Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Mike Beaulieu of Investor Relations. Please go ahead.

Good morning, and thank you for joining the Rapid Micro Biosystems Third 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 a press release announcing our third quarter 2025 financial results. A copy of the release is 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 term loan facility, guidance for 2025, including revenue, expenses, gross margins, 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 its 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, November 7, 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 this morning's call with a brief overview of our third quarter performance. Next, I will discuss the record multi-system order we announced this morning and then review our MilliporeSigma partnership. I'll conclude my prepared remarks with a few comments on our updated 2025 outlook and then turn the call over to Sean for a more detailed review of our financial results and outlook. This morning, we reported total third quarter revenue of $7.8 million, above the midpoint of our guidance range, representing our 12th consecutive quarter of meeting or beating revenue guidance. Within product revenue, consumables, which are a key indicator of customer demand and usage, increased 40% to a quarterly record. This strong performance helped offset a difficult comparison in system revenue, which included 5 Growth Direct placements versus 7 in the prior year. Service revenue grew 12% compared to Q3 2024. Recurring revenue, which is comprised of consumables and annual service contracts, increased more than 30% year-over-year. Third quarter gross margins were 9%, reflecting a 70 basis point improvement from the prior year quarter. Higher revenue and productivity gains drove service margins to 40% in the quarter. While product margins were slightly negative, we expect progress on our product cost reduction and manufacturing efficiency initiatives to deliver positive product margins in Q4. Looking forward, we expect continued meaningful gross margin improvement in 2026. Now I'd like to turn to the significant commercial win we announced earlier this morning. In October, we secured a record multi-system order from an existing top 20 global biopharma customer, with contributions beginning in the fourth quarter and extending into 2026 and beyond. This customer is deploying Growth Direct Systems across multiple sites in North America, Europe and Asia Pacific.…

Thanks, Rob, and good morning, everyone. Third quarter revenue of $7.8 million increased 3% compared to the $7.6 million we reported in Q3 2024. We placed 5 Growth Direct Systems and completed 4 validations in the quarter, and now stand at 174 cumulative systems placed globally, including 152 fully validated systems. Product revenue was essentially flat at $5.2 million in Q3, with record consumable revenue offsetting the impact of 2 fewer system placements compared to Q3 2024. Service revenue was $2.6 million, an increase of 12% compared to Q3 last year, driven by higher service contract revenue resulting from an increase in the cumulative number of validated systems on a year-over-year basis. Third quarter recurring revenue, which consists of consumables and service contracts increased 32% to $4.8 million with consumables growing 40% in the period. Nonrecurring revenue, which is comprised mainly of systems and validation revenue, was $3 million. Third quarter gross margin was 9%, marking our fifth consecutive quarter of positive gross margins and a sequential improvement of over 500 basis points compared to Q2. Product margins were negative 7% in the quarter, compared to negative 1% in Q3 2024. While consumable margins improved meaningfully compared to Q3 last year as we continue to make good progress on our product cost and manufacturing efficiency initiatives, overall product margins were slightly lower due to a short-term shift in the mix of revenue from systems to consumables. On a sequential basis, Q3 product margins improved by 4 percentage points compared to Q2. Service margins were 40% in the third quarter compared to 29% in Q3 last year. The improvement was driven by higher revenue and productivity as well as lower service headcount. Total operating expenses were $12.1 million in the third quarter, representing a decrease of 5% from the $12.7 million…

[Operator Instructions] And our first question will be coming from Thomas Flaten of Lake Street Capital Markets.

Congrats on the quarter. Sean, I just want to make sure I understand. In the last call, you indicated that you would be at the low end of the 21 to 25 system placement and now you're going to be at least 27, which leads me to believe there might be more than $1 million in terms of the guidance raise. Can you just square that circle for me?

