Alpha Teknova Q1 2025 Earnings Report

Alpha Teknova EPS Results

• Actual EPS: -$0.09
• Consensus EPS: -$0.11
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Alpha Teknova Revenue Results

• Actual Revenue: $9.60 million
• Expected Revenue: $9.41 million
• Beat/Miss: Beat by +$194.00 thousand
• YoY Revenue Growth: N/A

Alpha Teknova Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Alpha Teknova (NASDAQ:TKNO) produces critical reagents for the research, discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics in the United States and internationally. The company offers pre-poured media plates for cell growth and cloning; liquid cell culture media and supplements for cellular expansion; and molecular biology reagents for sample manipulation, resuspension, and purification. It provides lab essentials which provides chemical formulations for use in biological research and drug discovery; and clinical solutions, a custom product used in the development and production of protein therapies, gene therapies, mRNA vaccines, and diagnostic kits. The company serves its products to life sciences market, including pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostic franchises, as well as academic and government research institutions. Alpha Teknova, Inc. was founded in 1996 and is headquartered in Hollister, California.

Alpha Teknova Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 2025, Tecnova delivered 5% revenue growth to $9.8 million, improved gross margin to 30.7% (versus 23.8% a year ago) and narrowed its net loss to $4.6 million from $8.1 million.
• Catalog products grew in the low double digits on broader one-time and recurring demand, custom biopharma orders rose mid single digits, while custom tools & diagnostics fell over 30% due to lumpy timing of a large prior‐year order.
• Tecnova reaffirmed full-year 2025 guidance of $39 million to $42 million in revenue (about 7% growth), targeting mid single-digit catalog growth, ≥15% custom biopharma growth and mid single-digit custom life science tools/diagnostics growth.
• The company has expanded its clinical customer base (accounts spending >$5,000 annually rose from 13 in 2020 to 48 in 2024) and expects the custom biopharma segment to grow in the mid teens in 2025 as early-stage developers advance through trials.
• In March, Tecnova signed an exclusive US/Canada collaboration to manufacture and distribute Pluristics’ Plurifreeze iPSC cryopreservation system, gaining initial positive customer feedback ahead of any material 2025 impact.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Tecnova First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jennifer Henry, Senior Vice President of Marketing. Please go ahead.

[Jennifer Henry, Senior Vice President of Marketing at Alpha Teknova]

Thank you, operator. Welcome to Tecnova's first quarter twenty twenty five earnings conference call. With me on today's call are Steven Gunstream, Tecnova's President and Chief Executive Officer and Matt Lowell, Tecnova's Chief Financial Officer, who will make prepared remarks and then take your questions. As a reminder, the forward looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning these risk factors is included in the press release the company issued earlier today, and they are more fully described in the company's various filings with the SEC.

[Jennifer Henry, Senior Vice President of Marketing at Alpha Teknova]

Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors, and the company does not obligate or commit itself to update its forward looking statements except as required by law. The company's management believes that in addition to GAAP results, non GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies. We will therefore use non GAAP financial measures of certain of our results during this call. Reconciliations of GAAP to non GAAP financial measures are included in the press release that we issued this afternoon, which is posted on both Tecnova's and the SEC's website. Non GAAP financial measures should always be considered only as a supplement to and not as a substitute for or as superior to financial measures prepared in accordance with GAAP.

[Jennifer Henry, Senior Vice President of Marketing at Alpha Teknova]

The non GAAP financial measures in this presentation may differ from similarly named non GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of Technova's website. And now I will turn the call over to Steven.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Thank you, Jen. Good afternoon, and thank you everyone for joining us for our first quarter twenty twenty five earnings call. Today, I'd like to start by providing some commentary on the current macro environment and how it relates to our business. We had a strong first quarter that was in line or slightly ahead of our expectations. We believe this performance reflects the diversity of our customer base, the criticality of our product portfolio, and the limited exposure we have to changes in the geopolitical environment.

