Rapid Micro Biosystems, Inc. (RPID) Q4 2022 Earnings Report, Transcript and Summary

Good morning, and welcome to Rapid Micro Biosystems Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Mike Beaulieu, Vice President of Investor Relations and Corporate Communications. Thank you. Please go ahead, sir.

Good morning and thank you for joining the Rapid Micro Biosystems fourth quarter and full year 2022 earnings call. Joining me on the call are Rob Spignesi, President and Chief Executive Officer; and Sean Wirtjes, Chief Financial Officer. Earlier today, we issued a press release announcing our fourth quarter and full year financial results. A copy of the release is available on the company’s website at rapidmicrobio.com under Investors in the News & Events section. Before we begin, I’d like to remind you that many statements made during this call may be considered forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements, including, but not limited to, statements relating to Rapid Micro’s financial condition, anticipated year-end cash balance, cash runway and future revenue and system placements, expectations for business development and growth, customer interest and adoption of the Growth Direct System, expectations for our new RMBNucleus Mold Alarm and the potential impact of macroeconomic uncertainty and coronavirus pandemic 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 24, 2022, 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, March 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. And with that, I’ll turn the call over to Rob.

Thank you, Mike. Good morning, everyone, and thank you for joining us to review our fourth quarter and full year 2022 results. On today's call, I will begin with a summary of our Q4 performance and then discuss our growth strategy, and why we believe that the actions we have recently taken position Rapid Micro for a return to solid growth in 2023. Now, I'll then turn the call over to Sean for a more detailed discussion for our financial results and our guidance. Total revenue was $4.4 million in the fourth quarter and $17.1 million for the full year. We placed two new systems in the fourth quarter, including one to a new top 20 pharma customer. These results are in line or better than our January pre-announcement, as well as the guidance we provided in August and reaffirmed on our third quarter call in November. On a cumulative basis, we have placed 125 systems, including 103 fully validated systems, and has sold over 3 million consumables driving strong recurring revenue which grew by 40% to $11 million in 2022. Customers are clearly using the growth direct, which speaks to the strength of our value proposition and the robustness of our business model. 2022 proved to be a challenging year with our performance impacted by customer site access limitations and our own execution, not meeting our expectations. In response to these challenges, we launched a comprehensive action plan to improve execution, drive efficiencies in the business and enhance performance. As we look forward to 2023, our confidence stems from the improvements we have made in four key areas of our growth strategy: The first is accelerating growth through excess and placements. The second is developing and commercializing new products. The third is expanding our gross margins by leveraging both external cost initiatives and scaling the business. And fourth is a prudent management of our cash balance, which we recognize as one of our most important assets. Accelerating Growth Direct Systems placements remains our highest priority and we have enhanced not only our sales processes, but also our customer experience and service organizations. We have added focused resources and launched enhanced training programs, and new sales methodologies. We are expanding our lead generation and marketing capabilities, and we have equipped our teams with new sales tools. Also, we continue to expand our focus on key accounts. This is important as we partner with our larger customers to support reference selling and in the development of scientific white papers and technical training webinars. Last month, we held our annual global sales meeting and the team is excited about the scale and scope of these efforts. In 2023, we expect to attend over 20 events and conferences around the globe. Building on the success of the Growth Direct, which held for both current and prospective customers in the fourth quarter, we are planning additional events globally in 2023. We are also planning to meaningfully increase number of in-person customer events for Growth Direct demonstrations and system training at our local and licensed in Massachusetts locations. These sessions are focused events that see to deepen our customers' knowledge of the Growth Direct Systems capabilities and help them to more robustly understand its value proposition and use cases. We continue to have a robust funnel of system placement opportunities, which includes a strong mix of new and existing customers. Our expanded focus on key accounts is important, as these customers make up our largest opportunity for multi-system orders within our funnel. By product category, biologics including cell and gene therapies make up the majority of our funnel, as well as global opportunities within the CDMO segment. Geographically, opportunities in the U.S. and Europe continue to make up the majority of our funnel, but we are excited about the traction we are gaining in the Asia Pacific region, including a new customer win in the fourth quarter. We look forward to sharing highlights of our performance in this region with you over the course of 2023. Another major part of our growth strategy is the development of new products. We view innovation as a way to leverage a Growth Direct platform increasing our value proposition to our customers, creating barriers to entry and importantly, accelerating revenue growth. We were pleased to exit 2022 with momentum in our new product development efforts following the full market release of RMBNucleus Mold Alarm. Mold Alarm is a software product that allows for the early detection of mold in the manufacturing environment and gives a Go Direct system the ability to differentiate between mold and bacteria. Customers are especially interested in differentiating between the two, as mold can grow quickly and require a significant and costly remediation plan. Mold Alarm is capable of alerting customers to the presence of mold and as little as one day. Following the full release in December, we are executing against our commercialization plan, which includes fully training our sales and service teams and partnering with several of our larger customers for deployment across their network. Turning to our Rapid [Surely] program, we continue to make steady progress with product development, including ongoing beta testing with one of our existing Top 20 global customers. The Surely products will consist of a new consumable with the growth direct system. So again, leveraging our platform technology for growth. Sterility testing is typically the final step in the drug manufacturing process before the product is shipped to the market for patient use. The legacy method can take 14 days or longer, and we are targeting five to seven days for final results and even faster to first detection, which will allow customers to release product significantly faster. Lastly, we are nearing the completion of our manufacturing expansion in our Lexington facility. This site will include a backup consumable manufacturing line and a growth direct demonstration lab return and perspective customers. We are looking forward to hosting customers at this new facility this year. So, as we begin 2023, we are encouraged with the progress and execution of our growth strategy to accelerate system placements and further new product development. Customer engagement inside access has largely returned to pre pandemic levels, which allows our teams to work more closely with customers, understand their micro-QC workflows and challenges, and better demonstrate the manufacturing and regulatory benefits of the growth direct system. Now, I would like to turn the call over to Sean to discuss our fourth quarter performance and our 2023 outlook. Sean?

