Alpha Teknova’s Earnings Call: Growth Amid Challenges

Alpha Teknova, Inc. ((TKNO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Alpha Teknova, Inc.’s recent earnings call conveyed a mixed sentiment, reflecting both promising growth and notable challenges. The company reported significant growth in its clinical customer base and key segments like custom biopharma, alongside improvements in operational efficiency and cash flow. However, these positive developments were tempered by flat overall revenue growth, a decline in gross margins, and market-specific hurdles that impacted the company’s outlook.

Clinical Customer Growth

In 2024, Alpha Teknova experienced a substantial increase in its clinical customer base, supporting 48 clinical customers compared to 34 at the end of 2023. This 41% annual increase underscores the company’s successful efforts in expanding its reach within the clinical sector.

Revenue Growth in Key Segments

Alpha Teknova reported impressive revenue growth in its key segments, with sales to cell and gene therapy-related customers growing by 27% in 2024. The custom biopharma segment also saw a significant increase, growing about 40% compared to 2023, highlighting the company’s strength in these areas.

Operational Efficiency

The company made strides in improving operational efficiency, reducing operating expenses by $8.1 million in 2024 compared to 2023, excluding nonrecurring charges. This reduction reflects Alpha Teknova’s commitment to streamlining its operations and enhancing profitability.

Improved Cash Outflow

Alpha Teknova reported a total cash outflow of $13.5 million, which was better than the initial guidance of $18 million and a significant improvement from $26.7 million in 2023. This improvement demonstrates the company’s effective financial management.

New Product Launches

In 2024, Alpha Teknova launched three new offerings: Build Tech, Express Tech, and RUO Plus. These new products are expected to enhance the company’s portfolio and drive future growth.

Flat Revenue Growth

Despite the positive developments, Alpha Teknova’s total revenue for the full year 2024 was $37.7 million, marking only a 3% increase from $36.7 million in 2023. This flat growth highlights the challenges the company faces in scaling its overall revenue.

Gross Margin Decline

The company’s gross margin for the full year of 2024 was 19.2%, down from 28.1% in 2023. Excluding a $2.8 million charge, the gross margin would have been 26.5%, indicating a decline that the company needs to address.

Revenue Per Customer Decrease

Average revenue per customer in 2024 decreased by 25% to $148,000 for clinical solutions customers. This decline suggests potential challenges in maximizing customer value.

Market Challenges

The custom reagents in life science tools and diagnostic segments faced a challenging year, with reduced orders from larger life science tools companies. This market-specific hurdle has impacted the company’s performance in these segments.

Forward-Looking Guidance

Looking ahead, Alpha Teknova provided a positive outlook for 2025, projecting total revenue growth of 7% at the midpoint, with expectations ranging from $39 million to $42 million. The company anticipates mid-single-digit growth in its catalog business and life science tools and diagnostic segments, while custom products sold to biopharma accounts are expected to grow by at least 15%. Alpha Teknova aims to improve its gross margins to the high twenties percentage range and expects free cash outflow for 2025 to be less than $12 million. The firm plans to expand its product portfolio through collaborations and acquisitions, further strengthening its strategic positioning.

In conclusion, Alpha Teknova, Inc.’s earnings call presented a mixed picture, with significant growth in clinical customers and key segments, alongside improvements in operational efficiency and cash flow. However, challenges such as flat revenue growth, declining gross margins, and market-specific hurdles remain. The company’s forward-looking guidance suggests optimism for 2025, with expectations of revenue growth and strategic expansions, indicating a promising path forward.