Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Second Quarter 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 speaker today, Mike Beaulieu, with Investor Relations. Please go ahead.

Good morning, and thank you for joining the Rapid Micro Biosystems Second 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 2 press releases: The first announcing a new $45 million 5-year term loan facility with Trinity Capital and the second announcing our Q2 2025 financial results. Copies of both releases are 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 newly announced term loan facility, guidance for 2025, including revenue, expenses, gross margin, 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 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, August 12, 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 my prepared remarks with an overview of the new term loan facility we announced this morning, followed by a review of our second quarter highlights. I will then provide a brief update on the MilliporeSigma partnership and my current perspectives on customer and market conditions before turning the call over to Sean for a more detailed review of our financial results and our 2025 outlook. As Mike mentioned, we issued a press release this morning announcing a new 5-year $45 million term loan facility with Trinity Capital. After careful evaluation by management and the Board and with consideration for all stakeholders, we determined that this was a good time to raise additional capital. The facility supports our continued execution against our long-term strategy and reinforces our ability to achieve positive cash flow. Importantly, the loan does not include financial or liquidity covenants and is non-dilutive to shareholders. We drew down the initial $20 million tranche at closing which will be reflected in our third quarter financials. Now turning briefly to our second quarter performance. Total revenue increased 10% year-over-year to $7.3 million, slightly above the midpoint of our guidance range. We were pleased with the strength across the broader business, including mid- to high-teens growth in both consumables and service. Of note, recurring revenue increased 15%. Turning to systems. We placed 4 Growth Direct Systems in the second quarter, which was within the guidance range we provided in May. As we noted on our first quarter call, our guidance reflected the potential for customer site readiness delays, including ongoing construction, which ultimately pushed several system placements into the second half of the year. Gross margins were 4% in the second quarter, reflecting an improvement of 7…

Thanks, Rob, and good morning, everyone. Total second quarter revenue of $7.3 million increased 10% compared to the $6.6 million we reported in Q2 2024. We placed 4 Growth Direct Systems and completed 2 validations in the second quarter and now stand at 169 cumulative global systems placed, including 148 fully validated systems. Product revenue increased 6% to $4.8 million. Mid-teens consumable growth and higher Mold Alarm software sales in the second quarter this year more than offset the impact of one less system placement compared to Q2 2024. Service revenue of $2.5 million increased 18% compared to Q2 2024. The increase was driven by higher field service activity and higher service contract revenue due to an increase in the cumulative number of validated systems on a year-over-year basis. Second quarter recurring revenue, which consists of consumables and service contracts, increased 15% to $4.4 million. Nonrecurring revenue, which is comprised mainly of systems and validation revenue, increased slightly to $2.8 million. Turning to gross margins. Second quarter gross margin was 4%, marking our fourth consecutive quarter of positive gross margins and an improvement of 7 percentage points over Q2 last year. Product margins were negative 11% in the quarter, down slightly compared to Q2 2024 due primarily to the impact of one fewer system placement and revenue mix between systems and consumables even as we continue to make progress on our internal product cost and manufacturing efficiency initiatives. On a sequential basis, Q2 product margins improved by 12 percentage points compared to Q1. Service margins were 32% in the second quarter compared to 9% in Q2 2024. The improvement was driven by higher revenues and productivity as well as lower headcount and other service-related costs. Total operating expenses were $12.4 million in the second quarter, representing a decrease of 6%…

[Operator Instructions] Our first question comes from Paul Knight with KeyBanc Capital Markets.

Congratulations on the quarter. Could you talk about, pharma is clearly delaying a lot of decisions in the industry. Were you seeing -- what degree were you seeing that in the quarter? And is it starting to trend better, do you think here in Q3?

