Greetings, and welcome to the Fourth Quarter and Year-end 2022 Maravai LifeSciences Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Debra Hart, Head of Investor Relations. Thank you. You may begin.

Thank you, Diego. Good afternoon, everyone. Thanks for joining us for our fourth quarter and year-end 2022 earnings call. Our press release and the slides that accompany today's call are posted on our website and are available at investors.maravai.com. As you can see on our agenda for today on Slide 2, Carl will first provide you with a business update, and Kevin will review our financial results and guidance. Trey Martin, President of Biologic Safety Testing; and Becky Buzzeo, our Chief Commercial Officer, will join the call for the question-and-answer session following the prepared remarks. We remind you management will make forward-looking statements and refer to GAAP and non-GAAP financial measures during today's call. It is possible that actual results could differ from management's expectations. We refer you to Slide 3 for more detail on forward-looking statements and our use of non-GAAP financial measures. Our just issued press release provides reconciliations to the most directly comparable GAAP measures. Please also refer to Maravai's SEC filings for additional information on the risks and uncertainties that may impact our operating results, performance and financial condition. Now I'll turn the call over to Carl.

Well, thank you, Deb, and good afternoon, everyone. We appreciate having you join us for our call today. Let's start with our fourth quarter results on Slide 5. Today, we reported $205 million in revenue for the quarter, and our adjusted EBITDA of $130 million led to adjusted earnings per share of $0.35 per share. Our base business revenue of $81 million marks a record revenue quarter, up 67% over the fourth quarter of 2021, demonstrating the continued widespread uptake of messenger RNA platform technologies across multiple therapeutic infectious disease vaccine and immuno-oncology programs. Our adjusted EPS of $0.35 per share for the quarter and $1.80 per share for the full year put us at the top end of our guidance range provided during last quarter's earnings call. As Slide 6 indicates, 2022 was an incredible year for the entire business. Full year revenue was a record $883 million and net income was $491 million, with adjusted EBITDA margins coming in at 72%. Most importantly, our 2022 full year base business revenue when adjusted for the 2021 divestiture of our protein detection business grew 27%. You will be hearing from Kevin shortly that we expect our base business, excluding CleanCap sales related to COVID to continue to grow at around 20% this year as well. The reason this base business continues to deliver is simply the accelerating demand for our core products and services. We offer the market the exact technologies and advanced manufacturing services that enable cell and gene therapy development. More on that in just a moment. Turning now to Slide 7. Our Nucleic Acid Production business had revenue of $189 million in the fourth quarter. This includes an estimated $124 million of COVID CleanCap revenue. The remaining $66 million of base NAP revenue represents our largest quarter…

Thank you, Carl, and good afternoon. Our fourth quarter wrapped up an amazing year for Maravai. Given that Karl has presented the financial highlights already, I will briefly cover some more details regarding our financial results for the fourth quarter and full year of 2022. Before we dive into the details, I want to underscore our strong '22 performance. In early November of 2021, we provided our initial views for 2022 revenue expectations setting that range at $840 million to $880 million. Our strong fourth quarter resulted in a full year revenue total of $883 million, performing in excess of that initial guidance for 2022. On our call about a year ago, we also provided initial 2022 adjusted fully diluted EPS guidance for 2022 of [$1.70] [technical difficulty] $1.80 per share, solidly within that narrow range. Not only did 2022 deliver against these initial expectations, but we also continue to deliver on our strategy for the business via key strategic investments and strengthening our foundation for long-term growth. We believe that as we sit here today, we are squarely headed towards our vision of being a meaningful part of the future products, technologies and services that our customers will develop and commercialize to power the next generation of health care solutions. So let's discuss some of the recent results in more detail. Here on Slide 17, we begin with our GAAP numbers. Our GAAP net income before non-controlling interests was $87 million for the fourth quarter of 2022. This compares to $127 million for the fourth quarter of 2021. GAAP net income for the year was $491 million compared to $469 million for 2021. Note that certain prior year amounts were adjusted for the lease accounting standards change required under ASC 842. Income from operations was $109 million in the…