Yes. I think there's a couple of moving pieces here, Thomas. So we talked about -- so on the large multi-system order, I think when we talked last quarter, we have said consistently that we have a number of these kind of in the background where we have not been assuming them in the guide. So the transaction that we're talking about today is not something that was considered back then. So it is additive. We've got some things going the other way in Q4 in terms of the guide. So for example, service because of mainly timing, I think it's good news for 2026 service revenue. It does have a short-term impact on Q4 service revenue, will actually be lower than we expected it to be going back a quarter. So you've got some puts and takes here that are kind of netting out to that increase in the overall increase in the revenue guide.

Got it. And then kind of at a broader level, I know the multi-system order is across 3 geographies, and you said that you're going to benefit from onshoring. I'm curious, though, if you look more broadly, the demand you're seeing from a geographical distribution, what does that look like?

Yes, Thomas, it's Rob. So it's generally consistent with where it has been. So we -- as you know, we operate in North America, Europe and Asia. I think this most recent multi-system orders is a pretty good example, is a good proxy of end market conditions that we're seeing. Things are -- I wouldn't say they're more robust in one region than another. And many times, it's really dependent on the specific company that we're working with. So we anticipate -- it depends quarter-to-quarter and timing is always an issue depending on where in the world things are coming from. But I think the takeaways from this -- from our announcement is that our value proposition is resonating. Customers are trusting us to deploy globally, and we're seeing generally broad-based demand from our customer base to deploy globally. And notably, this particular win was not due to U.S. onshoring. So we expect that to be a potential benefit in 2026 and beyond.

And our next question will be coming from Paul Knight of KeyBanc.

Rob, congratulations on the order in the quarter. This is what? You're going to have 6 delivered in Q4 on this order. What -- did you say total order size?

I didn't say total order size, nor do we say how many we're going to deliver this quarter specifically out of the order, Paul. But we're not going to disclose the exact order size, but you can think of it as a double-digit order.

Okay. And then the next question is in the world with analytical instruments, it's kind of an instrument becomes ubiquitous across the world within each major biopharma. So the question is how many multiple -- how many multiple orders are you looking at? How many customers are saying, I've got to have this in all 3 continents?

Yes, we -- certainly, we're striving for ubiquity, Paul. So that of course, is the ultimate goal. So we've had historically customers purchase multi-system orders and deploy globally. This is a notable example of a large single order, and we anticipate more of these going forward. As we said, we've got multiple multi-system orders in our funnel, and we -- our plan is to continue to develop those and close those, and get our customers going. Moreover, we also expect over time, that Merck Millipore relationship to build upon this momentum and success. And that's how we look at the next -- certainly into '26 and beyond.

And there's 2 aspects to Merck Millipore, right? A, you expect them to sell some units in their own channel and the other, more cost efficiencies. Where do you think you're on the cost efficiency journey with them? Are you just getting started and we really see that in '26?

Yes, I think that's right, Paul. This is Sean. We are working through -- I think Rob mentioned some of this in his remarks, the process of looking at materials specifically right now. Some of the key materials that go into our consumables are things that we can procure from Merck. But as you do that, you've got to work through testing, validation, make sure it's all going to work and the performance is where you want it to be. And then there's a process of kind of moving that over to manufacturing, working through your existing inventory and transitioning over to the new inventory with that material in it. So I would think about the benefits from that kind of as we're looking at right now is probably second half of next year is when we'll start to see some benefits from that activity.

And our next question will be coming from Brendan Smith of TD Cowen.

Congrats on the [indiscernible]. Just wanted to get a sense of how you all are thinking actually about this momentum against the current backdrop. I guess we've heard broadly that pharma biotech spending has been, again, kind of broadly hitting instruments and services maybe more than other segments. Obviously, you all are still seeing some pretty steady demand, maybe with some nuances. But I guess my question is really as folks are getting their '26 budgets together and maybe start feeling more comfortable with revisiting some of that spend. Do you guys expect that could potentially be an outsized growth tailwind like in the first half of next year? Or is kind of the steady sequential growth we've been seeing how we should think about it in the next couple of quarters?

