structure and meaningfully improving our visibility. Combined with additional actions underway to improve systems manufacturing efficiency, this gives us confidence in an inflection to positive product gross margins beginning in the second quarter.

Service margins, where we are currently meaningfully positive, are also expected to accelerate further in the second half of 2026 as revenue ramps, supporting our outlook for an overall gross margin rate in the fourth quarter in the mid-20% range. Looking further out, we remain focused on our long-term goal of 50% plus gross margins, supported by internal initiatives and our work with MilliporeSigma to reduce costs across systems and consumables. These efforts include manufacturing efficiencies, improved sourcing and supply chain optimization and overhead leverage as volume scale. Service margins are expected to continue improving through productivity gains and improved headcount leverage across a growing installed base.

To conclude my remarks, customer demand remains strong with purchasing decisions increasingly strategic in nature and in many cases, focused on the Growth Direct as an enterprise priority. Our direct commercial organization is executing well and our collaboration with MilliporeSigma continues to advance. Supported by favorable industry tailwinds, including increased automation, U.S. reshoring initiatives and the growing complexity of advanced biomanufacturing, these dynamics are enhancing our visibility into our longer-term commercial pipeline extending into 2027 and 2028. Based on our first quarter performance and outlook, we are reaffirming our full year 2026 revenue guidance of $37 million to $41 million, including 30 to 38 system placements.

With that, I'll turn the call over to Sean to discuss our first quarter performance and 2026 outlook in more detail. Sean?

Thanks, Rob, and good afternoon, everyone. I'll begin with an overview of our first quarter 2026 results, followed by our outlook for the second quarter and full year. We will then open the call for questions. Total revenue for the first quarter increased 11% to $8 million compared to $7.2 million in the prior year period. We placed 6 Growth Direct systems in the quarter compared to 3 in Q1 2025. Product revenue, which includes systems and consumables, increased 36% to $5.6 million compared to $4.1 million in Q1 2025. The increase was driven by strong consumable growth of more than 30% and higher system placements. Service revenue was $2.4 million compared to $3.1 million in Q1 2025. This was within the guidance range we provided in March.

As a reminder, the timing of validation activities is typically the largest driver of quarter-to-quarter variability in service revenue. We completed 5 validations in the first quarter compared to 9 in the prior year period. Recurring revenue increased 28% to $5.1 million compared to $4 million in Q1 2025. Nonrecurring revenue, which is primarily comprised of systems and validation revenue, was $2.9 million compared to $3.2 million in the prior year period.

Turning to margin. Total first quarter gross margin and gross margin percentage were relatively flat compared to Q1 last year at $0.4 million and 5%, respectively. This was in line with our guidance. Within this, Q1 product margin was negative 8% compared to negative 23% in Q1 last year. The 15 percentage point improvement was mainly driven by a 33 percentage point improvement in consumable margins resulting mainly from direct material cost reduction activities, increased manufacturing productivity and efficiency and operating leverage from higher volumes. Q1 service margin was 34% in the first quarter compared to 43% in Q1 last year. The lower service margin was due to the lower service revenue in the period, which is partially offset by the positive impact of productivity improvements made over the past year.

Moving down the P&L. Total operating expenses were $14.2 million in the first quarter compared to $12.1 million in Q1 2025. Within OpEx, R&D expenses were $3.4 million, sales and marketing expenses were $3.4 million and G&A expenses were $7.4 million, which included $0.9 million of severance and other nonrecurring corporate expenses. Interest income was $0.3 million and interest expense was $0.6 million in the first quarter. Q1 net loss was $14.3 million. This compares to a net loss of $11.3 million in Q1 last year. The larger net loss in Q1 this year was primarily attributable to the nonrecurring G&A costs I just mentioned as well as interest expense on the debt we issued in Q3 last year, lower interest income and higher noncash stock-based compensation expense.

In Q2, we expect net loss to step down and be comparable to the second quarter last year and then show progressive improvement in Q3 and Q4 compared to the comparable periods last year. Net loss per share was $0.31 in Q1 compared to net loss per share of $0.26 in the prior year quarter. With respect to noncash expenses and capital expenditures, depreciation and amortization expenses were $0.7 million, stock compensation expense was $1.2 million and capital expenditures were $0.4 million in the first quarter.

Now I'll turn to our outlook for the second quarter and full year. For the full year 2026, we are reaffirming our total revenue guidance of $37 million to $41 million, which assumes 30 to 38 system placements. For Q2, we expect revenue of at least $7.7 million, which includes at least 4 system placements. We continue to expect to complete at least 25 validations in 2026. Turning to margins, we expect our Q2 gross margin as a percentage of revenue to be in the mid- to high teens. For the full year, we continue to expect total gross margins 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%.

We continue to 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. Continuing down the P&L for the full year, we now expect operating expenses of between $48 million and $52 million and $8 million in noncash expenses, including depreciation and amortization expense of $3 million and stock compensation expense of $5 million, $7 million of noncash expenses in OpEx and $1 million in cost of revenue. We also expect CapEx of $2 million, interest income of $1 million and interest expense of $2 million for the full year.

I'll now turn to our balance sheet. We used $15 million of cash in the first quarter and ended the period with $23 million. Q1 is typically our highest cash use quarter due to seasonal revenue and margin patterns and certain annual payments. This year, Q1 cash usage also reflects 2 notable timing items. First, Q1 cash collections were lower than usual due to stronger collections in Q4 2025, including the receipt of 100% of the cash associated with our record 16 system placements, which helped reduce Q4 cash usage to $3 million. And second, the previously mentioned $0.9 million of severance and other nonrecurring corporate expenses included in our G&A expense. For the balance of 2026, we expect cash usage to decline sequentially each quarter as revenue increases, margins continue to expand and operating expenses step down to levels generally consistent with the comparable quarterly periods in 2025. We also expect lower cash usage to be supported by disciplined management of CapEx and working capital. With our $23 million in existing cash and $25 million of remaining availability under our Trinity Capital credit facility, we are well positioned to execute our strategy and we'll continue to actively and prudently manage our balance sheet.

That concludes my comments. So at this point, we'll open the call up for questions. Operator?

[Operator Instructions] our first question comes from the line of Paul Knight with KeyBanc.

Rob, can you talk to the Millipore JV expansion by what more services? Could you help us understand what that is all about?

Yes, Paul. So basically, that agreement is linked to Growth Directs that MilliporeSigma sells that we will be the provider of all services associated, installation, qualification, all the way through routine use services. So the takeaway is that, that service revenue would be recorded by us. The best way to think about it is no matter where a Growth Direct is sold in the world, we will perform all the installation and qualification services, whether it's through our direct channel or through the MilliporeSigma channel.

And then the scale on consumables, is it you need more volume of consumables? Or is it some technical issue that they're getting solved on the Millipore side?

Yes. In terms of margin improvement opportunity, Paul?

Yes.

Yes. I think -- yes, it's a little bit of both. I think there's clearly opportunity for us to work with them and source from them over time. So that's the expectation that we have. We do not source anything from them for our consumables right now, and they make some of the largest components of the products. So that's a very large opportunity for us. But they have expertise in that product as well. And part of the deal with them on distribution is that they're going to increase the volume and the growth. So I think all of that fits together into a nice package for us that we expect is going to help drive margin improvement going forward.

As I touched on in my remarks, Paul, we're collaborating with them now on what that could look like with regard to that purchasing to drive gross margin improvement. Separately, the team has done a nice job with our current supply base to make sure we've got the right leverage, which we've given the forward view for the full year on margins. So that was incorporated. Then of course, the -- we have quite a bit of operating leverage in our business, whether it's consumables or systems manufacturing, given our fixed cost leverage in the business. So all that is colluding to come together to present our gross margin outlook, which Sean walked through.

Okay. And then lastly, Sean, the trending line of credit remaining available of $25 million, what are the terms on that?

Yes. So we have -- which terms are specifically interested in, Paul, I'm happy to kind of walk through the things that will be helpful.

I mentioned $25 million line of credit available...

So the remaining $25 million, we have 2 different tranches that are potentially available to us, and then there's $5 million of additional capital there that is at the lenders' option. So if you think about the structure of the tranches, the first tranche is potentially available to us later this year. There are some financial metrics that we would need to satisfy to unlock it. We expect to do that by the end of the year and have that be available to us. The next tranche is another $10 million that we could unlock as early as roughly middle of 2027, and we are trending towards that as well. So $10 million toward the end of this year, another $10 million middle of next year, potentially available to us and then $5 million of unallocated that we could work with the lender to unlock as well.

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

Rob, is there something to be said or a conclusion to be drawn from the kind of performance that you saw in consumables this quarter, 30-plus percent growth? Is that part of an acceleration trend? Or do you see that as more episodic to start the year?