Thanks, Rob, and good morning, everyone. This morning, we reported fourth quarter 2022 commercial revenue of $4.4 million, which compares to $4.9 million of commercial revenue reported in Q4 2021. We placed two growth direct systems in the fourth quarter compared to three last year. Product revenue, which is comprised of systems and consumables, was $2.8 million in Q4 compared to $2.9 million in Q4 last year. Consumable sales grew approximately 20% in the quarter and offset the impact of one fewer system placement compared to Q4 last year. Service revenue was 1.5 million in Q4 compared to 2.0 million last year. We completed the validation of three systems in the quarter bringing total validated systems to 103 at the end of 2022. While Q4 revenue was lower than last year due to less validation activity, service contract revenue increased approximately 40% due to our higher base of validated systems. Fourth quarter recurring revenue was $2.9 million, representing an increase of nearly 30% compared to the fourth quarter of 2021, driven by growth in both consumables and service contracts. Non-recurring revenue was $1.5 million in Q4 compared to $2.6 million in Q4 last year as a result of one fewer system placement and lower validation activity. Turning to gross margins, product margins were negative $2.4 million in Q4 compared to negative $2.7 million in the fourth quarter last year. The improvement was a result of continued progress on our consumable manufacturing efficiency initiatives, despite unfavorable product mix. On a sequential basis, product margins were consistent with Q3. While system margins were slightly negative in the quarter due mainly to lower system revenue and reduced production volumes, they improved meaningfully compared to Q3. Consumable margins declined in Q4 on both a year over year and sequential basis due to unplanned downtime on our automated manufacturing line. Service margins were negative $188,000 in Q4 compared to positive $48,000 last year. The decline was due to lower validation revenue as well as higher spending on personnel, travel and materials associated with supporting a higher level of systems under service contracts. On a combined basis, our fourth quarter gross margin percentage was negative 59%. This was relatively flat compared to Q4 last year with better system margins and benefits from our consumables efficiency initiatives offset by unfavorable product mix, unplanned manufacturing downtime, and consumables and lower service margins. While we continue to see some inflationary headwinds in certain material freight and labor costs, they did not have a meaningful impact during the quarter. Moving down the P&L total operating expenses were $14.7 million in the fourth quarter consisting of $4.1 million in sales and marketing, $3.4 million in R&D and $7.1 million in G&A. This compares to total operating expenses of $12.0 million in the fourth quarter of 2021. The increase was mainly due to $0.8 million in severance employee benefits and retention related to the restructuring plan we announced in August, as well as $1.0 million in expenses related to the strategic review process we announced in August and concluded in December. Net loss was $16.4 million in Q4. This compares to a net loss of $14.6 million in the fourth quarter last year. The higher net loss in Q4 this year was primarily due to higher operating expenses. As a result of the non-recurring items, I outlined a moment ago. Net loss per share attributable to common shareholders was $0.39 in Q4 2022, compared to a net loss of $0.35 in the prior year quarter. With respect to non-cash expenses and capital expenditures, depreciation and amortization was $0.9 million. Stock compensation expense was $1.1 million, and capital expenditures were $0.8 million in the fourth quarter of 2022. As of December 31st, we had $138.4 million in cash, cash equivalents, and investments. We remained confident this provides us with cash runway at least into 2026. Now turning to our 2023 outlook, my comments will be focused on the full year in the first quarter. For the full year 2023, we expect our commercial revenue to be at least $22 million, which assumes that we will place at least 15 systems and represents growth of at least 30%. For Q1, we expect commercial revenue of at least $4 million, which assumes at least two system placements. From there, we expect to continue to build momentum as we move through the year with commercial revenue and system placements accelerating as we move into the second half peaking in Q4. Having said that, we continue to be subject to quarter-to-quarter variability and the timing of system placements and therefore revenue. As Rob mentioned, most geographies are essentially back to pre-pandemic operations. However, we are still operating in a dynamic macro-economic environment. As a result, our guidance reflects our expectation that we will continue to see uncertainty and variability in some customer purchase decisions, including longer than expected lead times for some multi-system orders. With respect to other revenue streams, we expect the fact that we place nine systems in 2022 to result in lower revenue growth and service, mainly related to validations and to a lesser extent, consumables in 2023 as compared to 2022. We expect to complete at least 14 validations in 2023 with at least two in the first quarter. Based on our revenue outlook, we expect our Q1 gross margin to be similar to Q4 2022, and then improve as the year progresses as cost reduction and manufacturing efficiency initiatives generate benefits and volume leverage increases. With respect to operating expenses, we expect quarterly OpEx to be between $12.5 million and $13.5 million in 2023 with variability mainly driven by $1.8 million in non-recurring restructuring related expenses that will impact the first three quarters of the year, as well as the timing of certain new product development activities. Finally, we expect cash burn to be roughly $40 million in 2023. This includes a meaningful positive contribution from working capital, particularly as a result of inventory reduction act initiatives and approximately $2 million of CapEx spend. We expect this to put us at or slightly below $100 million in cash and investments at the end of 2023. That concludes my comments on our full year and Q1 outlook. So at this point, we'll open the call up for questions. Operator?

