REPLIGEN CORP Q4 2025 earnings call

Thank you, operator, and welcome everyone to our 2025 fourth quarter report. On this call, we will cover business highlights and financial performance for the three and 12-month periods ended December 31st, 2025, and we'll provide financial guidance for the full year 2026. Joining us on the call today are Repligen's President and Chief Executive Officer, Olivier Loeillot, and our Chief Financial Officer, Jason Garland. As a reminder, the forward-looking statements that we make during this call, including those regarding our 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 risks related to our business is included in our quarterly reports on Form 10-Q, our annual report on Form 10-K, and our current reports, including the Form 8-K that we are filing today, and other filings that we make with the Securities and Exchange Commission. Today's comments reflect management's current views, which could change as a result of new information, future events, or otherwise. The company does not oblige or commit itself to update forward-looking statements except as required by law. During this call, we are providing non-GAAP financial results and guidance unless otherwise noted. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this morning, which is posted to Repligen's website and on sec.gov.

Adjusted non-GAAP figures in today's report include the following: non-COVID and organic revenue and or revenue growth, cost of goods sold, gross profit and gross margin, operating expenses, including R&D and SG&A, income from operations and operating margin, tax rate on pre-tax income, net income, diluted earnings per share, EBITDA, adjusted EBITDA, and adjusted EBITDA margin. These adjusted financial measures should not be viewed as an alternative to GAAP measures, but are intended to best reflect the performance of our ongoing operations. With that, I'll turn the call over to Olivier.

Thank you, Jacob. Good morning, everyone, welcome to our 2025 fourth quarter call. We had a great finish to 2025 with $198 million of fourth quarter revenue, which translated to 14% organic growth in the quarter and $738 million of revenue for the full year. As a result, we exceeded the high hand of our October guidance for both revenue and adjusted operating income. We were thrilled to return to robust growth in 2025, with 16% growth on both a reported and organic non-COVID basis, and full year organic growth of 14% exceeded the high hand of our initial 2025 guidance. Once again, the diversity of our portfolio was on display in the fourth quarter as proteins and process analytics both grew over 30%, with chromatography not far behind, with more than 25% growth.

The same was true for the full year, as protein grew greater than 30%, while analytics grew 37% on a reported basis or 21%, excluding M&A. This highlights our team's strong execution on the growth opportunities that exist across our portfolio. Filtration grew high single digits for the quarter and the year. Consumables drove the growth in the quarter with over 20% growth. Capital equipment was essentially flat year-over-year due to a tough comparison, but up 10% versus the prior quarter as we saw capital equipment revenue grow sequentially throughout the year. Capital equipment benefited from downstream analytics demand. Outside of a couple of specific growth drivers, we saw relatively muted demand for equipment. In terms of end markets, biopharma led the way and revenue growth was strong across all geographies.

While we are no longer providing detailed order commentary, the strong order trend we saw throughout 2025 continued in the 4th quarter. In short, we had a great year with momentum across the portfolio, allowing us to significantly outpace market growth in 2025. As we turn the page to 2026, we're excited about the product portfolio we have, the team we've built, and the strategy we're executing. We recently held our global commercial meeting, and after spending time with the team, it's clear we've built a world-class organization and the team is highly energized. Our initial 2026 guidance called for $810 million-$840 million of revenue or 9%-13% organic revenue growth. This includes a two-point headwind from a gene therapy platform.

Jason will provide more details on our 2026 guidance, but I wanted to share a few high-level thoughts. There are a number of signs that macro backdrop is strengthening, including improved biotech funding, M&A activity, and more positive pharma sentiment. After a recovery year in 2025, the current environment is more balanced, though it remains early for some of these tailwinds. As a result, we believe our guidance is prudent, with the low end appropriately balancing some near-term uncertainty around FDA policy and biopharma's strategic response to MFN, while the high hand assumes we're able to convert certain funnel opportunities in 2026. Our team is focused on executing opportunities that will arise as the year plays out. At the midpoint, our guidance calls for 150 basis points of operating margin expansion in 2026.