It's -- what we're seeing, Dan, is a few things in the business, the continued growth in the Growth Direct footprint, efficiencies and our ability to validate. It's one of our fulcrum capabilities. So the faster we validate and the more efficiently we do it, the faster our customers get into routine use. But I would say the most exciting thing is that customers are really using these systems to drive ROIs in their business, which is extending conversations to more Growth Direct rollouts. So it's a really good leading indicator. If you see that in our business, it means customers are happy in using the system and most importantly, getting an ROI and that activates more and more discussions.

And increasingly, I touched on my trip in Asia and other conversations. Increasingly, the discussions have become more strategic in nature at senior levels. And it's exciting to see many of our customers thinking about enterprise-wide automation and integration of automation technology. So the market is definitely trending in the right direction.

Okay. All right. And then, Sean, on the 30 to 38 systems for the year, what portion of that comes from systems that are part of orders that you have in hand, Samsung, et cetera? Basically, I'm trying to understand how much new business you need to win in order to get there. It feels like you're on a pretty decent trajectory here, but curious to how you explain it.

Yes. So Samsung was in Q1. I think you're asking about backlog, which isn't something we've historically talked about. But I think it's -- if we look out over the balance of the year, Rob talked about the funnel. I think we feel good about the funnel. Obviously, MilliporeSigma is part of that as well, and we have very tight connectivity with them. So I'd say we feel good about where that range is set at this point. That's why we're reiterating it. And a good part of that is based on what we see out over the balance of the year. So -- and remember, we tried to clarify a little bit last quarter. There's some variability in that range, right? 8 systems is a decent sized range there.

And I think there are opportunities for us to drive some good movement within that range by getting large multisystem orders that we haven't assumed and where we end up with MilliporeSigma this year in terms of what they deliver against their commitment and the overall environment, which we're obviously watching closely these days. So we're trying to drive to the top end of it, but we feel good about the range in general.

Okay. But no additional Samsung placements after 1Q?

Yes, I don't think we can comment on that at this point. I mean there's definitely opportunity with Samsung going forward. Whether that happens this year or not, I don't think we comment on at this point, Dan.

[Operator Instructions] Our next question comes from the line of Brendan Smith with TD Cowen.

Maybe just another one on kind of margin story here. I guess wondering how we should think about any potential inflection and kind of the impact from consumables and services revenue over the coming quarters? I guess is there maybe a sweet spot number of total placements that you expect to ultimately kind of hit that tipping point where consumables read-through starts to kind of outweigh new device placements? Or really just any kind of color on how to think about the push and pull there on margins?

So Brendan, it's Sean. So for consumable margins, I think if you go back to what we said back in March, it still holds true. I think we expect to see that moving in a positive direction in the second half, driven in part by volume, but I think also driven very much by the other factors that I think both Rob and I have talked about, which is getting material costs out of the products, including the significant vendor pricing reductions we achieved recently, but also increasing volume and leverage that goes with that from an operating standpoint.

Service, I think as we've talked about before, is driven -- it is sensitive to volume. And as we said last quarter, the expectation right now is that we're going to have a heavier second half than the first half in terms of service revenue with validations. But we had the big Q4 last year. Those systems seem to be teeing up to be more second half than first half in terms of validation. So that revenue is going to come in the second half, and that will have a positive impact on margins in the second half.

Got it. Great. And then maybe just -- I know you noted some of the acceleration in cell and gene therapy programs. I guess just wanted to maybe get your take on kind of the recent overhaul in leadership at FDA. Do you expect any kind of notable changes there? Or just anything you're kind of watching over the coming weeks to maybe signal how that momentum shifts if it does?

Yes, it's Rob. We watch actively the approvals. As you know, we have very high penetration into the cell therapies CAR-T market in particular. I think our last reading was 86% of the FDA-approved manufacturers are using our system. So as you know, it's a very, very, very good fit. So we watch it actively. And I'm not sure if there's anything we've observed in the past few weeks as far as acceleration or deceleration of approvals. But we like generally the pipeline, as I touched on, also regionally speaking, to include Asia. So we are -- we believe we're well positioned to win cell and gene business broadly, whether it's through the principal manufacturers or through the CDMOs.

As you know, we've got a good footprint there. And we're also very well positioned to win that business globally, sort of region independent. So we'll continue to report out on what we see. But the takeaway for us right now is we are -- and our intent is to remain well positioned to win in the cell and gene market and cell therapy in particular.

Our next question comes from the line of Thomas Flaten with Lake Street Capital Markets.

I was wondering if there's any way you could characterize the Millipore sales funnel from an industrial vertical perspective, what's their focus? What are they looking at? And any way you could -- and I know you don't talk about backlog, but just give us a sense of what kind of number of potential placements you're looking at in the coming months here, however you want to phrase it?

Yes. Kind of in reverse order, I won't -- this is Rob. Thomas, I won't speak to the placement number. We haven't released that via -- with regard to Millipore. But I can tell you one thing I'm extremely excited what I'm seeing with regard to the global connectivity and activity and momentum that team is building, the Merck Millipore team. Very happy with how our teams are collaborating. It's a larger company. It's a much larger sales force. So it took a little bit of time to, if you will, get up to flying speed, but we're there, and I'm very, very excited about it. MilliporeSigma has hired and focused specialists within their regions, North America, Europe and Asia. Their funnels are growing and their relationships are deep and broad, which is activating and building funnel.

The next step will be seeing that funnel convert and close and potentially the acceleration of sales cycle. So that's TBD at this point, to be fair. But the -- I would say the conditions are present and the predicate steps have been put in place for this to be a very successful collaboration. The story is still being written, of course, but I think it's -- I'm very excited about the leading indicators that I'm seeing, and that's globally. It's not in any one region.

With regard to end markets, there is focus currently, not complete, but I would say a majority of focus within the broader pharmaceutical markets. We're in a lot of places, but we're also not in a lot of customers, and they have reach far beyond ours and there are many, many labs. So there's a net to match. We've got good brand in pharma. So that's a natural starting area. But they also can go deep in other verticals, which are also very large markets, such as personal care, cosmetics, medical device. Those can tend to be, in some cases, more scattered markets.

You need a broader and larger team to get after and brand and capability. So that was another reason why this partnership made sense for us. So that expands our TAM meaningfully. So more to tell there, but the report card right now with regard to the, I'll call it, the leading indicators, actual activities I'm seeing is I'm personally very, very excited about it.

Okay. No other questions, we're going to wrap today's call. Thanks, everyone, for your time and attention, and we look forward to speaking with many of you shortly. Thank you.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised 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 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, 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 are provided as 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 reconciliations carefully.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 12, 2026. 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 begin with a brief overview of our fourth quarter performance and recent commercial wins as well as an update on our key priorities. I'll then share a few comments on our 2026 outlook before turning the call over to Sean for a detailed review of our Q4 financial results and 2026 expectations.

Before reviewing our fourth quarter results, I'd like to highlight the first press release we issued this morning announcing that Samsung Biologics is expanding its deployment of the Growth Direct platform through a new multisystem order received in the first quarter of 2026. This follow-on order builds on our existing strong partnership, and we are proud to support Samsung's next-generation manufacturing strategy. This expansion yet again highlights the impact that Growth Direct delivers to the world's leading pharmaceutical manufacturers as they seek to automate and modernize their critical quality and manufacturing workflows.

Now turning to our performance. This morning, we reported total fourth quarter revenue of $11.3 million, representing 37% year-over-year growth and a quarterly record. These results exceeded the increased guidance we provided in November and mark our 13th consecutive quarter of meeting or exceeding expectations. We placed 16 Growth Direct systems in the quarter and ended the year with 190 systems placed globally, of which 155 are fully validated.

A highlight of the quarter was a record multisystem order from Amgen, reflecting their continued investment in the growth -- in the global rollout of the Growth Direct platform. Amgen is deploying systems across multiple sites in North America, Europe and Asia and fully leveraging all applications to include environmental monitoring, bioburden and water testing. Additionally, Amgen will sponsor our first-ever North American Growth Direct Day in the second quarter.

Product revenue increased 78% in the fourth quarter with outperformance driven by strong system placements. For the full year, consumable revenue increased 17%, reflecting continued strong utilization across our installed base. Consumable growth remains one of the clearest indicators that customers are actively using their systems and realizing meaningful ROI. Importantly, consumable strength underpins recurring revenue, which increased 15% for the full year and accounted for 53% of total revenue, highlighting the durability and visibility of our business model.

Turning to gross margin. Fourth quarter gross margin was impacted by inventory-related charges that Sean will discuss shortly. This does not diminish the significant progress we made throughout 2025 in reducing product costs, improving manufacturing efficiencies and increasing service productivity. As I look back at our performance over the last 3 years, total gross margin has improved by over 50 percentage points, a trajectory we are confident we can sustain.

