Rapid Micro’s Earnings Call: Merck Contribution and Procurement Timelines Don’t Match

<<>>

Date of Call: Aug 7, 2026

Financials Results

• Revenue: $8.1M, up 11% YOY
• EPS: Net loss per share of 27 cents, consistent with prior year
• Gross Margin: 15%, compared to 4% in the prior year period

Guidance:

• Full-year 2026 revenue guidance reaffirmed at $37 to $41 million, assuming 30 to 38 system placements.
• Q3 revenue expected to be at least $9.5 million, including at least seven system placements.
• Full-year 2026 gross margin expected to be approximately 20%.
• Q3 gross margin expected to be at least 20%, with Q4 in the mid to high 20% range and sequential expansion.
• Full-year validation guidance increased to at least 27 systems.
• Operating expenses expected to be between $51 and $53 million for the full year.
• Expect significantly lower cash usage in the second half of 2026.

Business Commentary:

Revenue Growth and System Placements:

• Rapid Micro Biosystems reported second quarter total revenue of $8.1 million, representing an 11% year-over-year growth and exceeding their guidance.
• The company placed four growth direct systems and completed nine system validations, marking a significant milestone with the placement of their 200th growth direct system.
• This growth was driven by increased product revenue, particularly a 20% rise in consumables, and strong customer engagement and adoption of the Growth Direct platform.

Margin Expansion:

• The company delivered a record 15% gross margin in the second quarter, reflecting a significant improvement from 4% in the same period last year.
• Product margins improved by 8 percentage points, and consumable margins improved by 17 percentage points year-over-year.
• These improvements were attributed to strong execution against margin expansion strategies, including manufacturing efficiencies and service productivity improvements.

Validation Activity and Recurring Revenue:

• Rapid Micro Biosystems completed nine validations in the second quarter compared to two in the prior year period, with recurring revenue increasing 14% to $5 million.
• The increase in validation activity provided greater visibility into future consumable revenue growth, strengthening the recurring revenue profile.
• The growing validation pipeline and strong system utilization were key drivers of this trend.

Customer Engagement and Market Trends:

• Customer discussions increasingly focused on integrating the Growth Direct platform into broader automation and digital strategies, reflecting an emphasis on improving speed, consistency, and data integrity.
• There was notable activity related to U.S. reshoring and biomanufacturing capacity expansion, expected to contribute to growth beginning in 2027.
• The company's collaboration with Millipore Sigma is expanding, with plans for further strategic initiatives to enhance commercial reach and leverage technical expertise.

Outlook and Strategic Initiatives:

• The company reaffirmed its full-year 2026 revenue guidance of $37 to $41 million, with expectations for continued revenue and system placement growth.
• Rapid Micro Biosystems aims for average annual revenue growth of greater than 20% over the next several years, driven by multiple growth factors, including existing customer expansion and collaboration with Millipore Sigma.
• A focused efficiency program is expected to reduce expenses and cash usage, further supporting the company's path to positive cash flow.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in growth and margin expansion, citing 'strong execution,' 'record 15% gross margin,' 'increasing our full-year validation guidance,' and stating 'the fundamentals of our business are stronger today than at any other point in our history.' They also noted 'highly encouraged by the value proposition' and 'encouraging activity related to U.S. reshoring and biomanufacturing capacity expansion.'

Q&A:

• Question from Thomas Flatton (Lake Street Capital Markets): You mentioned positive commentary from Merck Millipore Sigma meetings and their expected increased contribution in the second half, but you did not raise the bottom of the guidance range. Can you explain this discrepancy?
  Response: The low end of the guidance did not include the full allocation of Merck Millipore Sigma's commitment for the year, but their contribution is expected to increase meaningfully in the second half, providing confidence in the reaffirmed guidance.

• Question from Thomas Flatton (Lake Street Capital Markets): Can you characterize the placements made and projected for the second half in terms of new versus existing customers and depth versus breadth?
  Response: The majority of placements come from the existing customer base, but new customers also contribute each period. The funnel is building with good geographic representation and includes potential new customers with multi-system deals.

• Question from Dan Arias (Stiefel): Can you discuss consumables growth expectations for the back half of the year?
  Response: Consumables revenue is expected to be relatively flat sequentially from Q2 to Q3 and then increase in Q4. Growth is supported by new customers coming online and existing customers increasing system utilization.

• Question from Dan Arias (Stiefel): What are the key drivers needed to hit the gross margin trajectory for 2026, and can gross margins be up next year from the 2026 exit rate?
  Response: Key drivers include material cost reductions, manufacturing and service productivity improvements, and operating leverage from higher volumes. Yes, 2027 gross margin is expected to be higher than the exit rate for 2026.

• Question from Brendan Smith (TD Cowan): Can you discuss the customer breakdown for placements this year and any trends in biotech, pharma, CDMOs, and potential multi-system orders?
  Response: Placements are biased towards existing customers but include new ones. A new trend is emerging with CDMOs showing significant interest in fully automated integrated systems, which may drive demand in the second half and into 2027.

