Rapid Micro Biosystems - Q3 2023

Transcript

Operator (participant)

Thank you for holding, and welcome everyone to the Rapid Micro Biosystems third quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, press the star one. Thank you. I'll now turn the call over to Mike Beaulieu, Investor Relations. Mr. Beaulieu, go ahead.

Mike Beaulieu (VP of Investor Relations and Corporate Communications)

Good morning, and thank you for joining the Rapid Micro Biosystems third 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 third quarter 2023 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, anticipated year-end cash balance, cash runway, future revenue and system placements, expectations for and planned activities related to the company's business development and growth, customer interest and adoption of the Growth Direct System, expectations for RMBNucleus Mold Alarm and Rapid Sterility, and the potential impact of macroeconomic uncertainty 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 amended, 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, November 3, 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. With that, I'll turn the call over to Rob.

Rob Spignesi (President and CEO)

Thank you, Mike. Good morning, everyone, and thank you for joining us to review our third quarter 2023 results. I will begin this morning's call with an overview of our third quarter performance, followed by a review of the progress we have made in advancing our growth strategy. I will then turn the call over to Sean for a more detailed review of our financial results and outlook. Total revenue was $6.1 million, representing a 30% increase compared to Q3 last year and above our guidance for the third consecutive quarter. The strength was broad-based, with growth of approximately 30% in both product and service revenue for the second consecutive quarter.

Based on our solid year-to-date results and supported by a strong balance sheet, we are reaffirming our guidance of at least $22 million in revenue, representing approximately 30% growth for the full year. During the third quarter, we placed five Growth Direct Systems, including at least one in each of North America, Europe, and Asia. This included the placement of a system with a new top five global pharma customer. As a result, our customer base now includes two-thirds of the global top 20 pharmaceutical manufacturers. We also completed four validations in the quarter. With all three sales regions staffed, our funnel has expanded meaningfully since the start of the year and is well-balanced geographically.

Biologics and cell and gene therapy customers remain our largest opportunity, as the Growth Direct is ideally suited for the high volume testing, full automation, robust data integrity, and fast turnaround time required in these segments. That being said, we also have meaningful opportunities in segments such as small molecule and sterile injectable manufacturing, where our global commercial presence is providing insight and access to new opportunities. As many of you are aware, there are several thousand clinical trials for biologics and approximately 1,000 clinical trials for cell and gene therapies ongoing today. With the Growth Direct, customers can achieve faster time to results, improved data integrity, enhanced accuracy, and greater sample capacity than current methods. In these high-value segments, the value proposition of using the only fully automated, rapid detection platform for microbial quality control clearly resonates with this customer base.

In fact, the Growth Direct is currently being used in the manufacture of five of the six commercially approved CAR-T therapies and is set to place a system with the one remaining therapy later this quarter. We also have a significant footprint within biologics manufacturing, which remains our largest segment for system placements. Notably, according to the FDA, there are close to 700 licensed biologic therapies currently on the market, which creates a large growth opportunity. Our significant progress and penetration into the commercial cell and gene and biologics market, combined with our presence within the majority of the global top 20 pharma companies, speaks to the value proposition of the Growth Direct...

We are proud to be trusted partners on these critical life-saving therapies, and believe that this level of success keeps us on a path to establishing the Growth Direct as the industry standard for pharma-microbial QC testing globally. As we continue to focus on our commercial execution, and specifically on accelerating system placements, one of our objectives is to increase opportunity generation and the velocity of our funnel through direct customer engagement. We recently opened a Growth Direct demonstration lab in our Lexington, Massachusetts, facility, and have already hosted several prospective customers. This new lab complements our state-of-the-art automated consumable manufacturing line and provides a platform to showcase our comprehensive set of manufacturing and operations capabilities to customers. During these tailored customer interactions, we include detailed discussions about professional services, which include validation and system integration support.

This high-touch approach to selling instills confidence in our customers and reinforces our position as a trusted, long-term strategic partner of choice. Additionally, we continue to use our customer demonstration lab near Munich, Germany, to host high-value events for our European customers. In early October, we again participated as a platinum sponsor at the annual PDA Pharmaceutical Microbiology Conference. In addition to the conference, we hosted an invite-only event where prospective and existing customers are paired with members of our commercial and executive leadership team to enable deeper engagement with key users and decision makers. Over the three-day conference, and including our customer event, we generated numerous high-quality leads. And finally, in late November, Johnson & Johnson will host a multi-day Growth Direct event at their site in Schaffhausen, Switzerland.

