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Transcript Summary

Alpha Teknova’s Q1 2026 results showed a 13% year-over-year revenue increase to $11.1 million, driven by an 85% surge in the Clinical Solutions segment. The company is benefiting from a stabilizing macro environment where biopharma and diagnostic customers are transitioning from cash conservation to project execution, evidenced by an uptick in orders over $25,000. To sustain this momentum, Teknova is investing an additional $2 million annually in sales and marketing, targeting 20% revenue growth by 2027. Operational efficiency remains a priority, with the company implementing automated filling lines and transitioning to digital batch records to drive future margins. While the company reported a net loss of $4.6 million, gross margins improved to 34.2% due to increased volume. Management maintained its 2026 revenue guidance of $42 million to $44 million, awaiting further evidence of market durability. With $17.8 million in cash, the company anticipates lower quarterly cash outflows for the remainder of the year. Teknova currently supports 70 clinical therapies and expects to reach adjusted EBITDA break-even as these projects scale toward commercial production in 2027, supported by a recovering biotech funding environment.

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Alpha Teknova, Inc.: Metadata-only filing prevents substantive forensic analysis

Full Earnings Call Transcript — Q1 • 2026-05-06

Operator: Hello, and welcome to Alpha Teknova, Inc. first quarter 2026 financial results. 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. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to hand the conference over to Jennifer Henry. You may begin.
Jennifer Henry: Thank you, operator. Welcome to Alpha Teknova, Inc.'s first quarter 2026 earnings conference call. With me on today's call are Stephen Gunstream, Alpha Teknova, Inc.'s President and Chief Executive Officer, and Matthew C. Lowell, Alpha Teknova, Inc.'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. 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 for 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 Alpha Teknova, Inc.'s website and at 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. 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 Alpha Teknova, Inc.'s website and on today's webcast. And now I will turn the call over to Stephen.
Stephen Gunstream: Thank you, Jennifer. Good afternoon, and thank you, everyone, for joining us for our first quarter 2026 earnings call. It was a relatively straightforward quarter for us across the board, with revenue and operating expenses delivering in line with or better than our expectations. Revenue grew 13% compared to the same period last year, led by 85% growth in Clinical Solutions. Gross margin, operating expenses, and free cash outflow were in line with our expectations, including the planned incremental spend in sales and marketing. From a macro environment perspective, we continue to see stabilization across our end markets, and as we learn more about how our customers are planning for late-stage clinical trials and commercial production, we are growing increasingly confident in our ability to deliver long-term, sustainable, above-market growth. Building on that, I would like to provide a little more detail around our thoughts on the current macro environment. In the first quarter, we saw an increase in the number and total dollar value of orders over $25 thousand compared to the same period last year, which we believe indicates that some of our customers are shifting their focus from cash conservation to strategic execution. While there are still accounts focused on conserving capital, we believe this headwind has now been offset by an increase in customers placing orders to move their research and clinical studies forward. Notably, we are seeing growth in nearly every end market segment we serve, including life science tools, diagnostics, and biopharma. Moreover, some of our leading indicators, such as customer engagement and funnel health, provide us more confidence in a predictable market backdrop going forward. We are therefore encouraged that we began ramping our commercial investment at the beginning of 2026. As a reminder, the roughly $2 million annual increase in commercial spend is split between marketing and sales to increase lead generation activities, build lead qualification infrastructure, and onboard sales associates with experience in tools, diagnostics, and large pharma. I am happy to say that these initiatives are on track and that we should be able to see their impact on revenue by early 2027. We believe these investments, combined with the rebound in biotech funding and the progression of our customers' therapies and diagnostics towards commercialization, should position us for approximately 20% revenue growth in 2027. Operationally, we continue to focus on driving throughput, process improvements, automation, and software implementation. In the first quarter, we increased our high-volume bottle production by tripling our single-batch size and implementing an automated aseptic filling line. This project allows us to not only scale production volumes but also to reduce labor hours per unit. From a software perspective, we have now migrated 90 of our 3 thousand-plus paper batch records to digital, providing enhanced data analytics, increased visibility, better documentation quality, and improved standardization. We are fortunate to have dedicated engineering and software development teams on staff to lead these initiatives as we look to scale and achieve profitability. In the meantime, we remain focused on executing our plan by driving growth in Lab Essentials customer wallet share and increasing our active Clinical Solutions customer count. We are excited about the traction we are seeing so far in 2026 and believe the substantial investments we have made over the past three years have positioned the company to scale and generate significant value for our customers and stockholders alike. I will now hand the call over to Matthew to talk through the financials.
