Alpha Teknova Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 5, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter revenue rose 18% to a record $12 million, with growth broad-based across customers and major markets aside from cell and gene therapy. Gross margin improved to 40.1%, while free cash outflow declined sharply to $0.6 million from $2.3 million a year earlier.
  • Positive Sentiment: Teknova raised 2026 revenue guidance to $45 million-$47 million, implying approximately 14% growth at the midpoint, and now expects full-year free cash outflow below $8 million.
  • Neutral Sentiment: Management cited potential longer-term growth from more than 70 therapies and diagnostics in clinical trials, improving biotech funding, and commercial investments, but said the funding benefit has not yet reached revenue and expects most sales impact from the commercial buildout in early 2027.
  • Negative Sentiment: Cell and gene therapy demand remains muted, while operating expenses are expected to remain at least $8 million per quarter through year-end. The company still expects adjusted EBITDA to turn positive only after reaching approximately $52 million-$57 million in annualized revenue, and its 2027 target remains in the low-$50-million range.
  • Positive Sentiment: The company officially launched Build-Tek, an AI-powered custom-product configurator intended to shorten custom order design from weeks to a few business days and encourage catalog customers to adopt higher-value custom products; management expects it to support growth rather than generate direct software fees.
AI Generated. May Contain Errors.
Earnings Conference Call
Alpha Teknova Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

Good day, and thank you for standing by. Welcome to the Teknova second quarter 2026 financial results. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like to hand the conference to the first speaker today, Jennifer Henry, Senior Vice President of Marketing. Please go ahead.

Jennifer Henry
Jennifer Henry
SVP of Marketing at Alpha Teknova

Thank you, operator. Welcome to Teknova's second quarter 2026 earnings call. With me on today's call are Stephen Gunstream, Teknova's President and Chief Executive Officer, and Matt Lowell, Teknova'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
Jennifer Henry
SVP 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 a 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 to Teknova's website and at www.sec.gov/edgar. 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
Jennifer Henry
SVP 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 Teknova's website and on today's webcast. Now, I will turn the call over to Stephen.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Thank you, Jen. Good afternoon, and thank you everyone for joining us for our second quarter 2026 earnings call. We were very pleased with our performance in the second quarter. Revenue grew 18% compared to the second quarter 2025, exceeding $12 million for the quarter, the highest quarterly revenue in Alpha Teknova's 30-year history. This growth contributed to our lowest free cash outflow since before our IPO in June 2021. Considering our performance this year to date and our confidence about the back half of the year, we have increased our revenue guidance, which at the midpoint raises expected revenue growth from 6% to 14% for the year. I will start by providing a little more color on the second quarter growth drivers. We are particularly encouraged because once again, revenue growth was not driven by a single order or a single customer.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

It was broad-based with our largest direct customer representing less than 7% of total revenue in the quarter. In addition, we achieved growth in sales of our products across all of our major target markets, with the exception of cell and gene therapy related accounts, which were down in part due to order timing. Excluding cell and gene therapy, biopharma, generally including biotech, large pharma, and CDMOs, grew significantly, led by sales of our custom products. We are also encouraged by our continued strength in supporting our customers in the liquid biopsy market. We drove catalog sales through improved engagement with our distributors. All in all, it was a great quarter. It puts us in a strong position as we enter the second half of 2026. As we look to 2027, we believe there are a number of potential tailwinds that will further support our growth.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

