Maravai LifeSciences Holdings, Inc. Q4 FY2025 earnings call

Bernd Brust mentioned after assuming CEO role last June, the team focused on simplifying business, improving operational execution, increasing customer interaction. Key points include demonstrating leverage of new operating model with positive adjusted EBITDA in Q4, commercial execution improvements like increased customer engagement, operational changes such as reducing fixed costs, centralizing operations, implementing automation. R&D priorities on high-return opportunities, ModTail technology showing strong traction, Cygnus expanding mass spec infrastructure and investing in MockV product line. Raj Asarpota discussed Q4 financial results, segment results, and expense savings ahead of schedule.

TriLink generated $34.6 million in Q4 revenue, down 17% year-over-year but excluding high-volume COVID CleanCap comp in prior year quarter, base revenue grew 25% driven by GMP consumables and CDMO services. TriLink's full-year revenue was $119.8 million (64% of total) with adjusted EBITDA of negative $23.1 million. Cygnus revenue was $15.3 million in Q4, up 4% year-over-year, representing 31% of total revenue. Full-year Cygnus revenue increased 5% to $66 million with adjusted EBITDA of $44.2 million and a 67% margin.

Expect total revenue of $200 million to $210 million in 2026, representing 8% to 13% growth over 2025. TriLink expected to grow low double digits at midpoint driven by double-digit growth in GMP consumables and stabilization in discovery. Cygnus expected to grow low to mid-single digits. Full-year adjusted EBITDA expected $18 million to $20 million, improvement of $50 million to $52 million over 2025. Gross margin expansion of approximately 1,200 basis points year-over-year. Total operating expenses expected to decline approximately 13%, G&A expenses -18%, sales and marketing -13%, R&D modestly up. Interest expense net of interest income $15 million to $17 million, depreciation and amortization $50 million to $52 million, stock-based compensation $26 million to $28 million, net capital expenditures $4 million to $6 million.

Refer to Maravai's SEC filings for risks and uncertainties impacting operating results, performance and financial condition. Specifically mentioned risks related to the business's dependence on customer spending, lumpiness of orders, and the potential impact of clinical trial outcomes on revenue.

Q: Maybe on the commentary on visibility improving in the color on Slide 8, you talked about strong order volume. Is it fair to say orders are tracking kind of ahead of what you're guiding on revenues for '26 on year-on-year growth. So maybe just derisking a bit or leaving a bit of upside. Is there any more color you can give in terms of order and funnel growth type of a strong order volume? And if yes, maybe pipe out some of the opportunity where you see the most areas of upside as you move through '26 here?

A: Thanks, Matt. This is Bernd. We shared in our last earnings call that there's a little lumpiness of course, in this business, right, in a business that's a couple of hundred million bucks in revenue and our average order volume is fairly high, average order cycle is about 6 months. So it's hard to get a true outlook on what happens for the full year. And so we're certainly I think trying to be somewhat conservative as to how we set ourselves up for the future here. But specific to your question, order volumes are materially higher so far than they were last year at this period of time. So that's a good sign, obviously. What we see specifically is in the TriLink world in our GMP consumables as well as our larger order sizes in discovery. When we look at our business in discovery, there are sort of 2 categories: orders under average 15 [indiscernible], where we assume those salespeople are involved in orders over 15 that does require usually some kind of sales involvement where we're seeing material growth in is in these larger orders in discovery alongside with GMP. But order volumes are great, and we feel very, very confident about where we are with our forecast for the year.

Q: First one is on the gross margin expansion of 1,200 bps from restructuring cost initiatives and product mix. Can you break out each of these buckets, if possible?

A: Yes, sure. We can -- I can give you the details on the cost savings that we've outlined before. So we talked about the $55 million that we previously mentioned. And now the actual gross margin expansion is going to be coming from the $65 million annualized savings. And again, I'd like to remind you that we captured about $3 million of that in Q3 and another $8 million in Q4. So the $65 million in annualized cost savings basically resets the fixed cost base to create that margin lift on gross margin, which is independent of volume growth. And then there's additional expansion on gross margin that's going to come from mix, made from GMP consumables contribution and the operating leverage as we continue to expand revenue.

Q: AI role in drug discovery, development and manufacturing is the investor focus of late. How is Maravai using AI either at the sender side in R&D or otherwise to generate efficiency?