Matthew C. Lowell: Thanks, Stephen. Good afternoon, everyone. As Stephen explained, revenue was up 13% for the first quarter of 2026 compared to the same quarter in the prior year. This was also the first Q1 in which we earned over $11 million in revenue in nearly three years. I am also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered strong financial results for the first quarter of 2026. For revenue, Lab Essentials products are targeted at the research use only, or RUO, market and include both catalog and custom products. Lab Essentials revenue was $8.4 million in the first quarter of 2026, up 3% compared to $8.1 million in 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer, partially offset by a decreased number of customers. Clinical Solutions products are made according to Good Manufacturing Practices, or GMP, quality standards, and are primarily used by our customers as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $2.1 million for the first quarter of 2026, an 85% increase from $1.2 million in the first quarter of 2025. The increase in Clinical Solutions revenue was attributable to an increased number of customers and, to a slightly lesser extent, higher average revenue per customer. We expect revenue per customer to increase over time when a subset of these customers ramp up their purchase volume as they move through the clinical phases. However, this metric can be affected by the addition of newer Clinical Solutions or GMP catalog customers, who typically order less. 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. Onto the income statement. Gross profit for the first quarter of 2026 was $3.8 million, compared to $3.0 million in the first quarter of 2025. Gross margin was 34.2% in the first quarter of 2026, up from 30.7% in the first quarter of 2025. The increase in gross profit was driven primarily by higher revenue. Operating expenses for the first quarter of 2026 were $8.1 million, and for the first quarter of 2025 were $8.0 million. The increase in 2026 was primarily driven by higher spending in sales and marketing resulting from higher headcount and increased marketing expenses, partially offset by lower general and administrative expenses attributable to lower stock-based compensation expense and professional fees. Net loss for the first quarter of 2026 was $4.6 million, or negative $0.08 per diluted share, compared to a net loss of $4.6 million, or negative $0.09 per diluted share, for 2025. Adjusted EBITDA, a non-GAAP measure, was negative $2.0 million for 2026, compared to negative $2.5 million for 2025. Capital expenditures for the first quarter of 2026 and 2025 were both $200 thousand. Free cash outflow, a non-GAAP measure which we define as cash provided by or used in operating activities, less purchases of property, plant, and equipment, was $3.6 million for the first quarter of 2026, compared to $4.3 million for 2025. This decrease compared to the prior year was due to lower cash used in operating activities. Turning to the balance sheet. As of 03/31/2026, we had $17.8 million in cash, cash equivalents, and short-term investments, and $13.2 million in total borrowings. 2026 outlook. Turning to our 2026 guidance and outlook, we are reiterating our 2026 total revenue guidance of $42 million to $44 million. At the midpoint, this implies approximately 6% revenue growth compared to 2025. As our underlying end markets continue to recover, we have seen improvement in orders of custom products from both biopharma and life science tools and diagnostics customers. Customer conversations about future 2026 custom product orders continue to be encouraging, and we have started to see more large orders, those greater than $25 thousand, but are waiting to see more durability before we consider changing our guidance for the year. 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. We continue to expect gross margin in the mid-30s percentage range for the full year 2026. The company posted operating expenses of $8.1 million in Q1 2026, which reflects our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026. Our expectation is that these investments will pay off as soon as the end of 2026, but more likely in 2027, in the form of double-digit revenue growth rates. At this higher spending level, we expect to become adjusted EBITDA positive in the range of $52 million to $57 million in annualized revenue. As customer end markets are stronger in 2027 and our stepped-up commercial activity bears fruit as expected, we should report a positive adjusted EBITDA quarter by 2027. The company continues to see a reduction in free cash outflow during the first quarter of 2026 compared to the same quarter in the prior year. While the company saw an increase in free cash outflow compared to Q4 2025, 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 outflow for the remainder of the year. As such, the company continues to expect free cash outflow of less than $10 million for the full year 2026, even with the increased investment in our commercial capabilities. With that, I will turn the call back to Stephen.
Stephen Gunstream: Thanks, Matthew. Overall, we were very pleased with the start to 2026 and the progress we have 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 open the call for questions.