Thank you. [Operator Instructions]. Our first question comes from Dan Arias from Stifel. Please go ahead.

Good morning guys. Thanks for the questions. Sean, maybe just to start on the guide, at least $22 million obviously that leaves the door open to something higher. And Rob's initial comment sounded pretty confident. I guess that would say, but you did highlight uncertainty in lead times that you'll be dealing with this year. So can you just talk to, where you think the biggest swing factors are for the year? Is it macro related or is it more Rapid related? And then ultimately, how conservative or not conservative do you think this outlook is?

Hey, Dan, it's Rob. I'll take the first slice of that and Sean can weigh it out. Yes, our goal for guidance was to put up something that we believe is fully achievable. So I can't go through how we thought about it. This may answer some other questions on the phone, but sort of on the side that gives us confidence. And what we are seeing is: #1, the environment. As we touched on in our remarks is, basically back to pre-pandemic levels. The quality and type and frequency of customer interactions is robust, and very encouraging to include in person events, which is critical to our sales process, as you know. Critically customers are engaged with us in the process and we are seeing those leading indicators that gives us confidence that customers going through facility planning. Global coordination for multi-site orders, which tends to be a part of the process, to getting multi-site order as customers harmonize on our platform, the site alignment. We are seeing business cases being developed and work through procurement process. That is a encouraging outlook for us. Team deployment, training is going well. We are just coming off our global sales meeting and the team is engaged and going after it. We touched on this in the remarks as well, but our Asia Pacific region is, call it, up and running largely, and we do expect contribution from North America Europe and Asia in 2023. And our funnel again has a good mix of new and existing opportunities to include multi-system opportunities for both new and existing customers. So some total of that gives us good confidence in the year, offset by generally the macroeconomic overlay that's out there that can create headwinds to certain budgeting processes and availability cost of capital. And we have seen last minute or late breaking budget move. So that's also weighing. But there is some total of this bit of a long answer. I want to give you a full perspective on how we thought about the year.