Now turning to the MilliporeSigma collaboration. Our partnership is entering its second year, and we are pleased with the progress to date. In support of their commercial growth strategy, we have completed specialist training and MilliporeSigma has established customer demo labs across Europe and Asia. These labs will serve as an important part of the sales process to give customers hands-on experience with the Growth Direct system. As a reminder, Rapid Micro operates demo labs in North America, Europe and Asia as well. We continue to work closely with the MilliporeSigma team as they expand their funnel and drive sales, which we expect will meaningfully contribute to our 2026 system placements.

Turning to our supply chain. We are advancing opportunities to reduce product costs and leverage MilliporeSigma's broader logistics network and other capabilities. Combined with our internal efforts, we have already secured meaningful consumable cost reduction benefits that will positively impact product margins starting in the first half and accelerating in the second half of 2026.

Now I'd like to briefly review our priorities and 2026 outlook. We are off to a strong start of the year and our priorities remain consistent, accelerating system placements, expanding gross margins, continuing to innovate new products and prudently managing our cash, all while maintaining disciplined and consistent execution.

On the commercial front, we remain focused on expanding and converting our sales funnel. The multisystem global rollout at Amgen and today's announcement that Samsung Biologics is meaningfully expanding its deployment of the Growth Direct platform underscore the substantial opportunity we see across the global pharmaceutical market. In addition, our partnership with MilliporeSigma continues to complement our direct sales efforts by broadening our global reach in our core pharmaceutical segments and providing access to attractive adjacent customer segments.

As we work to expand the sales funnel, our annual Growth Direct Day remains one of the most effective customer-focused forums. This year, we are expanding the impact by adding events in North America and Asia, in addition to our premier recurring event in Europe. As a reminder, these sessions bring current and prospective customers together to showcase how automation and improved data management delivered by the Growth Direct can drive meaningful operational improvements and compliance within manufacturing and quality control. We are especially pleased Amgen will sponsor the North American event in Q2, reflecting their confidence in and commitment to the Growth Direct platform.

Looking at the broader market landscape, there are strong tailwinds augmenting our consistent commercial execution. These include increased adoption of full automation, a greater focus on data integrity by industry and regulators, advanced manufacturing modalities driving the need to modernize and growing investment in the onshoring of pharmaceutical manufacturing in the U.S. We believe these tailwinds will remain strong and durable, which will contribute to position us well for sustained long-term growth.

In addition to staying highly focused on our priorities of accelerating Growth Direct placements and expanding gross margins, we continue to innovate to provide new value-add solutions to our customers. To this end, we expect to release 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 spent 15 years developing and refining the industry-leading algorithm for microbial growth detection, and this new platform will leverage that experience to deliver significant additional value through AI-driven analytics and insights across our customers' global data. As the Growth Direct installed fleet expands globally and generates increasing volumes of digital data, this new software and data platform will provide meaningful value to our customers by enabling deeper insights and faster decision-making power for global quality and manufacturing operations.

Against this backdrop, we are initiating full year 2026 revenue guidance of $37 million to $41 million, including 30 to 38 system placements. We expect meaningful gross margin expansion and expect to achieve approximately 20% gross margin for the full year, with performance accelerating in the second half. We believe this guidance is both prudent and achievable and reflects our track record of consistent execution.

Sean will provide some additional details around the assumptions included in our outlook as well as potential upside opportunities, and we look forward to updating you as the year progresses. And with that, I'll turn the call over to Sean to discuss our fourth quarter performance and 2026 outlook in more detail. Sean?

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 of 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 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?

[Operator Instructions] Our first question comes from the line of Thomas 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 take a shot at that. I think part of that -- a lot of that has to do with timing actually in terms of -- there can be variation between when we deliver a system and when that validation process gets started depending on the customers' plans and resourcing that goes along with that. So I think we'd expect to see that come down. I think we talked about Amgen this time. I think as we look at that, some of the color we gave in the call prepared remarks really ties into how we expect that to roll out, which I think the majority of that work is right now, our plan working with them would be that a lot of that would happen at the end of this year.

So I think if you look at a deal like that, the expectation would be you'll see that placed in Q4 last year. We'll get most, if not all of that work done with them by the end of this year. So that gives you some indication of how these things can typically go. So there is a natural lag in there. I think you'll see that variance come back in a bit as we work through that and a few other customer situations. So I don't -- it's nothing we're concerned about. It is something we keep our eyes on, and it's something that we will continue to work to keep tight as much as we can. So I don't know, Rob, if you have any comments on that.

No, it's clearly a robust validation year as well. So 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 color. And then just with the Samsung announcement this morning, could you just comment on the percentage of your place systems that are within CDMOs and how you see that space evolving over time relative to the manufacturer or to the drug originators themselves?

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 previously announced Lonza as a customer, Samsung. We obviously, in other CDMOs as well. We have a very strong value proposition for CDMOs as well as what we 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 CDMOs, in particular, are benefit from our ability to turn their lines faster, release product faster and also, to a certain extent, in some cases, market -- the use of advanced technologies in 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 -- we don't talk about it significantly on these calls. We also have small and 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 is one is 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 an 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. Yes. I'll take that one, Dan. I think about it, there's a couple of key drivers to focus on from my perspective. One is we talked -- or I talked to my comments about the fact that we have recently locked in some meaningful product cost reductions with some vendors that will benefit us beginning in Q2, but that will accelerate in Q3 and Q4. So that is a substantial reduction from what we're paying for some of the key materials in our product, and that's consumables specifically. So that's number one.

Number two, I'd say is I talked a minute ago about how we expect the year to roll out from a validation and service revenue standpoint. You kind of see in recent quarters, what lower service revenues can do from a leverage standpoint in our service margins. We expect to see that go back the other way as we work our way through this year. So to get to 20%, I think the 2 of the largest drivers, if not the largest drivers are that those cost reductions kind of kicking in full bore in the second half and us getting our service revenues back up to levels where they can generate meaningful margins beyond where we've been over the past quarter or 2.

Volume is also a big part of it. So as we progress through the year, we're manufacturing more, we expect to sell more. I talked about peaking in placements in Q4. Those things also contribute. So I think it's important to note the comment that we expect Q4 exit to be mid-20s or above. So that trend should be growing as we work our way through the year overall for total margins. And those are the kind of key factors that give us confidence in being able to achieve those kinds of numbers for the year and exiting the year.

Yes. And Dan, just to put maybe an exclamation 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 out in addition to the other elements that Sean mentioned.

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 to 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. So I guess on the first question, Dan, I think in terms of what will happen with Amgen and Samsung in terms of pull-through, I think I talked about Amgen a little bit ago, latter part of the year, likely when we get those fully validated. Samsung, I don't know that we have a fixed timetable for that yet, but I'm sure it kind of follows that similar time line would be my best guess. So in terms of where we get with them, I think validations are definitely in play for 2026, our expectation, frankly. In terms of when they start to contribute to recurring revenue, I'd expect that to be more a 2027 factor.

In terms of pull-through, I think we've continued recently, I'd say, to be kind of in that single-digit year-over-year improvement range that we've talked about historically. So I'd expect that, that will be similar. I think with big orders and kind of a bolus of validations like we're talking about with these larger orders, I think there is an opportunity for us to see more meaningful step-ups in that as we bring those systems online kind of in short periods of time.

So for now, I'd say think about it as single digits in 2026. I think as we look at '27 that we would potentially have opportunity to see a better -- a bigger step-up than that in '27.

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, on Samsung, we don't get into the specific quantum of it, but it's a 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 way, 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 those are also in scope. And as I mentioned a couple of years ago, we expect to grow with Samsung in the quarters and years ahead. And I'll say it again, we expect to grow with Samsung in the quarters and years ahead. Interestingly, which we didn't talk about in the prepared remarks, but we're 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. So a general rule of thumb is repeat customers go faster. generally, both in the sales process and the validation process. It's a general takeaway. Now certain things like some of these large orders, Amgen is an example, and other large customers, we haven't specifically mentioned by name across several sites around the world. The sites have projects going on at any given time. So the timing could be throttled by a site-based activity. But generally, it's quite faster. Generally, we have what's called a modular validation, which basically leverages the knowledge and work we've done on the initial validation usually at a starter site, and we can roll that out in an expedited fashion to accelerate the process. And as you may imagine, our land and expand strategy is focused on that. But also to your point, we're also -- the team is also out there focused on acquiring new customers as well, which can be a bit longer, both in the sales process and the initial 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 it a software update push you can monetize into existing installed bases? Just kind of wondering how we should think about that contributing to growth.