Yes, Brendan, it's Rob. I would say that it's -- we don't -- we're not seeing a demonstrable -- we haven't seen a demonstrable change. It's a little hard to prognosticate at this point about 2026, although it seems to be getting, I would say, maybe a click or 2 better. As we said in several -- what we are seeing though, the 80-20, if you will, is at least over the past several quarters, it's been fairly consistent where, to your point, yes, the CapEx budgets have been more scrutinized and things are going through more diligence, if you will. But as we've said several times, high ROI compelling investments are getting through. And I think we've been able to continue to be a beneficiary of that. And I think this most recent announcement is a clear and present example that pharma will continue to invest in high ROI projects. And also, as I've mentioned on previous calls, in some cases, in this most recent one, I think, is a good example where there's a strategic impact across an enterprise in multiple sites, we have seen growth direct projects be a bit more resilient to the vagaries of the budget tightening.

Got it. Yes, makes sense. And then really quickly, just maybe piggybacking off of the onshoring conversation a little bit. Is also something we get asked about quite a bit. I guess it's feeling like most people are assuming it's not going to be a huge factor in '26, but could maybe start to hit in '27. Does that kind of gel with how you're thinking about it or what you're hearing? Or should we think maybe more '28 plus? Just kind of...

I think -- yes. I think that's -- Listen, I don't think it's going to be a floodgate from what we can tell. And just we've been involved over the years in a lot of construction projects with new labs. So what you'll see is it won't be uniform. In some cases, entire sites are being built from a greenfield. In other cases, other sites are being expanded, which can move a little faster. In other cases, even labs are being expanded. So you'll have this maybe uneven mix. As we talked about last time, there might be a log jam with some of the design and A&E firms out there. So that may play a factor. But I think you could start to see potentially the leading edge. More broadly, I won't speak for RMB specifically, but more broadly in 2026. And then I would generally agree, '27 could be certainly feature more and then '28 and beyond, absolutely.

And our next question will be coming from Dan Arias of Stifel, Nicolaus & Company Inc.

This is [ Rowan ] on for Dan. Maybe a quick one. Regarding the large multi-system order in October, how long does it typically take to plays validate and start seeing a ramp on consumable pull-through from these systems? Just trying to get a better view on the time line there. Or maybe just in general, as you alluded to having other, I guess, orders in the pipeline there, or potential orders in the pipeline?

[ Rowan ], it's Sean. I think as we look at this particular deal, I think we expect it to kind of follow the following path. I think the placements, they're going to have a meaningful impact in Q4. And moving into the first half of next year, we expect to get those systems installed and validated. I think we have a motivated customer, and we are ready to go with them in that time frame to get that work done, which I think is a tailwind as we think about services in that time period. And then as we get into the second half of the year, what typically happens and what we expect in this case is that they'll -- we'll get the validations done. They'll kind of work through their internal process and start to ramp up into GMP use, and we expect to see at least the front end of that in the second half of next year from a consumable standpoint. So that's the kind of time frame we typically expect to see. I think different customers can move with different speed depending on resourcing and things like that. But I think this one we feel good is there's good alignment between us and the customer to work along that time line.

Okay. And maybe just one more quickly. In the past, Rapid has alluded to wanting to penetrate adjacent markets such as personal care. How much traction are you all seeing in that market? What has become of those efforts?

Yes. Thanks, [ Rowan ]. It's Rob again. So as we have mentioned, there are sizable adjacent markets. Personal care, as you mentioned, is certainly one of them. Our current strategy from a Rapid Micro direct sales commercial effort is principally focused on global pharmaceutical and biopharma. Our strategy to develop those adjacent markets, personal care, med device and others is generally focused on our collaboration with Merck MilliporeSigma. Some of those markets, they're large or can be large. They tend to be a bit more fragmented, a little bit different sales cycle. So having a larger sales force that Merck MilliporeSigma has focused on those markets and more uniformly spread globally is really our strategy to go after those markets. And our collaboration agreement allows for that, and encourages that, frankly. Great. And I think that's the last question. So thank you all for the question. We'll conclude the call at this time. Appreciate everyone's time and attention, and we look forward to speaking with many of you soon. Thank you.

And this concludes today's program. Thank you for participating. You may now disconnect.