[Stephen Gunstream, President & CEO at Alpha Teknova]

While we serve over 500 academic and government institutions annually, these customers represented less than 4% of our total revenue in 02/2024. We also believe that customers will continue to use our products, notwithstanding changes to NIH funding levels because they are foundational to basic research and generally represent a small part of the cost associated with R and D activity. From a tariff perspective, our diverse customer base spans the entire life science market from biopharma to life science tools to diagnostics to other areas such as food and environmental testing. We manufacture 100% of our products in The United States and source only about $1,000,000 worth of our raw materials from outside The United States annually. From a commercial perspective, less than 5% of our total revenue comes from sales to customers outside of The United States, and we generate no material revenue from sales to customers in China.

[Stephen Gunstream, President & CEO at Alpha Teknova]

We therefore expect no material direct adverse impact from change from recent changes to tariff policies. With that said, second order effects such as a reduction in biotech funding will will likely cause delays or reductions in purchases of our products from some small and mid sized biotech customers. As a reminder, our growth strategy is to engage with these early stage therapeutic developers and support them as they move their therapies through to clinical trials to commercialization. Over time, we believe a combination of these new clinical customers in our core business, which has grown at an average annual rate of 12% since 02/2009, will allow us to achieve sustainable above market growth rates of 20% to 25% annually. Until biotech funding recovers, however, we believe that many small and mid sized biotech companies with limited capital will continue to manage their expenses conservatively.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Fortunately, we have been able to increase the number of clinical customer accounts that purchase more than $5,000 annually from 13 in 2020 to 48 in 2024, and we expect the custom biopharma segment of our business to grow mid teens in 2025. All things considered, we remain confident in our ability to execute on our plan for 2025 and therefore in our guidance for the year. Now turning to the quarter, it was a relatively straightforward period for us across the board with revenue and operational expenses delivering at or better than our expectations. Our catalog products, which are purchased from a very broad customer base of over 3,000 accounts annually and represent approximately 60% of our total revenue grew low double digits when compared to the February. This is due to a combination of some larger one time orders from select accounts and a general increase in demand across multiple product lines and customer types.

[Stephen Gunstream, President & CEO at Alpha Teknova]

We will continue to monitor the performance of our catalog products, which could provide some upside to our revenue guidance if the trend continues. Revenue from sales of custom products to life science tools and diagnostics customers declined more than 30% compared to the same period last year due to a large order delivered to a single customer in the first quarter of twenty twenty four. Excluding this order, revenue in this segment would have increased high single digits in the first quarter of twenty twenty five. Revenue from custom products sold to biopharma customers grew mid single digits compared to Q1 twenty twenty four. The size and timing of orders for custom products makes it difficult to measure performance on a quarterly basis.

[Stephen Gunstream, President & CEO at Alpha Teknova]

But based on customer discussions and our funnel metrics, we still expect at least 15% growth in revenue from sales of custom products to biopharma customers and mid single digit revenue growth from sales of custom products to life science tools and diagnostics customers in 02/2025. Finally, as we mentioned on our q four call, we believe there is an opportunity to expand our product portfolio through collaborations and acquisitions. While we have spent the past couple of years investing in infrastructure, systems, and scalability, numerous other companies have focused on developing novel products and technologies. By working closely with these companies, we believe we can expand our product portfolio and geographic footprint. The combination of our operational and commercial scale with our collaborators' novel products and technologies creates a great opportunity to drive additional top line growth and margin expansion over the longer term.

[Stephen Gunstream, President & CEO at Alpha Teknova]

In fact, in March, we signed a collaboration agreement with Pluristics. Pluristics is a leading provider of induced pluripotent stem cells or iPSCs for use in next generation cell therapies. Through their development of iPSCs, Pluristics identified a novel formulation for the systematic freezing of cells called cryopreservation that streamlines the manufacturing of cell products. The product line is trade named Plurifreeze and includes a wash system paired with a cryopreservative designed to simplify the scale up process for companies working to bring allogeneic cell therapies to market. Tecnova is now the exclusive manufacturer and distributor in The United States and Canada for this suite of products.