As we highlighted earlier this year, we're committed to margin expansion while balancing the investments required to support future growth. We expect operating leverage in 2026 with a growing contribution in coming years. Unpacking our performance by end market. 4th quarter biopharma revenue grew over 20% year-over-year, driven by growth from both pharma and emerging biotech. Revenue from emerging biotech customers grew for the 3rd quarter in a row. Activity from this customer base remains below historical levels, so we believe it's too soon to call this a trend. CDMO 4th quarter revenue grew low single digits year-over-year due to a tough comparison, as we were lapping greater than 14% growth in the prior year. Notably, we saw strong growth from our Tier 2 CDMO customers. From a geographic point of view, we saw strength across all regions led by Europe.

New modality revenues were consistent with our expectation for a muted back half. For the year, new modalities grew low single digits or high single digits when excluding the impact from a gene therapy customer. We saw strength in cell therapy, while mRNA demand was a headwind. Turning to strategy, in 2025, we delivered on all five strategic priorities we outlined at the beginning of the year. First, we accelerated growth with a transformed customer experience. As I mentioned earlier, we delivered 16% growth in 2025. This was driven by momentum across our portfolio, customer base, and geographies, and a tech demand through our commercial strategy.

We continue to capitalize on our broad portfolio with our key accounts team, which is focused on approximately 20 large pharma and CDMO customers, with the objective of further penetrating these accounts by increasing both the number of product lines they purchase and their overall volume. As we highlighted earlier this year, we are now selling 2.5 times as many product lines to these customers versus 2019. Our commercial team is incentivized to cross-sell our entire portfolio. We continue to see a long runway for key account penetration and cross-selling opportunities. In 2025, we made notable progress on our Asia Pacific strategy. We will continue to invest in 2026, given the growth opportunities in this region. We would highlight our investment in services, which was accretive to growth in 2025, and our guidance assumes it will be again in 2026.

We have a high attachment rate for services in our analytics franchise and are working to replicate this success across the rest of our capital equipment portfolio. As Jason will discuss in more detail, in 2025, we balanced margin expansion with critical investments in the business. We expanded adjusted operating margin by 90 basis points to 13.8%. Excluding M&A and foreign currency, we expanded operating margins by 240 basis points. In 2025, we made important investment, including legal, finance, and IT leadership, along with AI and infrastructure investments. These are critical to ensure we have a scalable foundation to support the growth we see in coming years. Third, we had an active year of new product launches in 2025 across our franchises.

In analytics, we launched our SoloVPE PLUS System, the next generation of our SoloVPE System, with increased accuracy and faster readout time. We saw traction with the SoloVPE PLUS System in 2025, as we benefited from the first wave of upgrades. We believe this upgrade cycle represents a multi-year opportunity. In filtration, we launched our new ProConnex MixOne single-use mixer. We began demos in 2025 and expect to deliver our first placements in 2026. In proteins, we developed and launched a variety of new resins, including three new catalog resins in December for the new modality market. We also saw traction with custom resins developed for specific key accounts. In 2026, innovation remains a top priority. Fourth, we executed on our M&A roadmap. In March, we acquired 908 Devices bioprocessing portfolio, which is now part of our recently rebranded PATsmart portfolio.

In 2025, we cross-trained and merged our upstream and downstream analytic teams. This has resulted in a growing funnel of opportunities. We also made progress on our integration of Stantec. In July, we announced a strategic partnership with Novasign to develop and integrate their machine learning and modeling workflow into rapid gene filtration system. As part of the partnership, we also made an investment in Novasign to help scale and expand their operation. This furthered our digitization efforts and highlight that minority investments are another good investment avenue within our broader capital allocation strategy. In 2026, M&A remains our top priority for capital allocation, and our acquisition criteria are unchanged. First, we are looking for differentiated technologies that address key customer pain points across the bioprocessing workflow and their pipeline of modalities. Second, it must make financial sense from a return and accretion perspective.