That's helpful context. I mean, I guess to your last point, are you -- do you feel like the budget at this point as we stand in the beginning of March are generally set and so you've gotten past the period of budgeting uncertainty or are you still dealing with that factor as we head into the end of 1Q? And so it's a matter of how that shapes up over the next couple of months?

Yes. I think, it's generally set down, but there is always some risk, especially when our customers are going through their year as well and their results come in. So there is always some chance of that, or some other critical priority comes up, I would say, unrelated to the macro economy, facilities way that can always sort of delay things or move budget around. But -- so I would say, budgets are, we got decent clarity on budgets generally, but the macroeconomic environment does seem to be weighing on, I'll call it, some of our customer's minds.

If I could just ask one shot follow-up, Sean, on the revenue mix, can you just help us with the way that you see that trending over time? I mean, I know you don't want to get too far into a long-term forecast, but one of the things that was attractive at the time of the IPO was just the way that the P&L was shaping up when it comes to the percentage of sales that were coming from recurring revenues. I think you had a goal of getting to 50% by 2026, I believe. Is there anything you can help us with as far as like a refreshed view or an updated view on just the progression and the shift that you see there?

Yeah, I mean, I think with -- what we've been experienced with placements over the past five, six quarters, we actually are way ahead of schedule if you look at the revenue mix in terms of recurring. So I think, we had 40% recurring revenue growth in 2022, that was a point of important strength for us. So I think we're going to stay a little bit ahead of where we thought we'd be. We shouldn't be I think -- if you look over the course of this year that's still going to be well over 50% of the revenue recurring. I wouldn't expect that to continue over time. I'd expect us to more balance out. So, I think the critical thing is we look at the business, and I think Rob touched on this. I mean, number one priority for us is getting system placements going again. If you look back a couple of years, I think the kind of mix of revenue that we saw, then what is something that we're working to get back to a large extent where we drive placement growth, placement growth drives validation and service growth. That service growth then drives consumable growth and that recurring that percentage drifts up with that. So I think Dan, we were back -- I think we were down in the 40% range in terms of recurring a couple years ago, maybe even a little bit below that. We're well above 50 now. I expect that to even out over the longer term as we get back to more significant placement growth. And we get that kind of engine running again with service and consumables.

Our next question comes from Tejas Savant from Morgan Stanley.

Hello, this is Yuko on the call for Tajas. Thank you for taking our question. Could you outline priorities for investment in light of focus on cash preservation and cost cuts? And then also, are you putting in any contribution from new products, namely the RMB nucleus mode alarm software into the guide?

Yeah, so, with regard to investment priorities in the business is consistent with our core planks of our business strategy. Number one is accelerating system placements, so that's investment in commercial and related activity. Investment in new product development is a clear priority as well, and investment in efficiency activities constitute the bulk of our investment approach and portfolio. I'll pass on for the second part of that question.

Yeah, and just on that first point, yeah. I'd say, obviously Yuko, we did a restructuring back in August to take some cost out of the system here and within those investment areas that we're going to be very targeted. So every decision we make around investments is grounded in being responsible stewards of our cash. So, that is top of mind in every discussion around investment that we have. But we are going to continue to make those investments going forward. That's the plan. On new product contribution, specifically mold alarm. Our goal for 2023 with mold alarm is to is to basically get it out there in the market, work with a number of our customers to get them using the product so that they're in a spot where when we get to 2024, they're ready to sign up for recurring annual subscriptions to that software. Having said that, we do have a bit of a contribution. I'd say it's very modest in our forecast for this year in our guidance to them. But I'd expect that to be much more meaningful as we move out of ‘23 and get more into those annual subscription periods in ‘24 and beyond.

Got it. That was helpful. And your prior comments indicated gross margin positive potentially by late ‘23 if you place high single digit placements in 4Q, is achieving gross margin positive and late ‘23 embedded into your guidance?