The purpose of this event is to facilitate collaboration and education by bringing together industry thought leaders, customers, and prospective customers to discuss current business goals and to share best practices. We anticipate that over 60 customer participants will attend, and the event will feature expert panel discussions on topics such as automation and regulatory approaches using the Growth Direct. In addition, participants will tour a local customer site that includes a fully validated Growth Direct system in a GMP environment. New product development is another important component of our growth strategy. Our goal is to innovate new products that solve customer challenges, create meaningful differentiation and competitive advantage, strengthen partnerships, and enhance the Growth Direct's value proposition. Additionally, we expect innovative products such as Mold Alarm and Rapid Sterility to become new sources of revenue growth and drive margin expansion.

With respect to Rapid Sterility, we continue to increase focus on commercialization and expect to be able to provide a more significant update next quarter. In summary, we continue to make good progress against our growth strategy. Accelerating system placement remains our highest priority. Despite the ongoing challenges posed by the macroeconomic environment, we have achieved nearly 30% growth year-to-date through Q3, which demonstrates that the actions we have been taking to improve our commercial execution and enhance customer experience are gaining traction. Additionally, we are focused on leveraging internal cost initiatives, which, combined with the scale we are beginning to achieve, will continue to drive gross margin improvement. And with that, I'll now turn the call over to Sean to discuss our third quarter performance. Sean?

Sean M. Wirtjes (CFO)

Thanks, Rob, and good morning, everyone. I'll start with a recap of our third quarter 2023 results, followed by our updated outlook. Q3 revenue increased 30% to $6.1 million, compared to $4.7 million in Q3 2022. We placed five Growth Direct systems in the third quarter this year, compared to three in Q3 last year. Product revenue, which is comprised of systems and consumables, increased 31% to $4.2 million in Q3, compared to $3.2 million last year. The growth in revenue was primarily driven by the two additional system placements in the quarter. Consumable revenue increased on a year-over-year basis, but was down slightly on a sequential basis following a record second quarter, due mainly to the timing of customer shipments between Q2 and Q3, both this year and last year.

Service revenue increased 27% to $1.9 million in the third quarter, compared to $1.5 million last year. The increase was largely driven by higher recurring service contract revenue, which grew almost 40% in the quarter. Third quarter recurring revenue increased 17% to $3.4 million, compared to $2.9 million last year, driven by the growth in both consumables and service contract revenue. Non-recurring revenue was $2.7 million in Q3, compared to $1.8 million in the prior year quarter. Turning to gross margins, product margins were negative $1.5 million in Q3, compared to negative $2.4 million in the third quarter last year.

The improvement was mainly due to higher placements and production volumes in systems and favorable consumables product mix in Q3 this year, as well as the one-time write-off of expired materials and consumables in Q3 last year. This improvement was partially offset by the impact of planned downtime on our automated consumables manufacturing line to implement enhancements that will benefit future margins, as we discussed on our last earnings call. These enhancements are now substantially complete, and we expect them to start making a meaningful contribution to improved consumables margins beginning in the fourth quarter of this year. Service margins were -$0.1 million in Q3, compared to -$0.4 million last year. Leverage from higher revenues and better productivity drove the improvement in service margins in the quarter. On a combined basis, our third quarter gross margin percentage was -27%....

representing an 11 percentage point improvement on a sequential basis and a 32 percentage point improvement compared to the third quarter last year. Looking at margin improvement another way, our total cost of revenue only increased 3% year-over-year, compared to the 30% increase in total revenue we realized in the same period. This illustrates the progress we are making in implementing manufacturing efficiencies and cost reductions across both products and services, as well as the benefits of higher revenue, increasing production volumes, and tight control of overhead costs. We are laser focused on the activities we believe will drive significant long-term and sustainable improvement in our gross margins.

Continuing down the P&L, total operating expenses were $12.8 million in the third quarter, consisting of $3.5 million in sales and marketing, $3.1 million in R&D, and $6.2 million in G&A. This compares to total operating expenses of $14.1 million in the third quarter of 2022. The decrease was largely due to nonrecurring costs incurred in the third quarter of last year, associated with the strategic review process initiated by our board of directors in that period. Net loss was $13.4 million in Q3. This compares to a net loss of $16.3 million in Q3 last year. This improvement was largely due to higher revenue, better gross margins, and lower operating expenses in Q3 this year.