Well, thanks, Kevin, and we apologize for those of you on the line, it sounds like there were technical problems on Kevin's line, where some of the things cut out, and I assure you it wasn't a strategy to have our CFO’s line blank out just as he was saying important numbers. So if you missed any of that feel free to ask, and we'll be happy to recap any of it for you. So to wrap up on Slide 28, we had an incredible '22 and are poised for future growth in our base non-COVID business in 2023 and beyond. We believe we are playing in the right target markets with strong leadership positions while building our product portfolio and expanding our services offerings in strategically important and high-value areas. From new and improved COVID-19 vaccines to vaccines for influenza and shingles to cell and gene therapies, battling cancer, the transformative impact that messenger RNA is having on global human health will only accelerate. We at Maravai are proud of the key role that our customers, partners and employees are playing and making that happen. We're committed to building a strong foundation for long-term sustainable growth, and we'll continue to focus on operational excellence, innovation and people as our three strategic pillars as we work to catalyze the customers' journey with us. I would now like to turn the call back over to Diego to open along for your questions. Diego?

[Operator Instructions] Our first question comes from Dan Leonard with Credit Suisse.

My first question is on the guidance phasing for 2023. Kevin, I heard your comments on COVID revenue. Is there anything else we should keep in mind as we're thinking about first half versus second half phasing or otherwise?

Yes, Dan. In addition to the COVID phasing that I mentioned, obviously, with the $60 million or so that's firm and in hand being relatively evenly spread and then the remainder likely in the second half or back half. I think the base business will start at the low end and ramp from there as well. So I think you'll see a combination of those two items leading to the lower revenues here in the first quarter and then ramping up kind of progressively on the base business as we see things continue to evolve over the course of 2023.

Understood. That's a helpful flag. And then my follow-up. Carl, thank you for all the high-level commentary on the cell and gene therapy pipeline. I'm curious if you're seeing any change in velocity of customer activity, though, whether driven by the biotech capital drought or anything else? I mean Lonza, for example, is a company who has flagged softening trends.

Sure, Dan. I think that we had -- we commented previously and would say that it's still the case that there is some reprioritization of pipelines, especially among smaller companies. for cash conservation may be important. So if somebody was working three to five programs before they may be emphasizing two to three or two to four of them now. So there is some stuff going on at the margin there for sure. But in terms of the major players in the industry and the big customers, we really haven't seen that phenomenon. .

Our next question comes from Matt Sykes with Goldman Sachs.

Maybe first, Kevin, just for you on just the margins. I understand the sort of the one-offs that occurred in the fourth quarter that related to that. But as we kind of look towards '23, it looks like the kind of the math that I did on the implied EBITDA margin for '23 is around 41%, which sort of the low end of the range you talked about in Q3. But as we go from sort of the high 60s like 40, 41 over the course of '23, can you help us with the cadence of that margin? Obviously, it will be coming down, but just kind of maybe help us bridge sort of from a quarter-to-quarter basis, what margins could look like?

Yes. Look, I'm not going to go into every exact quarter here. But yes, certainly, with the revenue starting out where it is the revenues are a big driver of our margin, as you know. I mean, obviously, as the business scales, we have tremendous leverage and that reverses itself as we're sitting here today. So I think those margins for the first quarter will start south of that midpoint and then progress over the course of the year to the highest margins probably in the back half of the year, assuming the COVID revenue comes in as we've explained it, and I think that's just a natural progression. Again, we're adding the infrastructure we've talked about here and here and now. And for us, that certainly pressures margins, doesn't concern us because we think it's the right thing to do, but it will be most apparent here in the first quarter. And then I think we see that, again, much like revenues kind of leveling out as we go up throughout the course of the year.

Got it. And then just as you think about the RUO to GMP conversion, I know there was something last year about the China contract. You kind of mentioned something in the fourth quarter, I believe. But how do you feel you're positioned with Flanders coming online in the first half of this year to deal with that RUO to GMP conversion? Do you think you're in a better position for '23 to deal with that change as you were, say, in '21, '22?

Absolutely. There's no question about that, and that's the reason for making those investments. It's just going to depend individually on the customers as to which direction they go. And I think as we've commented before, the larger pharma companies becoming involved with more and more of the programs, probably accelerate that.

Got it. If I could squeeze 1 more in. Just on the pie chart you had on modalities for CleanCap, understanding some of the comments you made previously about the difference in terms of quantity of materials for RNA therapies versus vaccines. Is there sort of a mix shift of modalities that you're aiming for in order to shoot for that either higher quantity of materials or faster-growing modality? Or is it just sort of attaching yourself to as many programs as you can as you move through '23 and then kind of build from there? I just wanted to get sort of a high-level strategy as you think about modalities.