Paul, it's Rob. Thanks for the question. Actually, we're quite encouraged by -- we talked about some near-term timing uncertainty, but bigger picture, we're -- I'm personally quite encouraged with what I'm seeing with pharma, conversations with senior executives about Growth Direct plan specifically, in some cases -- in many cases, meaningful, especially with our existing larger customers. And also the build-out in North America, in some cases, seems to be well underway with customers. So it's a mixed bag, I think, of where they're potentially prioritizing their time, but high ROI projects like the Growth Direct are seemingly making the cut. And then it was interesting to note that this well-announced investment in the U.S. market for some of our customers, it's an active prioritized project as we speak, which clearly benefits Rapid Micro Biosystems over time as well. So we remain quite encouraged. That being said, you heard some commentary about some uncertainty in the trade dynamics, that's there as well. So there's -- I would say there's no like one-size-fits-all, but I do see quite a few encouraging signs and trends with regard to pharma decision-making and build-outs as it could impact our business positively.

And I know that there's a lot of capacity build in the industry, specifically CAR-Ts. There's just no capacity build that seems to be strong double digits, are you writing or taking share in that as we would expect?

In CAR-T specifically, Paul?

CAR-T and new build and then part of that question would be, are you going in and doing retrofit on systems as well? And what degree...

Yes, so it's a great question. Yes, the majority of our installations are in site placements are existing facilities. That being said, it's a -- this is why we're quite excited about any new build-out because typically pharma companies will seek to invest with the current edge. And if we're really clear, especially in high-cost regions like the U.S., I'd expect personally for the preponderance of automation to be even higher just given the cost of doing business in the region. So not only are we doing well with existing customers around the world, but certainly for any new build, we are a very, very clear and strong fit as well.

Our next question comes from Dan Arias with Stifel.

Sean, to Rob's point on Paul's question about just what's going on in pharma, it sounds like things are generally encouraging, particularly pharma-out build-out stuff. Can you just touch on why the low end of the range on systems is the way that you're thinking the year will shape up here?

Yes. Dan, yes, so I think we're looking at it just we're focusing on the next, what have we got here 4.5 months and kind of how fast things are moving. And that's -- it's really that, Dan, I think what's happening out there in the market with the trade dynamics is not helping in the near term. I think as we look out long term, there's lots of reasons as Rob walked through for us to be positive on where things are headed. But it really is more of very near-term focus on what we've got in our funnel. Like I said, we're -- our teams are out there pounding the pavement hard to try to get things closed, but just where we sit right now and what's happening with those specific opportunities in the funnel, it just feels like where we are right now, that it's prudent to be toward that lower end in terms of how we're thinking about it.

Okay. And then maybe on the consumables side, nice growth there. How stable do you think that is from a quarterly standpoint as we think about the second half of the year and into '26? Obviously, the placement dynamic is up and down, but I'm wondering whether you think there's some consistency that comes to a nice level of growth that you're seeing on the recurring revenue side?

Yes, yes. So I think that's a good story for us right now. We -- the guide is that we're going to step up from Q2 to Q3 and step up again in Q4. In the background there, it's kind of the things we're looking for as we go forward. We've got a couple new multisystem high- volume sites that are coming online in the second half that are helping to drive that. So that's what we want to see in the business, and we are expecting to see that in the second half, and I think that's -- that will help us. And it's one of the things that helps us maintain the guide for revenue, even if we point toward the bottom end of the range or the lower end of the range for placements. I think that's -- our service business, our consumables business are performing pretty well. So we feel good about them in the second half.

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

Congrats on the quarter. Maybe just a quick one from us. I guess, first, you referenced a few different options to kind of continue driving gross margins. I guess, just wondering if you can expound a bit on some of maybe the more near-term levers you see there and when you think some of those might come into play?