Net loss per share was $0.31 in Q3, compared to net loss per share of $0.38 in the prior year quarter. With respect to non-cash expenses and capital expenditures, depreciation and amortization was $0.8 million, stock compensation expense was $1.3 million, and capital expenditures were $0.5 million in the third quarter. I'll now turn to our outlook. We are once again reaffirming our previous full year 2023 revenue guidance of at least $22 million, which represents growth of at least 30% and assumes we will place at least 15 systems. Compared to Q3, we expect Q4 system revenue to be relatively consistent, consumable revenue to be slightly lower, due mainly to shipment timing, and service revenue to be higher due to increased validation activity.

We expect to complete at least five validations in the fourth quarter, which is consistent with our prior guidance. In light of the current macroeconomic environment, our customers continue to scrutinize the timing and scale of purchase decisions. And while our guidance continues to reflect this uncertainty and our teams continue to effectively navigate this environment, we expect these headwinds to persist through the end of the year. Shifting to gross margins, we expect sequential improvement in Q4 as we benefit from higher production volumes and cost reduction activities and consumables, as well as the benefit of higher revenue and increased productivity in service. Gross margin improvement continues to be a top strategic objective for us. We are focused on driving cost reduction and increasing manufacturing efficiency in products and increasing productivity in services.

We continue to expect these actions, as well as the benefit of higher sales volumes, to lead us to positive gross margins in 2024, with expansion to 50%-60% as the business continues to scale over time. We expect Q4 operating expenses to be between $12 million and $13 million. Finally, we finished the third quarter with approximately $104 million in cash, cash equivalents, and investments. Cash burn was approximately $9 million in the period. In the fourth quarter, we expect cash burn to be slightly less than Q3 as we realize cash benefits from working capital management. As a result, we expect to end 2023 with cash and investments slightly below $100 million and remain confident that this will provide us with cash runway at least into 2026. That concludes my comments.

At this point, we'll open the call up for questions. Operator?

Operator (participant)

Certainly. At this time, if you'd like to ask a question, please press star one on your telephone keypad. Again, that is star one on your telephone keypad. Tejas Savant with Morgan Stanley, your line is open.

Speaker 6

Good morning, guys. This is Edmund on for Tejas. Thank you for taking my questions. Just to start, with five systems placed in the quarter, your guidance implies more for the remainder in Q4. Just wondering what underlies your confidence in being able to deliver that in Q4? And what do you currently have baked into your guidance in terms of a year-end budget flush?

Sean M. Wirtjes (CFO)

Yes, so this is Rob Spignesi. Thanks for the question, Edmund. You know, really, our confidence in delivering the full delivering our guidance comes from a couple different areas, you know, first of which, we've got a full team staffed as I discussed in the remarks. Globally, we've got good penetration into the top customers, global top 20. We've got increasing senior access into the senior leadership of the top 20, and notably, the conversations that we're having, you know, give us confidence and insight into the purchasing approaches and timing within these large customers. The funnel, notably and importantly, looks the way we want it to look to give us confidence in our outlook.

Another strong leading indicator we look at is customer experience, which we measure closely, and is quite high. So the combination of these elements is what gives us confidence in our outlook. Now, with regard to Q4 budget flush, you know, we're not—A, we're not seeing it, and B, we don't expect a traditional, if you will, budget flush, nor are we seeing what I would call a budget freeze. So it's been fairly consistent with what we've seen in previous quarters that we've mentioned. So it really is a customer by customer,

Rob Spignesi (President and CEO)

... situation. And in some cases, not all, in some cases, the growth rate has been prioritized as a corporate level initiative. So it, it's a bit more resilient to, you know, to the current budget environment. Although in some cases, you know, we've seen customers push projects to the right into 2024. So the combined elements of all the above is what gives us confidence in our outlook for Q4.

Speaker 6

Great, Rob. Thank you for the detail. That's super helpful. And then, in terms of Project Rapid for shortened-

Rob Spignesi (President and CEO)

Mm-hmm

Speaker 6

... validation platform, I was wondering if you could help us benchmark how the project is performing. Are you seeing the same magnitude of impact between both existing customers and new customers? Finally, if you could remind us, aside from dedicated project managers, what are some of the other areas of opportunity that you guys are leveraging to shorten the ramp time?