Yes. So thanks for the question, Brendan. It's a -- think of it as a bit of a phased approach. So out of the box, it's -- first of all, it's a complete rewrite of our application software for the Growth Direct. So it's a completely different architecture. So day 1, customers benefit from a modern UI, much easier integration into some of their IT infrastructure. And by cloud native, it's been built around a cloud infrastructure. We envision the customers' cloud will run it. But from a future revenue standpoint, we could also provide cloud services. Right now, the system is in a prelaunch phase with a major customer operating in their cloud running the Growth Direct and the feedback has been exceptional. So we're quite excited about that.

So on the box, a couple of benefits. First, a complete rewrite. So customers benefit from easier navigation, easier integration, a more modern UI, the ability to access data from the cloud from any device versus through their IT infrastructure attached to their LIMS. Over time, we see the ability to provide services against that cloud data. So imagine a fleet of Growth Direct generating -- and the idea came from we have these Growth Directs around the world generating all this data, how can we help customers benefit from that? So the Growth Direct would be effectively an appliance. Other technologies can also plug into this technology and feeds into a cloud infrastructure. And then against that, we could provide services against that, predictive analytics, other types of insights on seasonality, quality failures, potentially speciation and ID services.

And that's really part of the vision. We're not going to get into too much detail on what those are and how we plan to monetize it. But think of this as step one to a couple of step multiyear process to really advance from the automation side into the, I'll call it, the AI sort of higher-powered analytics and cloud-enabled side of our business, which will -- the goal is to continue to drive to recurring -- high-margin recurring revenue over time.

And what we've seen is that customers are -- especially in pharma, which can be a little conservative, are open to discussing how AI and cloud, in particular, can enable their environment. So we're not really pushing against a closed door. It's really -- it feels like we're pushing against an open door. And in some cases, customers are asking us for services in this general category.

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 the added reduction in the second half?

Yes. Brendan, it's Sean. Yes, we are still working with Merck MilliporeSigma on several different opportunities. I think some could benefit this year. Some are more longer-term focused in terms of things we could do. And as we've talked about in the past, it's quite a broad palette of things that we're looking at in terms of things that could benefit our margins, not just material cost reduction. I'd say that the locked-in savings that we have at this point that are going to benefit consumables in 2026 are not with Merck Millipore directly, but there are things that are direct inputs with other vendors that we have in place that our procurement team has done a really good job with kind of leveraging our growth, leveraging other relationships to be able to get us what I would say is kind of a step change reduction in cost for a couple of different key inputs into the material that will benefit us this year.

So we're excited about that. As I said earlier, it's going to be a key driver of our gross consumable margin expansion and by association overall gross margin expansion. And we think it's something that we can use as a template to drive future reductions in other areas in the future and continue to drive those consumable margins up.

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.

Good afternoon, everyone. My name is Ryan Rice. I'm an associate with the JPMorgan Healthcare Investment Banking team. Welcome to the session for Rapid Micro Biosystems. Presenting today, we have the President and CEO, Rob Spignesi; and also the CFO, Sean Wirtjes. As a reminder, the presentation will be roughly 25 minutes, followed by about 15 minutes of Q&A. So we please just ask that you hold your questions until the end. With that being said, I'll turn it over to Rob so we can get started. Thank you.

Thanks, Ryan. Good morning, everyone. Again, I'm Rob Spignesi, CEO of Rapid Micro Biosystems and joined by our CFO, Sean Wirtjes. Thank you for joining this morning. So to get -- for those online, our deck is available on our website under Investors. It won't sequence automatically. So I'll do our best to keep us all in sync.

So Slide 3, if we can dive right in and by way of background and context on our business, we're focused on a critical part of the global pharmaceutical quality control infrastructure called Microbial quality control. So this is a regulated process mandated by the global regulators, and all pharmaceutical companies go through this process. It's a high-volume testing process to ensure their products are free of microbial contamination, so think bacteria, fungi and other organisms to ultimately ensure their products are safe for patients.

The problem with the current methods used in most locations around the world is they hasn't advanced, literally using the same slow petri dish method invented by Louis Pasteur about 100 years ago or so. It's causing risks and costs, as you may imagine, for the industry. So we developed a technology called the Growth Direct platform that automates this legacy process and brings it into the 21st century where it belongs, and we'll chat about that today.

So on Slide 4, we thought we'd get started, just give you a sketch -- a high-level sketch of our company by the numbers, if you will. So finished 2025 with about $34 million in revenue with 20% growth, so a strong growth year and about $18 million in recurring revenue. An important note about our company, and we'll talk about this today several times is we have a strong base of recurring revenue. And this is in the form of recurring consumables, proprietary consumables and service contracts that help feed our business model.

We have 190 Growth Direct Systems placed globally. We are a global business. We'll go through our customer base and where they are around the world. And importantly, 155 validated systems. So this is the -- a validated system is important because that's the point in time where the pharmaceutical company has adopted our technology as the system of record and is being used in what's called routine use or routine testing. And it's at that point, subsequent to that point, where we achieved the high rate, high yield of recurring consumables and service contracts.

As I touched on, we're global. We operate in about 20 countries around the world. We have a fantastic customer base. We're proud to count around 75% of the global top 20 pharma companies as customers. I'll go into our, again, the types of modalities that we serve, the manufacturing modalities. So we're modality agnostic. We serve all types of manufacturing modalities. We are, however, especially strong in the advanced modalities of biologics and cell and gene therapy manufacturing. In fact, around 86% or so approved -- FDA-approved commercial CAR-T manufacturers are using our technology in routine testing and drug release for patients.

We pre-released our Q4 and full year earnings, on Slide 5 now, Tuesday after market close. It was a consequential year, a strong year for us. So we announced record quarterly revenue, and we exceeded our full year guidance, which was a raise after our Q3 earnings. And it was our 13th quarter of meeting or exceeding our revenue guidance, this track record that we're quite proud of, announced strong recurring revenue, as I touched on, which is double-digit growth in 2025. We also announced a multi-record system order from one of our existing customers, very exciting order, the customer is rolling out our system globally and adopting all of our core applications of environmental monitoring, water and bioburden. And this was the -- we had previously announced this during our Q3 earnings call.

We had strong gross margin growth throughout the year, and we also reinforced our balance sheet with a $45 million facility from our capital partner. And earlier in the year, and we'll talk a bit about this today, we announced a partnership with Merck MilliporeSigma to help drive our growth, our margin expansion and our innovation. Quickly with regard to the numbers, we announced about $11.3 million in total revenue in Q4, which is 37% growth year-on-year, $4.6 million in recurring, 16 systems placed and 3 validated.

On the full year, 33.6%, as I touched on, 20% growth. Roughly $18 million of that recurring, which is over half of our revenue is recurring revenue, 28 systems placed and 18 systems validated. So a bit about us from a financial standpoint. Kind of diving back into the business on Slide 6. This slide helps orient you to how we see the market and the value chain in context of the problem that we are trying to solve or are solving. So I think we can all agree, scientific and technology innovation has impacted how we discover drugs around the world, upstream and certainly how we manufacture drugs across various modalities downstream in the manufacturing environment.

But the quality control, the fundamental quality infrastructure hasn't changed, as I mentioned, there's still a very old legacy error-prone manual petri dish method. So you can see by this slide, hopefully, it's obvious it's a pretty clear incongruent situation that you have. And these therapies, these modalities are putting pressure on this legacy system. In fact, this method, the fundamental petri dish method was invented when these modalities weren't even a vision. So we have this situation. And again, it's causing pressure and costs and risk for the industry. And this is what we're going after to solve.

On Slide 7, for those of you to get a little more down into the -- kind of into the gritty part of how this actually works. If those of you haven't been into a micro QC lab in a pharmaceutical site, this is what one looks like. Imagine it scaled up to be much larger depending on the site size. But what you'll -- when you walk in, what you'll invariably see no matter where you are, you'll see plenty of people, you'll see petri dishes, paper, pencil, incubators. You might see a computer, you might not. But again, this is effectively a high-volume testing process that's mandated by regulators, a stack that we like to throw out at some of the higher volume sites, they consume enough petri dishes in a year that if you stack them would go 8 miles into the air.

So just think of the sheer volume that's handled manually. So really quickly, the way this works is it could be a handful, it could be dozens of quality control technicians will come in. They'll grab their media petri dishes. There's different forms and flavors, but imagine a petri dish and they'll fan out across the clean rooms or the sites and test, test the air, the water systems, the personnel, human beings are typically the top source of contamination in pharmaceutical environments, the actual manufacturing surfaces themselves. So they'll bring all those petri dishes back, and they'll put it into basically a giant incubator, some of the size of this room that we're in right now and labeled Monday, Tuesday, Wednesday around the room, come back a week later, 2 weeks later and visually inspect each petri dish, count if there's any organisms, manually count, write that down on a piece of paper and ultimately type that into a computer system for recordkeeping and batch release.