First, our products are used to manufacture more than 70 therapies or diagnostics currently in clinical trials, at least one of which we expect will be commercial by the end of next year. As a reminder, we believe that once a therapy reaches commercialization, the dollar value of a customer's purchases from us increases approximately tenfold compared to when the therapy is in phase III clinical trials, and approximately thirtyfold compared to phase I clinical trials. Second, there has been an increase in total biotech funding over the past three quarters compared to the same period in the prior year. Given that we have historically seen an approximately four-quarter lag from funding changes to revenue recognition, we believe there may be a positive revenue impact from this additional funding at the end of this year or in early 2027.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Third, leading indicators show that the investments we began to make in our commercial organization in January are producing results on or ahead of plan. The new lead generation resources and systems we've put in place, together with the additions to our field sales organization, are enabling us to reach high-profile accounts and create opportunities that would have been much harder to come by a year ago. We expect these opportunities to start translating to revenue by early 2027. Taken together, the progression through clinical trials of therapies supported by our products, the increasingly favorable biotech funding environment, and our recent commercial investments provide us with the confidence that we will continue to deliver sustainable above-market growth. Lastly, I want to shift and talk about how we are leveraging AI to enable our customers to quickly and efficiently design and order custom products.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Today, we officially launched Build-Tek, our new AI-powered custom order configurator, which is an evolution of the buffer configurator we introduced back in 2024. Designed to build custom product quote requests, this interactive personal AI reagent assistant engages with customers so that they can create complex custom products in minutes, leveraging standard formulations, published literature, or specifications that they supply. Before Build-Tek, designing a complex custom product required multiple rounds of back and forth between our manufacturing science and technology team and the customer, which could take weeks and be error-prone. With our new Build-Tek custom configurator, a customer simply engages with the assistant and starts with as much or as little information as they have, and the assistant provides guidance on product type, formulation, container format, manufacturing grade, QC testing, and more.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Build-Tek, which is trained on 30 years of Teknova's manufacturing experience and know-how, defines and finalizes the product specification and allows the customer to submit a request for quote. It also supports the ability to upload existing files, formulations, or literature for reference, and to design multiple custom products in one session. Our customers can now complete the entire process in a few business days rather than weeks. We soft launched the Build-Tek service last quarter, and we're already receiving quote requests from customers who have previously only ordered catalog products. This is only the beginning. We will continue to build out new features, such as the ability to customize existing catalog products, to save custom product requests to an online account, to get instant quotes, and more. We're excited to see how this tool evolves over time. In summary, we had a great quarter.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

We feel good about where we are today, and we're excited about what we think is yet to come. I will now hand the call over to Matt to talk through the financials.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Thanks, Stephen, and good afternoon, everyone. As Stephen explained, total revenue was up 18% for the second quarter 2026 compared to the same quarter prior year. This was also the highest quarterly revenue the company has achieved in its history. We're also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered excellent financial results for the second quarter of 2026. By way of reminder, we target our Lab Essentials products at the Research Use Only, or RUO market, and they include both catalog and custom products. Lab Essentials revenue was $9.2 million in the second quarter 2026, up 18% compared to $7.8 million in the second quarter of 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer and to a slightly lesser extent, an increased number of customers.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

We make our Clinical Solutions products according to Good Manufacturing Processes or GMP quality standards, and our customers use them primarily as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $2.4 million in the second quarter 2026, an 18% increase from $2.1 million in the second quarter of 2025. The increase in Clinical Solutions revenue was attributable to an increased number of customers, partially offset by lower average revenue per customer. We expect revenue per customer to increase over time when a subset of these customers ramp up their clinical purchase volumes, excuse me, as they move through clinical trial phases and ultimately to commercialization. However, this metric can be affected by the addition of newer Clinical Solutions or GMP catalog customers who typically order less.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Just as a reminder, due 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. On to the income statement. Gross profit for the second quarter 2026 was $4.9 million, compared to $4.0 million in the second quarter 2025. Gross margin was 40.1% in the second quarter 2026, up from 38.7% in the second quarter 2025. The increase in gross margin was primarily driven by higher revenue, partially offset by higher fixed cost absorption into cost of goods sold from faster finished goods inventory turns. Operating expenses for the second quarter 2026 were $7.8 million compared to $7.4 million in the second quarter of 2025.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

The increase in 2026 was primarily driven by investments in our sales and marketing capabilities, resulting in higher headcount and increased marketing expenses, partially offset by lower general administrative expenses attributable to lower stock-based compensation expense. At the end of the second quarter 2026, we had 156 total associates, compared to 171 a year earlier. Net loss for the second quarter 2026 was $3.2 million, or -$0.06 per diluted share, compared to a net loss of $3.6 million or -$0.07 per diluted share for the second quarter of 2025. Adjusted EBITDA, a non-GAAP measure, was -$0.7 million for the second quarter of 2026, compared to -$0.8 million for the second quarter of 2025. Now, cash flow and balance sheet highlights. Capital expenditures were $0.1 million in the second quarter of 2026, compared to $0.2 million in the second quarter of 2025.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Free cash outflow, a non-GAAP measure that we define as cash used in operating activities less purchases of property, plant, and equipment, was $0.6 million for the second quarter of 2026, compared to $2.3 million for the second quarter of 2025. This decrease compared to prior year was due to lower cash used in operating activities. Turning to the balance sheet, as of June 30th, 2026, we had $17.4 million in cash equivalents, and short-term investments, and $13.2 million in total borrowings. On to 2026 outlook. Based on the strength of our revenue in the first half of 2026 and our confidence about the second half of 2026, we are increasing our 2026 total revenue guidance to between $45 million and $47 million, up from $42 million to $44 million previously. At the midpoint, the supply implies approximately 14% revenue growth compared to 2025.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