Rob Spignesi (President and CEO)

Okay, so we are seeing broad-based performance with new and existing. And for those that are listening that aren't aware of it, I'll just back up. Project Rapid is a project designation for an umbrella set of activities that we have to accelerate our validation processes. There's multiple elements that we need to work through with our customers under good manufacturing principles, to go from an installation to the system of record through various validation processes to ensure the system is validated for use in a manufacturing environment. So over time, we've improved our capability in this regard.

We have over 100 systems validated globally in GMP environments, and we've learned with our customers not only to accelerate the process but also to harmonize the process. We've worked hand in glove. One of the most exciting things we've done as a company is harmonized our global validation processes with our large customers. Both our existing customers, as I touched on, and our new customers benefit from that. Some of the activities that help to accelerate our validation on our Project Rapid, as Edmund touched on, we've got project management in place, so this is dedicated global product management. And this is effectively a project management process to get from an installation to validation. We've got dedicated product managers.

We have very experienced validation personnel who go in on-site with customers. We've improved our documentation and our data, so we're able to bring data to bear and to accelerate the process versus generating data on-site. And we're down the learning curve. We understand where validation processes can be accelerated, where they typically slow down, where customer challenges are. So we're able to come in with a deep experience base in order to accelerate the process. And we do this globally across all the sites that we interact with. I view it as one of our fulcrum capabilities, and it's one of the areas that you know, customers strongly appreciate our capabilities in.

Speaker 6

Great, Rob. Thank you for the answers and the time today.

Operator (participant)

Dan Arias with Stifel, your line is open.

Dan Arias (Managing Director)

Hey, good morning, guys. Thanks for the questions. Rob, maybe just to follow up on your new versus existing customer comment there.

Rob Spignesi (President and CEO)

Mm-hmm.

Dan Arias (Managing Director)

When you think about the sales funnel that will translate to orders and revenue next year, how does the mix look when it comes to placements at those new accounts versus repeat purchases? And then, as a follow-up to that, on the cell and gene therapy side, you sound kind of positive there. Can you just talk about how those conversations are going? Obviously, there are some ups and downs with some of those companies, and the things that they're experiencing these days, and just the spending level that you might expect there. So how does visibility compare there to the other parts of the market?

Rob Spignesi (President and CEO)

Yeah, Dan, thanks for the question. So, with regard to new versus existing, it's balanced. You know, we, you know, it's weighted towards existing customers, as you may imagine, and, you know, you, you heard we, we brought a new one on. So as we continue to chip away at some of the larger customers out there, you know, our funnel, our outlook and our funnel, is weighted in that direction, given our land and expand strategy. You know, that being said, again, as with the full team out there across North America, Europe, and Asia, we are generating new opportunities, kind of across our segments that include both new and existing. So we, we like the way our funnel looks with regard to, both new and existing.

As I mentioned, we're excited about what we're hearing and seeing with some of our larger customers and getting better insight into their rollouts, you know, plans and budgets against those. You know, on the cell therapy front, I think you heard with regard to CAR-T in particular, or cell and gene generally, and CAR-T in particular, we've done well there. You know, our value proposition resonates quite well. So I think that's a situation where our particular technology fits their manufacturing needs quite well. And it's really the, you know, in our view, the only real fully automated system that can serve their needs.

You know, more broadly, in cell and gene therapy, we are active with CDMOs who operate in that space, that CDMO business is healthy, as well as obviously the broader ecosystem with plasma manufacturers and other who continue to be healthy as well. So, you know, we're obviously watching it. We're strong in the space broadly and but as I mentioned on the call as well, we've got a good footprint in biologics manufacturing, which is our largest segment, and small molecule as well. So, we watch our segment mix carefully, and while we're strong in cell and gene therapy, it certainly isn't the only segment that we're focused on. And again, it's important to note that biologics is our largest segment.

Dan Arias (Managing Director)

Yep, gotcha. Okay. And then, Sean, on, on consumables, how do you think pull-through tracks on an annualized per system basis into year-end? And then can you just touch on why consumables will be down next quarter? I think that's actually two sequential down quarters.

Sean M. Wirtjes (CFO)

Yep.

Dan Arias (Managing Director)

It seems like you feel pretty good about the momentum, so maybe just touch on how consumables face over the next-

Sean M. Wirtjes (CFO)

Yeah, uh-

Dan Arias (Managing Director)

1-2 quarters.