So as you can probably tell from that description, it's incredibly manual. It's slow because you're waiting for the organisms to grow. It's visually inspected by human beings, and we're designed to do a lot of things well, but the repetitive high demand accuracy probably is at the top of that list. It is open to falsification and just error and lacks the data integrity that the regulators are focused on and clearly paper-based and slow. So like this is the day-to-day activity used to release drugs around the world in locations where the Growth Direct is not installed, of course.

So to address this problem, we have developed the Growth Direct platform. So it's the only fully automated high-throughput system available and consists of the Growth Direct System itself on Slide 8 now, as you can see on the left, a suite of proprietary consumables. So it's important to note we developed a system to automate the vast majority of daily routine use consumables. And many of our customers have multiple systems across multiple sites to absorb all this volume. So this isn't a niche tabletop type of analyzer. This is meant to be the workhorse of the pharmaceutical, in some cases, campuses.

So we have consumables that automate all the various tests. We have a full data and software complement that seamlessly interconnects our systems to our customers' information management systems for secure 2-way seamless data exchange inbound and outbound. And we have teams of people around the world that do the installation services, the maintenance services and all the validation. So we also provide that service, which is part of our revenue model. The customers get a very robust value proposition, which is what's driving our success.

So first, data integrity. As I touched on, this is a very important part of all of our customers' focus with regard to our technology adoption. This is a consequence of global regulators writing regulations and enforcing against data integrity requirements against which we are complement -- can complement quite nicely. So our system can help a customer go from a challenged data integrity environment to a quite robust one. Operational efficiency is a core area as well. This is where a lot of the hard dollar ROI comes from.

So our system is fully automated and walked away. Once the sample goes on the system, with one of our consumables, that's the last time a human being will typically see it. It's automatically processed. Our vision systems do all the visual inspection. The data is automatically managed. And we're also a Rapid system. So we're able to provide a result to the customer half the time or less. And in many cases, it's far less than half the time.

So at the end of the day, the customer gets a very accurate, trustworthy piece of data they can make a decision with, ship to market faster, ship to the next bioprocessing step faster, for example, or find problems faster. You find a problem in your operation, you can shut down or remediate that problem faster, you can avoid manufacturing scrap. There's clearly a labor leverage model here as well. So this is where a lot of the hard dollar ROI comes from. And then insight and accuracy, machine-driven, computer-driven, vision-driven, AI-driven system that is extremely accurate and eliminates the current challenge with human error and the current microbial QC process I walked through.

So on Slide 9, this is the transformation that our customers go through. On the top half of the slide is that legacy workflow I walked through. It's a 15-step, as I touched on, very manual -- completely manual, error-prone, long, slow insecure process to a leaned out fully automated walkaway process with very high data integrity. This is why customers adopt our technology.

And on Slide 10, it's just -- this is the vision -- our vision is to juxtapose to the previous slide in the deck with the quality control infrastructure fundamentally being replaced by the Growth Direct. And that's really our vision is to create a new microbial quality control infrastructure for global pharma and to bring this critical function up to contemporary standards and on par with how discovery and research works and certainly downstream and how manufacturing and bioprocessing work.

There are a number of tailwinds driving our business forward as well as the pharma industry generally to automation. And these are not only powerful, but we believe are and will be long-lasting. First, it's a large market. Global pharma is a large market. The testing market is large. We size it at about $5 billion of recurring consumables and service opportunity and about $5 billion in total system opportunity globally. As I touched on a few times already, there's regulatory pressure to adopt automation with regard to data integrity standards.

The industry is changing. It's moving more towards advanced modalities, biologics, cell and gene therapy, mRNA therapy. These therapies in many cases and the manufacturing modalities that support them require faster turnaround time. They're higher-value therapies. So there's more at risk and requires higher accuracy, and it's a perfect fit for automation.

And finally, expanding manufacturing globally, in particular, the onshoring into the U.S. I mean, new sites, as you may imagine, tend to be -- have a high preponderance of automation put into them, especially in higher cost labor markets like the U.S. So this is a trend that we expect to benefit from as well.

On Slide 12, an overview of our growth -- of our organic growth strategy. We have a land and expand commercial strategy. So we land in a customer environment and then seek to expand with that customer across their network. So a customer will typically start with between one and a handful of Growth Direct Systems. They'll validate those systems and then expand across their manufacturing networks. This can be across the manufacturing networks with regard to a single type of assay. They can also expand via bringing onboarding more of our applications. For example, they started with water, they can move to environmental monitoring or bioburden or sterility. And they also expand notably geographically. Many of our customers seek to automate their full manufacturing network. And I'll go through our customer list in a couple of slides. Many of them are the large global enterprises.

Another important part of our growth strategy is innovation. So think of our technology as a platform technology in the middle of a mission-critical workflow. How do we move upstream and downstream with regard to new products and services, including data to help our customers achieve more of the benefits in the ROI regarding the Growth Direct and of course, capture more share of wallet in revenue and margin.

And then finally, adjacent markets. So we are focused right now in pharmaceutical manufacturing, but there's also a strong opportunity in other markets such as food and beverage, personal care, medical device. So this is also a great opportunity for us to partner with Merck MilliporeSigma on expanding our ability to access adjacent markets.

So on Slide 13, for those of you in the room, can see our customer logos. For those of you online, you cannot. But our value proposition and our growth strategy has led to this -- our customer network. So as you can see, again, 75% of the global top 20 pharma companies are our customers. We're very, very proud of that, but not all. So we have midsized companies. We have some government entities. We have a mix of -- we're very strong in biologics and cell and gene therapies, but we also serve the CDMO market quite well as well as small molecule manufacturing as well.

From a geographic distribution standpoint, we're pretty balanced between North America and Europe. So think of us as between 40%, 45% or so between -- in North America and in Europe, pretty evenly balanced and the balance, about 10% of our installations in Asia and growing. Again, this is a consequence generally of larger companies adopting the technology and rolling them out across their global networks. It's also important to note, while this is -- we like this chart a lot, and we think it's impressive. It's important to note that we are not fully penetrated in this customer base. There's a long runway to go for additional systems and a lot more consumables and services in our current customer base. And clearly, we're going after those customers who are not yet on this slide.

Slide 14. So we make connecting with our customers a priority. And one of the most powerful ways we do that is through our annual Growth Direct Day. So this is a 2-day event. We host it in Europe. We -- every year, we have a partner customer that is a cosponsor. This past year, it was Daiichi Sankyo. So it's an annual 2-day event. Customers from around the world come in. It's centered in Europe. So it's mostly European, but customers from the U.S. and Asia come as well. It's grown over the years. It started with a handful of people, and it's about 100 we had this most recent year.

And imagine, if you will, it's customers, current customers, prospective customers talking about the Growth Direct for 2 days and how to implement it, how they thought about the onboarding strategy, sharing case studies, sharing examples of how they use the technology. Typically, the sponsor company, again, in this case, Daiichi, will bring the attendees to their actual site and walk the customers around the site to show what the Growth Directs are across the site campus and answer any questions in context of how they adopted the technology.

So it's a fantastic event. We're very proud of it and thrilled with how it's grown. We also had a chance to invite our partner, Merck MilliporeSigma to the event this year, which was quite exciting.

So Slide 15 overviews our historic growth. And we've had strong growth, as I touched on, over the past several years, think of our growth rate, our revenue growth rate as about 25% compounded over the years. So quite strong growth, driven primarily by our land and expand strategy and that strong value prop I walked through. It's also important to note on the revenue slide, the recurring revenue strength that you see year-over-year over year. Not only is that great from a business model standpoint, but it's also indicative of the fact that the customers are using our systems, they're generating value from our systems, and we anticipate they'll continue to purchase and deploy growth because they're getting the ROIs that they expect.

Gross margin is also a high priority for the business. And you can see we've expanded gross margins by 64 percentage points over the past several years. We've had extreme focus on increasing gross margin through efficiency initiatives, product cost reductions, productivity and other focused efforts. And we are fully committed to continue these trends into the future, both from a revenue standpoint and a gross margin standpoint as well.

So on Slide 16, as we look into 2026 and beyond, we believe we're set up very well as a business. We have the right product. It's clear to us with the right adoption, the right commercial momentum against that. We have secular and strong tailwinds driving the business forward. Our business model is working. It's clear we place our capital equipment. We pull through recurring revenue and services. Our business model is very healthy and working. We continue to drive margin expansion. You saw the history, and we fully plan on continuing those margin expansion trends into the future.

We have a fantastic relationship with Merck MilliporeSigma. It's about 10 months old and performing well, and we expect them to -- there is a commitment from Merck Millipore that will impact 2026 meaningfully, which we're excited about. And we also strengthened our balance sheet in 2025 as well, and we're a financially healthy business. So we're set up well to continue to grow and drive margins forward.