• Question from Brendan Smith (TD Cowan): Can you provide more granularity on U.S. reshoring dynamics, including timing and impact on ordering or revenue recognition?
  Response: Reshoring is expected to benefit the company starting in 2027, likely mid to late 2027, with potential acceleration in 2028-2029. Conversations with customers indicate it is a real trend, but the exact timing and pace are uncertain.

• Question from Anna Snopkowski (KeyBank): What is the visibility into back-half gross margin, and are any Millipore Sigma procurement initiatives already contributing?
  Response: Key drivers for second-half gross margin are material cost reductions and volume-driven service revenue. Millipore Sigma procurement initiatives are ongoing but are not expected to be significant contributors in 2026; their impact is more likely in 2027.

• Question from Anna Snopkowski (KeyBank): What are you seeing in the CAR-T market, and what is your involvement in cell and gene therapy?
  Response: The CAR-T market is healthy, and the majority of CAR-T manufacturers use the Growth Direct system, which is a strong fit due to its speed, automation, and accuracy. This market contributes to the company's consumable performance and growth.

Contradiction Point 1

Merck Millipore Sigma's Annual Contribution Allocation in 2026

Guidance low-end assumption vs. expected second-half acceleration.

Thomas Flatton (Lake Street Capital Markets) - Thomas Flatton (Lake Street Capital Markets)

2026Q2: The low end of the company's guidance did **not** include the full allocation of Merck's annual commitment. Merck is expected to contribute **meaningfully more** in the second half, but they likely will **not fulfill their full obligation in 2026**. - [Rob Spignessi](CEO)

Why wasn't the guidance raised despite positive feedback from Merck Millipore Sigma meetings and expected increased H2 contributions? - Thomas Flaten (Lake Street Capital Markets)

2026Q2: The low end of the full-year guidance did not include the full allocation of the Merck commitment. The company expects Merck to meaningfully increase its contribution in the second half of 2026, though it may not fulfill its full annual obligation. - [Rob Spignesi](CEO)

Contradiction Point 2

Millipore Sigma Procurement/Sourcing Initiatives' Contribution Timeline

Contradictory statements on when new sourcing initiatives will materially contribute.

Brendan Smith (TD Cowan) - Brendan Smith (TD Cowan)

2026Q2: While actively discussing procurement with Millipore Sigma, **meaningful contributions are not expected in 2026**. The integration and validation of new materials take time, so these initiatives are more likely to impact **2027** and beyond. - [Sean Wurchis](CFO)

Can you provide more granularity on U.S. reshoring dynamics, including the expected timing and impact on ordering and revenue recognition? - Anna Snopkowski (KeyBank, for Paul Knight)

2026Q2: The company is **aware of its impact** as some customers are contacting them to **get ahead of potential placements**. The company expects to **benefit starting in 2027**, likely **mid-to-late 2027**, with potential acceleration in 2028/2029. - [Rob Spignessi](CEO)

Contradiction Point 3

Millipore Sigma Collaboration Contribution Timing

Contradiction on when significant revenue contributions from the Merck Millipore Sigma partnership will materialize.

Thomas Flatton (Lake Street Capital Markets) - Thomas Flatton (Lake Street Capital Markets)

2026Q2: Merck is expected to contribute **meaningfully more** in the second half, but they likely will **not fulfill their full obligation in 2026**. - [Rob Spignessi](CEO)

Why hasn't the guidance's bottom end been raised despite positive Merck Millipore Sigma feedback and expected H2 contribution increase? - Brendan Smith (TD Cowan)

2026Q1: The company is aware of its impact as some customers are contacting them to **get ahead of potential placements**. The company expects to **benefit starting in 2027**... - [Rob Spignessi](CEO)

Contradiction Point 4

Gross Margin Trajectory for Consumables

Contradiction on the expected timing for consumable margins to turn positive.

Dan Arias (Stiefel) - Dan Arias (Stiefel)

2026Q2: A new technology has been implemented to improve **OEE (Overall Equipment Effectiveness)** on the consumables line, enhancing efficiency. - [Sean Wurchis](CFO) & [Rob Spignessi](CEO)

What key actions are needed to achieve this year's gross margin trajectory, and what are the upside scenarios for next year's gross margins? - Brendan Smith (TD Cowen)

2026Q1: Consumable margins are expected to turn positive in the second half of 2026, driven by volume, supplier pricing reductions, and operating leverage. - [Sean Wirtjes](CFO) & [Rob Spignesi](CEO)

Contradiction Point 5

Customer Placement Strategy

Contradiction on the primary focus for new system placements.

Thomas Flatton (Lake Street Capital Markets) - Thomas Flatton (Lake Street Capital Markets)

2026Q2: **New customers also contribute each period**. The Millipore Sigma collaboration is opening new geographies and customer segments. - [Rob Spignessi](CEO) & [Sean Wurchis](CFO)

How would you characterize year-to-date and second-half projections in terms of breadth vs. depth (new customers vs. existing customer expansions)? - Dan Arias (Stifel)

2026Q1: The guidance range... is based on a solid funnel and collaboration with MilliporeSigma. While a part of the range is supported by **existing opportunities**, there is room for movement... - [Rob Spignesi](CEO) & [Sean Wirtjes](CFO)

<<>>