Rapid Micro Biosystems - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $7.26M, up 10% YoY, a modest beat vs S&P Global consensus of $7.03M; diluted EPS was -$0.27, slightly below consensus of -$0.25, while gross margin improved to 4% (+700 bps YoY).*
• Management reaffirmed FY 2025 revenue guidance of at least $32.0M and guided Q3 revenue to $7.25–$8.00M with 4–6 system placements; they expect full‑year gross margin in the “high single digits to low teens” and year‑end cash of ~$40M.
• Execution remained broad-based: product revenue +6% to $4.80M, service revenue +18% to $2.46M, and recurring revenue +15% to $4.40M; placements were four systems with two validations, and cumulative placements/validated systems reached 169/148.
• Liquidity was strengthened via a new five‑year $45M term loan (first $20M drawn, interest initially 11.5%, no financial or liquidity covenants), plus warrants issued at $3.35; proceeds support commercial expansion and margin initiatives.
• Near‑term headwinds include global trade/tariff dynamics delaying larger capital decisions; management now expects FY placements toward the low end of the 21–25 range, but cites consumables/service stability and MilliporeSigma partnership as offsetting support.

What Went Well and What Went Wrong

What Went Well

• Broad-based growth with product revenue +6% ($4.80M) and service revenue +18% ($2.46M); recurring revenue +15% ($4.40M) underscored durability.
• Continued gross margin improvement to 4% (fourth consecutive positive quarter); service margin reached 32%, with sequential product margin improvement vs Q1.
• Liquidity/strategic flexibility improved via $45M term loan; “highly favorable terms, including no financial or liquidity covenants,” “positions us well to build on our meaningful progress”.
  Quote: “This facility significantly strengthens our financial position and reinforces our ability to achieve positive cash flow.” — CEO Robert Spignesi.

What Went Wrong

• EPS missed consensus modestly (-$0.27 vs -$0.25*); net loss remained elevated at $11.86M despite OpEx reductions.*
• Systems pace slower than prior year (four placements vs five last year) and validations (two vs five), reflecting site readiness and macro caution; FY placements expected at the low end of 21–25.
• Tariff/trade dynamics introduced additional near‑term uncertainty on timing/scale of customer decisions for multi‑system projects, prompting cautious Q3/FY placements stance.

Transcript

Speaker 4

Good day, and thank you for standing by. Welcome to the Rapid Micro Biosystems second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. 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 two press releases, the first announcing a new $45 million five-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 Biosystems' 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 Biosystems' business development and growth, including the expected benefits from our distribution and collaboration agreement with MilliporeSigma, customer interest in 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 Biosystems' 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 Biosystems 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. With that, I'll turn the call over to Rob.

Speaker 2

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 five-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 four 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 put several system placements into the second half of the year.

Gross margins were 4% in the second quarter, reflecting an improvement of seven percentage points from the prior year. This marks our fourth consecutive quarter of positive gross margins and a trend we expect to continue as we drive further operational improvements. Turning to our partnership with MilliporeSigma, we remain excited about the relationship and continue to make meaningful progress across key commercial and supply chain workstreams. Our teams are engaging on a regular cadence, jointly developing commercial opportunities and supporting the advancement of a global Growth Direct sales funnel. Over the past few months, we conducted training and educational sessions with their automation specialists in North America, Europe, and Asia. We share a collective view that a long-term industry shift is well underway to advance automation, robotics, and digital tools within the Micro QC Lab.

The Growth Direct platform plays a central role in this transformation, serving as a key solution for modernizing QC workflows and increasing efficiency in microbial QC testing. Beyond our commercial partnership, we have identified and are pursuing several initiatives focused on lowering our product costs and enhancing supply chain efficiency to support gross margin expansion. Additionally, we are discussing a number of areas with exciting potential for joint innovation and product development. As a reminder, this is a five-year agreement, and we are just five months in. We are confident in the long-term potential of this partnership to meaningfully accelerate Growth Direct system placements, improve gross margins, and drive product innovation. Before I wrap up my prepared remarks and turn the call over to Sean, I'd like to share a few thoughts on the market.

I continue to be encouraged by ongoing industry trends, including increasing investments in global pharmaceutical manufacturing capacity and a growing shift towards new technologies and automation. We're hearing strong customer support for these developments. Importantly, we are well-positioned to benefit from the significant investment in and build out of new pharmaceutical manufacturing capacity that is starting to take place within the U.S. market. These new facilities will typically incorporate advanced technologies and automation, and the Growth Direct platform is a clear fit to meet the demands of modern pharmaceutical manufacturing and ensure safe and effective patient care. At the same time, global trade dynamics are adding further uncertainty to the timing and scale of some customer purchase decisions, especially for larger capital investments. That said, I'd like to highlight a few of the key business drivers as we look ahead into 2026 and beyond.

