Earnings Call: Q2 2021

Aug 26, 2021

Quarterly report

Ladies and gentlemen, thank you for standing by, and welcome to the Rapid Micro Biosystems Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer question. Star then 0. I would now like to hand the conference over to your speaker, Mr. David Deichler with Investor Relations. Please go ahead, sir. Quarter. Good afternoon, everyone, and thank you for joining Rapid Micro Biosystems 2nd quarter 2021 earnings call. I'm David Dykeler from the Jill Martin Group. Call. On the call from Rapid Micro, we have Rob Spignesi, Chief Executive Officer and John Wertschuss, Chief Financial Officer. Earlier quarter. Today, Rapid Micro released financial results for the Q2 ended June 30, 2021. A copy of the press release is available on the company's website. Call. Before we begin, I'd like to remind you that management will make statements during this call that include forward looking statements within the meaning of federal securities laws, quarter, 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 quarter. The forward looking statements are forward looking statements. Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. Quarter. 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 Form S-1 call with the Securities and Exchange Commission on July 12, 2021. We urge you to consider these factors and you should be aware that these statements should be considered estimates call only and are not guarantees of future performance. This conference call contains time sensitive information and is accurate only as of the live broadcast today, August 26, 2021. Quarter. Doctor. Micro disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward looking statements, call, whether because of new information, future events or otherwise. And with that, I'll turn the call over to Rob. Thank you, David, quarter. Good afternoon, everyone. I'll begin my remarks with a review of financial and operational highlights for the Q2, followed by an overview of our business quarter. I'll then pass it over to Sean for a detailed financial review before we open the call up for questions. Call. I'd like to start by saying that we're very excited to be speaking with you for the first time following our IPO on July 15. Quarter. We listed on the NASDAQ and raised approximately $165,000,000 in net proceeds, including the underwriters exercise of their over allotment option. Call. We'd like to thank everyone who supported us during our IPO. We are thankful for the hard work of our dedicated Rapid Micro team and for the support of our customers and shareholders. Call. With the IPO now complete, we are better positioned than ever to execute on our strategy to accelerate the global adoption of our GrowthDirect platform within biopharmaceutical manufacturing. We are pleased to report that we had a strong second quarter with reported commercial revenue of $5,700,000 quarter, representing year over year growth of 135%. This performance demonstrates continued robust adoption of our GrowthDirect platform quarter with 8 systems placed and 11 systems validated during the quarter. We also announced today that we expect our full year 2021 commercial revenue to be at least $24,000,000 which would represent growth of at least 70% compared to 2020. Additionally, we shipped our 1 millionth consumable since the launch of our current generating GrowthDirect system. Quarter. We are also very pleased to report that we are continuing to grow our team with the addition of great new talent across the company. During the second quarter, we quarter. We expanded our Board of Directors and our executive leadership team to include a General Counsel and Vice President of R and D as well as a new General Manager in Asia Pacific. We believe these new additions to our team will expand our capability and support our growth and innovation goals. Call. While we had a chance to tell our story to many of you through our IPO process, I'd like to take a few minutes today to provide a brief overview of our company, our end markets quarter. For background and context, Rapid Micro Biosystems is revolutionizing microbial quality control quarter or MQC, a critical regulated aspect of the global pharmaceutical manufacturing process and fundamental element of the global pharmaceutical quarter. The $1,000,000,000,000 global pharmaceutical market is undergoing tremendous change, quarter. Growing at 7% per year to meet global demand for therapies, while transitioning from traditional small molecule modalities to advanced modalities, including biologics and Cell and Gene Therapies. To meet the growing scale, complexity, capacity and regulatory demands confronting global pharmaceutical companies, The future of pharmaceutical manufacturing depends on a massive deployment of automation and digital technologies. The MTC process includes a constant testing of raw materials, production environments, personnel, in process materials and final sterility testing of drug products for microbial contamination such as bacteria, mold and other harmful organisms. Call. The MQC process is critical because it ultimately helps to ensure patient