A: I'm sure the question was how is AI driving efficiencies in the business? Yes. I think we're implementing this in various areas of the organization. And you heard us talk about mRNAbuilder that we went live with, I think it was the third quarter of last year. It's really an automated platform that we acquired through the efficient acquisition early last year that allows customers without really any human intervention to upload their DNA construct and then create an optimized RNA construct from there. I think so far, since we have been live, something like 70-or-so orders have been going through that system. It's gradually picking up. But that's probably the biggest involvement of AI that we have at the moment. I can't speak to whether we use that in the CDMO world, I don't believe so.

Q: Congrats on the update. It seems like you've turned a corner here. I wanted to ask about the guide for the year. Just given Q3 and Q4 you had some lumpiness with some of the CDMO builds. And so a number of larger peers have characterized perhaps a softer first quarter, though they're optimistic about the build for the year. So just curious if there's anything you would call out either from a prior year comp or an expected order conversion that might affect casing in the first quarter in particular?

A: Listen, we're optimistic on Q1. As we shared, we're optimistic on the year as well. On the top line, it's really not any serious negative comps. So obviously, we comped out all of the COVID hits that we comped against '24 and '25, but when you look at the orders that we are currently seeing in the business, it's really quite a diverse set of customers across the portfolio of TriLink. And obviously, Cygnus continues to run at the sort of mid-single-digit revenue levels as well. So we really don't look at it as a negative or positive comp in Q1. I think if you look at this year, probably Q3 last year was pretty tough on the GMP world. So we'll see what that means this year on Q3. But certainly, as we look at the first half of the year here, we shared with I think the group here in September that we were expecting somewhere between $10 million and $20 million worth of COVID caps in 2026, specifically in the first half. We still expect that to happen in the first half. So that is the one positive comp that you'll see in the first half. But other than that, I think it's true strength of customer spending.

Q: Regarding the restructuring, you got through that earlier than expected. So should we anticipate that the expense lines kind of have reset at this point, maybe a little bit below the Q4 numbers for sales in general and all that and kind of show some normalized growth -- CA growth, if you will, over the course of the year or is there still yet one more step down after Q1?

A: So again, going back to the macro level, the $65 million in expense reductions that we've outlined those expense categories haven't changed. Some have moved a little bit towards being more favorable. Our labor expense profile is going to remain the same. Our facilities is going to essentially remain the same. Our controllables expense is going to be down a lot more than we anticipated. And then just by the account types. If you look at our COGS profile, that's going to materially essentially remain the same. But on the OpEx side, we're going to get a lot more out of G&A. And like we said we're going to invest a little bit on R&D and then sales and marketing is going to essentially remain the same. There will be another modest drop in Q1 though I think to get your question directly.

Q: The FDA recently provided some new draft guidance regarding some of your markets. And I'm just curious what your thoughts were on that draft guidance? And more importantly, when do you think that you could maybe start to see some benefit from that?

A: Yes. I don't think we have internally looked at that very closely. We don't have a ton of exposure on where that dialogue sits at the moment. And so I don't think we have a clear view on that at this...

Q: You mentioned that you're working with around 250 to 300 customers within the mRNA ecosystem. I was just wondering where kind of market shares show out between clinical and preclinical customers and how you kind of characterize the recent market share dynamics there? And then just lastly, how do you kind of feel about current mRNA pipeline trends heading into 2026?

A: Yes. I think we assume about 1/3 market share, right, of mRNA customers out there. It's not always that easy to talk about programs because we don't always know how many programs a customer is running at a given point in time. But I think if you look at our GMP revenues, which Raj, which are this year forecasted at what number, do you remember? GMP consumables. It's somewhere around $44 million, $45 million, right, something like that. And so that suggests that your discovery business is still larger than our GMP business. So I would say that today, the GMP world, I know it's 1/3 of our revenue, something like that. And we're seeing the fastest growth happening there. So that certainly to us indicates that you're going to continue to see either more programs coming into the GMP world or programs progressing in higher volumes.

Q: Sticking with GMP, can you give us a sense of what that -- how much revenue that generated in 2025? And then as we think about 2026, excluding the COVID revenue, is there any seasonality that we should take into consideration for TriLink?

