Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please advise that today's conference is being recorded. I would now like to hand 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 Fourth Quarter and Full Year 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 fourth quarter and full year 2025 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 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 2026, 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…

Thank you, Mike. Good morning, everyone. I will begin with a brief overview of our fourth quarter performance and recent commercial wins as well as an update on our key priorities. I'll then share a few comments on our 2026 outlook before turning the call over to Sean for a detailed review of our Q4 financial results and 2026 expectations. Before reviewing our fourth quarter results, I'd like to highlight the first press release we issued this morning announcing that Samsung Biologics is expanding its deployment of the Growth Direct platform through a new multisystem order received in the first quarter of 2026. This follow-on order builds on our existing strong partnership and we are proud to support Samsung's next-generation manufacturing strategy. This expansion yet again highlights the impact that Growth Direct delivers to the world's leading pharmaceutical manufacturers as they seek to automate and modernize their critical quality and manufacturing workflows. Now turning to our performance. This morning, we reported total fourth quarter revenue of $11.3 million, representing 37% year-over-year growth and a quarterly record. These results exceeded the increased guidance we provided in November and marked our 13th consecutive quarter of meeting or exceeding expectations. We placed 16 growth direct systems in the quarter, and ended the year with 190 systems placed globally, of which 155 are fully validated. A highlight of the quarter was a record multisystem order from Amgen reflecting our continued investment in the growth -- in the global rollout of the Growth Direct platform. Amgen is deploying systems across multiple sites in North America, Europe and Asia and fully leveraging all applications to include environmental monitoring, bioburden and water testing. Additionally, Amgen will sponsor our first-ever North American Growth Direct Day in the second quarter. Product revenue increased 78% in the fourth quarter with…

Thanks, Rob, and good morning, everyone. I'll begin my comments this morning with a review of our fourth quarter 2025 results and then discuss our first quarter and full year outlook for 2026. We'll then open the call up for questions. Fourth quarter revenue increased 37% to a record $11.3 million compared to $8.2 million in Q4 2024. During the fourth quarter, we placed 16 Growth Direct systems, which was also a record compared to 6 systems in the fourth quarter last year. We also completed 3 validations in the quarter compared to 4 in Q4 last year. Product revenue, which is comprised of systems and consumable revenue, increased 78% to $9.3 million in the fourth quarter compared to $5.2 million in Q4 2024. This was primarily driven by the increase in system placements. Consumable revenue grew 11% in the fourth quarter compared to Q4 last year. Service revenue was $2 million in the fourth quarter, which was in line with the guidance we provided in November, compared to $3 million in Q4 2024. As a reminder, the timing of validations tends to be the largest driver of quarter-to-quarter variability in service revenue and the validation revenue we generated in Q4 2024 and remains a company record. Fourth quarter recurring revenue, which consists of consumables and service contracts increased 10% to $4.6 million compared to $4.2 million in Q4 2024. Nonrecurring revenue, which is comprised mainly of systems and validation revenue increased 65% to $6.7 million. Turning to margin. Product margin was negative 8% in Q4, this includes a $1.1 million or 12 percentage point impact related to the write-off of unusable consumable inventory in the period. Our manufacturing team has addressed the underlying situation, and we do not expect any further charges related to this in 2026. Excluding the…

[Operator Instructions] And our first question comes from the line of Tom Flaten of Lake Street Capital Markets.

I appreciate 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?

Yes, 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 customers' 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, it really ties into how we expect that to roll out, which think the majority of that work is 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 if 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 I don't -- 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 I don't know, Rob, if you have any comment on this.

Yes. It's clearly a robust validation year as well. 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.

That's great. I appreciate that color. And then just with the Samsung announcement this morning, could you just comment on the percentage of your place systems that are within CDMOs and how you see that space evolving over time relative to the manufacturer -- or to the drug originators themselves?

Yes. 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've previously announced Lonza as a customer. Samsung, obviously, in other CDMOs as well. We have a very strong value proposition for CDMOs as well as probably call principal manufacturers. We're growing clearly, today is a good example of both Amgen and Samsung. So you've got both a principal manufacturer and a CDMO. But CDMos in particular, or benefit from our ability to turn their lines faster or lease product faster. And also, to a certain extent, in some cases, market the use of advanced technologies and their quality control and manufacturing operations. So yes, quite strong in CDMOs and we plan to stay that way and grow with the CDMO space. We also have 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 it's one 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.

Our next question comes from the line of Dan Arias of Stifel.

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 the 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 in 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.

Yes. Yes. I'll take that one, Dan. I thinking about it, there's a couple of key drivers to focus on from my perspective. One is -- we talked -- 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 with that accelerate 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 the two of the largest drivers, if not the largest drivers are that 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 and placements in 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.

And Dan, just to put maybe an estimation 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.

No. Okay. Okay. That's helpful. All right. And then maybe on the systems to Samsung and Amgen, how do you see utilization ramping there? And then just on overall utilization, can you maybe just talk about consumables pull-through per system 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.

Yes. 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 I talked about Amgen a little bit ago, 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 time line 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 continue 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 that 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, I'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.

Our next question. Our next question comes from the line of Anna Snopkowski of KeyBanc.

Congrats on the quarter and the exciting announcement with Samsung. Maybe to start do you think you could share more insight on the Samsung multisystem 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.

Yes. Generally, Samsung. We won't get into the specific quantum of it, but it's the next phase of rollout. I think many of you may remember, we had the initial launch with Samsung a couple of years ago. This is a second way, 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 also in scope. And as I mentioned a couple of years ago, we expect to grow at Samsung in the quarters and years ahead. And I'll say it again, we expect to grow a Samsung in the quarters and years ahead. Interestingly, which we didn't talk about in the prepared remarks, but 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?

Yes. 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 as 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 a 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 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 is also out there. acquiring new customers as well, which can be a bit longer, both in the sales process and the initial validation.

And our last question comes from the line of Brendan Smith of TD Cowen.

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 how this gets integrated into devices moving forward? Is this something that all new orders will automatically include some of these analytics capabilities? Is that software update push you can monetize into existing installed base? Just kind of wondering how we should think about that contributing to growth.

Yes. So thanks for the question, Brendan. It's a -- 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 1, the 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 customers' cloud will run it. But from a future revenue standpoint, we could also provide cloud services. Right now, the system is in a prelaunch phase with a major customer operating in their cloud, running the Growth Direct 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 Direct generating. And the idea came from we had these Growth Direct around the world is generating all this data. How can we help customers benefit from that. So the Growth Direct 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 multiyear 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 will -- the goal is to continue to drive to recurring -- 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 the closed door. It's really -- it feels like we're pushing against an open door. And in some cases, customers are asking us for services in this general category.

Got it. Super helpful. 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 within the Millipore network, I know you referenced maybe what else you're planning there this year to kind of drive that added production in the second half.

Brendan, it's Sean. Yes, so we are still working with MilliporeSigma on several different opportunities. I think some could benefit this year. Some are more longer-term focused in terms of things we could do in very -- 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 association overall gross margin expansion. And we think it's something that we can use as a template to drive future reductions in others in the future and continue to drive those consumable margins up.

Thanks, Brendan. Well, thanks, everyone, for your time and attention. We'll wrap the call up at this point. Thanks again, and look forward to speaking with many of you shortly.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.