safety. A single drug production facility may conduct anywhere from tens of 1,000,000 to 1,000,000 MQC tests per year. MQC testing is mandated and closely monitored by the FDA and other global regulatory agencies quarter. With serious regulatory and financial consequences for lack of compliance, including Form 483 observations, warning letters or even consent decrees. Call. The traditional method to conduct MQC testing is called growth promotion, where samples are manually collected on media plates by MQC specialists, quarter. Manually processed, incubated and then visually inspected for growing colonies of microorganisms. Quarter. This labor intensive manual method was developed about 100 years ago and has not fundamentally changed since. Today, quarter. Well over 95% of global MQC testing still uses this legacy approach despite growing costs, complexity and risk post by a non automated process. The legacy MQC process is slow, requiring up to 14 days to deliver results. 2nd, the legacy process is entirely dependent on human labor for each of the 15 steps it involves. 3rd, quarter. The legacy process is subject to technician's fallibility, error and even the potential for falsification of data. Quarter. Finally, the legacy process is unsecured, which can result in noncompliance with data integrity regulations. Call. These risks have spawned multiple real world problems for pharmaceutical manufacturers, including long regulatory investigations, costly enforcement actions and in some cases, substantial shareholder value destruction. For these reasons, the legacy manual MQC quarter. The 2nd quarter revenue growth in the quarter was up 4% year over year. The 2nd quarter revenue growth in the quarter was up 4% year over year. Call. We developed our technology to specifically solve this problem. Our GrowthDirect platform is the only fully automated, high throughput and Secure MQC solution in the world. Developed with over 15 years of active feedback from our customers, we have made significant investments in difficult to replicate engineering improvements. These investments have resulted in a purpose built robust and scalable solution to support the rapidly expanding demand for novel and quarter. Call. Our GrowthDirect platform is designed to fully automate and replace the traditional manual MQC process. Call. Our proprietary technology works by replacing human counting in growing colonies with software and algorithm driven detection and counting based on image analysis quarter of natural microbial autofluorescence. Our system wraps this core detection technology with fully automated, high volume, high capacity, walk away robotic sample handling and incubation, locked behind a secured interface that enables compliance with data integrity regulations. Call. Our technology delivers a speed, accuracy, scalability and security required by Advanced Pharmaceutical Manufacturing. Quarter. GrowthDirect accelerates timed results by several days, a 50% improvement over the traditional method. Quarter. GrowthDirect MQC testing is a simple 2 step workflow eliminating 85% of the manual steps of the traditional MQC process. Call. Our customers benefit from the advantages of the Growth RX system with accelerated time to test results, reduction of human errors, cost savings, data integrity compliance and ultimately more efficient, higher capacity and lower risk manufacturing operations. Call. Moreover, the Growth RX system is designed to absorb and automate the vast majority of daily MQC test volume in any pharmaceutical manufacturing facility quarter and can be operated in fleets of multiple systems to scale with high volume manufacturing. Microbial quality control test market is large. Globally, we estimate 350,000,000 MTC tests are conducted annually in thousands of dedicated pharmaceutical manufacturing facilities, quarter producing billions of doses of therapeutics every year. Based on a recent market research study we commissioned, we estimate our total addressable quarter to be approximately $10,000,000,000 in 2021, which we expect to grow at an 8% CAGR to over $14,000,000,000 quarter by 2026. As we embed our products within global pharmaceutical manufacturing operations and begin to automate and digitize customer workflows, we believe our platform is exceptionally well positioned to enable the future of quality control automation. Quarter. The strength of our value proposition has attracted a top tier customer base, including the majority of the global top 20 pharmaceutical manufacturers quarter as well as small and midsized customers. Our customers include manufacturers of biologics, small molecules, cell and gene therapies, 503B Compounders and Personal Care Products. We have installed our systems across manufacturing site networks in North America, Europe and Asia. Quarter. To date, more than half of our global customer base has purchased multiple systems, many of which are installed across multiple manufacturing sites within a customer's network. Call. We see significant opportunity to expand our market share within existing customers as well as acquire new customers. Call. While we address all