Yes. So I'd say it, we -- the guidance would get us very close, but not quite there in Q4. I think, high single digit systems would likely get us there in Q4. I think what we have said, and just to reiterate is if we look at the full year ‘24, we expect the year to be positive. So, based on where that our guidance is right now, we would not anticipate getting there in Q4. We'd be very close and with some upside we could potentially get there.

Okay, great. And then one more, if I may, you mentioned 14 validations except expected in ‘23, but given lag between system placements and validation and soft system placements last year, could you help us think about how you're thinking about pace of validating systems in ‘23? Should we expect that to be spread roughly evenly across the quarters or more backend weighted?

A bit more backend weighted, but I wouldn't overstate that. I think there's a couple important things to say on this topic, [Yuko], that I'll hit. One is we do have more than the number of systems we validated last year, kind of in our validation backlog, either in process or waiting to start. Just to kind of hit that question head on, we do have some customers, I'd say it's the minority, but there are some where they're waiting for some type of construction, anything from getting air and power and data into a room to a complete site build. That means the customer's got a system that's waiting to go in and there's the delay as we wait for that construction to be completed. So that is a factor that you should be aware of that contributes to that number being a little bit higher than what we've placed in the last year plus. And then as we go forward, as you think about the systems that we placed this year, we are working very hard as to shrink the time to get a validation completed, and that differs between new customers in existing customers typically. So that's an important mix question, as you think about modeling it. But typically, as you look at placements in the second half of the year, there aren't many of those that are going to get fully validated before you hit the end of the year. So our opportunity to complete validation on systems placed this year is really going to be focused on the front part of the year. And you know that as we've indicated that the sequencing for the guidance is going to be the lower end of the system placements in the year. So just, those are important things I think to keep in mind as you think about the question you asked.

Our next question comes from Rachel Vatnsdal from JP Morgan.

This is Casey on for Rachel. Thanks for taking my questions. I guess can you elaborate on the unplanned downtime that contributed to flat sequential margins here on the gross line? Can you maybe quantify how much of a headwind this was, why it was unplanned, and then just maybe the cadence of gross margin expansion embedded in the guide. I think, you mentioned that you're going to see flat gross margins in 1Q. Is there more downtime kind of embedded in there and how should we think about that?

Yes, sure. Casey. So, we do have some downtime that's planned. This was not what we encountered in this particular situation. We have looked at the causes of the unplanned downtime. We understand them. We have addressed them. And we feel good that they won't recur. We will continue to focus on that and make sure that we do what we can to make sure that's what actually rolls out. So as you think about '23 guidance, we have not assumed that we see recurrence of that. We believe we have kind of addressed what we ran into in Q4. In terms of the impact, it was meaningful. We are not going to give a quantified number. But I would say, it's the #1 contributor of our variance from what we expected in the fourth quarter in terms of margin performance, compared to what we thought going into the quarter.

Got it.

And then you asked about cadence -- sorry, I didn't mean to interrupt. You asked about cadence in '23. You are right. We guided that we think Q1 will look a lot like Q4. I think that's true for the quarter in general. And then as we work way through the year, given what I said a few minutes ago, we expect to end the year getting pretty close to positive in Q4. So I think if you kind of roll out the revenue guidance we gave and the sequencing there with the volume increases that should come along with that, I'd expect to see the margin followed pretty closely in terms of the step-up, as you work your way through the year.

Got it. That's helpful. And then just on the pull through per instrument on the consumable side, I think this year was around $80,000 per system. At our conference you talked about pull through increasing high singles to potentially mid-teens in 2023. I guess, can you just walk through what's embedded in the 2023 guidance from an instrument pull through perspective? And then what needs to happen for you guys to get to the high end of that range? Yes, just like puts and takes into that range.

Yes. So we did finish the year in '22 around that $80,000 mark, excuse me. The guidance has built into it. I think high single-digits in terms of the full year growth in that metric. And I'd expect us to start the year in the first half below, where that would put us and to finish the year above where that would put us. I think the things moving validations ahead inline with what we expect is critical to make sure that happens. As is some of the things working on around what we refer to as Project Rapid where we are doing things to reduce the amount of time it takes to actually get a validation completed. So I'd say, we haven't assumed heroics on those things to get to the guidance number, so there is potentially upside there, if we can over execute on that. But those are the main things that would drive our ability to get to that range and that high single-digit type growth number for the year versus the $80,000.