We have an active pipeline and a healthy balance sheet. As a result, we aspire to add new capabilities to our portfolio in 2026. We remain focused on integrating 908, leveraging our high-performing analytics team. Finally, in 2025, we made considerable progress on our efforts to become more Fit for Growth and ensure we have the right foundation in place as we look to scale the business in coming years. We made critical leadership hires across the organization. In addition, we made significant investment in our business systems to ensure we have the right tools and processes to scale the business. This included initial AI investment across our legal and supply chain functions. Looking ahead, we will continue to deepen our bench and make system investments in IT modernization, financial planning, and lifecycle product management.

Before I turn the call over to Jason, I'll provide some more detail on our franchise-level performance. Starting with filtration. As a reminder, this is our largest and most diverse franchise. Filtration revenue grew high single digits in the quarter, driven by fluid management and ATF consumables. For the year, filtration revenues grew 8% or 11% non-COVID. This was a bit below our expectations due to the timing of fluid management revenue and the muted demand environment for downstream systems. We continue to work to optimize fluid management manufacturing and the margin of this product line. Fluid management was still a strong contributor to growth in 2025, while ATF was also a credit to filtration growth after a remarkable year in 2024, when it was up more than 50%.

Thank you, Olivier, and good morning, everyone. Today, we are reporting our financial results for the fourth quarter and full year 2025, and providing initial guidance for the full year 2026. Unless otherwise noted, all financial measures discussed reflect adjusted non-GAAP measures. As shared in the press release this morning, we exceeded guidance and delivered fourth quarter revenues of $198 million, a reported year-over-year increase of 18%. This is 14% organic growth, excluding the impact of acquisitions and foreign exchange. Acquisitions contributed approximately 1 point of the reported growth, and foreign exchange contributed 2 points. For the full year, revenue grew 16% on both the reported and organic non-COVID basis and 14% organic. As Olivier offered details on our product franchise performance, I'll provide more color on our regional performance.

Starting with quarterly revenue, North America represented approximately 47% of our total, EMEA represented 34%, and Asia Pacific and the rest of the world represented approximately 19%. North America grew mid-teens, driven by proteins, ATF, and fluid management. EMEA grew more than 20%, driven by proteins, chromatography, and analytics. Asia Pacific grew high teens, driven by chromatography and analytics. China grew for the second straight quarter, albeit off a low base. After declining in 2025, we are optimistic China will return to growth in 2026, supported by strong orders in the fourth quarter. For the year, North America and Europe both grew approximately 16%, and Asia Pacific grew 19%. Transitioning to profit and margins, fourth quarter adjusted gross profit was $104 million, and adjusted gross margin was 52.4%.

This was margin expansion of 170 basis points versus last year. The year-over-year increase was driven primarily by volume leverage and price, both offsetting inflation and slight headwinds from mix and tariffs. For the full year, gross margin was 52.6%, with approximately 220 basis points of year-over-year increase. The year had similar drivers as the quarter's margin expansion, with volume and price overcoming inflation and some tariff and mix headwinds. Continuing through the P&L, our adjusted income from operations was $30 million in the fourth quarter, up 19% year-over-year on a reported basis, and up about 25%, excluding the impact from foreign currency and M&A. OpEx was sequentially flat to the third quarter.

This translated to an adjusted operating margin of 15% in the fourth quarter, which was an increase of 10 basis points year-over-year on a reported basis, but 140 basis points of margin expansion, excluding M&A and the impact of foreign currency. For the full year, our adjusted operating income from operations was $102 million, a strong 24% year-over-year reported increase, or up 35%, excluding the impact of M&A and foreign exchange. The growth was driven by a $68 million increase in gross profit, reduced by $49 million of increased OpEx. $19 million of this increase was related to M&A expenses and foreign exchange. Excluding these items, OpEx grew roughly 13% year-over-year with investments in our Fit for Growth journey.

