Company Background
Company Overview
Alpha Teknova, Inc. (TKNO) is a leading provider of critical reagents that enable the discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics. With a rich history spanning over two decades, the company has established itself as a trusted partner to a diverse array of customers, including pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostics franchises, and academic and government research institutions.
Founded in 1996, Teknova has evolved into a versatile and innovative organization, offering a comprehensive portfolio of products that cater to the ever-evolving needs of the life sciences industry. The company started by manufacturing and delivering high-quality, custom, made-to-order products with short turnaround times and at scale, across all stages of its customers' product development, from early research through commercialization.
Product Portfolio
Teknova's product offerings include two primary product categories: Lab Essentials and Clinical Solutions. The Lab Essentials category includes pre-poured media plates for cell growth and cloning, which are used by customers for various applications in the life sciences market. The Clinical Solutions category encompasses liquid cell culture media and supplements for cellular expansion, as well as molecular biology reagents for sample manipulation, resuspension, and purification.
These products support customers across the entire continuum of the life sciences market, from early research through commercialization. Teknova's commitment to quality and reliability has earned it ISO certification, ensuring its solutions meet the stringent requirements of diagnostic and therapeutic applications.
Recent Developments
In 2021, Teknova reached a significant milestone by completing its initial public offering, which raised net proceeds of $99.1 million. This influx of capital allowed the company to fund various growth initiatives, including the completion of a new state-of-the-art manufacturing facility in Hollister, California in 2022. This expansion enabled Teknova to increase its production capacity and improve operational efficiencies, positioning the company for future growth.
Financial Performance
Financials
Historical Performance
Teknova's financial performance has been marked by both challenges and successes in recent years. In 2023, the company reported revenue of $36.68 million, a decline from the previous year, largely due to the impact of the COVID-19 pandemic and the broader economic uncertainty that followed. The challenging biotech funding environment also contributed to the company's difficulties. Net income for 2023 was -$36.78 million, with operating cash flow (OCF) of -$18.81 million and free cash flow (FCF) of -$26.75 million.
In response to these headwinds, Teknova undertook two strategic workforce reductions in 2023 to align its costs with near-term revenue expectations and create operational and management-level efficiencies. While these reductions resulted in the loss of some institutional knowledge and expertise, the company has worked to navigate these challenges and maintain its focus on long-term growth.
Recent Performance
In the first half of 2024, Teknova delivered solid financial results, reporting revenue of $18.9 million, a 8.4% decrease compared to the same period in 2023. However, when excluding revenue from a large one-time order in the second quarter of 2023, the company's revenue actually increased by 5% year-over-year. This performance was driven by continued growth in the company's Lab Essentials product category, which accounts for approximately 70% of total revenue, as well as new customer acquisitions in the Clinical Solutions segment.
For the second quarter of 2024, Teknova reported revenue of $9.61 million, a decrease of 16.6% compared to the same period in 2023. However, excluding the large Clinical Solutions order from Q2 2023, total revenue was up 9% year-over-year. The company reported a net loss of $5.36 million for Q2 2024, with operating cash flow of -$2.86 million and free cash flow of -$2.98 million.
Teknova primarily sells in the United States, with 95.7% of revenue coming from the US in 2023 and 96.0% in Q2 2024. International sales accounted for the remaining 4.3% in 2023 and 4.0% in Q2 2024.
Liquidity
As of June 30, 2024, Teknova had $18.60 million in cash and cash equivalents and $27.90 million in working capital. The company's debt-to-equity ratio stood at 0.19, with $12.13 million in outstanding debt under its Term Loan. Teknova also has access to a $5 million revolving credit facility as part of its Amended Credit Agreement with MidCap Financial Trust.
The company's current ratio was 4.76, and its quick ratio was 3.28 as of June 30, 2024, indicating a strong short-term liquidity position. These ratios suggest that Teknova has sufficient resources to meet its short-term obligations and fund its ongoing operations.
Strategic Initiatives
New Offerings
To further strengthen its market position, Teknova has recently launched two new offerings – Express-Tek, an expedited manufacturing and delivery service, and RUO+, a manufacturing grade that bridges the gap between research-use-only and GMP-certified products. These innovative solutions are designed to address key customer pain points and unlock new revenue streams for the company.
Market Trends
Looking ahead, Teknova remains cautiously optimistic about the long-term prospects of its end markets. The company's management team has cited positive signs of stabilization in the biotech funding environment, which they believe could translate to increased customer demand in the coming years. To capitalize on these trends, Teknova is focused on expanding its customer base, particularly in the high-growth cell and gene therapy market segment, where it has seen a steady increase in the number of active customers over the past year.
Teknova has historically achieved average annual revenue growth of approximately 13% from 2019 to 2023, excluding the impact of a large order in 2023. The company believes it can maintain this growth rate over the next few years, with potential upside as its growing number of Clinical Solutions customers move through later clinical trial phases and into commercialization.
Financial Guidance
For the full year 2024, Teknova has reiterated its revenue guidance of $35 million to $38 million, which implies a return to double-digit growth in the second half of the year compared to the same period in 2023. The company expects approximately 5% growth in Lab Essentials revenue for 2024, with the remainder of the revenue growth coming from Clinical Solutions.
Teknova continues to expect a free cash outflow of less than $18 million for the full year 2024. The company's management is also closely monitoring its operating expenses and has implemented various cost-saving measures to enhance profitability, with the goal of achieving adjusted EBITDA breakeven at $50-$55 million in annualized revenue, and becoming cash flow positive shortly thereafter.
Future Outlook
Despite the challenges faced by the broader biotech industry in recent years, Teknova has demonstrated resilience and the ability to adapt to changing market conditions. The company's commitment to innovation, quality, and customer service has positioned it as a valuable partner to its diverse customer base of over 2,500 active customers spanning the life sciences market.
Teknova's strategic focus on expanding its product portfolio, improving operational efficiencies, and capitalizing on growth opportunities in high-potential market segments such as cell and gene therapy positions the company well for future success. The company's ability to manufacture and deliver high-quality, custom products with short turnaround times and at scale gives it a competitive edge in serving the evolving needs of its customers across all stages of product development.
As Teknova continues to navigate the evolving landscape, investors will be closely watching the company's ability to capitalize on new opportunities, drive sustainable growth, and deliver long-term shareholder value. The company's guidance for 2024 and its long-term growth expectations provide a roadmap for potential future performance, but execution and market conditions will ultimately determine Teknova's success in achieving its financial and strategic objectives.