These include a robust sales funnel with multiple customers planning global, multi-system global rollouts and our strong customer engagement efforts to provide solid visibility into future demand. Increasing contributions from MilliporeSigma, driven by their meaningful system purchase commitments beginning in 2026. Consistent execution for over 10 quarters, which has been supported by our diverse revenue model, which includes systems, software, and services, generating durable recurring revenue from consumables and annual service contracts. Significant and consistent gross margin expansion. Since the positive inflection we reached in Q3 of last year, we've been delivering on our cost reduction initiatives and remain on track to deliver significant margin improvements going forward. Our strong financial position, reinforced by the new term loan facility we announced today, positions us to build on the meaningful progress we have made across our business.

Collectively, these elements reinforce our confidence in the strength of our long-term strategy and our ability to deliver sustained shareholder value. I'll close with a quick look ahead at the strong lineup of industry and customer events we have planned for the second half of 2025. In October, we will be exhibiting at the annual PDA Micro Conference in Washington, D.C., followed by the Pharma Lab Congress in Germany in November. We will also hold our annual Growth Direct Day in November, which in the past was hosted by customers such as Lonza and Johnson & Johnson. This year, we're excited to announce that Daiichi Sankyo will host this two-day event near their facility outside of Munich, Germany.

As in prior years, Growth Direct Day is a two-day event that will feature existing and prospective customers discussing the benefits of the Growth Direct platform, sharing best practices, success stories, and the positive impact on their workflows. The event will also include a hands-on workshop and a customer site tour. We look forward to providing further updates on our third quarter earnings call. With that, I will now turn the call over to Sean.

Speaker 4

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 four Growth Direct systems and completed two 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.

Non-recurring 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 seven 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% from $13.2 million in Q2 2024, due largely to benefits from the operational efficiency program we announced in August 2024 and the timing of spending on new product development activities. Within OpEx, R&D expenses were $3.2 million, sales and marketing expenses were $3.1 million, and G&A expenses were $6.1 million. Net loss was $11.9 million in Q2 compared to a net loss of $12.6 million in Q2 last year. Net loss per share was $0.27 in Q2 compared to a net loss per share of $0.29 in the prior year quarter. With respect to non-cash expenses and capital expenditures, depreciation and amortization expenses were $0.8 million, stock compensation expense was $1.2 million, and capital expenditures were $0.4 million in the second quarter. We ended the second quarter with approximately $32 million in cash and investments.

Now, turning to our outlook, we are reaffirming our full-year revenue guidance of at least $32 million. Our systems outlook continues to account for ongoing near-term uncertainty around the timing and scale of customer purchase decisions, particularly around multi-system opportunities. Global trade dynamics, including tariffs, are adding to this uncertainty. While our teams are working aggressively to close our 2025 funnel, we now believe it's prudent to assume that we are more likely to finish the year toward the low end of our previous guidance range of 21 to 25 system placements. With that in mind, we expect Q3 revenue to be in a range of $7.25 to $8 million, which assumes a range of between four and six system placements in the quarter.

Turning to consumables, consistent with my commentary last quarter, we expect revenue to step up on a sequential basis in both Q3 and again in Q4, with variability driven by the timing of customer orders and shipments. With respect to service revenue, we expect Q3 and Q4 to be relatively consistent with Q2, with variability driven by the timing of validation activities. We continue to expect to complete at least 18 validations in the full year 2025, with at least three in the third quarter. Turning to gross margins, we expect Q3 to be in line with or slightly better than Q2 due to continued progress on product cost reduction and efficiency initiatives. We then expect gross margins to improve meaningfully in the fourth quarter.

For the full year 2025, we continue to expect total gross margins as a percentage of revenue to be in the range of high single digits to low teens. We are closely monitoring the evolving tariff landscape from a cost standpoint. While we started to see some limited tariff-driven cost increases on certain materials in the second quarter, we continue to expect to limit any margin impact this year through a combination of our ongoing cost reduction and manufacturing efficiency initiatives, current inventory levels, and proactive supply chain strategies. We expect operating expenses to step down from Q2 to Q3 and to now be between $46 and $48 million for the full year. We expect full-year depreciation and amortization expense of $3 million, stock compensation expense of $4 million, and CapEx of $2 million.

Other income and expense, which will now include both interest income on our increased cash balance and interest expense on our recently issued debt, is expected to be $1 million of income for the full year, with income and expense largely offsetting each other in the third and fourth quarters. Finally, I'll wrap up my prepared remarks with some additional commentary on our cash position and path to cash flow break-even. As Rob Spignesi outlined, we recently entered into a new $45 million term loan facility and drew down the first tranche of $20 million. The facility includes two additional $10 million tranches, which can be drawn subject to the achievement of certain future commercial and operational milestones, as well as a further $5 million tranche that is subject to the lender's discretion.

Following this transaction, we believe that the combination of our new term loan facility, our existing cash balance, expected benefits from our ongoing initiatives to increase system sales, expand gross margins, and tightly control expenses and working capital, and expected benefits from our partnership with MilliporeSigma reinforces our ability to achieve positive cash flow. With respect to the full year 2025, we now expect to end the year with roughly $40 million in cash. That concludes my comments, so at this point, we'll open the call up for questions. Operator? As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from Paul Knight with KeyBank Capital Markets. Your line is open.