Sean M. Wirtjes (CFO)

Sure. Yeah, so I break it down. We still expect to grow single digits in year-over-year pull-through, effectively, when we look at the full year. I think, you know, do we get to high single digits? We may—we have a few headwinds that may keep us from getting quite to where we thought we'd get to a couple of quarters ago, but it's mainly due to timing. So if you kind of break down Q3 and Q4. Q3, you know, a couple of things working against us in terms of the year-over-year growth. One is that we had some $200,000 worth of shipments pushed from Q2 to Q3 last year. And, you know, with our record quarter last quarter, we pulled probably a somewhat similar amount from Q3 this year into Q2 this year.

So that comp is challenged both directions as a result of that. Thinking about Q4, Q4 is actually kind of the opposite of systems in the sense that most of our customers tend to shut down mid-December in terms of receiving new material. So it tends to be a little bit of a lighter quarter on a relative basis. So I'd say that, that and some, you know, some kind of more transient timing issues in terms of shipments are really driving what we expect to see in, in Q4. I think as we go forward from there, it's really, you know, you know, we do continue to expect to see that pull-through number move up.

You know, we're working very hard, and Rob talked about Project Rapid, kind of moving customers not only through validation, but also in the routine use of those systems and pulling through the consumables. And we've got a kind of the full court press on that front, and that gives us confidence that we'll see that sequential growth pick up again in 2024.

Dan Arias (Managing Director)

Okay. Okay, if I could sneak one more in here, just on gross margins. Do you think the improvement that you see over the next couple of quarters, which I think is something you're looking for, is that going to be driven more by the product side and/or the services side? And then on gross margin positivity for next year, is the latest thought that you sort of, you cross over to positivity at the end of the year to exit 2024, or could that happen sooner?

Sean M. Wirtjes (CFO)

Yeah. So I expect improvement to be both product and services. You know, we talked a little bit about productivity and service. There was an improvement, a pretty good improvement this quarter in service, and I think as you know, I think everything kind of comes from system placements. And as we're getting back on a trajectory now where placements are stepping up, it's going to drive more validation opportunities for us. And the other one that you know, I never lose sight of is service contracts. You know, almost every month now, we have new customers moving into a situation where they need to start buying service contracts from us. So you know, that, we expect those two things to drive growth in services.

And then I talked in the call a bit about products across both systems and consumables. But consumables, in particular, is an area where we're investing a lot of time and energy. As you know, we did some things on the line over the past couple of quarters that we expect to yield-

Dan Arias (Managing Director)

Mm-hmm

Sean M. Wirtjes (CFO)

... benefits starting this quarter. So I'd expect that to come, the improvement to come from both areas within the business. I think as you look at what I expect to happen over the coming quarters on margin, I mean, thinking about Q4, you know, we improved 11 percentage points from Q2 to Q3. That's probably not a bad way to think about what we expect to happen based on our outlook at this point. You know, we've also talked about the fact that a couple more system placements getting us up into high single digits could get us to positivity, and I think that's still true. So give you a couple of points to triangulate on there relative to Q4 margin expectations.

Then, you know, if we assume, just for argument's sake, our typical kind of quarterly trend within a year, we typically step down in placements from Q4 to Q1. So that obviously puts some negative pressure on margin. So, you know, we'll talk about guidance when we announce Q4, but, you know, I would expect that we'll see revenues step down. Placements typically step down in Q1 unless, you know, we see some other things happening, and we'll talk more about that when we give guidance. But if we assume the normal, the normal trend, I'd expect that you'd be... You'd probably be negative in Q1. From there on out, it really depends on the ramp on placements and business activity. So latter part of the year is more likely.

You know, I think, could we get there kind of middle of the year? Possibly. But we'll give you more color around that when we're ready to give you guidance for next year.

Dan Arias (Managing Director)

Yep. Okay, I can work with that. Thanks a bunch, guys.

Sean M. Wirtjes (CFO)

Sure.

Operator (participant)

Steven Mah with TD Cowen, your line is open.

Steven Mah (Senior Equity Research Analyst)

Great. Thanks for taking the questions. Can you give us an update on the timelines on the Rapid Sterility offering? It's been in beta testing for some time now.

Sean M. Wirtjes (CFO)

Mm-hmm.

Steven Mah (Senior Equity Research Analyst)

And then also, you know, have you been getting any early inbounds on, on the Rapid Sterility offering from either new or existing customers? And can you discuss the impact on how you think about your, your sales funnel in, uh, in 2024?

Rob Spignesi (President and CEO)

Yeah, Steve, thanks. Thanks for the question. It's, it's Rob. So we have not given, uh, a timeline on Rapid Sterility. I-- we, we have mentioned in the past couple of calls that we're increasing our focus on commercialization. So we'll let, uh, you know, that, that, that should be a bit of an indicator of kind of, you know, kind of how, how we're tracking through the development process. Development's gone well.