Yes, I'll take that question. It's Sean here. Yes, so I think pretty consistent with what we've been talking about for a while now in terms of where we're focused. I think product cost is a very big area of focus for us. We are making good progress. We expect to continue to make significant progress as you look out over the balance of the year and over the next several years. So product costs, there's different ways to go after that. There's a procurement angle there where we're driving conversations with vendors. As we grow in volume, there's more opportunity to leverage that volume into better pricing with vendors as well. We're getting more efficient in how we manufacture. We're reducing things like waste. We're moving more manufacturing in consumables onto our automated line. So those are all areas we're focusing on in terms of driving margin improvement, with a lot of it focused on consumables, but not all. We're looking at different things around product cost as well on systems, and there's opportunity there for sure. So I think those are critical areas that we're focused on. I think we have talked a little bit about it's one of the key pillars of the Merck agreement, is that we're working with them actively right now, as Rob mentioned, on some different opportunities. I think there are some near-term things that are right in the crosshairs right now, likely not to help '25, but we do think that there is some real opportunity to start to create additional tailwinds to margin improvement in '26, and that's really just the first phase. There are other opportunities there that probably take a bit longer to get at, but we're also working with them kind of early stages to dive deeper into those and assess what the opportunity might look like there. So very big focus in the business on that broader area, and those are a few of the areas that we're focused on specifically.

Got you. Okay. Makes good sense. And then maybe just one more on some of those, call them, potential medium-term tailwinds for the onshoring initiatives. That's the question we get a lot from investors. So I guess just trying to understand a little bit the potential expected timing for all that to start. I totally understand that a lot of this is a little bit nebulous, but is it fair to assume that maybe a lot of those onshoring-related tailwinds would potentially be like a mid- to second half next year push? Or do you think there's like an opportunity to see some of that manifest even sooner? I guess we're just trying to see how you all view that time line, if there's any considerations we all should be aware of in that calculus?

Yes, it's Rob. That's probably -- it's really -- I think broadly, I think that's right. With a lot of -- I think a dynamic to watch is a lot of pharma companies coming into the U.S. market with a limited supply of engineering and design build firms. So I'd watch the supply and demand dynamic there, specifically with regard to construction timing. And then as that starts the knock-on effects of actual lab equipment ordering, if you want to kind of bring it down to our business. But as I touched on, I personally had conversations with customers who have active projects underway, it's really hard. I won't put a pin on when we think we'll benefit from it, but broadly, we are quite excited about it. Like I mentioned, it's real from what we can tell. And then the reality of it is when you do a new build, it's typically outfitted with the next-generation technology. Moreover, when you do a new build in a high-cost labor environment, which the U.S. generally is compared to other environments, you also see an increased ponderance as I mentioned, automation. So thematically, we like to picture quite a bit. The specific timing, I'm sure, I think you're going to start to see some of it relatively soon, how it actually gets pushed through the system, sites built, equipment ordered in place and all that might be a little less clear right now, but the trend is a real -- there's a relatively clear signal from the overall trend from our perspective.

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

Just a quick one. I don't want to belabor the macro environment more than necessary. But I was curious if there's a difference in kind of the attitude "among customers" who have already adopted Growth Direct versus those that are kind of in the funnel, if they have a different outlook towards bringing systems on board if there's anything to read into that?

It's a good question, Tom. It's Rob. There is. So I think the ones that have adopted the Growth Direct typically have, in many cases, our larger customers, in particular, have ongoing projects or initiatives and some of them meaningful and quite significant. And you can tend to see those better weather uncertainty. And then the customers and their sites, importantly, know and understand the Growth Direct, they've already achieved in many cases, an ROI. So they're certainly, they can tend to be more resilient in these sorts of situations. And as you know, we've got a fairly decent penetration into the top 20 and our funnel does have a meaningful proportion of existing customers, which helps us, I would say, weather some of the uncertainties out there. And there are some exciting, which we haven't fully accounted for, larger opportunities in our funnel that could potentially land this year that kind of fall into this category. But generally, the answer is yes. On existing customer, I would say, if you will, lower risk-ish with regard to the current environment than a new customer to our business. I think that's the last question. So thanks for that, Thomas. We're going to wrap the call this morning. So thank you all for joining, and we look forward to speaking with many of you soon. Thanks, all.

This concludes today's conference call. Thank you for participating. You may now disconnect.