Operator: Thank you. Please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile. Our first question comes from the line of Mackie Tau with Stephens. Your line is open.
Mackie Tau: Hey. Good afternoon, and thank you for taking my questions. Great to hear about the updated macro outlook. I have heard some of your peers talk about maybe a little bit of bifurcation between earlier-stage biotech and later-stage biotech. I would love to get your sense of what you are hearing at this point from these individual customers and whether you are seeing a similar trend in your customer base. Thank you.
Stephen Gunstream: Yeah, thanks, Ben. In some ways, yes, we are seeing some similarities. We had some nice large pharma growth in the quarter, but on the clinical side of our business, we did still see some of these earlier-stage phase one, phase two place some nice orders with us. A lot of that probably has to do with the work we have been doing with them for some time. In the very early stage, on the research in the Lab Essentials, there is a little softness there, but we have not seen it as much. It could just be some of the accounts that we are supporting today, but we are starting to get more customer engagement from these smaller biotechs, and it is looking pretty encouraging right now.
Mackie Tau: As we think about your different end markets, it sounds like all of them are coming back together as one. Are there any that are leading the pack more so than others?
Stephen Gunstream: Yeah. Like I just mentioned, we had some nice growth in large pharma in the quarter. We did get some nice growth on the diagnostic side as well and the tools and diagnostics, but particularly on the biotech side we had some nice orders come in there. We are seeing some growth there. I think, like I said, the biopharma as a whole is a little bit slower, but you are starting to see some growth there. There are certainly pockets where we expect that to increase throughout the year.
Mackie Tau: I appreciate the color. Thank you.
Operator: Our next question comes from the line of Brendan Smith with TD Cowen. Your line is open.
Brendan Smith: Great. Thanks for taking the questions, and congrats on the quarter. Following up on the commentary regarding customers advancing through clinical development, do you have a sense, even broad strokes, what percent of customers are in that preclinical/phase one bucket versus those in phase three or approaching commercial? I am wondering how that funnel is looking at this point, especially if the funding environment continues to improve.
Stephen Gunstream: Yeah, Brendan. It is not that different than what we put out in our slides for the 2025 full year. We are supporting approximately 70 therapies. There are five therapies in phase two or phase three that are nearing completion at the moment, and then 12 in phase one, and then the rest are preclinical. We would expect those numbers to increase as we go throughout this year. That is our strategy as you onboard more of these clinical customers, and certainly if biotech funding comes back, we would expect that to continue, and we have done that really since we started targeting these clinical customers back in 2020.
Brendan Smith: Got it. And as a quick follow-up, we have started to see some increases in wet lab spending activity as a result of customers rolling out AI capabilities and needing to validate models and new targets. It feels early, but do you have any sense of this materializing in your customers' ordering patterns, and is there any reason why that would not be a notable tailwind for Alpha Teknova, Inc. over the coming quarters?
Stephen Gunstream: Yeah. I think these AI data generation programs are significant, and it is lots of reagents. They are generating significant amounts of data. We are supporting many of the customers that are supporting the end users here to generate that data, or directly. So the standard products we offer in our catalog, products like LB broth for bacteria, or the buffers and things to purify proteins, I would expect that to be a tailwind for us. There are customers we are supporting that we are seeing pick up their spend with us for those reasons, but it is not yet significant or material.
Operator: Thank you. Our next question comes from the line of Matthew Richard Larew with William Blair. Your line is open.
Matthew Richard Larew: Nice upside in the quarter relative to the Street, but the guide was maintained. You referenced wanting to see more durability before changing the guide. It seems like more companies than normal have called out benefit from more days in the quarter that reverses later in the year. Was there any timing impact like that or any orders that got pulled forward into the print, or is it just an effort to be conservative given the broader macro picture?
Matthew C. Lowell: Good question, Matt. We do have some of this phenomenon where we have business days impacts, particularly in the catalog portion of our business, which is about 60% of the total business. I would say that was not really a factor for Q1. It will be and usually is for Q4. We saw pretty typical ordering and delivery behavior in Q1, so I do not think that really impacted the quarter. As you noted, and I did as well, there is still macro uncertainty, and while we are off to a good start here, we are certainly optimistic, but not ready to increase our guidance range at this time. It is definitely something that we are evaluating each quarter, and it is encouraging to have this great start.
