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Alpha Teknova, Inc. (TKNO)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue was $9.6M (+17% YoY), with underlying gross margin of 29.8% excluding a one-time $2.8M inventory write-down; GAAP gross margin printed 0.9% and diluted EPS was -$0.15 .
  • The company reaffirmed FY 2024 revenue guidance of $35–$38M and lowered full-year free cash outflow guidance to less than $16M from less than $18M, citing continued OpEx discipline and improving free cash trends .
  • Clinical Solutions revenue rose 229% YoY to $2.0M on increased customer count; Lab Essentials was largely flat YoY at $7.2M, with management calling out seasonal Q4 softness and a recently canceled large Clinical Solutions order now likely to shift to 2025 .
  • Liquidity improved with $31.7M in combined cash and short-term investments and $12.1M gross debt; management believes liquidity is sufficient to reach profitability without additional capital and targets adjusted EBITDA breakeven at $50–$55M revenue .
  • Key stock reaction catalysts: the non-recurring inventory write-down that depressed GAAP margins this quarter; lowered free cash outflow guidance; and commentary that a large Q4 Clinical Solutions order was canceled (timing risk), partially offset by growing clinical customer pipeline and margin leverage potential .

What Went Well and What Went Wrong

What Went Well

  • Double-digit YoY revenue growth (+17%) driven by Clinical Solutions, with underlying gross margin at 29.8% excluding the charge, and lowest quarterly free cash outflow in over three years (“$2.4M”) .
  • Customer momentum: “the number of our active clinical customers again increased in the third quarter,” supporting long-term revenue ramp as therapies advance to commercialization .
  • Cost discipline: OpEx fell to $7.5M (lowest since IPO), below the $8M quarterly target; headcount down 24% YoY to 165 associates .

What Went Wrong

  • GAAP gross margin compressed to 0.9% due to a $2.8M non-recurring, non-cash inventory disposal/write-down related to 2022 production ramp, driving gross profit to $0.1M vs $1.5M in Q3 2023 .
  • Q4 caution: typical seasonal revenue softness and cancellation of a large Clinical Solutions order expected to lower Q4 Clinical Solutions revenue (customer may reorder in 2025) .
  • Lab Essentials revenue was flat YoY, with lower average revenue per customer partly offset by increased customer count; management cited pockets of softness with a few large life science tools accounts .

Financial Results

Core P&L and Cash Metrics (Quarterly)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$9.290 $9.614 $9.576
Diluted EPS ($USD)-$0.20 -$0.13 -$0.15
Gross Margin (%) GAAP23.8% 29.2% 0.9%
Gross Margin (%) excluding non-recurring charge——29.8%
Operating Expenses ($USD Millions)$10.195 $7.904 $7.522
Adjusted EBITDA ($USD Millions)-$3.756 -$2.568 -$5.001
Free Cash Flow ($USD Millions)-$6.670 -$2.953 -$2.390

Q3 2024 vs Prior Year and Prior Quarter

MetricQ3 2023Q2 2024Q3 2024
Total Revenue ($USD Millions)$8.169 $9.614 $9.576
Lab Essentials Revenue ($USD Millions)$7.274 $7.638 $7.161
Clinical Solutions Revenue ($USD Millions)$0.597 $1.565 $1.964
Other Revenue ($USD Millions)$0.298 $0.411 $0.451
Gross Margin (%) GAAP18.0% 29.2% 0.9%
  • Q3 2024 YoY revenue growth: +17% (from $8.169M to $9.576M) .
  • Q3 2024 sequential revenue change: -0.4% (from $9.614M to $9.576M) .
  • Clinical Solutions YoY: +229% ($0.597M → $1.964M) .

Segment Breakdown

Segment Revenue ($USD Millions)Q1 2024Q2 2024Q3 2024
Lab Essentials$7.266 $7.638 $7.161
Clinical Solutions$1.718 $1.565 $1.964
Other$0.306 $0.411 $0.451
Total Revenue$9.290 $9.614 $9.576

KPIs and Balance Sheet

KPIQ1 2024Q2 2024Q3 2024
Operating Expenses ($USD Millions)$10.195 $7.904 $7.522
Adjusted EBITDA ($USD Millions)-$3.756 -$2.568 -$5.001
Free Cash Flow ($USD Millions)-$6.670 -$2.953 -$2.390
Cash & Equivalents ($USD Millions)$21.596 $18.596 $6.145
Short-term Investments ($USD Millions)——$25.546
Gross Debt ($USD Millions)$12.1 $12.1 $12.1
Associates (Headcount)174 169 165

Note: Combined cash and short-term investments were $31.7M at Q3 2024 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2024$35–$38M (Q2 2024) $35–$38M (Q3 2024) Maintained
Lab Essentials Revenue Growth AssumptionFY 2024~5% (Q2 2024) ~2% (Q3 2024) Lowered
Free Cash OutflowFY 2024< $18M (Q2 2024) < $16M (Q3 2024) Lowered

