Rapid Micro Biosystems, Inc. Q4 FY2025 earnings call

Rob mentioned fourth quarter performance, commercial new orders like Samsung expanding GrowthDirect platform deployment and Amgen's multi-system order. Highlighted 2026 priorities: accelerating system placements, expanding gross margins, innovating new products, and prudently managing cash. Progress in partnership with Millipore Sigma and expectation to release next-generation cloud-native software platform in second half of 2026.

Fourth quarter revenue was $11.3 million, up 37% year-over-year, a quarterly record. Product revenue increased 78% driven by strong system placements. Full-year consumable revenue grew 17%, and recurring revenue increased 15% to account for 53% of total revenue. Fourth quarter gross margin was impacted by inventory-related charges, at -3% overall, but 7% excluding the inventory write-off. Full-year operating expenses decreased 3% while revenue increased 20%.

2026 full-year revenue guidance is $37 to $41 million, including 30 to 38 system placements. Q1 revenue expected to be at least $7.5 million with at least 5 system placements. Full-year gross margin expected to be approximately 20%, with Q4 exit rate in the mid-20% range or better.

Risks include inability to meet publicly announced guidance, impact of existing and future indebtedness on business operation, ability to access debt financing and comply with obligations, product delivery and revenue recognition issues, and market and macroeconomic conditions.

Q: Hey, good morning. I appreciate you taking the questions, and thanks, Sean, for 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?

A: Yeah, 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 customer's 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 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, 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 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, Rob, if you have any comments. 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.Q: And with the Samsung announcement this morning, could you just comment on the percentage of your play systems that are within CDMOs and how you see that space evolving over time relative to the drug originators themselves?

A: Yeah, 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 Lanza is a customer. Samsung, obviously, and other CDMOs as well. We have a very strong value proposition for CDMOs as well as what we call principal manufacturers. We're growing rapidly. Clearly, today's a good example of both Amgen and Samsung, so you've got both a principal manufacturer and a CDMO. But CDMOs in particular 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, We have quite strong 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 mid-CDOs globally as well. So generally it's a very strong segment for us as well as the principal manufacturers. I can't say 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.Q: Hey, good morning, guys. Thanks. 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 and 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?

A: Yep. Yep. I'll take that one, Dan. Thinking about it, there's a couple of key drivers to focus on from my perspective. One is we talked to 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 without accelerating 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 two of the largest drivers, if not the largest drivers, are 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 two. 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 key factors that give us confidence in being able to achieve those kinds of numbers for the year and exiting the year. Yeah, 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.Q: And then maybe on these 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? You know, 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?

A: Yeah, 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, you know, I talked about Amgen a little bit ago, you know, 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 timeline 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,我'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 bigger step up than that in 27.Q: Hi, thanks for taking my question and congrats on the quarter and the exciting announcement with Samsung. Maybe to start, do you think you could share more insight on the Samsung multi-system 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. Thank you.

A: Yeah, 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 years ago. This is a second wave, which is actually a larger order size, and it's focused primarily on their principal area in South Korea, although some of you may know that Samsung is also acquiring around the world, so those are also in scope. And as I mentioned a couple 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?

A: Yeah, 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 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 expand strategy is focused on that, but also to your point, we're also, the team's 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.Q: Great. Thanks for taking the questions, guys. 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 you know, how this gets integrated into devices moving forward? Is this something that, you know, all new orders will automatically include some of these analytics capabilities? Is it a software update push you can monetize into existing install bases? Just kind of wondering how we should think about that contributing to growth.

A: Yeah, so thanks for the question, Brad. Think of it as a... a bit of a phased approach. So out of the box, 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 one, 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 customer's cloud will run it, but from a future revenue standpoint, we could also provide cloud services. Right now, the system is in a pre-launch phase with a major customer operating in their cloud, running the growth directs, and the feedback has been exceptional. So we're quite excited about that. So out of 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 limbs. Over time, we see the ability to provide services against that cloud data. So imagine a fleet of growth directs 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 rec 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-step multi-year 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 the goal is to continue to drive to 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 really feels like we're pushing against an open door. In some cases, customers are asking us for services in this general category.Q: 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, you know, within the Millipore network that you referenced? Maybe what else you're planning there this year to kind of drive the added reduction in the second half?

A: Yeah. Hey, Brennan. It's Sean. Yes, we are still working with Merck Millipore Sigma on several different opportunities. I think some could benefit this year. Some are more longer-term focused in terms of things we could do. As we've talked about in the past, it's quite a broad pallet 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 they 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. and 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 by the 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.