Yes, I wish we were able to target it that specifically. But no, I think we welcome all comers, we will enable whatever program or whatever ultimate scale it may be. And remember, in the early stages, all the customers need the same kind of services at roughly the same scales. So they all start reasonably similar and then they diverge as they become more successful and their indications are proven.

Our next question comes from Dan Arias with Stifel.

I wanted to just ask a little bit about maybe new business wins. Carl, the 70 new programs that you guys identified in that follow-up study what's the rough mix of new customers where contributions are sort of all incremental versus existing ones? And then on the Flanders side, can we think about that driving new account wins this year as you sort of open up your capabilities beyond Phase 1 and serve this GMP market, or is that -- sort of to Matt's point, is that just more of being ready for a transition that takes place inside the existing accounts?

Yes. Let me answer the first part of the question, then I'll ask Becky Buzzeo to comment on your second question about what Flanders enables her team to do. I think that as we look at the -- well, first, let me go ahead and turn it over to Becky and ask her to comment first, and then I'll fill in after that. Becky?

Sure, Carl. So to answer your first question, we had just shy of about 2,000 new customers last year. So we calculated out to be almost 1,900 new customers last year. So we do see the contribution of new customers being quite rapid. We are making investments in our commercial team to also address penetration in the markets. So specifically in Europe and Asia, where we think there is more share for us to gain. As it relates to Flanders enabling our business, we see this as a really great opportunity. One, Flanders 1 is going to give us redundancy in manufacturing. That's been a big concern with our customers because we are single source for CleanCap. So that gives us a very nice ability to showcase how we have that redundancy and then maintain control of that critical raw material. Flanders 2 is going to bring on later stage manufacturing for GMP, and that will be up and running, and we believe we have a great value proposition to really transition customers from RUO material into Phase I and then continue that journey as they continue their clinical endpoints.

And the reason I was bundling around from my answer, I was looking for the numbers in detail on those incremental 70, and I don't have that in front of me. So I can't answer the first part of your question in detail.

Yes, no problem. One to recall on your fingertips. Maybe if I could just ask a follow-up, Kevin, on the BST outlook, low teens for the year. You guys have historically been pretty positive on your ability to grow above market there which was kind of in that low double-digit range, I think, for viral contamination and for host cell detection. So do you think the market growth has just come in a little bit for reasons like China? Or is this more of a reversion back to market growth rate that presumably accelerates down the road?

There's a couple of factors there, and I'll touch on the guidance and perhaps Trey can provide some color as well. From our perspective, we do see that kind of -- when you add those two market growth segments together, you're in that 12% to 14% range. Look, we think that's still a good range to target, and that's what we can complement and exceed that through services and through uptake of our MockV asset, which really doesn't have a market. So we're kind of creating that there. But as we guide to 2023, we're still seeing some softness in China. I don't know how that's going to impact the overall industry regard those legacy kind of growth rates that we think are the correct ones, but it's certainly starting our year off a little slow, so we're trying to be on the conservative end of that range. And I think that we, again, that low teens range then up to market range. And then I talked about the factors that historically allowed us to outperform, and those are kind of the sensitivities around that business. Trey, any color from your end?

That's good stuff, Kevin. The -- as Carl highlighted, the 15 out of 15 figure, we're particularly proud of in participating in CAR-T and gene therapy. So we also have diverse geographic business. So China is material to that, as you've already touched on. And Carl also recently referred to the prioritization of some programs. So there's a general activity call there, but we're not concerned about our competitive position, and we do have the exciting growth vectors of the new segment of MockV and growth in services that we expect to continue

Our next question comes from Catherine Schulte with Baird.

I guess first, we had a large mRNA player readout some mixed flu vaccine data last week and while not a customer of yours, I guess, what's your take on that data? And do you think it has a broader read-through to the potential of mRNA in flu?

Catherine, I haven't studied it in detail. So probably I am not the best guy to ask the question, but I would say that each one of these trials in flu can be done at a different time in a different place with a different design of the target sequences that you're going after. So I think one heads-up comparison is probably not enough to draw a conclusion about the class. And when you see a little bit more data from Pfizer and BioNTech and others who are working on these kind of programs like CureVac, I think you'll be able to draw a better conclusion.

Okay. Got it. And then base nucleic acid production increased over 35% sequentially and more than doubled year-over-year. Any onetime orders in the fourth quarter that we should be aware of? And how should we think about the cadence of that business in '23?

Kevin, do you want to handle that?

