Good morning, and welcome to the Rapid Micro Biosystems First Quarter Financial Results Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome, Mike Beaulieu, of Investor Relations to begin the conference. Mike, over to you.

Good morning, and thank you for joining the Rapid Micro Biosystems first quarter 2023 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 first quarter 2023 financial results. A copy of the release is available on the company's website at rapidmicrobio.com under Investors in the News & 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 were 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, anticipated year-end cash balance, cash runway, future revenue and system placements, expectations for business development and growth, customer interest and adoption of the Growth Direct System, expectations for our new RMBNucleus Mold Alarm, and the potential impact of macroeconomic uncertainty and the coronavirus pandemic on Rapid Micro's business. Actual results may differ materially from those expressed or implied in the forward-looking statements, due to a variety of factors. For a list and description of the risks and uncertainties associated with Rapid Micro's business, please refer to the Risk Factors section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2023, as such risk factors are updated 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 5, 2023. 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 now turn the call over to Rob.

Thank you, Mike. Good morning, everyone, and thank you for joining us to review our first quarter 2023 results. I will begin this morning's call with a summary of our first quarter performance, followed by a brief discussion of the progress we are making to both accelerate Growth Direct System placements and advance our new product development opportunities. I will then turn the call over to Sean for a more detailed discussion of our financial results. Our execution in the first quarter was solid across systems, consumables, and services. First quarter total revenue was $5 million, representing growth of 21%, compared to the first quarter last year. We placed three systems and completed the validation of two customer systems in the quarter. Recurring revenue increased 22% to $3.3 million, compared to Q1 last year. On our fourth quarter earnings call in March, we indicated that we had confidence in our plan to accelerate system placements in 2023 and return Rapid Micro to solid growth. We believe our first quarter performance is an early indicator of the effective execution against those plans. Based on our solid first quarter performance, the progress we've made to improve execution and our funnel of system placement opportunities, we are reaffirming our full-year 2023 revenue guidance of at least $22 million, representing growth of at least 30%, compared to 2022. That said, and as we discussed in March, we are still operating in a dynamic macroeconomic environment, and our guidance reflects some of the uncertainty that this presents. Our highest priority remains accelerating Growth Direct System placements. Now, I want to discuss some of the progress that we have made, as well as customer engagement activities that we have activated to support this priority. During the first quarter of 2023, I had the opportunity to visit…

Thanks, Rob. Good morning, everyone. This morning, we reported first quarter 2023 revenue of $5.0 million, which compares to $4.2 million of revenue in Q1 2022. We placed 3 three Growth Direct Systems in the first quarter, compared to two in Q1 last year. Our Q1 2023 placements included one system that we previously forecasted in Q2, but we're able to pull into Q1. Product revenue, which is comprised of systems and consumables was $3.3 million in Q1, compared to $2.6 million in Q1 last year. The additional system placed in Q1 this year accounted for the majority of the year-over-year increase in product revenue. Consumables revenue grew 12%, compared to Q1 last year. Service revenue was $1.7 million in Q1 2023, compared to $1.6 million in Q1 last year. We completed the validation of two systems in the quarter, compared to nine in the prior year quarter. Validation revenue was lower in Q1 this year, primarily as a result of fewer system placements in 2022 versus 2021, which resulted in a lower volume of validation activity in the period. Also, as a reminder, several validations that we expected to complete in Q4 2021 were delayed into Q1 last year impacting the comparison. As of March 31, we had a total of 105 validated systems, which drove growth in service contract revenue of almost 50% in Q1 2023, more than offsetting the lower validation revenue in the quarter. First quarter recurring revenue increased 22% to $3.3 million, compared to $2.7 million in Q1 last year, driven by growth in both consumables and service contract revenue. Non-recurring revenue was $1.8 million in Q1, compared to $1.5 million in the prior year quarter. Turning to gross margins. Product margins were negative $1.7 million in Q1, compared to negative $1.8 million in the…

[Operator Instructions] Your first question comes from the line of Tejas Savant of Morgan Stanley. Your line is open.

This is Yuko on, on the call for Tejas. Thank you for taking our questions. Maybe to start, could you comment on what you're hearing around tightening budgets among your customers? And do you see it worse in one region versus another or is it pretty similar across the board at this point?

Yes. This is Rob, Yuko. There's no – we're not perceiving any differences across the three primary regions in which we operate. And as far as the first part of the question, our budgets haven't been – have certainly not been slashed, as we talked about in our remarks, they are, in some cases, gets going through what can be considered more scrutiny, which could extend some of the processes. It just feels like there's a tighter filter on some of the internal processes with some of our customers.

Okay. That's helpful color. And then maybe somewhat of a related question. When you think about your current funnel, could you share the mix between existing and new customers? And how would you describe the proportional multi-unit potential versus single units? And how that trended over the last several months?

Yes. So, the best way to think about it, I won't break it down in a quantitative way, but the best way to think about it, and this is a metric that we look at quite often. Think of it as a good balance between new customers and existing customers. We now have with some incredibly encouraged by three nearly fully staffed commercial regions in North America, Europe and Asia. I'm incredibly excited about the talent and the new talent that we're bringing on board as well as joining our existing top talent. So, we've got our regions online. We're working with developing new customer opportunities and our funnel reflects that. And the best evidence we have that our existing customers are continuing to see growth direct value proposition is our recurring revenue and our consumption of consumables and services. So that propagates into our funnel, and we've got a healthy mix across our regions of both new and existing. Clearly, we're a bit newer in our Asia region. So, that's a little bit more weighted towards newer customers. But on balance, we've got a good mix between new and existing. And it's also important to note that we don't have much at all early emerging biotech exposure. The vast majority of our customer base, I think, as you know, tends to be the larger customers that we have around the world, mostly in the global top 20, call it, top 50, but very little early-stage biotech exposure.

Got it. Makes sense. And then just one last one for me. With RMBNucleus Mold Alarm launched and Sterility consumable beta testing underway. Based on customer feedback, where do you see the low-hanging fruit in terms of product enhancements, workflow improvements as we think about future product pipeline?

Yes. So, future product pipeline beyond Mold and Sterility, is the question?

Yes. That's right.

Okay. Yes. So, our product strategy is fundamental. The growth direct is we view it as a platform technology. So, we view it in the middle of a legacy manual workflow that we are able to automate, accelerate, and improve significantly with regard to data integrity. So, our strategy is to provide more value in that workflow. So, to move upstream in our product into workflow and downstream that workflow, which informs our product strategy. So, Mold is an example of providing more value into the current workflow, but also a step down downstream as well. Typically, customers will seek to identify any kind of organism downstream. And that's a – giving them a, kind of an early steer on that as part of our strategy. Sterility is one step further in automating the vast majority of routine used consumables. And our product strategy is very much that as well to have a fully automated system that automates the vast majority of daily routine use tests in any pharmaceutical manufacturing environment. So, look, for – in the future, I won't get into too much detail now, but moving upstream and downstream. And also, as we enable data and data analytics, that general category is very much part of our thinking about future product development and release.

Thank you.

Well, thanks, Yuko. We're going to wrap the call – the live call up now. Thanks to everyone for joining us today.

This now concludes today's conference call. You may now disconnect.