We're incredibly encouraged in what we're seeing as far as our internally generated data, feedback from our beta customer, and it's given us the confidence to focus increasingly on commercialization activities. As I mentioned, we'll have a more significant and robust update for everyone next quarter. And we'll be excited for that at discussion. With regard to inbounds, we're not commercially—it's not being commercially marketed currently, so clearly, there's well, there is interest in a Rapid Sterility offering. We've done meaningful voice-of-customer work and believe we have the right, you know, features and benefits and value proposition that this market is looking for, all under the umbrella and aegis of our Growth Direct system, with data integrity and full automation.

So we're very excited about the commercial potential for the system. But again, we haven't been marketing it, and we're not in that mode right now. But more to follow as we move through time here.

Steven Mah (Senior Equity Research Analyst)

Okay. Yeah, great. Thanks for the color. A question actually for, you know, Sean now.

Rob Spignesi (President and CEO)

Mm-hmm.

Steven Mah (Senior Equity Research Analyst)

You know, on the ASPs, it looks like they've normalized in Q3 versus, you know, Q2. Maybe you can discuss some of the trends there. You know, then a question maybe for Rob: You know, do you expect to have to give, you know, multisystem, you know, either promotions or discounts? Is that gonna be part of your sales and marketing strategy?

Sean M. Wirtjes (CFO)

Yeah. Hi, Steve, it's Sean. Are you talking about systems specifically?

Steven Mah (Senior Equity Research Analyst)

Yeah.

Sean M. Wirtjes (CFO)

Yeah. So I think, you know, and this may lead into Rob's question, so he'll have comments too. Yeah, so I think, you know, we... I wouldn't necessarily tie it directly to multisystem deals, but, you know, we obviously look at strategic customers. There are times that we will do certain things for specific customers from a pricing standpoint, to either get them on board, kinda get them on the team. You know, that happens with some variability, so that can impact how ASPs move from quarter to quarter. So I would say that's clearly not the norm. We're happy overall with where we are in ASPs this year. And, you know, our expectation is we're gonna continue to look at opportunities to move them up as we go forward.

Rob Spignesi (President and CEO)

Yeah, Steve. So, so I think as, as in, as in many markets, with the higher the volume opportunity, the, you know, you know, price will, be, be an area of focus. And, you know, one, one of the, one of the, elements our business is moving through as we become a larger and larger piece of enterprise discussions and enterprise rollouts, especially in big pharma, you know, we will engage with, with the procurement teams and, and, and have those discussions about, about, about price and volumes. But that's, that's in the ordinary course. As Sean touched on, we're, you know, we watch ASPs carefully, and, and we're happy with, you know, where we're, where we are and where we're trending with them.

You know, we always endeavor to make sure we're getting paid for the value that we provide. But certainly with larger enterprise rollouts, the pricing is gonna be a bit different than a, you know, a smaller one-off sale,

Sean M. Wirtjes (CFO)

for sure.

Steven Mah (Senior Equity Research Analyst)

Okay, great. Thanks. That's helpful. And if I can sneak one last question: You guys talked a lot about, you know, your, your marketing activities, you know, with your, with your demo labs in, in Germany and, and in Massachusetts. You know, when I look at the, you know, your sales and marketing spend, looks to be relatively flat from, you know, 2022, you know, how should we think about sales and marketing OpEx, you know, going forward? You know, is it gonna be sort of a steady state, or is that gonna be increasing? Thank you.

Sean M. Wirtjes (CFO)

Yeah, I think year-over-year comparison, Steve, last Q3 last year was a bit of an anomaly. We had a restructuring that we executed on then. You know, a number of things came out of that that were kind of one time. So I'd say where we are now, fully staffed, as Rob mentioned, is more where I'd expect to be. So I think if the comp was impacted by that, we've increased spend kind of on the base organization and activities since last year. And I would think about that as us being fully staffed and, you know, we'll continue to invest in that area, but I wouldn't expect to see, you know, large increases in that spend in the near term at this point.

Steven Mah (Senior Equity Research Analyst)

Okay, great. Thank you.

Rob Spignesi (President and CEO)

Great. Well, thanks for the question, Steve, and thank you all for your time. We're gonna wrap up the live call now.

Operator (participant)

This concludes today's call. We thank you for your participation. You may now disconnect.