pharmaceutical modalities, we are especially strong in biologics and cell and gene therapies. Of note, 30% of all approved cell and gene therapies are currently using the GrowthDirect system. As I mentioned earlier, quarter. We completed 8 system placements and 11 system validations during the Q2, bringing our cumulative totals to 103 systems placed in 63 Systems Validated. While we are excited about this initial start, we have significant commercial runway ahead. Call. Our GrowthDirect platform drives multiple revenue streams to be an attractive razor razorblade revenue model. Quarter. Initial customer revenue begins with a capital equipment sale of the GrowthDirect system and associated lab information management system connection software, quarter, which provides customers a two way secure and paperless data workflow. We then provide global support and validation services to help our customers install and validate quarter. Once the system is validated and transitions to routine use, each Growth Direct system starts to pull through increasingly high volumes quarter of our proprietary and broad suite of consumables. As we add to our base of validated systems and utilization increases, quarter. We expect consumables will drive a substantial, recurring and durable revenue stream with an attractive profitability profile. We also provide ongoing preventative maintenance services, which drive recurring service revenue in addition to recurring consumable revenue. Quarter. Looking forward, we're tremendously excited about the growth opportunities for our business. We're focused on the goal of standardizing the global microbial quality control test market on our GrowthDirect platform and ultimately delivering MQC Automation more broadly across pharmaceutical manufacturing industry. Call. We believe we are in a very strong position to capitalize on a large and growing market with low competitive intensity. We are leveraging our strategic advantage to accelerate strong commercial momentum, especially in the high growth biologics and cell and gene therapy segments. Our growth strategy is clear. We continue to drive new customer adoption across the global pharmaceutical industry. We are expanding within our existing customers, placing more systems, expansion. Expanding to new sites and broadening the applications we deliver. We are targeting new geographies to include Asia Pacific where we see substantial opportunity to build our commercial and operational quarter. And as we look to the future, we intend to launch new products spanning data, consumables, automation and services quarter that deliver integrated QC Automation. We expect to grow our influence upstream and downstream within customer workflows and secure more customer share of wallet over time. Call. We have well established commercial teams in the U. S. And Europe with significant opportunity to continue to build these teams to drive future revenue growth. We see our investment in commercial infrastructure as a key driver to accelerated adoption in the U. S. And Europe as well as geographic expansion to Asia Pac. With our IPO proceeds, we are also increasing investment in research and development to accelerate innovation. Quarter. In addition to organic investments for the future, we may also use M and A selectively to add complementary products and services to enhance our value proposition to customers. Call. In closing, we have had a strong start to 2021 and we are very excited about our business going forward. Quarter. We believe there is an exciting opportunity to own the microbial quality control space and define the future global standard. We look forward to updating you as we invest in and quarter. I'll now turn the call over to Sean to discuss our financial results. Sean? Thanks, Rob, and good afternoon, everyone. Before I review our Q2 results, I'd like to walk you through the revenue streams and KPIs that we're reporting today quarter. And why we believe they're important to understanding our business. Our revenues currently have both a commercial component and a noncommercial component. Quarter. Commercial revenues represent over 90% of our total revenues today and are comprised of sales of both our products and our services to customers. Quarter. Noncommercial revenues relate to funding we received from BARDA under an existing contract to develop a new consumable for rapid sterility testing on our GrowthDirect system. Quarter. Within commercial, the product revenue component includes sales of our GrowthDirect system and our LEMS connection software, both of which are nonrecurring quarter as well as consumables, which are recurring. The service revenue component includes sales of our installation and validation services, which are non recurring, as well as recurring annual service contracts. We break out recurring revenues and report them as a KPI because we view them as an important measure of our business progress over time. Quarter. In terms of other KPIs, we plan to provide information about the number of systems placed. A system placement occurs when we ship or deliver a system to a customer quarter. System placements