[Stephen Gunstream, President & CEO at Alpha Teknova]

We launched the products at the Bioprocess International West Conference and have received an enthusiastic response from our target customers. We are excited about the first of what we expect to be additional collaborations and what these relationships can bring to our customers and our investors alike. In summary, we had a strong start to the year. We are excited about the progress we've made and believe we are in position for long term success. I will now hand the call over to Matt to talk through the financials.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

Thanks, Stephen, and good afternoon, everyone. Revenue was up 5% for the first quarter of twenty twenty five compared to the same quarter prior year. I'm also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered solid financial results for the first quarter twenty twenty five. Total revenue for the first quarter of twenty twenty five was 9,800,000.0, a 5% increase from 9,300,000.0 for the first quarter of twenty twenty four.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

Lab Essentials products are targeted at the research use only or RUO market and include both catalog and custom products. Lab Essentials revenue was 8,100,000.0 in the first quarter of twenty twenty five, a 12% increase from 7,300,000.0 in the first quarter twenty twenty four. The increase in LabEssentials revenue was attributable to an increased number of customers, partially offset by slightly lower average revenue per customer. Clinical solutions products are made according to good manufacturing practices or GMP quality standards and are the primarily used by our customers as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical solutions revenue was 1,200,000.0 in the first quarter of twenty twenty five, a 32% decrease from 1,700,000.0 in the first quarter of twenty twenty four.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

The decrease in clinical solutions revenue was attributable to lower average revenue per customer, partially offset by an increased number of customers. We expect revenue per customer to increase over time as customers ramp up their purchase volumes when they move through clinical trial phases. However, this metric can be affected by the addition of newer clinical customers who typically order less. Just as a reminder, to the larger average order size in clinical solutions compared to Lab Essentials, there can be more quarter to quarter revenue lumpiness in this category. Notably, there was a large Clinical Solutions delivery to a customer in the year ago quarter that did not reoccur in the first quarter twenty twenty five.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

However, this was attributable to customer timing as it remains one of our top customers. On to the income statement, gross profit for the first quarter of twenty twenty five was 3,000,000 compared to 2,200,000.0 in the first quarter of twenty twenty four. Gross margin was 30.7% in the first quarter of twenty twenty five, which is up from 23.8% in the first quarter of twenty twenty four. The increase in gross profit was primarily driven by higher revenue coupled with lower overhead costs. Operating expenses for the first quarter of twenty twenty five were $8,000,000 compared to $10,200,000 for the first quarter of twenty twenty four.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

Excluding the non recurring charge of 1,300,000.0 recorded in the first quarter of twenty twenty four related to the reduction in workforce, operating expenses were down 900,000.0. The decrease was driven primarily by lower stock based compensation expense related to the March 2024 option repricing and reduced spending generally. At the end of the first quarter twenty twenty five, we had 176 total associates compared to 174 in total a year prior. Net loss for the first quarter of twenty twenty five was $4,600,000 or negative $09 per diluted share compared to a net loss of $8,100,000 or negative $0.20 per diluted share for the first quarter of twenty twenty four. Adjusted EBITDA, a non GAAP measure was negative $2,500,000 for the first quarter of twenty twenty five, compared to negative 3,800,000.0 for the first quarter of twenty twenty four.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

On to cash flow and balance sheet. Capital expenditures for the first quarter of twenty twenty five were $200,000 compared to $100,000 for the first quarter of twenty twenty four. Free cash flow, a non GAAP measure, which we continue to report as cash used in operating activities plus purchases of property, plant and equipment, was negative 4,300,000.0 for the first quarter of twenty twenty five compared to negative 6,700,000.0 for the first quarter of twenty twenty four. This decrease was due both to 1,300,000.0 in severance payments only in the year ago period and improved profitability in the current period. Turning to the balance sheet as of 03/31/2025, we had 26,300,000.0 in cash and cash equivalents and short term investments and $13,200,000 in total borrowings.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