Got it. And then maybe just should we think about instrument ASP in 2023? Just curious if you have a plan on moving price around just given the macro environment one way or the other?

Yes. We have a mix -- we generally took prices up this year. I'm not going to get into a lot of specifics. But I think as we look at ASPs on systems, we do expect a modest increase in ASPs, as we compare '23 to '22.

Okay, got you. And maybe if I can just squeeze one last one in. The guide is pretty back-end loaded just can you talk generally about your visibility into those placements in the back half of the year? Two placements in 1Q, 15 on the year, so to get to that high single digit placement number in 4Q, I guess how much visibility do you have into that from a customer conversation perspective.

Yeah. Case it's Rob. Yeah, as I touched on in the intro question by Dan, what's giving us confidence in the guide is the conversations we're having with customers and in some cases regarding their purchase intentions on multiple systems and just the shape of the process and when we expect things to land. And of course we're still kind of ramping into the year. So, as well as well as a broader sort of mix of other opportunities we have in our funnel across all through all of our regions, sort of the sum total of this kind gives us the confidence in the outlook. And it also just practically speaking is kind of how we think about the year rolling out with a bit more of the back end waiting.

Our last question comes from Max Masucci from TD Cowen.

Hi, this is Stephanie on from Max. Thanks for taking my questions. Most of my questions have already been asked, so if I can ask a couple of quick ones. So you mentioned in your prepared remarks that you have about 20 or so events since Conferees planned for the year, which is great to hear as you head into 2023, what are the key catalyst and milestones that we should be keeping an eye on for the year?

So, the key milestones we have in our year with regard to, um, external facing shows our largest one is end of the year, which is PDA. If Stephanie, if your question is referring to the publicly facing or open trade shows if not but please steer me. But with regard to milestones PDA's a big one. We've got a collection of other events around the world that will attend. We we're always excited about our growth direct day, which is a chance to bring together a number of new and prospective customers. Typically, this is centered around Europe. We're hopeful to have one in the US this year as well, which is a really good chance to bring the ecosystem together -- to come together and do all things growth directly for a full day. I wouldn't call it a catalyst per se, but it's certainly a milestone as we think about interacting with key customers around the world.

And then on the consumable utilization side, so I know this has already been touched on a bit in the Q&A, but how quickly have existing customers been ramping on that consumable utilization versus your expectation? Do you see that there could be potential for further acceleration versus your expectations for the year?

Yeah, I'll start and maybe Rob will have a comment as well. I think, it depends on the customer. I think over in general, we are improving in terms of how we work with our customers to help them make that transition more quickly. But a lot of times it is heavily dependent upon their situation and resourcing and plan. Having said that, that's getting better. I would also say that, we are continuing to work with customers to find different ways to, even when they're in routine use and pulling through kind of where we originally expected them to increase that utilization. So whether it's new applications we are -- we have customers who are adding products or they're getting new indications to existing products, or they need more capacity, or they have the ability to utilize more capacity on the system. So, that's also a way that we believe over time we're going to be able to get that pull through number higher for the business.

Just a couple other comments that Stephanie. We have a dedicated sales people slash consultants, that work with our customers in our -- across our regions to do just that, to ramp them as quickly as possible into routine use after validations any training required, but certainly any ordering required, standing orders. So basically, to be easy to work with and kind of grease the gears to move consumables through more quickly into Sean's point, we also track the capacity in any systems and seek to sell, if you will, new applications onto any open capacity. And of course, look for opportunities inside any manufacturing plant. If a customer, for example, has automated environmental monitoring, there's opportunities to further automate water or and bioburden applications, which could be put on existing capacity or many times triggers the purchase of a new system. So think of it as a organic sale to a customer. In most cases, it's opportunity within an actual manufacturing plant. That's how we seek to maximize pull through. And also, -- it's also a great lead source for new system opportunities as well. Great. Well thanks Stephanie again. So we're going to wrap the live call now. As a reminder, we are attending the TD Cowen Healthcare Conference in Boston next Wednesday, March 8, and look forward to speaking with many of you in the coming weeks. Thanks to everyone for joining us today. And Julien, we'll close the call now.

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