are important because they drive the systems component of our product revenue. We also plan to provide the number of validated quarter. Now turning to our Q2 results. Total revenue for the Q2 of 2021 was $6,100,000 quarter. Commercial revenues made up $5,700,000 of this total, representing growth of 135% over Q2 last year. Within commercial revenue, product revenues were $4,100,000 and grew 146% over Q2 last year, quarter. With revenue from both systems and consumables growing over 100% in the quarter. From a systems standpoint, we placed 8 systems in the quarter. Quarter. This compares to 3 system placements in Q2 last year, which was negatively impacted by some COVID related border closures and other customer site access limitations. Quarter. Many of those issues were resolved in Q3 last year, which positively impacted our results for that period. Service revenue was $1,600,000 in the 2nd quarter, quarter, up 113% compared to the same period last year. The increase was due to higher revenue from validation services and, to a lesser extent, recurring service contracts. During the quarter, we completed the validation process on 11 new systems, bringing the cumulative number of our systems in the field that are validated to 63. Quarter. This represents an increase of almost 100% over the past 12 months. Given the implications of this metric to our potential for future consumables revenue growth, quarter. We view this as significant and important progress. Recurring revenue, which includes consumables and service contracts, was $1,900,000 quarter. And grew 91% compared to Q2 last year. This growth was driven by triple digit growth in consumables as well as solid growth in revenue from service contracts as we quarter. To finish up on revenue, noncommercial revenue related to our contract with BARDA was quarter. $400,000 compared to $200,000 in the Q2 of 2020. Moving on to gross margins. Product margins were negative quarter. $2,000,000 or negative 49 percent in Q2 this year compared to negative $1,200,000 or negative 74% in the same period last year. Quarter. Service margins were $300,000 or 16% in the 2nd quarter compared to breakeven in Q2 last year. The improvements in gross margin percentage for both products and services were mainly attributable to cost leverage resulting from higher revenues in Q2 this year. Quarter. Moving down the P and L. Total operating expenses were $9,100,000 in the 2nd quarter with spending of $3,100,000 in sales and marketing, $2,300,000 in R and D and $3,600,000 in G and A. This compares to total OpEx of $4,400,000 in the Q2 of 2020. The primary drivers of the year over year increase in OpEx spending were investments in sales and marketing and R and D. Costs included in G and A related to our IPO process quarter. Investments we made in anticipation of operating as a public company also contributed to the increase. Net loss in the quarter of 2021 was $11,800,000 which compares to a net loss of $9,300,000 in the Q2 of 2020. Quarter. Net loss per share attributable to common stockholders was $20.01 in Q2 2021 compared to a net loss per share of 31 point $0.93 in Q2 last year. With respect to non cash expenses and CapEx, depreciation and amortization expense was $400,000 quarter. Stock comp expense was $400,000 and capital expenditures were $500,000 in the Q2 of 2021. Call. We ended the Q2 of 2021 with $100,000,000 in cash and cash equivalents and $26,200,000 in debt, excluding unamortized debt discount. Quarter. Following the closing of our IPO in July and the underwriters' partial exercise of their over allotment option in early August, we had roughly $260,000,000 in cash and cash equivalents on our balance quarter. Prior to our IPO, we finished Q2 with approximately 1,000,000 common shares outstanding. Following the closing of our IPO, quarter. Which also triggered the conversion of all of our outstanding preferred stock into common stock and the underwriters exercise of their overallotment option, quarter. We now have approximately 41,100,000 Class A and Class B common shares outstanding on an aggregate basis. Now shifting to guidance. We expect our full year 2021 commercial revenues to at least $24,000,000 which would represent growth of at least 70% compared to 2020. Call. On a sequential basis, we expect our commercial revenues to increase, gross margins to improve and OpEx spending to increase as we progress through Q3 and then Q4. Quarter. These expectations are predicated on the assumption that we won't see material changes in our business environment, including any significant tightening of governmental and customer policies relating to COVID. Quarter. We remain vigilant in monitoring these COVID policies and their potential impacts, but we haven't seen any indication of material changes in our business environment to date. Quarter. Finally, as you model Q3 this year, I'd like to remind you that we were required to pay an $800,000 exit fee to a formal lender upon the closing of the IPO. Quarter. We currently expect to record this amount below the line in other expense in our Q3 P and L. That concludes our prepared remarks. So at this point, we'll