Matthew Richard Larew: You brought up 2027 in your remarks and being in position for 20% revenue growth. If I look at TTM revenue, it has improved over a year ago, particularly on the Clinical Solutions side, and Lab Essentials has stabilized at least in the mid-single digits. From where we are today, what elements do you see improving the most to get to 20% in 2027?
Stephen Gunstream: A couple of things come into play. First is an improving backdrop. We have seen biotech funding now two quarters ahead of where it has been. From past data, we think it is pretty similar this time that we will start seeing an impact with about a three- to four-quarter lag, and we are expecting to see that towards the end of this year. That will drive a portion of that growth, so the baseline is picking up a little bit. On the clinical side, we are supporting more customers, and more of them are moving later into the pipeline, including where we would expect either diagnostic or therapeutic commercial approval by the end of next year. Even moving from phase one to phase two or phase two to phase three or phase three into commercial will drive significant growth. That base is relatively small, and on the diagnostic side there are a couple in there, including on the leukocyte side, that we may be supporting larger volumes for next year. In addition, the investment we are making on the commercial side, both in marketing and in the field, will take six to twelve months to ramp up, and that will help us as well. Historically, Lab Essentials has grown 11% on average since 2008. I think we start to see that pick up a little bit, and combined with these other things, that should get us into that 20% range.
Operator: Thank you. Our next question comes from the line of Matthew Hewitt with Craig-Hallum Capital Group. Your line is open.
Matthew Hewitt: Good afternoon, and congratulations on the nice start to the year. Regarding Clinical Solutions, phenomenal Q1, up 85% year over year. Was there a larger order that drove some of that, or was it more broad-based as you noted several large orders? And how should we be thinking about cadence for that bucket over the remainder of the year?
Stephen Gunstream: I will let Matthew touch on the cadence in a minute, but when you look at the customers we supported in Q1—and we have talked a lot about the lumpiness—the question is right: Is this just a lumpy quarter, or is this more broad-based? In this case, it is more broad-based. In fact, we had a fairly large customer last year order, and then we came over that, and we had a number of customers that we delivered for in Q1. I would say it is pretty positive that this one is not just a one-time lumpy piece for a quarter. I will let Matthew talk a little bit about the cadence for the rest of the year.
Matthew C. Lowell: I would echo what Stephen said. We are feeling pretty good about the diversity in that part of the business in Q1 and also based on the discussions we are having now for the rest of the year. That is an area where we should continue to see results at these kinds of levels, let us say in the $2 million range per quarter or better, depending on how things go later in the year. That is definitely going to be an important component of growth this year. All to say that part is looking good, and we should continue to see good results there.
Matthew Hewitt: Thank you. Switching gears a bit, with the investments you have been making—digitizing paper, creating larger batch sizes—as I think about your target 60% to 65% gross margins in a few years, how much of that comes from volume leverage versus these strategic initiatives?
Matthew C. Lowell: That is a good question. I believe the single biggest driver, and it will continue to be, is volume growth. But we are not going to sit and rest on our laurels and wait for that to play out. There are lots of other things we can be doing and are doing. The example you gave is a good one, and they are meaningful. These are not trivial things. Sometimes they play out as productivity benefits where we see the benefit more as we grow than immediately in terms of cost reduction. It can show up as cost strength as we grow. We have that digitization and a lot of other projects always going on, and there is a never-ending set of opportunities. But I would still say the main driver is volume growth, and we are seeing that happen right now, and we are excited about it.
Matthew Hewitt: Got it. Thank you.
Operator: Please stand by for our next question. Our next question comes from the line of Matthew Moriarty Parisi with KeyBanc Capital Markets. Your line is open.
Matthew Moriarty Parisi: Hi. This is Matthew Parisi on for Paul Knight. Congrats on the quarter, and thanks for the question. You mentioned the onboarding of new sales associates during the call. How long does that ramp period take?
Stephen Gunstream: Typically, my experience is six to twelve months until you really start to see the impact. I mentioned that probably towards the end of this year we will be able to see it. We are starting to see some early indicators with more meetings and more engagement with some of the target accounts that we are after. It has been great to onboard them, and we are very happy we started in January. I think all is going to plan.
Matthew Moriarty Parisi: Thank you. That is all for me.
Operator: Ladies and gentlemen, I am showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.