Alpha Teknova, Inc. Q3 FY2025 earnings call

• Revenue increased 9% year-over-year, marking the fifth consecutive quarter of growth, driven by 16% growth in Lab Essentials sales. - Executed well operationally with investments in distributor management, purchasing integration, and price optimization, achieving double-digit growth in catalog products. - Increased and diversified Clinical Solutions customer base, expecting revenue per customer to rise as they progress in clinical trials. - Key projects for operating efficiency (e.g., moving to electronic batch records) on track to be operational in 2026, improving metrics like on-time delivery. - Active in pursuing tuck-in acquisitions and collaborations to bolster capabilities. - Limited geopolitical exposure as sales are predominantly in the US, but exposed to biotech funding changes with 25% of revenue from custom products in preclinical/early-stage trials facing delays.

In the third quarter of 2025, Lab Essentials products generated revenue of $8.3 million, a 16% increase from $7.2 million in the same period of 2024. Clinical Solutions products had revenue of $1.7 million, a 13% decrease from $2.0 million in the third quarter of 2024. Lab Essentials represents the majority of revenue, while Clinical Solutions is a smaller segment.

• Reiterated 2025 total revenue guidance of $39 million to $42 million, expecting to finish slightly below the midpoint. - Catalog products expected to grow mid-teens, while custom products have modest growth. - Gross margin target for FY2025 remains in the low 30s. - Anticipates operating expenses of at least $8 million in Q4 to position for market recovery. - Believes will become adjusted EBITDA positive at $50 million to $55 million in annualized revenue. - Full year 2025 free cash outflow expected to be less than $12 million.

• Exposure to changes in biotech funding levels, with 25% of revenue from custom products in preclinical/early-stage trials facing delays. - Limited geopolitical impact but still some exposure exists.

Q: Maybe just to start, just given the recent rhetoric around MFN pharma tariffs and just the subsequent announcements around onshoring capacity and pharma production, how have customer conversations trended thus far into the second half of this year?

A: Yes. Thanks, Mac. So I would say we like the idea of these leading indicators, whether it's biotech funding or the MFN results, but we're not yet seeing the impact from the customers. So I think there's optimism across the board, but the actual actions of maybe purchasing more ramping up purchases, we have not yet seen, which is why we've been here before, and we want to make sure that we're cautious and seeing that when these things start to happen, if they're sustained for an extended period of time, we believe it will impact the sort of the emerging therapy side. At this point in time, I would say we're seeing some nice growth in the large pharma. We're actually seeing some nice growth in some of the emerging therapeutic companies that have been purchased by larger companies, but those that are still constrained by capital are operating in a way that they're rationalizing the pipeline or slowing things down at the moment. So at this point in time, Mac, there's been pretty limited conversations about ramp-up there.

Q: I appreciate all the color on actually the funding environment impact or potential impact into next year. Actually, just wondering if you could maybe give really any more color there on actually the expected product mix that could kind of come in some of these different scenarios that might help drive that compensation you're talking about the possibility of a more protracted biotech slowdown. I guess really just wondering if there are any specific products within that custom portfolio that you're seeing particular interest in and what maybe your expectations are for those into next year?

A: Yes. So Brendan, if you're asking about like what type of product mix we typically sell into the custom biopharma, is that correct? And how we see that changing over time? ...