now open the call up for questions. Call. Operator? Thank we ask that you please limit yourself to one question and one follow-up question. Our first question will come from Tycho Peterson with JPMorgan. Please go ahead. Hi, guys. This is Casey on for Tycho. I guess the first one is around the competitive landscape. Can you talk a little bit about Competitors in the MQC testing space, I know IntraScience has sort of a similar product. I think Charles River competes. Can you just talk a little bit about what you're seeing on the competitive side and how the Growth Direct system is differentiated a little bit from competition? Yes, I'd say generally there's been no change in the competitive environment and the competitive intensity call. It remains low. By far, the largest competitor we have, we believe is a legacy method with 95 plus percent of the market using it. We, of course, are watching the competitive landscape. But again, we believe the competitive intensity quarter. Remains to be low. Moreover, we believe our system is highly differentiated against Any of the, I would call it, the technology enabled companies out there. We have the right high capacity, high throughput system with the right makeup and was built custom built effectively for the pharmaceutical market. Quarter. And we believe it's highly differentiated compared to the other players out there and we believe our commercial traction globally and our customer base represents that. Got you. And then just following up on that, during the IPO process, we got the question, call. I think compared to how long you guys have been on the market, I think around 15 years, I think you've only penetrated around 50% quarter. So maybe can you talk a little bit about historically pharma penetration and how you're quarter. Yes. So I think for context, it's important to note that really we count the first full launch of our current Go Direct system in 2017 relative recently. So from that perspective, call. It was initially launched in 2014 and effectively a beta format. But we view it as the official commercial launch in 20 2017. And we've had a phenomenal reaction to the global customer base, especially among the global top 20 and in particular in the Biologics and Cell and Gene Therapy segments. So we're continuing to see broad based uptake of our system globally, quarter. Not only in the global top 20, but also in small and mid customers as well. So we have a broad based value proposition that is highly differentiated. And as I mentioned, quarter. It's the right system for this market. It was purpose built again specifically to solve the challenges in this market that these globally that pharmaceutical companies are experiencing. Got you. Call. And then last one for me and then I'll hop back in the queue. In terms of menu build out priorities longer term, I guess, call. Would personal care MQC testing be something you guys would look at? And I guess how near term would we expect sort of some menu build out? Call. Or is that something that you guys aren't thinking about at this point? Thanks. Well, you're certainly aware of it. As I mentioned in my quarter. We have sales into the segment, although we're currently focused on the pharmaceutical market. It's just a tremendous amount of runway we have in front of us. We've got Very strong brand momentum and credibility and trust in Global Pharmaceuticals. So we're focused on that market for those reasons and others. You mentioned menu. It's important to note that we can address the personal care market with our current platform. So it'd be more of a Less of an R and D activity and more of an extension of our commercial operation. But again, we're focused on our commercial resources currently on the global pharmaceutical market. More to follow perhaps in the future, but our focus right now is global pharma and biopharma. Call. Thank you. Our next question will come from Tejas Sivant with Morgan Stanley. Please go ahead. Call. Hey, guys. Good evening. Just a couple of quick ones for me. Rob, on backlog here, I mean, call. Can you share a little bit more color on backlog mix in terms of any large multi unit orders we should be thinking about? And then in terms of quarter. Sizing up the backlog in a slightly different way in terms of placements at the same site, same customer, but new site and then new customers. Call. Can you share some color on that and what that means for your sales and installation cycle heading into the back half of the year? Call. Yes. So I won't get into any specific customers or orders, TayJobs, but thematically, Per my previous remarks, we are seeing large companies in particular rolling us out across their Global Networks. So and by backlog, I'll refer to, I'll call it funnel. Our forward funnel call. Consists of it's got a healthy mix of both our current customers executing those rollouts across their quarter. Within their current sites, they have systems into new sites and into new geographies, that we expect will drive continuing quarter. Strong orders from those customers as well as new customers starting with us. So all those are quarter. Our funnel is