Our borrowings increased by $1,100,000 in the quarter as an offset to the exit fee owed to our lender due to the refinancing. On to 2025 outlook. We are reiterating 2025 total revenue guidance of 39,000,000 to 42,000,000. At the midpoint, this implies 7% revenue growth compared to 2024. Our catalog products, which represent a very broad customer base, was up low double digits and higher than expected in the first quarter despite the macro environment.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

On the other hand, growth was lower than expected from custom products delivered to our biopharma customers. We expect these growth rates to flip over the course of the year due to the timing of larger custom orders. Our fiscal year twenty twenty five revenue guidance assumes mid single digit growth in catalog products, at least 15% growth and custom biopharma products and mid single digit growth in custom life science tools and diagnostics products. While gross margins improved over the year ago quarter in excess of our previously communicated expectations of about 70% of incremental revenue, we still believe this is the best estimate over longer periods of time. There were some additional favorable factors in the first quarter of twenty twenty five that will not necessarily be repeated.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

We therefore continue to target a gross margin in the high 20s for fiscal year twenty twenty five. We also continue to expect operating expenses of at least $8,000,000 per quarter, allowing us to moderately increase our investment in sales and marketing compared to last year to position ourselves for the market recovery. At these spending levels, we continue to believe we will become adjusted EBITDA positive in the range of $55,000,000 in annualized revenue. While the company saw an increase in free cash outflow compared to the fourth quarter of twenty twenty four, this is consistent with the company's expectations for the year and is higher due to certain larger payments typically occurring during the first quarter. We anticipate lower average quarterly free cash flow cash outflow for the remainder of the year.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

As such, the company continues to expect free cash outflow of less than $12,000,000 for the full year 2025. As we have communicated previously, based on reasonable assumptions about future growth and spending plus current liquidity, we believe that we do not need to raise additional capital to execute our organic growth strategy. With that, I will turn the call back to Steven.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Thanks, Matt. To conclude, we believe that first, our core business is returning to double digit growth. Second, the more than 60 therapies we support in clinical trials will drive additional long term sustainable growth. Third, the business is prepared operationally and commercially to scale the $200,000,000 in revenue without with minimal additional investment. And finally, additional collaborations and acquisitions provide opportunities to accelerate growth and profitability.

[Stephen Gunstream, President & CEO at Alpha Teknova]

As such, we believe the long term outlook for our end markets remains positive, and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies, diagnostics, and other products that improve human health. We will now take your questions.

[Operator]

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1, 1 again. Please stand by while we compile the Q and A roster.

[Operator]

Our first question comes from Anna Snoopowski with Our first question comes from Anna Snoutkowski with KeyBanc. Please go ahead. One moment for our next question. Our next question comes from Mark Massaro with BTIG.

[Operator]

Please go ahead.

[Vidyun Bais, Equity Research - Vice President at BTIG]

This is Vivian on for Mark. Thanks for taking the questions. So just wanted to check on your cell and gene therapy customer count. Just any commentary you can provide on the demand that you're seeing there after the recent leadership change at the FDA? And if you

[Vidyun Bais, Equity Research - Vice President at BTIG]

could just comment on any month on month improvements you're seeing just

[Vidyun Bais, Equity Research - Vice President at BTIG]

in the macro biotech funding landscape. Thanks.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Sure. Thanks, Vivian. Well, I mean, it's only been a day since the change has been announced. I don't I have not seen the change, but we will be at ASGCT next week and we'll be talking to a number of customers and I'm seeing, customers tomorrow as well. That said, I don't think anything's changed since we gave our guidance, right?