As our underlying end markets continue to recover, we have seen improvement in orders for our custom products, in particular from life science tools and diagnostics customers, driven by our exposure to the liquid biopsy, spatial biology, and genetic sequencing markets, among others. However, biopharma revenue has been muted so far this year due to softness in orders from cell and gene therapy customers. While biotech funding has been strong for the last three quarters, as Stephen mentioned earlier, our experience is that there's an approximately four-quarter lag before that funding begins to flow through to revenue for Teknova. Nevertheless, revenue from our catalog products across all end markets grew in the low double-digits rate compared to the quarter a year ago.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Despite raising our revenue guidance for 2026, our outlook for 2027 remains unchanged, and we continue to target revenue in the range of the low $50 millions. As we have indicated before, due to the high percentage of fixed costs associated with our operations, we estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70%, with some variability quarter to quarter in reported results due to GAAP accounting. While gross margin improved in the second quarter of 2026 year-over-year, we remind investors that the second quarter 2025 included unusually favorable manufacturing efficiencies, making for a difficult comparison. We now expect gross margin to land in the mid-to-upper 30s percentage range for the full year 2026.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

The company posted operating expenses of $7.8 million in the second quarter of 2026, reflecting our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026. Our belief is that these investments will pay off as soon as the end of 2026, but more likely in 2027. We forecast that operating expenses will be at least $8 million per quarter through the end of 2026. Taking account of this spending level, we expect to become adjusted EBITDA positive in the range of $52 million-$57 million in annualized revenue. If our end markets are stronger in 2027 and our stepped-up commercial investments bear fruit as anticipated, then we should report a positive adjusted EBITDA quarter before the end of 2027.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

As I noted earlier, the company achieved a significant reduction in free cash outflow during the second quarter of 2026 compared to the same quarter in the prior year. Although we don't expect that figure to be as low in the next two quarters. We now anticipate free cash outflow of less than $8 million for the full year 2026, even with the increased investment in our commercial capabilities and potentially higher capital expenditures in the second half of 2026. With that, I will turn the call back to Stephen.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Thanks, Matt. Overall, we were very pleased with the second quarter 2026 and the progress we've made against our strategic priorities. We believe the 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'll conduct a question and answer session. As a reminder to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes to the line of Brendan Smith of TD Cowen. Your line is now open.

Brendan Smith
Brendan Smith
Analyst at TD Cowen

Great. Thanks for taking the questions, guys, and congrats on a strong quarter. Excuse me. I appreciate all the color on the growth drivers in particular here. I guess maybe first, can you speak a bit more to just whatever visibility you have on the order funnel in Q3 and Q4, especially in that biotech pharma CDMOs bucket. You spoke about that three to four quarter lag between funding and revenue, but just wondering fair to say this is maybe coming a bit early there, or just anything to note on the dynamics specifically in second half and what kind of growth assumptions underpin the new guidance there?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Great. Thanks, Brendan. Our funnel looks strong. It is not due to what we believe the biotech funding flowing through yet. We have not yet seen that happen. We have seen some nice growth in some of the large pharma CDMOs and just general biotech, but cell and gene therapy has been muted. We did have an order push out from Q2 to Q3. Outside of that, it is still pretty muted. We do expect to see this increase. We're getting some nice engagement from customers, and the funnel's filling really nicely. At this point in time, we're not factoring any of that into the back half. We're not factoring in the biotech funding roll through into the back half of the year.

Brendan Smith
Brendan Smith
Analyst at TD Cowen

Got it. Okay. Understood. Maybe just quickly on the Build-Tek launch. I guess, is this something you're able to monetize in the sense that customers pay to use it upfront as part of the order, or is the value then largely to your product team on consultation and time saving? Just wondering how we should think about potential impact there on either revenue or OpEx. Thanks.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah. I wouldn't expect that you'd see. First of all, we're not going to charge people to use it. This is about building our capability around custom manufacturing and enabling our customers to get those custom products faster. The configurator's really built upon training data for 30 years of manufacturing. How do we do it to get all the right specifications up front? The users are putting those in electronically. The formats are for us so we can quickly quote. As you heard me say, we're going to get to so that this quote is done online at some point in the future. It's very much about increasing the brand strength, but then bringing more of these customers into custom products with Teknova and enabling them to do that, than it is around charging for the use of the tool.