very healthy and we're quite confident in our forward looking funnel with regard to both general categories of customers. Call. Got it. Fair enough. And then on a somewhat related note Rob, can you share some details around the kinds of Kaizen projects you have underway to shorten the cycle from Instrument orders generation of consumable pull through and specifically around the validation process? Yes, sure Tejas. So call. Yes. So Kaizen or lean schools, we apply across our business holistically to for process improvement and productivity. And clearly, quarter. Looking at our continuing to improve our speed through the other space, one of the partners with our customers to do that. Quarter. And we have and do value stream mapped our validation process from PEO through routine use and we're call. And working through ways, I won't get into the details on this call. We can not only within Rapid Micro, but in partnership with our customers Improve the speed and throughput and efficacy of the validation process. Got it. Okay. And then any updates on sterility testing plans? Obviously, the BARDA contract is scheduled to run out in November this year, but are you in a good place to launch that capability quarter. Perhaps next year and can you help us think about how big that opportunity could be and the competitive differentiation there versus folks like Seltzer's etcetera? Question. Yes. So maybe in reverse order, the total market size is better than $2,000,000,000 Your competitive The consumable will run on our system. So the sterility platform, the sterility consumable will benefit from The full automation, the walk away automation, the speed, the data integrity, the digital nature of our system that our other quarter. The benefit from that's clearly differentiated from any other player on the market to include capacity and throughput. Call. With regard to the program, it's proceeding well. At a high level, I can tell you we're looking we're speaking to current quarter. And potential new customers on a beta test, call it, in 2022 for sterility. That would be the high level of steer I can give you with regard to how the development is going. Perfect. And one final one for Sean. Sean, are you seeing any supply chain cost pressures, quarter. Given all the chatter around inflation, etcetera, and in terms of just your hiring plans through the back half of the year, I mean, any possibility of a slower than expected cadence call. In terms of OpEx, given the pressures to hiring good people that a lot of life science companies are seeing at the moment. Yes. Sure, Tejas. Yes. So I think as we Think about the costs and inflation and things like that. We've been very proactive, starting pretty early on when COVID hit quarter of doing things like building safety stock and locking in supply through longer term commitments with our vendors. So there's clearly some inflationary, call. I guess headwinds out there in the marketplace. We've done, I think, a pretty good job of being able to avoid most of those by doing that and being proactive with that. Bits and pieces of it are hitting us. I would say it's nothing that we view as significant at this point or something that we can't continue to kind of manage and mitigate going forward. In terms of hiring, clearly a competitive marketplace out there in life sciences and in general. We have been actively hiring through this entire year and have been, I'd say, pretty successful with it. Quarter. We are looking at accelerating and adding to some of that as we move into the second half of the year. We are supplementing our recruiting capabilities both internally and to help us with that. So we feel very optimistic that we'll be able to meet our goals for hiring in the second half of the year. Call. But it's a tough market. So we're going to continue to look at things we can do to make sure we're able to execute on that. Perfect. Thank you, guys. Call. Thanks, Ted, Josh. Thank you. Thank you. Our next question will come from Max Massocchi with Cowen. Please go ahead. Call. Hi, Robert and Sean. Congrats on a strong debut. Thanks, Max. Thanks, Max. Call. So we appreciate you providing the full year commercial revenue target at least $24,000,000 that's just above where we were. Call. Can you just maybe touch on some of the underlying assumptions that get you to that $24,000,000 number? And then what types event, whether it be a large customer order or a quicker pace of validations could mark upside? Call. Yes, sure. It's Sean, Max. I think I talked a little bit in my prepared remarks around sequential cadence, what we expect to happen to drive Some of that, right? So our expectation is you're going to see placements sequentially go up in Q3 and then again in Q4. Quarter. We're validating more systems. We've almost doubled the number of systems we have validated in the field over the past 12 months. So that's going to help us to drive consumable growth over time. And then we still have a pretty healthy backlog of validation work quarter. And we're adding to our service contract backlog. So as we build that base across our growing customer base installed base, all