Yes, sure, Catherine. Yes. Again, we had -- I mean, it was a really strong quarter, obviously or just saying looking at the numbers. We did have some stand-up stand-alone CleanCap orders for some non-COVID vaccine programs in there. I think we've seen that spike in every when then and that was a bit of a driver there as well, and that will lead to a little bit of softer numbers coming out of the gate for 2023, just based on a timing perspective. So I think you'll see that as we progress throughout the course of '23, starting low on the base business in NAP and then kind of trending sequentially each quarter based on how we see it today is, we'll see those type of standalone CleanCap orders for non-COVID indications, pretty light here in the first part of the year as people use that for their current phases and then pick up again in the second half.

And the next question comes from Tejas Savant with Morgan Stanley.

Carl, maybe one for you on just your sort of long-term COVID CleanCap sort of forecast of roughly about $100 million. You've talked in the past of 600 million to 700 million doses or so embedded in there. Any updates on that in terms of your recent conversations with your marquee customer here? And as you sort of thought about this philosophically in terms of framing the guide, why not move towards only including firm commitments. It sounded like 2% of that 100, at least in '23 was firm commitments. So just any color around that, given the variables at play, right, including inventory levels and the transition to a commercial market in the U.S. and then you've got the combo vaccs potentially in '25, that would be super helpful.

Sure, happy to do that. Look, your crystal ball is probably as good as mine. So I'm not going to claim any premise here in knowing exactly what's going to happen. But we tend to consult the best available data sources that are out there that have a track record of having been correct in the past. And I would say we point generally towards Airfinity, as the best commercial data source that's available and pretty thoughtful in the way that they do it. And knowing what we know from their estimates of the number of vaccines and sort of the utilization I'll call it the wastage rate that goes into the manufacturing of vaccines and then their later distribution. We still feel pretty comfortable that in that 600 million range, and I think there was 590 million that it ties very nicely with that 100 million estimate. As to why we don't just show you the 60 million because honestly, we believe there's upside there. We don't know today exactly where that upside will come from, but that's based on our -- both our past experience and our instincts here. So if I only gave you the forecast, if I only guided you to all the orders I have in hand, you probably wouldn't be terribly satisfied with that. So this is a reasonable compromise. But if you look at the delta between the two years going from sort of 600 million this past year, down to 100 million. That puts us at 15%, 16% of utilization. We think that's a fair reflection of the realistic downturn in banking volume.

Got it. That's super helpful. And then one follow-up on the org update that you highlighted here, guys. I mean -- it sounds like you're really focused on this one-stop shop value proposition versus the stand-alone sort of operating company structure underpinned by the Maravai services that you outlined on that slide. So can you help us dimension how many of your customers today buy more than one solution from you, any analysis you've done on opportunities to increase account penetration and cross-selling? And then just examples of significant bundling potential in the portfolio?

Yes. Look, let me start, and then again, I'll tumble it over to Becky to finish up. But I think that as we look at it right now, with our existing products and services customers, there is a significant overlap between those two. Now let's put academic and smaller customers aside and just focus on the biotherapeutic market. So a lot of those customers will buy components from -- or will initially come to us to get their mRNA construct and potential targets made in a rapid fashion and then may buy products and services from us later as they develop these programs or as they make choices to in-source things and then buy components like CleanCap for their own usage. So that does occur a lot. There will definitely be a significant overlap with the enzyme customer base with Alphazyme. We haven't bottomed that out. So I don't have any numbers for you right now. And Becky, would you like to talk a little bit about your thoughts on cross-sells?

Yes. It's a very good question and one that we're highly focused on. Obviously, our objective is to continue to focus on high-quality, high-purity mRNA and all the components that go into making that. And so we -- some of the things that we have done this year is separate out our sales team. So we have a very focused team on products and a very focused team on services, but then have some overlay in how they go to market and communicate and partner with customers. So we are very focused on kind of selling more to our existing clients as well as taking share in how the market is growing organically.

So Diego, I think we're at the top of the hour now. So with that, perhaps we can turn it back over to Deb.

Thank you, sir. And correct, we have now reached the end of our question-and-answer session. And now I'll turn the call over to Debra Hart for closing remarks.

Well, thank you, and thank you, everyone, for joining us today. Apologies if anyone's in the queue that we didn't have time to get to. We will be answering questions throughout this afternoon and evening. So I hope to catch up with you there. We're also attending several financial conferences in March and hope to meet with some of you at those events. Thanks so much for your time.

Thank you. This concludes today's conference. All parties may disconnect. Have a great evening.