[Stephen Gunstream, President & CEO at Alpha Teknova]

We expected a pretty tough market when we write our guidance this year. And those early stage customers with short cash runways are going to conserve capital until that changes. Fortunately, we have a number of customers in our pipeline that have either raised or are in larger institutions. And they are operating to their the plan that they laid out at the beginning of the year. So while the market isn't what it what it could be, for the most part, our customers are in execution mode, and hence why we believe this segment will still grow in the 15%, that we guided to this year.

[Vidyun Bais, Equity Research - Vice President at BTIG]

Okay. Great. Thanks so much for that. And then I just wanted to check-in on the revs per customer that you called out and how that tends to soften as newer customers come on board. Could you just talk about the mix shift you're seeing with the new customers onboarding and just how the utilization of the mature customers is trending?

[Vidyun Bais, Equity Research - Vice President at BTIG]

Is there any kind of aspirational metric you could provide on where you expect peak utilization to go for those more mature customers? Thanks.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Well, I would say, and then I'll hand it to Matt. But I would say this, Vivian, the what we're seeing when we do the metrics, right, we tell you how many clinical customers we had at the end of twenty twenty four. In this case, it was 48. Of those 48, 20 three were cell and gene therapy customers. Those are the total accounts, not the total number of therapies.

[Stephen Gunstream, President & CEO at Alpha Teknova]

But what we do see is very similar to the market research we did, a number of years ago on the increase in spend as they move down those trials. So, you know, you're thinking about the as they get closer to phase two, phase three, it's hundreds of thousands per therapy per account, but account can have multiple therapies. And then as they go from phase one to commercialization, we still expect that 30 fold increase. So I don't think anything's changed there. What we've seen is rationalization in the pipeline more than anything else.

[Vidyun Bais, Equity Research - Vice President at BTIG]

Okay. Great. Thanks so much for taking the question.

[Operator]

Thank you. Our next question comes from Anna Snackowski with KeyBanc. Please go ahead.

[Anna Snopkowski, Equity Research Analyst at KeyBanc Capital Markets]

Hi, this is Anna on for Paul Knight. Maybe starting with your recent collaboration with Pluristics, could you just touch on the competitive position for this product? Just does it allow you to increase your presence and penetration with existing customers or target, a different customer set? And do you see any material impact in 2025? Thanks.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Yep. Great. Thanks, Anna. We are very excited about the collaboration, because it not only does it help build out our cell therapy workflow, but also is a critical component in a lot of the application areas in the catalog business like stem cell research or some cell banking, type applications that are commonly used. So, yes, it it is go does target our current customer base.

[Stephen Gunstream, President & CEO at Alpha Teknova]

I would say that we're not as deep in cell therapy just because of the products we offer. And we feel like this can obviously help us get our foot in the door there and expand, because it is a pretty unique product. And, from the from the material impact, as you know, these things take a long time to mature. Right? And of course, there's a large incumbent in there and there's actually what we're finding a lot of homebrew in the space.

[Stephen Gunstream, President & CEO at Alpha Teknova]

And so while we're enthusiastic and the customers are excited about it, have a sampling plan going right now. I wouldn't expect a material impact necessarily in 2025, but we'd start to build that as it goes out in the twenty sixth, twenty seventh time periods.

[Anna Snopkowski, Equity Research Analyst at KeyBanc Capital Markets]

Great. Thank you. And then just one follow-up. Hopefully, you didn't touch on this already, but if you could comment on the recent news with CBER and the appointment of Doctor. Prasad, just if we could get your initial thoughts there, and if you could just remind us of your exposure to vaccines.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Yeah. So, on the on the new appointment in CBER, obviously, you know, this is something everyone's gonna be watching. I think it's too early to tell. So it's it's hard to even measure in a day or two, and there's lots of opinions. So we will be interested to hear it next week at ASGCT directly from some of our customers.

[Stephen Gunstream, President & CEO at Alpha Teknova]

But let's talk about exposure real quickly. Right? We said we have 48 clinical customers that ended 2024. 23 of those were selling gene therapy. And I don't believe at this moment in time, there's really any that are large in or in the vaccine space necessarily for us.