Speaker 3

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

Speaker 2

Hey, Paul. It's Rob. Thanks for the question. Actually, we're quite encouraged by, we talked about some near-term timing uncertainty, but the bigger picture, I'm personally quite encouraged with what I'm seeing with pharma, conversations with senior executives about Growth Direct plans specifically. In some cases, you know, in many cases, meaningful, especially with our existing larger customers. Also, the build-out of North America, in some cases, seems to be well underway with customers. 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 cuts. It was interesting to note that this, you know, 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. We remain quite encouraged.

That being said, you heard some commentary about some uncertainty in the trade dynamics. That's there as well. 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.

Speaker 3

I know that there's a lot of capacity built in the industry, specifically CAR-Ts. Does this new capacity build that seems to be strong double digits? Are you riding or taking share in that as we would expect?

Speaker 2

In CAR-T specifically, Paul?

Speaker 3

CAR-T and new build. Part of that question would be, are you going in and doing retrofit on systems as well? What degree is into new?

Speaker 2

Yeah, it's a great question. The majority of our installations and site placements are existing facilities. That being said, I'd say this is why we're quite excited about any new build-out because typically, pharma companies will seek to invest with the current edge. 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. 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.

Speaker 3

Thank you.

Speaker 4

Thank you. Our next question comes from Dan Arias with Stifel. Your line is open.

Speaker 5

Hi, good morning, guys. Thanks for the questions here. 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 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?

Speaker 0

Yeah. Hey, Dan. I think we're looking at it just, you know, we're focusing on the next, you know, what do we got here, four and a half months, and kind of how fast things are moving. 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. It really is more of a kind of very near-term focus on what we've got in our funnel.

Like I said, 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.

Speaker 5

Okay. On the consumable 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 2026? 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. Thanks.

Speaker 0

Yeah, yeah. I think that's a good story for us right now. 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 multi-system high-volume sites that are coming online in the second half that are helping to drive that. That's what we want to see in the business, and we are expecting to see that in the second half. I think that will help us. 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. We feel good about them in the second half.

Speaker 5

Okay, thank you.

Speaker 4

Thank you. As a reminder, to ask a question, please press *11 on your telephone. Again, that is *11 to ask a question. Our next question comes from Brendan Mychal Smith with TD Cowen. Your line is open.

Speaker 1

Great. Thanks for taking the questions, guys. 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.

Speaker 0

Yeah, I'll take that question to Sean here. 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. Product cost, 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.

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. I think those are critical areas that we're focused on. We have talked a little bit about it's one of the key pillars of the MilliporeSigma agreement is that we're working with them actively right now, as Rob Spignesi mentioned, on some different opportunities. I think there's some near-term things that are right in the crosshairs right now, likely not to help 2025, but we do think that there is some real opportunity to start to create additional tailwinds to margin improvement in 2026. You know 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. Very big focus in the business on that broader area, and those are a few of the areas that we're focused on specifically.

Speaker 1

Gotcha. Okay. Makes good sense. Maybe just one more on some of those, let's call them potential medium-term tailwinds for the onshoring initiatives. This is a question we get a lot from investors. I guess just trying to understand a little bit the potential expected timing for all of that to start. I totally understand 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 timeline, if there's any considerations we all should be aware of in that calculus.

Speaker 2

Yeah, it's Rob. That's probably, it's really, I think broadly, I think that's right. 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. I'd watch a supply and demand dynamic there, specifically with regard to construction timing. As that starts, the knock-on effects of actual lab equipment ordering, if you want to kind of bring it down to our business. As I touched on, personally, I 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, you know we are quite excited about it. Like I mentioned, it's real from what we can tell. 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 preponderance, as I mentioned, of automation. Thematically, we like to picture quite a bit. The specific timing, 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. The trend, there's a relatively clear signal from the overall trend from our perspective.

Speaker 1

Gotcha. Yep. Makes a lot of sense. Great. Thanks, guys.

Speaker 4

Thank you. Our next question comes from Thomas Flaten with Lake Street Capital Markets. Your line is open.

Speaker 5

Hey, good morning. I appreciate you guys taking the questions. 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, quote-unquote, among customers who've already adopted Growth Direct versus those that are, you know, kind of in the funnel, if they have a different outlook towards bringing systems on board, if there's anything to read into that.

Speaker 2

It's a good question, Thomas. It's Rob. There is. 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. You can tend to see those better weather uncertainty. The customers and their sites, importantly, know and understand the Growth Direct. They've already achieved, in many cases, an ROI. They can tend to be more resilient in these sorts of situations. 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. There are some exciting, which we haven't fully accounted for, larger opportunities in our funnel that could potentially land this year, but that kind of fall into this category.

Generally, the answer is yes. An existing customer, I would say, if you will, is lower risk-ish with regard to the current environment than a new customer to our business.

Speaker 5

Excellent. Thank you.

Speaker 2

Sure.

Speaker 5

Thank you.

Speaker 2

I think that's the last question. Thank you for that, Thomas. We're going to wrap the call this morning. Thank you all for joining, and we look forward to speaking with many of you soon. Thanks all.

Speaker 4

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