So to wrap up on Slide 17, we're excited for a number of reasons about our business. Again, a large market, growing and under pressure to change. We have strong barriers to entry, first-mover advantage in particular. First-mover advantage is very important in this market because as you -- as customers adopt the technology and validate it and put it into routine use in GMP, it becomes quite durable and quite sticky.

We have the right product, the right value proposition as we've chatted about and the adoption by our customer base, we believe is clear evidence to support that. Again, we address all modalities of manufacturing, but we're especially strong in the high-growth areas of biologics manufacturing and cell and gene therapy manufacturing. And we have a proven high-growth business model. I think we've -- hopefully, we've demonstrated that today with our history of where we place the Growth Direct, the capital equipment and pull through a very high rate and high yield of recurring consumables and service contracts, creating that strong recurring revenue base.

So with that, that is the formal comments complete, Ryan. So I think there might be a question or 2.

Yes. Now we can go ahead and start the Q&A session here. I think we've got some questions already here. So Rob, you preannounced your Q4 and fiscal year '25 revenue this Tuesday -- this past Tuesday afternoon. Your performance included a record multisystem order. Can you provide any additional details on this that you'd like to share?

Well, I mean, I think on the quarter and the year, I'll touch on that first. I had a couple of comments in the prepared remarks, but it was -- first, I want to congratulate and thank the Rapid Micro Biosystems team members and employees. It's a fantastic year across multiple dimensions. So revenue, not only system growth, but also recurring revenue growth, margin expansion, I touched on balance sheet reinforcement. So it was a good balanced approach throughout the year.

The large order that we announced was fantastic news in general. But I think it also highlights, again, the strength of our business and our value proposition. That customer was an existing customer, basically going through that land and expand process I touched on. It was an existing customer who had bought a system, put it into routine use, bought another system, put it into routine use and then expanded -- is expanding across their global manufacturing network. And we anticipate this customer will continue to buy even more systems.

I think what's also very exciting about this process with this particular customer is they're adopting all of our applications. So environmental monitoring, water and bioburden. So it's a fantastic case study of how we like to see our customers adopt our technology, global and in depth across the applications.

Out of newly installed base for the last year, what percentage is through Merck Millipore? And how do you see that percentage go up on a 3- or 5-year basis?

Yes. The question was what percent of our installed base is -- was driven by Merck Millipore. So we don't -- we're not releasing the Merck Millipore contribution. But I can tell you this, the Merck Millipore relationship is only about 10 months old. So the vast, vast, vast majority of our installed base is via our direct sales channel. Now that being said, we are very excited about the partnership with Merck Millipore. And looking forward, we anticipate a meaningful contribution. If that's helpful.

I was wondering if you can comment on how much of your revenue is recurring? And also do you pursue lease versus sale? And then finally, just any color on the sales cycle itself.

Yes. So over half, I think it was in 55% last year, what was recurring revenue. So we have a very strong recurring revenue base, so I think half or more. So when it comes to the actual relationship with the customer, we're pretty flexible. I mean the vast majority are arm's length sale, but we have done some leases for certain customer segments that's of interest, but it's probably 95-plus percent is a standard capital acquisition.

And there's a third question there. I'm not sure -- sales cycle. Yes. So it's a standard -- think of it as a standard capital equipment sales cycle. I would divide it into existing customers and new customers. So for a brand-new customer, as you may imagine, it's going to fall into a budgeting -- capital budgeting annual cycle. So it's a 12-month, 18-month type of sales cycle for the first one. Follow-on orders and the expand phase of our land and expand strategy, those can come much quicker than that as customers buy the subsequent tranches of systems from us.

So we have a few more questions here. Sean, you achieved pretty meaningful gross margin improvement in 2025. What are some of the drivers to sustain this trend in 2026 and beyond?

Yes. Thanks. Yes, I think as Rob said earlier, gross margin improvement is a very significant strategic area of focus for us. With good improvement in 2025, I think a highlight to share with the group here that we haven't talked about, didn't have in our pre-announcement is that we -- in the fourth quarter of 2025, kind of a next step on our journey and margin expansion is we've reached positive gross margins on products. So we look at things between product margin, service margins. Service margins have been meaningfully positive for a pretty significant period of time. We've been on a journey kind of moving our product margins up. We have now turned positive there, and that's on a pretty steep trajectory.

As Rob mentioned, if you look at the total business over the past 3 years, we've expanded our overall gross margins over 60 percentage points. So we expect to continue on a pretty significant trajectory as we go forward. And looking at how we do that, I think, is an important part of what we're kind of doing to execute against that. So how do we do that? How do we increase gross margins from where we are now mid- to high single digits for 2025 up into the 50-plus percent range, which is our midterm goal.

I think we start with material cost reductions in our products. We have a number of initiatives, short, medium, long term, to do things related to procurement, vendor changes, vendor negotiations, engineering changes. There's a very broad portfolio of things that we are doing to try to get cost out of both our systems and our consumables. We also have opportunities across both our systems and our consumables to drive increased efficiency through the manufacturing processes.

We have an automated manufacturing line we use to build our consumables. There are opportunities to increase throughput and to be more efficient with things like waste on that line. There are process changes we're looking at in our systems manufacturing. So there are lots of different ways that we have, and we will continue to reduce the amount of material in our products. I think there's also -- volume is a really important part of it as well. So as we continue to grow the business, the base of kind of overhead costs that we have to support the manufacturing of our systems or our consumables is relatively fixed.

We have capacity to grow multiple years into the future, adding very little cost to support that. So as volumes go up, the amount of overhead we're allocating to our products is going down in a meaningful way. So lots of different levers we're pulling through different aspects of the business to drive product margins up. But service margins are important, too. They're around 40% for 2025. There's room to expand there. I think there's productivity initiatives that we can continue to drive in our service business and efficiency in terms of how we do our work and work with our customers. So I think taking all of that, I'd add to that the Merck Millipore partnership that Rob referred to.

Merck is a supplier of a lot of materials we use, particularly in our consumables. So we're talking with them about opportunities to potentially replace existing vendors with them and get preferred pricing on some of those materials, which could accelerate some of our cost reduction initiatives related to those products. But we're also talking to them about their broader supply chain capabilities, logistics partners, distribution. They have a very significant distribution network across the world.

Opportunities for us to kind of piggyback on some of the things that they have in place already to help drive margin expansion for us. So as we look forward, I think we're really excited about what we can do. One thing I can also share is we're off to a really good start in terms of the key initiatives we have in some of these areas in 2026. And as we look out, we'll guide around margins when we give our full year guidance later this quarter. But I can already tell you that the amount of margin expansion we expect in our products, which is where the bulk of our focus is right now, we expect that to be more in 2026 versus 2025 than it was in 2025 versus 2024. So we expect to see some acceleration on a year-over-year basis.

And then we've got one more here for you, Sean. In mid-2025, you strengthened your balance sheet with a term loan facility, as Rob touched on in the presentation. How do you feel about your balance sheet and cash position as we begin 2026?

Yes. Yes. So as you said, Rob touched on our debt facility we put in place in Q3. It's a $45 million debt facility. We drew down $20 million. So there's $25 million of capacity left there. We finished the year with about $38 million in cash. That was in line with our guidance that we had put out there, so in line with expectations. And we expect the burn in 2026 to step down from 2025 as we continue to grow sales, expand margins and we hold spending tightly. That is a core part of what we're doing here to try to manage cash and move ourselves towards breakeven. So when you put all that together, I think we look at that and say that positions us well to get to cash flow breakeven with where we are right now.

[indiscernible]

It was in the $30 million range, a little bit more than $30 million.

[indiscernible]

Excuse me?

Just to clarify for the webcast, this gentleman is asking about the cash burn for the year.

What was the second question?

[indiscernible]

I think with that, with reduced burn, I think we believe that we have a trajectory to get to breakeven without additional financing.

Right. Well, thank you, everyone, for coming to the presentation today. If there's no further questions, I think we can conclude.

Thank you all.

Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn 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 Third Quarter 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 third quarter 2025 financial results. A copy of the release is available on the company's website at rapidmicrobio.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, assumptions regarding future financial performance, anticipated future cash usage, statements relating to the company's term loan facility, guidance for 2025, 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 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.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 7, 2025. 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. I'll begin this morning's call with a brief overview of our third quarter performance. Next, I will discuss the record multi-system order we announced this morning and then review our MilliporeSigma partnership. I'll conclude my prepared remarks with a few comments on our updated 2025 outlook and then turn the call over to Sean for a more detailed review of our financial results and outlook.

This morning, we reported total third quarter revenue of $7.8 million, above the midpoint of our guidance range, representing our 12th consecutive quarter of meeting or beating revenue guidance. Within product revenue, consumables, which are a key indicator of customer demand and usage, increased 40% to a quarterly record. This strong performance helped offset a difficult comparison in system revenue, which included 5 Growth Direct placements versus 7 in the prior year.