[Stephen Gunstream, President & CEO at Alpha Teknova]

So I think the exposure for some of these things is not quite as much for us. That said, obviously, the impact is really this second order effect again with the biotech funding, right? These small mid sized biotech companies that have a short cash runway would be limited in terms of what they can spend until we solve that problem. So something we're gonna keep our eye on it, Anna, and we'll we'll keep you guys updated.

[Anna Snopkowski, Equity Research Analyst at KeyBanc Capital Markets]

Thank you. That's helpful.

[Operator]

Thank you. Our next question comes from Matt Hewitt with Craig Hallum Capital Group. Please go ahead.

[Matthew Hewitt, Senior Research Analyst at Craig-Hallum]

Good afternoon. Thanks for taking the questions. And I apologize those hopping between a couple of different calls. But as I was getting back on to yours, I heard something along the lines of, I think, 4% government exposure, if I heard that correctly. And I'm just curious if you've spoken with some of your larger institutions on the academic and government side.

[Matthew Hewitt, Senior Research Analyst at Craig-Hallum]

And I realize that this is kind of a fluctuating situation with NIH cuts and whatnot, but what are you hearing from them? Are they kind of looking at it as they're staying the course until someone comes and tells them to stop? Or are they are you seeing a little bit of a pause? Realize that's a small percentage of your revenues, but just curious what you're hearing.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Yeah. Thanks. Thanks, Matt. It is a 4% for that's for all the academic and government institutions we support, which is about 500 in The US. So it's pretty diverse.

[Stephen Gunstream, President & CEO at Alpha Teknova]

So you think about 4% of our revenue and divide that by 500, it's a pretty small amount. And I can tell you we're not actually seeing an impact for our products at this time. If you remember, a lot of the products we sell are just your standard basic research tools like AggerPlates or TrisBuffer or things like that. Probably unlikely to be impacted, right away. They're they're not expensive, but and they're also just sort of the necessary consumables you need to do research.

[Stephen Gunstream, President & CEO at Alpha Teknova]

So we we feel like it's not only small, but also probably a little bit more resilient than to some of the other areas. The only things I've really heard so far, Matt, is just the it's a lot of concern. Right? And you hear about people and, you know, that are postponing, you know, positions that they had opened and things like that. But I don't know that we're seeing yet the material effects or we are not, I should say, at this point.

[Matthew Hewitt, Senior Research Analyst at Craig-Hallum]

Understood. Thank you very much.

[Operator]

Thank you. Our next question comes from Matt Larew with William Blair. Please go ahead.

[Matt Larew, Research Analyst - Healthcare at William Blair]

Hey, good afternoon. As I think about the balance of the outlook for the year, I'm trying to think maybe upside downside. One way there may be a risk to the outlook is if there was some sort of pull forward of end of the first quarter. So just curious, just based on your assessment of customer order patterns, if you saw any of that. Maybe an upside dynamic might be, to your point, Stephen, the industry has gone through a lot of rationalization and your products are sort of daily use must have products.

[Matt Larew, Research Analyst - Healthcare at William Blair]

So there may not be the same reservation like there might be for capital equipment or larger dollar amounts. So can you maybe comment on those two and how to play in the decision to maintain the outlook?

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

Maybe I'd just comment on the on the polling question, Steven, and you can.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Yeah, great.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

But

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

yeah, just looking at it in two pieces, Matt, the lab essentials versus the clinical part of our business, starting with the latter, the clinical solutions, that was down in the in the quarter, versus a year ago. And this was kind of one of those situations where it's actually the opposite effect, which you didn't have some of the larger orders that we had in the year ago period, that being the sole reason and again, we've kind of checked in with our customers and our funnel and we do believe that that's, you know, going to kind of correct itself later later in the year. So on the clinical side, we feel it's more just normal timing at this moment. On the on the lab essentials part of our business of which, you know, the large part is the catalog business and that had a very strong performance in Q1 in the low double digits as we reported. We have we have, you know, dug in there.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

And at this time, we do not believe that there's any pull in activity or that we can detect anyway. Of course, these things are with a large customer base. It's hard to know all the forces at work here. But based upon looking at different segments and types and those kind of things, it's not clear that that's the case. It could be possible, of course, but it's not clear from the data that that is happening.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

And, but it's something, as you said, we'll be continuing to watch as we do expect that business to grow mid single digits for the full year and it was above that in Q1. So we'll see how things progress into Q2.