Brendan Smith
Brendan Smith
Analyst at TD Cowen

Got it. Understood. All right. Thanks, guys.

Operator

Thank you. One moment for our next question. Our next question comes to the line of Matt Larew of William Blair. Your line is now open.

Jacob Krambil
Jacob Krambil
Analyst at William Blair

Hi, this is Jacob Krambil on for Matt. Thanks for taking the questions. Stephen, you mentioned a lot of tailwinds, the customer therapy moving to commercialization next year, improving biotech funding, benefits from the commercial investments starting to flow through. Just as we think to 2027, is 20% growth still on the table for next year? I know, I think you mentioned low $50 million revenue expectation for next year, just kind of wondering how you're viewing your expectations next year and maybe what elements do you see needing to continue improving the most as you work towards that level of growth?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah. Thanks for the question, Jacob. That's right. We did highlight the 2027 target at the low $50 million, and that's because that is basically the level that we indicated when we had our initial guidance, and then the 20% growth on top of that. We've left that essentially unchanged from a dollar perspective, primarily because at this point, it's still middle of 2026, and we don't have visibility and enough time has passed to see that this biotech funding and the impact of our commercial investments, as you mentioned, as well as the customer moving into commercial, how those things will impact us in 2027. At this point, we're just being prudent about next year and setting that up.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

If these things that I just mentioned do come to fruition and we start seeing those impacting our results, then there could be upside from there. Right now, that's what we're seeing.

Jacob Krambil
Jacob Krambil
Analyst at William Blair

Okay. That makes sense. Then I wanted to touch on just inter-quarter demand trends. Obviously, very strong growth in the quarter, but kind of just wondering how things were trending month-over-month and kind of exiting the quarter in the third quarter. Understand that the back half, you guys are being pretty prudent, not embedding any of the improved biotech funding or anything like that, but sounds like cell and gene therapy had an order push out into the third quarter. I guess, what's your level of confidence of that coming in the third quarter? Is there any risk it could be pushed out? Is there maybe anything else kind of embedded in the back half guide that we should be aware of in terms of just the timing dynamic?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah. I'll just mention on that order, I mean, it's still a relatively small part of our revenue, the cell and gene therapy, I think we're 24% in 2025. When we talk in a quarterly perspective, that's a relatively small number. These are not $millions type of orders that slid, and it's not something that's going to slide. It's happened in Q3. There's no risk there whatsoever. From the guidance, maybe Matt you want to comment on how we thought through the back half.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Yeah. I'll just maybe make this more generally about 2026 guidance, Jacob. The midpoint of the range being at $46 million, the way we thought about that was essentially mirroring the revenue that we've seen here in

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

The first half of the year. Essentially all things being the same in the environment and what we're seeing in our business, that's all obviously based on what we're seeing from the orders book and funnel and things like that. With $23 million plus in the first half and now $23 million in the second half, we would expect it to play out as we have in the past couple of years, where Q3 is a stronger quarter than Q4. Q4 is seasonally light for us, typically because of the fewer business days in that year, and that's played out the last few years. That is how we're seeing the rest of the year. Now, again, if some of these things like the commercial investment or things in biotech funding do start to come into play, then that's something we'll revisit later.

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Right now, we're not seeing that yet.

Jacob Krambil
Jacob Krambil
Analyst at William Blair

I got it. Thank you, guys.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Matt [Hewitt] of Greyhound Capital Group. Your line is now open.

Matt Hewitt
Analyst at Greyhound Capital Group

Good afternoon. Congratulations on the strong quarter. Maybe first up, just a clarification. Did you say that it was low double-digit growth for all modalities, in the second quarter? Would that include cell and gene therapy?

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

No. The specific reference that I made to low double-digit growth was about our catalog business, Matt. That catalog business does encompass all the modalities, but it only represents 60% approximately of our business. That's the rough amount of catalog. There are some different nuances on the custom side, but overall, the catalog we're under, sorry, in the low double digits.