Service revenue grew 12% compared to Q3 2024. Recurring revenue, which is comprised of consumables and annual service contracts, increased more than 30% year-over-year. Third quarter gross margins were 9%, reflecting a 70 basis point improvement from the prior year quarter. Higher revenue and productivity gains drove service margins to 40% in the quarter. While product margins were slightly negative, we expect progress on our product cost reduction and manufacturing efficiency initiatives to deliver positive product margins in Q4. Looking forward, we expect continued meaningful gross margin improvement in 2026.

Now I'd like to turn to the significant commercial win we announced earlier this morning. In October, we secured a record multi-system order from an existing top 20 global biopharma customer, with contributions beginning in the fourth quarter and extending into 2026 and beyond. This customer is deploying Growth Direct Systems across multiple sites in North America, Europe and Asia Pacific. Additionally, the customer will utilize the Growth Direct platform across several manufacturing modalities and fully leverage all of our applications, including environmental monitoring, water and bioburden.

This milestone underscores the Growth Direct platform's position as the leading fully automated solution capable of meeting the demands of increasingly complex, large-scale and global biopharmaceutical manufacturing. It also reflects the trust and strong partnerships we've built with our customers, and illustrates how customers have and will continue to adopt the Growth Direct platform. Importantly, we expect this customer to make additional purchases as they continue to expand and standardize across their network. This achievement is a testament to the outstanding work of our commercial team, and we are now focused on timely and efficient execution as our operations and service team support this global deployment.

In addition to this multi-system order, broader customer engagement remains strong. Last week, we attended the annual PDA Pharmaceutical Microbiology Conference, the largest global industry event focused on microbiology and pharmaceutical manufacturing. Our key takeaways were twofold. Confirmation of the accelerating industry trend towards automation and validation from existing and prospective customers that the Growth Direct platform is the right product for modernizing pharmaceutical manufacturing and quality control.

Now turning to our collaboration with MilliporeSigma. We remain closely engaged with our commercial team as they develop their global sales funnel. In the third quarter, they began to order Growth Direct Systems. Though as previously indicated, their purchase commitments will remain modest in 2025 and become more meaningful in 2026. Next week, Daiichi Sankyo will support our annual Growth Direct Day near their facility outside Munich, Germany. As you'll recall, this event will feature existing and prospective customers discussing the benefits and sharing best practices of the Growth Direct platform.

And this year, we're pleased to welcome colleagues from MilliporeSigma and several of their prospective customers, making it our largest Growth Direct Day ever. In addition, later in November, our sales and marketing colleagues will work alongside the MilliporeSigma team in the Jason Booth's at the Pharma Lab Congress, also taking place in Germany. This will be a valuable opportunity to jointly engage customers and further accelerate commercial momentum for both organizations.

Turning to the second component of our MilliporeSigma collaboration. We are nearing completion of an initial product supply agreement. We are currently conducting material validation studies and assessing additional areas to potentially expand the scope of the agreement. This agreement is a meaningful step towards driving margin improvement as these programs are expected to lower our direct product costs and improve gross margins, with financial benefits starting in the second half of 2026.

In summary, we're pleased with our execution and very encouraged by the momentum building as we exit 2025. With strong year-to-date performance across the business and initial contributions from the recent multi-system order, we are raising our full year total revenue guidance to at least $33 million, which includes at least 27 Growth Direct System placements.

As we look ahead to 2026, there will be 3 core drivers of revenue growth. First, a robust pipeline. Our sales funnel remains strong with multiple customers planning multi-system global rollouts. These opportunities are similar to our recent record order motivated by a compelling ROI and a drive to standardize and automate global manufacturing networks.

Second, our business model is anchored by an expanding global installed base of over 150 fully validated Growth Direct Systems, generating durable recurring revenue from consumable and service contracts.

And third, our collaboration with MilliporeSigma continues to progress well. They have begun to order Growth Direct Systems, and are building a global funnel of opportunities that we expect to contribute meaningfully to system placements in 2026.

In addition to these revenue growth drivers, we remain equally focused on improving profitability. Margin expansion will accelerate in 2026, driven by internal product cost reductions and manufacturing efficiency initiatives, as well as anticipated benefits from the MilliporeSigma supply collaboration. Finally, we are well positioned to capitalize on industry tailwinds, including the accelerating use of automation technology and increased investments in the onshoring of U.S. pharmaceutical manufacturing. The Growth Direct strong customer value proposition, combined with our growing global top-tier customer base, optimally positions us for future pharma industry investment and growth.

And with that, I'll turn the call over to Sean.

Thanks, Rob, and good morning, everyone. Third quarter revenue of $7.8 million increased 3% compared to the $7.6 million we reported in Q3 2024. We placed 5 Growth Direct Systems and completed 4 validations in the quarter, and now stand at 174 cumulative systems placed globally, including 152 fully validated systems.

Product revenue was essentially flat at $5.2 million in Q3, with record consumable revenue offsetting the impact of 2 fewer system placements compared to Q3 2024. Service revenue was $2.6 million, an increase of 12% compared to Q3 last year, driven by higher service contract revenue resulting from an increase in the cumulative number of validated systems on a year-over-year basis.

Third quarter recurring revenue, which consists of consumables and service contracts increased 32% to $4.8 million with consumables growing 40% in the period. Nonrecurring revenue, which is comprised mainly of systems and validation revenue, was $3 million. Third quarter gross margin was 9%, marking our fifth consecutive quarter of positive gross margins and a sequential improvement of over 500 basis points compared to Q2.

Product margins were negative 7% in the quarter, compared to negative 1% in Q3 2024. While consumable margins improved meaningfully compared to Q3 last year as we continue to make good progress on our product cost and manufacturing efficiency initiatives, overall product margins were slightly lower due to a short-term shift in the mix of revenue from systems to consumables. On a sequential basis, Q3 product margins improved by 4 percentage points compared to Q2.

Service margins were 40% in the third quarter compared to 29% in Q3 last year. The improvement was driven by higher revenue and productivity as well as lower service headcount. Total operating expenses were $12.1 million in the third quarter, representing a decrease of 5% from the $12.7 million we reported in Q3 2024, due largely to benefits from the operational efficiency program we announced in August last year. Within OpEx, R&D expenses were $3.5 million, sales and marketing expenses were $2.9 million and G&A expenses were $5.6 million. Interest income was $0.3 million and interest expense was $0.4 million in the third quarter.

Net loss was $11.5 million in Q3 compared to a net loss of $11.3 million in Q3 last year. Net loss per share was $0.26, both in Q3 this year and last year. With respect to noncash expenses and capital expenditures, depreciation and amortization expenses were $0.8 million. Stock compensation expense was $1.1 million and capital expenditures were $0.1 million in the third quarter. We ended the quarter with approximately $42 million in cash and investments.

Now I'll turn to our outlook. As Rob highlighted earlier, we are raising our full year 2025 revenue guidance to at least $33 million, which includes at least 27 Growth Direct System placements. This guidance reflects the initial contribution from the large multisystem customer order we recently received. We expect this order to contribute meaningfully to system placements and system revenue in Q4 with related installation and validation service revenue recognized in the first half of 2026. These new systems are also expected to begin generating consumable revenue as they ramp to routine use in the second half of 2026.

Turning to consumables. We expect Q4 revenue to step down sequentially and be consistent with Q2 levels with variability driven by the timing of customer orders and shipments. With respect to service revenue, we expect to temporarily step down to roughly $2 million in Q4 due to the timing of validation activities. Specifically, most validations of recently placed systems were either completed by the end of Q3 or are planned for 2026, including the validation of systems under the multisystem order we received this quarter. We continue to expect to complete at least 18 validations in the full year 2025 with at least 3 in the fourth quarter.

Turning to gross margins. We expect our gross margin percentage to be in the mid-single digits in Q4. Breaking this down, we expect positive product margins for the first time, driven by higher system placements and continued progress on our product cost reduction and manufacturing efficiency initiatives. Conversely, we expect service margins to step down both sequentially and year-over-year. This reflects lower service revenue and a challenging comparison to last year's Q4, which remains our highest service revenue quarter on record. For the full year, we expect our overall gross margin percentage to be in the mid- to high single digits.

We expect further meaningful gross margin improvement in 2026, driven by our ongoing product cost reduction and manufacturing efficiency initiatives, as well as increasing volume leverage and anticipated benefits from the MilliporeSigma supply collaboration as we progress through the year. We expect operating expenses to step down from Q3 to Q4, and to now be around $48 million for the full year, with full year depreciation and amortization expense of approximately $3 million, stock compensation expense of $4 million and CapEx of $2 million. For the fourth quarter, we expect interest income of $0.5 million and interest expense of $0.6 million to largely offset each other. Finally, we continue to expect to end the year with roughly $40 million in cash and investments.

