Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Repligen Corp (RGEN, Financial) reported an improving quarter for both revenues and orders, with orders pacing 2% above revenues for Q2 and 1% above for the first half of the year.
- Pharma revenues in Q2 were up about 15% sequentially and 20% year-on-year, with strong order growth of 5% sequentially and 40% year-on-year.
- Consumables maintained momentum with Q2 revenues up double digits versus Q1 and orders up 30% year-over-year.
- The new modality customer base delivered mid-single-digit revenue growth in Q2 versus the same quarter in 2023, with orders up more than 40% year-over-year.
- Repligen Corp (RGEN) is narrowing its revenue guidance to a range of $620 million to $635 million, reflecting confidence in achieving its targets despite headwinds.
Negative Points
- Total Q2 revenues decreased 3% year-over-year, driven by declines in China demand and headwinds in proteins and COVID-related products.
- China orders and sales were down again in Q2, with expectations that China revenues will be around $25 million in 2024, a $10 million decline from previous estimates.
- Increased headwinds from foreign exchange are impacting overall financial performance.
- Adjusted income from operations was down approximately $14 million compared to the prior year, driven by incremental incentive compensation and lower volumes.
- Repligen Corp (RGEN) is updating its full-year guidance to reflect an additional $3 million in adjusted operating expenses due to delayed cost reduction initiatives.
Q & A Highlights
Q: Can you unpack what really drove the strength in the CDMO market? And how durable do you think some of this strength is?
A: Tony Hunt, CEO: The strength in the CDMO market was driven by a significant uptick in Tier 2 CDMO activity, which had been flat for the last six quarters. This growth is encouraging and suggests that destocking is behind us. The next few quarters will be telling, but the positive signs are there.
Q: Can you walk us through what you are assuming in terms of sequential revenue growth into Q3 and Q4?
A: Tony Hunt, CEO: We expect Q3 to be lighter, consistent with historical seasonality, and Q4 to be very strong. For the second half of the year, we are projecting 11% growth in non-COVID revenues compared to the same period in 2023.
Q: Do you have a cell and gene therapy growth forecast for the year?
A: Tony Hunt, CEO: We haven't put a specific forecast in place for cell and gene therapy. However, our new modality customer base, which includes cell and gene therapy, delivered mid-single-digit revenue growth in Q2 and more than 40% year-over-year order growth.
Q: Can you elaborate on the visibility and predictability of your forecasting?
A: Jason Garland, CFO: We have better visibility now due to the normalization of our backlog and the growth in our opportunity funnel. This gives us higher confidence in our market outlook as we move into 2025.
Q: Can you unpack what you are seeing in China and how it affects your strategy?
A: Jason Garland, CFO: We saw further deterioration in orders from China in Q2, leading us to reduce our revenue guidance by $10 million. We have rightsized our team in the region and now expect China to contribute around $25 million in 2024.
Q: Can you provide more detail on the cost reductions and their impact on margins?
A: Jason Garland, CFO: We are executing a 7% reduction in adjusted operating expenses in the second half of the year. This, combined with volume leverage, will help us achieve a 12% to 13% adjusted operating margin for the year.
Q: What is driving the growth behind the CDMOs?
A: Tony Hunt, CEO: The growth is driven by a combination of destocking being over and an increase in project activity. We saw strong order growth from Tier 2 CDMOs in Q2, which is encouraging.
Q: How do you view the market growth for bioprocessing going forward?
A: Tony Hunt, CEO: Historically, the bioprocessing market has grown at 8% to 12%. While it's hard to predict exact growth rates for 2025, we expect the market to perform better than in 2024, and we aim to grow above market rates.
Q: Can you comment on the intra-quarter progression in activity and how July is shaping up?
A: Tony Hunt, CEO: June was stronger than May, and July is off to a solid start. However, Q3 is typically lighter due to seasonality, especially with most of Europe on vacation in August.
Q: What is your visibility on orders and revenue for the second half of the year?
A: Olivier Loeillot, CCO: We typically have three to four months of backlog, which gives us about 60% to 65% visibility into the upcoming quarter. This helps us manage our expectations and plan accordingly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