of those things are going to be drivers for the revenue. So I think that's kind of this construct that we expect the rest of the year to play out under. Quarter. I think across all of those areas, there's the potential for some upside. I think call. We have relatively good visibility on the systems side looking out into the second half. I think we feel good about where we are, call. But want to make sure that we're managing the business carefully there as well. I think consumables is an area where we're pushing very hard. Is there some opportunity there? We'd like to think there is, but I think it's a little early to be building any of that into the forecast at this point. Quarter. So I think there's opportunity there. We don't have the level of conviction we need to put it into the forecast, but we're going to continue to go after that as we work our way through the second half. Yes, absolutely makes sense. And then if we look at a few of your customers that have rolled out growth direct systems to multiple sites over a, say, 4 or 5 year period. Can you just help us understand how these question. Customers think about when it's the right time to expand the GrowthDirect platform from 1 to several manufacturing sites. And then just generally, how customers think about the pace in which they want to roll out the systems to their global network? Call. Yes, Max, it's Rob. The process typically starts usually at a site, maybe 2 sites where the customers will Initially purchased systems, they'll go through a validation, installation validation process. And then from there, they'll typically start the follow on purchases. Different customers have different initial problems they're solving. Call. Some rollout more thematically across a application like a water application to multiple sites call. Across maybe multiple products and maybe even environmental monitoring across multiple sites as well. Other customers will quarter. Tends to focus on a single product category and even a therapeutic category and roll out globally That way, so there's not really one size fits all with regard to how the rollout is driven, but From a high level, typically starts at a site where it's validated and again, and it rolls out from there. And many, many customers Have done that and are doing that now around the world across North America, Europe and Asia. As far as timing, quarter. We are seeing, I would say, a quickening of the pace as we mature and customers are more aware of us and we've got more and more brand and capability in the market. I wouldn't call it out as a necessarily a highly different feature, but we are seeing that We are seeing a strong demand from the market to roll our systems out to their global networks, their global manufacturing networks. Call. Yes. And Max, one thing I'd add to that is we've as we build out our sales organization, we have a component that's focused on key accounts And part of their remit is to look at these opportunities and try to accelerate that rollout. So they're going to have they have global visibility into customers And are working with our individual reps across the world to try to drive that process forward. Right. And with our field reps in tandem, exactly. Makes sense. Good segue. Now that you've fortified the balance sheet, Can you just give us a sense for the specific areas where you think increased investment can be the most impactful? Is it on the sales side call. For new customer wins and existing customer growth or is it on the customer support side to assist in enterprise deployments In shortening the validation period. Yes, it's a bit of both actually. So it's starting with call. You may have picked up in my initial remarks. We do believe there's a very clear ROI in hiring more direct sales quarter. Resources around the world. We believe that will accelerate our revenue growth. Quarter. As you may know, we've had very relatively light investment in sales leading up to the IPO, but we do we are planning on more than doubling quarter. Our direct sales force globally this year and we'll continue to grow looking into 2022 and beyond. As we Sell more through that process and customers roll out to per our previous discussion, that drives more demand for validations as well To part B of your question, so we'll continue to add validation resources, which we view as a competitive differentiator. We believe it is a Among other differentiators we have in our business, our ability to partner with customers, to validate with our customers, to move them into routine use Effectively and efficiently is a competitive advantage. We'll continue to make sure we leverage that and invest in that validation group. Quarter. That's a bit more volume driven as you may imagine, but we'll also be investing there. And you didn't Separate topic, but we also see investment in R and D as another lever of longer term growth and innovation for the business as well. But Those are the high level areas where we're focused on incremental investment. Great. Thanks for taking the questions. Thank you. Thank you. Our next question will come from Dan Arias with Stifel. Please go ahead. Call. Good