Matt Hewitt
Analyst at Greyhound Capital Group

Got it. All right. Thank you for that. I don't know if you have visibility into this, but as you look at the clinical progress, I think you noted you've got 70 trials for biotherapeutics as well as diagnostics. As you look at those, what kind of progression are you seeing from phase I to II and II to III? Are you seeing some nice ramp there as you look towards particularly the later stage, especially given some of the improvement that we've seen in funding?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, I would just say that the later stage customers that we're engaged with, we talk to regularly. They're planning these things out. This is happening. Assuming that they get approval. The activity there is very structured. We're going to need this by this time, and here's all the orders coming through. Those are sort of timed out over the next, say, six to 12 months, we have those conversations. The earlier stage ones, there's still progression there, and engagement. I don't think it's related to the biotech funding as much as that pre-clinical side is very much where we started. We would see some of the stuff perk up and with biotech funding, and that we have not seen much of just yet. We're seeing higher engagement.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

We're seeing when we do a quote, it's not about, "Okay, we just wanted to get the budget and then plan it." It's much more around, "Hey, we want to quote and we're going to order." That's a very positive sign for us, we have not seen the biotech funding roll into revenue yet.

Matt Hewitt
Analyst at Greyhound Capital Group

Understood. Maybe just to follow onto that, I don't know if you're able to disclose this, but how many phase III customers are you currently working with?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, I think we said at the end of 2025, we had five in phase II or phase III, some of these are the accelerated pathway, that's why they put them together.

Matt Hewitt
Analyst at Greyhound Capital Group

Got it. Thank you very much.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Mark Massaro of BTIG. Your line is now open.

Mark Massaro
Mark Massaro
Analyst at BTIG

Hey, guys. Thank you for taking the questions, congrats on the strong beat and raise. I wanted to start in the life science diagnostic tool space. Stephen, you called out a bunch of areas, notably liquid biopsy. I guess if you could you double-click in there? How much of this is from early detection or screening versus MRD or recurrence monitoring versus prenatal or rare disease or germline testing? I just wonder if you could just give us a flavor of where you're seeing the biggest signs of growth.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, I'll give you a flavor. I don't mean to go into all that detail, Mark, but the reality is we do sell to almost all of the companies that are doing some sort of form of liquid biopsy. The amount they buy from us does vary by customers, sometimes by the application, as you know, and then sometimes by what we provide for them. So for some of them, we provide reagents and buffers in bulk for DNA purification or next-gen sequencing library prep, where they hook those up to their robots and go. Others, we actually do the full outsourced GMP manufacturing, where we make the product with everything needed in it for sample preparation for sequencing. The latter, of course, is a larger account.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

The former is smaller, we're seeing growth across the board, and we do play in each one of those segments that you mentioned.

Mark Massaro
Mark Massaro
Analyst at BTIG

Okay, that's great. In the Lab Essentials business, you've talked about an increase in average revenue per customer. If you could try to rank order what you think is driving that, is it just expanding some of the clinical trials work? Maybe could you just double-click in there, please?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Sure. Lab Essentials, as you know, is our research use only product. This is all in the research use only side. Some of those are purchased for preclinical work, but a lot of that's also in the tool of diagnostic space where we're making products for discovery and for OEM. In this case, Matt mentioned that our catalog business grew low double digits. Overall revenue growth for Lab Essentials is 18%. What that tells you is that the custom side grew significantly more than that. The average revenue per customer is likely a lot more driven by the fact that these orders are larger and more of the business is based on the custom side.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

We are seeing that in a little bit of preclinical, but I would say much more on the tools side, where we're seeing some spatial and some of those liquid biopsy companies buy Research Use Only products because they run as LDTs and things like that.

Mark Massaro
Mark Massaro
Analyst at BTIG

Okay, fantastic. Last one for me. Just looking at your balance sheet, you guys have a little over $17 million of cash. I'm just curious if you continue to look at the potential for inorganic growth. If so, what are the types of things that you're looking for? I think in the past, you've talked about geographic distribution, or perhaps technology. Would be curious what your latest thinking is.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, I'll take that one, Mark. You're right about the cash there. As we've said for now for quite some time, we do believe that we have the liquidity between the cash and the access we have on our revolver to be able to fund the business to cash flow positive based on our organic strategy, everything that we've just been talking about here. We are looking at M&A opportunities with opportunities to expand, as you pointed out, both geographically and also potentially our product portfolio. There are a couple of areas that we've highlighted there, other complementary reagents, including those in the area of proteins, and some other related categories.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

That part of the strategy is obviously subject to a lot more whims of what's happening out there with individual companies and their expectations. We are active in looking and in evaluating these opportunities and I'm hopeful that we can find something that makes sense at the right price.