A: I don't know there's seasonality necessarily. That's kind of the interesting part about this business. The lumpiness exists based on these order sizes and really until you get some of these programs becoming commercial you have changes from certainly discovery into GMP, you have certainly movement from Phase I to II to III. Some programs don't make it out of certain trial levels. And so the lumpiness that we see in the business is really not seasonal, it's purely tied to really how successful these clinical trials are. But yes, the nature of our business is such that because these orders are fairly large, as they shift between programs they will likely shift between time as well.

Q: The first on APAC, the second on MockV. So starting on APAC. As a percentage of revenue, APAC increased pretty meaningfully in the fourth quarter compared to the third quarter. I think you said China was stable. So it does seem to imply that there was a pretty big pickup in Asia, ex China. Am I thinking about that right? And if so, what drove that change? And is this a trend that you expect to continue into 2026? And then on MockV, you called out demand as a driver of growth in the quarter. How has that been trending? And how do you expect that to contribute in 2026? And I'm just wondering if over time, that could be a contributor to driving overall Cygnus growth above the mid-single-digit construct?

A: I'll take the -- I'll start with the GMP and like in Asia Pacific in Q4 was driven by 2 large GMP orders, but they were kind of tied to our ongoing programs and partnerships and not kind of the onetime events. And then -- so we view this as a sustainable kind of event and reflective of the ongoing improving program momentum we have, and it's not a one-off event. So that was what drove the APAC growth. And then what was your second question again, I'm sorry? Yes, we did see MockV growth, and we think that product has shown tremendous kind of runway from last year to this year and in -- sorry, from '24 to '25 and we see continued kind of growth on that product line within Cygnus. If I also may add MockV. So Cygnus has supported several customers with the including MockV data in customers' clinical trial application. So the idea of MockV could potentially replace expensive lengthy viral clearance study, which can really broaden our potential customer base. And we think MockV has great potential runway here, and I think it's a good indication of that. I would also say, don't expect that to happen in 3 months. It's a longer-cycle business. Ad short-term growth, I think the question was, how do we potentially look at Cygnus growing faster than sort of mid-single digits? I think certainly, long-term MockV could be a player there. We've invested some more in services. We bought another mass spec into the organization. So I think you'll see some opportunity coming from there. And I think you're right, Asia does have some opportunities. that are potentially there for us to capitalize on.

Q: This is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. Congrats on the great quarter. So a quick question about the CleanCap revenue. You mentioned $10 million to $20 million will come in the first half. Can we assume that there will be additional COVID CleanCap revenue in the second half?

A: No. I think we shared with all of you in Q4 that we expect $10 million to $20 million will be the total number for 2026. So we kind of look at that as the ongoing run rate in the following years as well. And you should keep that number as a guidance for the business. We expect this year that all to come in the first half of the year.

Q: And then next would be kind of -- you talked to the significant traction you're seeing in ModTail. I was wondering if you could talk to the traction you're seeing in the new IVT kits. And then你 previously mentioned that you intend to launch new kits in '26? And when could we potentially expect to see the launch of those kits?

A: Chan, do you want to answer that or would you like me to? Yes. Yes. So we've -- the ModTail we launched nRNA service and catalog mRNA. And so the data coming back from customers that they are very positive. And so they are starting asking -- as Bernd mentioned, that we have large pharma companies using this technology. And as the positive data coming back, they are asking sort of GMP-related question. Obviously, we'll be ready for GMP to meet the customer demand. And for the IVT kits, as you know, [indiscernible] has been doing mRNA for many years. So we have deep knowledge IVT CleanCaps. So the kit is really well received in the field. We have over 100 kits ordered first few weeks -- first 4 weeks, and we see sequential growth from Q3 to Q4, and we also see more adoption in the field. We also converted one major customer from a competitor to use our kit. So it's all good, and我们 are going to launch more kits and a different version of kit to meet customer demand this year. So ModTail is an interesting product. I mean it's still early days, obviously, but the fact that we officially launched this in September through the commercial organization, well over $1 million in orders already. And that's through Chanfeng's comments, service and some catalog mRNA feedback that's come back from customers have been quite impressive. And so we have a lot of confidence of this product becoming a big driver of revenue growth for our business in the years to come.