[Operator]

Thank you.

[Matt Larew, Research Analyst - Healthcare at William Blair]

Okay, very good. Sorry, just one more. Following up with a question fever and Doctor. Prasad, maybe just a broader question on some of the other changes that have been proposed with FDA and NIH about how early stage research is going to be done, potential use of three d cell culture or animal excuse me, organoids relative to animal models. Again, I understand it's early, but maybe just speak to how your portfolio might be positioned to benefit from some of those changes.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Yeah, think it is, again, all these things are pretty early, so it's pretty speculative at this point. But, you know, we probably we do support more of the non animal models. Right? So there's a potential tailwind there, as, if there's a shift. My understanding is that it's it's not as near term as it sounds in the in the news.

[Stephen Gunstream, President & CEO at Alpha Teknova]

So I'm interested in hearing more as we go through the next couple months as they sort this out. But certainly, you move to more organoid type models and instead of animal models, I think we'd see a potential benefit there.

[Operator]

Thank you. Our next question comes from Brendan Smith with TD Cowen. Please go ahead.

[Chad Wiatrowski, VP - Equity Research at TD Cowen]

Hey, this is Chad Vaitraschi on for Brendan Smith. Just wanted to sort of double click on the cryopreservation collaboration. Is this sort of a cost plus model for you guys or are there other economics attached like royalties or something? And the second part of that would be, as you mentioned, there's sort of an incumbent gold standard here. So what from like a strategy perspective gave you conviction that they're going to win share in this market, whether it's from price or performance.

[Chad Wiatrowski, VP - Equity Research at TD Cowen]

Could you just elaborate on that? Thanks.

[Matthew Lowell, Chief Financial Officer at Alpha Teknova]

Steve, you want me to talk a little bit to the economics? I'll just say that first of all, it's, you know, we haven't disclosed the details of collaboration, of course, we have disclosed that we are, you know, the exclusive manufacturer and, you know, reseller of this product so that we are expecting economics to reflect that. I would say in general with these type of collaborations, we're expecting them to obviously to be sort of adjusted EBITDA positive. So contributors to the overall profitability of the company. But, and then certainly for the near term as we try to build up the science for this in the market, it's gonna take a little while before we see anything material in the results.

[Stephen Gunstream, President & CEO at Alpha Teknova]

Yeah, and then I'll just touch on the positioning. You know, there are two pieces, right? As you think of it more of the cell therapy side of things, the lack of, the reduction in viscosity of the product enables it to be, better suited for allogeneic cell therapies, versus autologous just because of the scale which you're doing these, in and working with such viscous fluid does cause problems in actual bioprocessing. But then we also have a RUovers and meaning a research use only version of the product that makes it more accessible to the broader market and research. And we think that can help go after that homebrew segment that we believe is relatively large there.

[Chad Wiatrowski, VP - Equity Research at TD Cowen]

Thanks, Kay.

[Operator]

Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Participants

Executives

• Jennifer Henry, Senior Vice President of Marketing
• Stephen Gunstream, President & CEO
• Matthew Lowell, Chief Financial Officer

Analysts

• Vidyun Bais, Equity Research - Vice President at BTIG
• Anna Snopkowski, Equity Research Analyst at KeyBanc Capital Markets
• Matthew Hewitt, Senior Research Analyst at Craig-Hallum
• Matt Larew, Research Analyst - Healthcare at William Blair
• Chad Wiatrowski, VP - Equity Research at TD Cowen