Mark Massaro
Mark Massaro
Analyst at BTIG

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes on the line of Matthew Parisi of KeyBanc Capital Markets. Your line is now open.

Matthew Parisi
Matthew Parisi
Analyst at KeyBanc Capital Markets

Yes. Congrats on the great quarter, thanks for the questions. This is Matt Parisi on for Paul Knight at KeyBanc Capital Markets. Last year, you saw an increase of 25% in your GMP customer count, I was wondering if you could provide any color on the GMP customer count in the first half of 2026.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, Matt provided a little bit in the script around the number, not the actual number, but whether or not we're seeing an increase or decrease in the number of customers. In this case, it was an increase. We continue to engage with these customers. We're obviously front-loading, some of them are small. That's why you see the average revenue per customer come down. We still see traction there. We're still onboarding some. Some have either gotten acquired or gone out of business. You have to go over that as a hurdle when we talk about year-over-year. Still feel good about that, I think what we're also very excited about is actually the progression of those customers' therapies through the clinical trials, right? Which is what we've really been building towards over time.

Matthew Parisi
Matthew Parisi
Analyst at KeyBanc Capital Markets

Appreciate the insight. Just one last one, around you guys signed the collaboration agreement with Pluristyx in the first quarter of 2025. I was wondering if there's been any update on that and if you still expect some revenue impact in the back half of 2026.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, Matt, this is a space where BioLife has been the preeminent player for a very long time, and they have a very strong position, particularly on the therapeutic side when they're commercial, right? We're not in that zone yet, let's put it that way, because it takes a long time to take a therapy from one side, from research all the way through. Right now, the strategy is get in early with these customers, have them try the product, and then migrate over the next five years. I wouldn't expect anything material significant as a growth driver in the near term.

Matthew Parisi
Matthew Parisi
Analyst at KeyBanc Capital Markets

Appreciate the color. Thanks again for the questions.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Mac Etoch of Stephens Inc. Your line is now open.

Analyst at Stephens

Hey, this is Hannah on for Mac Etoch. Congrats on the quarter. It's good to see. It looks like the only pockets of weakness that you guys are still calling out is on the cell and gene therapy side. Is that right? I think maybe there was some preclinical research pockets of weakness in Lab Essentials you called out last quarter. Have we kind of moved past that, or would there be anything else to call out there? On the CGT weakness, are there any differences in earlier stage customers versus late stage or any other nuances you would call out there?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Absolutely. Thanks, Hannah. As I said before, first of all, of all the end markets we serve, I think the cell and gene therapy was the only one that was not growing pretty significantly this quarter. Part of that was, excuse me, due to timing of that order. Another piece is just really in the early stages in the R&D side, discovery side, we're seeing some movement there as well. That has not come back for biotech funding. The second part of your question, around the stage, obviously these later stage therapies that we're talking about that are in that phase II or even phase I, phase II, phase III area, those continue to move forward, right? We expect that to be a revenue growth driver going forward.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Of course, we're loading the front end up as much as we can at the moment. Those right now are continuing to order. It's just more of a timing related thing than anything else.

Analyst at Stephens

Great. Thanks for the color. On the margin side, by our math, it looks like incremental margins might have trended a little bit lower than typical. I know you'd normally expect 70% contribution margins. Was there anything that impacted the quarter there or anything you would call out in terms of near term gross margin trends?

Matt Lowell
Matt Lowell
CFO at Alpha Teknova

Thanks, Hannah. I would just say, first of all, we did highlight some of this as a comparison issue, where last year in Q2, we had a very strong out of the ordinary gross margin for reasons due to manufacturing efficiencies. That is a part of it, is just the comparison. We actually saw quite nice improvements when you exclude that impact, basically. There is always going to be some fluctuation. I have to say, the 70% is not a strict formula, because there's lots of other things that happen in the income statement. There's going to be quarters where it could be 50 or 80 or whatever. I would say generally what happened is what we expected, and it's more of a comparison to the prior quarter, which I think is masking some of the real improvement there.

Analyst at Stephens

Great. Thanks. That's helpful. I'll leave it there.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Max Masucci of Roth Capital Partners. Your line is now open.