Reference: Q1 2024 guidance had ~10% Lab Essentials growth and < $18M free cash outflow .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2024)Trend
Biotech funding/macro stabilizationStabilization; 4-quarter lag to revenue; more supportive in early 2025 Market stabilized in 2024; expect modest growth in 2025 Improving
Product initiatives (Build-Tek, RUO+, Express-Tek)Build-Tek launched; AAV-Tek stabilizer; RUO+ & Express-Tek launched; high-margin service Express-Tek operating “full speed”; RUO+ resonating; margin accretive; no significant extra S&M investment Adoption increasing
Gross margin trajectory70% drop-through on incremental revenue; sequential leverage GAAP GM 0.9% due to $2.8M write-down; ex-charge GM 29.8%; not anticipating further write-downs Underlying improving; one-time charge
Clinical Solutions growth/customer countCustomer count rising; 43 active clinical customers by Q2 Sequential increase again; Q4 Clinical Solutions to be lower due to canceled order Customers up; revenue lumpy
Liquidity and capital$15.4M private placement closed in July $31.7M cash & short-term investments; CFO: sufficient liquidity to reach profitability Improving
Capacity/scalabilityHollister facility supports ~$200M revenue Infrastructure in place to support up to ~$200M Unchanged
Cost structureOpEx at lowest since IPO; continued reductions OpEx $7.5M, below $8M target; headcount 165 (-24% YoY) Continued discipline

Management Commentary

  • “Our year-on-year double-digit revenue growth in the third quarter gives us confidence that we have put Teknova on track for long-term success.” — Stephen Gunstream, CEO .
  • “We remain confident that we’ll finish the back half of 2024 with double-digit revenue growth and look to build on this momentum as we enter 2025.” — Stephen Gunstream, CEO .
  • “We typically see revenue soften in the fourth quarter... maintaining our full-year outlook of $35–$38 million while lowering our free cash outflow outlook from less than $18 million to less than $16 million.” — Matt Lowell, CFO .
  • “Excluding the impact of [the $2.8M] charge, gross margin would have been 29.8%... driven by higher Clinical Solutions revenue coupled with reduced headcount.” — Matt Lowell, CFO .
  • “We have the liquidity necessary to reach profitability without additional capital.” — Stephen Gunstream, CEO .

Q&A Highlights

  • RUO+/Express-Tek traction and pricing: Express-Tek accelerates production for critical custom orders with additional fees; margin accretive; RUO+ bridges RUO-to-GMP with higher pricing reflecting GMP-like environment; no significant incremental S&M required .
  • Inventory management and future write-downs: Management does not anticipate future write-downs; implemented stricter internal inventory stocking rules over recent quarters .
  • Margin path: Long-term gross margin target “60%+”; primary driver is revenue leverage on high fixed cost base; mix shift to Clinical Solutions and automation can further accelerate margins .
  • Capacity and breakeven: Facility supports ~$200M revenue; adjusted EBITDA breakeven expected at $50–$55M annualized revenue; positive free cash flow shortly thereafter .
  • Q4 caution: A large Clinical Solutions order was canceled and may reorder in 2025; expect lower Clinical Solutions revenue in Q4 alongside typical seasonality .

Estimates Context

  • Wall Street consensus (S&P Global/Capital IQ) for Q3 2024 revenue and EPS was unavailable at time of query due to SPGI request limits; therefore, estimate comparisons are not provided. We will update when S&P Global data is accessible.

Key Takeaways for Investors

  • Q3 showed solid top-line momentum (+17% YoY) with strong underlying margins, obscured by a one-time $2.8M inventory write-down; watch for normalization of GAAP margins in Q4/Q1 as inventory cleanup is complete .
  • Free cash flow trends are improving materially (-$2.4M in Q3 vs -$6.7M in Q1), and guidance lowered FY 2024 FCF outflow to < $16M; sustained OpEx discipline (Q3 $7.5M) is a key lever .
  • Near-term risk: Q4 seasonal softness and a canceled large Clinical Solutions order likely to reduce Q4 Clinical Solutions revenue; timing of reorder pushed to 2025 .
  • Medium-term thesis centers on Clinical Solutions customer ramp (sequential increases) with revenue leverage (70% drop-through on incremental revenue) and long-term GM potential of 60%+ .
  • Liquidity position ($31.7M combined cash/investments; $12.1M gross debt) plus July equity raise provides runway to profitability without additional capital, per management .
  • Watch product initiatives (RUO+, Express-Tek, Build-Tek) for incremental margin-accretive revenue and customer acquisition, particularly as biotech funding stabilizes and spending ramps with a lag .
  • Key catalysts: resolution of one-time inventory charge effects, confirmation of margin improvement, conversion of clinical accounts to larger volumes, and updated FY 2025 outlook once estimate comparisons can be made with S&P Global data .