That concludes my comments. So at this point, we'll open the call up for questions. Operator?

[Operator Instructions] And our first question will be coming from Thomas Flaten of Lake Street Capital Markets.

Congrats on the quarter. Sean, I just want to make sure I understand. In the last call, you indicated that you would be at the low end of the 21 to 25 system placement and now you're going to be at least 27, which leads me to believe there might be more than $1 million in terms of the guidance raise. Can you just square that circle for me?

Yes. I think there's a couple of moving pieces here, Thomas. So we talked about -- so on the large multi-system order, I think when we talked last quarter, we have said consistently that we have a number of these kind of in the background where we have not been assuming them in the guide. So the transaction that we're talking about today is not something that was considered back then. So it is additive.

We've got some things going the other way in Q4 in terms of the guide. So for example, service because of mainly timing, I think it's good news for 2026 service revenue. It does have a short-term impact on Q4 service revenue, will actually be lower than we expected it to be going back a quarter. So you've got some puts and takes here that are kind of netting out to that increase in the overall increase in the revenue guide.

Got it. And then kind of at a broader level, I know the multi-system order is across 3 geographies, and you said that you're going to benefit from onshoring. I'm curious, though, if you look more broadly, the demand you're seeing from a geographical distribution, what does that look like?

Yes, Thomas, it's Rob. So it's generally consistent with where it has been. So we -- as you know, we operate in North America, Europe and Asia. I think this most recent multi-system orders is a pretty good example, is a good proxy of end market conditions that we're seeing. Things are -- I wouldn't say they're more robust in one region than another. And many times, it's really dependent on the specific company that we're working with. So we anticipate -- it depends quarter-to-quarter and timing is always an issue depending on where in the world things are coming from.

But I think the takeaways from this -- from our announcement is that our value proposition is resonating. Customers are trusting us to deploy globally, and we're seeing generally broad-based demand from our customer base to deploy globally. And notably, this particular win was not due to U.S. onshoring. So we expect that to be a potential benefit in 2026 and beyond.

And our next question will be coming from Paul Knight of KeyBanc.

Rob, congratulations on the order in the quarter. This is what? You're going to have 6 delivered in Q4 on this order. What -- did you say total order size?

I didn't say total order size, nor do we say how many we're going to deliver this quarter specifically out of the order, Paul. But we're not going to disclose the exact order size, but you can think of it as a double-digit order.

Okay. And then the next question is in the world with analytical instruments, it's kind of an instrument becomes ubiquitous across the world within each major biopharma. So the question is how many multiple -- how many multiple orders are you looking at? How many customers are saying, I've got to have this in all 3 continents?

Yes, we -- certainly, we're striving for ubiquity, Paul. So that of course, is the ultimate goal. So we've had historically customers purchase multi-system orders and deploy globally. This is a notable example of a large single order, and we anticipate more of these going forward.

As we said, we've got multiple multi-system orders in our funnel, and we -- our plan is to continue to develop those and close those, and get our customers going. Moreover, we also expect over time, that Merck Millipore relationship to build upon this momentum and success. And that's how we look at the next -- certainly into '26 and beyond.

And there's 2 aspects to Merck Millipore, right? A, you expect them to sell some units in their own channel and the other, more cost efficiencies. Where do you think you're on the cost efficiency journey with them? Are you just getting started and we really see that in '26?

Yes, I think that's right, Paul. This is Sean. We are working through -- I think Rob mentioned some of this in his remarks, the process of looking at materials specifically right now. Some of the key materials that go into our consumables are things that we can procure from Merck. But as you do that, you've got to work through testing, validation, make sure it's all going to work and the performance is where you want it to be. And then there's a process of kind of moving that over to manufacturing, working through your existing inventory and transitioning over to the new inventory with that material in it.

So I would think about the benefits from that kind of as we're looking at right now is probably second half of next year is when we'll start to see some benefits from that activity.

And our next question will be coming from Brendan Smith of TD Cowen.

Congrats on the [indiscernible]. Just wanted to get a sense of how you all are thinking actually about this momentum against the current backdrop. I guess we've heard broadly that pharma biotech spending has been, again, kind of broadly hitting instruments and services maybe more than other segments. Obviously, you all are still seeing some pretty steady demand, maybe with some nuances.

But I guess my question is really as folks are getting their '26 budgets together and maybe start feeling more comfortable with revisiting some of that spend. Do you guys expect that could potentially be an outsized growth tailwind like in the first half of next year? Or is kind of the steady sequential growth we've been seeing how we should think about it in the next couple of quarters?

Yes, Brendan, it's Rob. I would say that it's -- we don't -- we're not seeing a demonstrable -- we haven't seen a demonstrable change. It's a little hard to prognosticate at this point about 2026, although it seems to be getting, I would say, maybe a click or 2 better. As we said in several -- what we are seeing though, the 80-20, if you will, is at least over the past several quarters, it's been fairly consistent where, to your point, yes, the CapEx budgets have been more scrutinized and things are going through more diligence, if you will.

But as we've said several times, high ROI compelling investments are getting through. And I think we've been able to continue to be a beneficiary of that. And I think this most recent announcement is a clear and present example that pharma will continue to invest in high ROI projects. And also, as I've mentioned on previous calls, in some cases, in this most recent one, I think, is a good example where there's a strategic impact across an enterprise in multiple sites, we have seen growth direct projects be a bit more resilient to the vagaries of the budget tightening.

Got it. Yes, makes sense. And then really quickly, just maybe piggybacking off of the onshoring conversation a little bit. Is also something we get asked about quite a bit. I guess it's feeling like most people are assuming it's not going to be a huge factor in '26, but could maybe start to hit in '27. Does that kind of gel with how you're thinking about it or what you're hearing? Or should we think maybe more '28 plus? Just kind of...

I think -- yes. I think that's -- Listen, I don't think it's going to be a floodgate from what we can tell. And just we've been involved over the years in a lot of construction projects with new labs. So what you'll see is it won't be uniform. In some cases, entire sites are being built from a greenfield. In other cases, other sites are being expanded, which can move a little faster. In other cases, even labs are being expanded. So you'll have this maybe uneven mix.

As we talked about last time, there might be a log jam with some of the design and A&E firms out there. So that may play a factor. But I think you could start to see potentially the leading edge. More broadly, I won't speak for RMB specifically, but more broadly in 2026. And then I would generally agree, '27 could be certainly feature more and then '28 and beyond, absolutely.

And our next question will be coming from Dan Arias of Stifel, Nicolaus & Company Inc.

This is [ Rowan ] on for Dan. Maybe a quick one. Regarding the large multi-system order in October, how long does it typically take to plays validate and start seeing a ramp on consumable pull-through from these systems? Just trying to get a better view on the time line there. Or maybe just in general, as you alluded to having other, I guess, orders in the pipeline there, or potential orders in the pipeline?

[ Rowan ], it's Sean. I think as we look at this particular deal, I think we expect it to kind of follow the following path. I think the placements, they're going to have a meaningful impact in Q4. And moving into the first half of next year, we expect to get those systems installed and validated. I think we have a motivated customer, and we are ready to go with them in that time frame to get that work done, which I think is a tailwind as we think about services in that time period.

And then as we get into the second half of the year, what typically happens and what we expect in this case is that they'll -- we'll get the validations done. They'll kind of work through their internal process and start to ramp up into GMP use, and we expect to see at least the front end of that in the second half of next year from a consumable standpoint. So that's the kind of time frame we typically expect to see.

I think different customers can move with different speed depending on resourcing and things like that. But I think this one we feel good is there's good alignment between us and the customer to work along that time line.

Okay. And maybe just one more quickly. In the past, Rapid has alluded to wanting to penetrate adjacent markets such as personal care. How much traction are you all seeing in that market? What has become of those efforts?

Yes. Thanks, [ Rowan ]. It's Rob again. So as we have mentioned, there are sizable adjacent markets. Personal care, as you mentioned, is certainly one of them. Our current strategy from a Rapid Micro direct sales commercial effort is principally focused on global pharmaceutical and biopharma. Our strategy to develop those adjacent markets, personal care, med device and others is generally focused on our collaboration with Merck MilliporeSigma.

Some of those markets, they're large or can be large. They tend to be a bit more fragmented, a little bit different sales cycle. So having a larger sales force that Merck MilliporeSigma has focused on those markets and more uniformly spread globally is really our strategy to go after those markets. And our collaboration agreement allows for that, and encourages that, frankly.

Great. And I think that's the last question. So thank you all for the question. We'll conclude the call at this time. Appreciate everyone's time and attention, and we look forward to speaking with many of you soon. Thank you.

And this concludes today's program. Thank you for participating. You may now disconnect.