Max Masucci
Max Masucci
Analyst at Roth Capital Partners

Hey, good afternoon. Nice quarter, guys. Build-Tek, appreciate the detail in the release this morning. Just curious how the quote volume has trended since the June beta launch through early August here, understanding that you're not charging for Build-Tek, I would assume it could more quickly shift some customers from catalog to custom. Just curious if that could become a light growth tailwind into 2027.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, we're obviously very excited about Build-Tek. It's really fun. I encourage you all to go try it out. You can obviously say, "Hey, I want this particular formulation," then it'll ask you through which type of container and how to QC it, how soon you want it delivered, all the pieces that go into how we manufacture the product. You can also just say, "I want the most cited licensed buffer in the space in recent publications," then it will spit out some of the different options for you to pick from. In that example, we're really helping customers figure out what they need then getting it into our system quickly. I do think it'll be a tailwind. I think it's a big differentiator for us in the space.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

It's much better than trying to do these drop downs and build your product online like a lot of other historical configurators in the space. We're excited about that. We have seen some increase in usage, I think we were really excited when we put it out there, people were finding it, there are customers that had not been typically ordering custom products from us or not had much engagement. I think we're going to get a wider audience with something like this.

Max Masucci
Max Masucci
Analyst at Roth Capital Partners

Okay. You hired some field reps with existing relationships across tools, DX, pharma. Just curious how things are going there more broadly on the heels of your commercial investments. Are you expecting to see the benefit show up more in new account wins, funnel conversion or deal size?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah. We're very excited and executing really well. If you remember, there are two pieces. Obviously, you mentioned the field sales team. They're on board and they're executing. The other piece is around lead generation. That's also going really well. That's support from people, but also new tools for lead generation, includes some AI stuff that we've been using. Those are all generating improvements in the funnel, more meetings with the right customers. We targeted this investment towards sort of the biggest opportunities, but some of the more complex accounts that will take some time to play through. We'd expect to see that impact probably in the Q1 2027 timeframe. It looks like we're on track for those.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

We see the opportunities added to the funnel when those would close. It's probably around that time when we'd start to see the benefit of that.

Max Masucci
Max Masucci
Analyst at Roth Capital Partners

That's great. Thanks.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Christopher Hillary of Roubaix Capital. Your line is now open.

Christopher Hillary
Analyst at Roubaix Capital

Hi. Good evening.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Hey, Chris.

Christopher Hillary
Analyst at Roubaix Capital

A lot of great questions already asked, I'll just ask a different one. Can you just remind us where you are with your utilization in your key facilities and how you think about that as you move through this year and into next year?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Yeah, thanks, Chris. From a capacity utilization, I think, well, I know we have a lot of room still to go. We use revenue as an estimate of capacity, right? We'd say $200 million in revenue. Just to put it in perspective, we're operating between four and five days on one shift right now. Obviously we can add multiple shifts, we can go weekends, but even in sort of some of these facilities, we're not at full utilization, even in those shifts, where adding just a handful more people, we could ramp up work orders significantly. You combine that with some of the efficiencies that we're doing from our lean manufacturing and everything else. I think we're well within the 200, and are excited that we don't have to do another facility build or anything like that.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

At this point in time, the projects for manufacturing are a lot more around driving efficiency, how do we get more work orders with the same number of people, but also new capabilities around either automation or new vessel types and things like that can enable us to go after different opportunities that we're finding in the market. I feel very good right now, and we're ways away from needing to do another capital expenditure in that area.

Christopher Hillary
Analyst at Roubaix Capital

Okay, great. Thank you.

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

Major capital expenditure in that area.

Christopher Hillary
Analyst at Roubaix Capital

Following up on an earlier question of sorts, with the commercial investments, the sales force investments you made this year, with the progress you're seeing, does it start to inform you about how you might think about that for next year?

Stephen Gunstream
Stephen Gunstream
President and CEO at Alpha Teknova

We'll be looking, probably early Q4, late Q3 to see that, does it make sense to make additional investments, right? What's the ROI on what we've made? These things take a little bit of time to play out, so we always want to make sure we don't get too far ahead of our skis or if we don't need it yet. Obviously, if we think we can drive additional growth with more investment, we will weigh that and make that decision. At this point in time, we have yet to see the first $2 million investment roll through, in terms of ROI, and we're seeing some really nice growth as is. We're excited about where it's at. Certainly this is one of those things we evaluate quite a bit and look for the next big moment will probably be at the end of Q3.

Christopher Hillary
Analyst at Roubaix Capital

Great. Thank you.

Operator

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

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