afternoon, guys. Congrats on the initial call here. Rob, can you just talk a little bit about the usage intensity call. For Growth Direct that you see when you look at the application focus of a customer just in terms of small molecule, biologic cell therapy, etcetera. Call. I ask just sort of trying to understand when we see a company X that has a box, if we know that that's a CAR T company, what that might mean call. At a high level on a relative basis just across the different types of accounts when it comes to usage. Yes. So, call. At a high level, Dan, the biologic and cell and gene therapy formats tend to be a bit more complex manufacturing and generally higher usage. I would say that sterile injectables would also be at the higher end and higher usage as well. Call. Small molecule, oral type formats and therapies would be on the lower end. And then personal care, Depending on what the actual product is, we tend to be kind of a moderate or lower end as well. Okay. And then maybe Sean on the gross margin line, what does the path forward there look like? I mean, I think that includes seeing the benefit of leverage, But also some cost reduction. So maybe on the cost side, what's the best way to think about the elements there, outsourcing, vendor consolidation, quarter. What's the timing that you're thinking about and where should we maybe look first for you to do some things? And anything you might want to say on the target in the out year would be helpful too? Yes. So we have a number of different levers that we're looking at pulling to take cost out. You touched on one of them, kind of vendor consolidation, vendor leverage Is one. So I'd look at that and put it under the broader category of strategic procurement and looking at getting cost out of materials call. That we're putting into our products through a number of different strategies including ones like that I just mentioned. We're looking at things like value engineering quarter. With our products, looking at how we build our products today, what they're made of today and looking at opportunities to replace materials, make design changes quarter. In other ways, take cost out of the product as well. Another category that's definitely in our crosshairs, but maybe a little bit further out would be quarter. Looking at ways to verticalize our manufacturing process. So taking things that we outsource, including things like sterilization, Different parts of the manufacturing where it's more of a variable cost, and bringing that in house and turning it into more of a fixed cost that we can drive a leverage out of. So those would be a few of the more significant areas we're focused on. Some are shorter term, some are longer term. So We'll continue to work on those and we do expect to see regular and meaningful progress as we march forward over the next 18 months quarter in getting those margins positive and then continuing to climb toward a goal that's somewhere quite a bit higher than that over the next several years. Call. Yes. Okay. Very good. And then just last one for me, which I don't think I heard you mention, but apologies if you did. Just on Asia, I mean, that's obviously a really great source of growth for these companies in You have a small presence there, but I think the plan is to grow your footprint pretty significantly. Can you just talk about the investment focus Specific to Asia and how we should look about you rolling out capabilities and just footprint there. Yes. So call. We started with our leadership role that we recently hired and he's based in Singapore. Call. Sean Manners, he's joining us from Thermo Fisher Scientific. So he is our commercial leader quarter. In this space and we plan to consistent with the previous comments on growing our sales force plan to do that in the Asia Pacific region as well around and not only direct sales, quarter. But over time, the balance of the commercial operation as well to include validations in field services. Okay. Thanks very much. We have placements in the region, but this will our plan is to accelerate our investment and revenue growth in the region going forward. I think we want to be fairly aggressive there just given the opportunity. I mean, we talked before about revenue mix. I mean, As Rob said, we do have systems there, but the relative revenue is pretty small in Asia today. So there's we view that opportunity as very attractive. Okay. So we should from a geographic perspective, we should assume expansion in Asia outpaces anything in the rest of the regions or the other regions? Well, initially investment will it will be investment and then getting Productivity on that investment, Dan. So kind of standby for more on that. Ultimately, we would expect strong growth out of the region, yes. Week. Okay. Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Rob Cignesi for any further remarks. Call. Well, thank you all for joining us today on our first earnings call as a public company. I look forward to updating you on our progress during our Q3 call in a few months. Thank you very much. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now have a disconnect.