I'll also note that about 5 percentage points of the increase came from our annual merit and compensation inflation. 2025 adjusted operating margins were 13.8%, about 30 basis points better than our prior guidance and 90 basis points higher than last year, driven primarily by volume leverage and price, mostly offset by the dilution of our recent M&A investments. Excluding the impact from M&A and foreign exchange, we are very pleased with our operating margins expanding 240 basis points year-over-year. Our full year adjusted EBITDA margin was 19%, a year-over-year increase of 50 basis points on a reported basis, but up approximately 230 basis points, excluding the impact of M&A and foreign exchange. Continuing through the P&L, adjusted net income was $28 million, a $3 million year-over-year increase.

Higher adjusted operating income was offset by $2 million of lower interest income on declining interest rates. Our fourth quarter adjusted effective tax rate was 20%, which was slightly better than our prior expectations due to tax planning actions in the quarter. Adjusted fully diluted earnings per share for the fourth quarter was $0.49, compared to $0.44 in the same period in 2024. For the full year, we delivered $1.71 of adjusted fully diluted earnings per share, up 9% over last year and $0.03 better than the high end of our October guidance. Finally, our cash and marketable securities position at the end of the fourth quarter was $768 million, up $90 million sequentially from the third quarter.

This was driven by $26 million of cash flow from operations, offset by $8 million of CapEx. For the full year, we generated $117 million of cash flow from operations. We remain focused on optimizing our working capital to drive improved cash flow conversions. To echo Olivier, we are very pleased with our execution in 2025 and the momentum we are seeing across the business, which allowed us to outperform the high end of our original organic growth expectations and to drive year-over-year margin expansion. Looking ahead to 2026, we will remain focused on executing on all strategic priorities, driving above-market revenue growth, and balancing margin expansion with investments in the business. I'll now speak to adjusted financial guidance.

This includes our current view on foreign currency outlook, for which we are assuming euro to dollar foreign exchange in 2026 to be very similar to the latter half of 2025. As you may expect, we are continuing to evaluate the implications of the recent Supreme Court ruling on tariffs. That said, included in our guidance is the expectation that tariff surcharges and related costs will have a slightly higher impact on revenue and margin than we saw in 2025, as we incur a full year effect. We are guiding $810 million-$840 million of revenue, or 10%-14% reported growth and 9%-13% on an organic basis.

The difference of these growth rates is driven by just under one point of revenue growth from foreign exchange and de minimis impact from M&A. Regarding revenue growth by franchise, our overall reported growth guidance of 10%-14% assumes the following: filtration growth in the low double digits, and as a reminder, certain gene therapy platform creates a 3-point headwind for this franchise. Both chromatography and proteins growth in the low double digits, and finally, analytics growth greater than 20%. We expect adjusted gross margins to expand to 53.6%-54.1% for the full year and up approximately 125 basis points year-over-year at the midpoint. This will be driven by volume leverage, pricing, and productivity, and we expect a relatively neutral mix impact in 2026.

Our guidance assumes several million dollars of tariff surcharges, which represents approximately 50 basis points of headwind, which, as I mentioned, we will continue to evaluate. We expect adjusted income from operations to be between $122 million-$130 million. This implies another year of 20% plus growth and delivers margin expansion of 150 basis points at the midpoint. As we have highlighted, we will continue to prioritize investments to support our Fit for Growth journey. These include IT modernization and capabilities, product lifecycle management, further commercial investments, including Asia, and continued build-out of our leadership bench. We expect operating leverage to accompany our gross margin expansion.

Continuing through the P&L, we are assuming $18 million of adjusted other income, slightly lower than 2025 due to lower interest rates and a 22%-23% adjusted effective tax rate. The increase over 2025 is driven by jurisdictional mix assumptions and the benefits we achieved in 2025 that will not repeat. That said, we will continue to execute our tax planning strategy and look for opportunities for improvement. Putting this all together, we expect adjusted fully diluted earnings per share to be between $1.93 and $2.01. This is up $0.22-$0.30 versus 2025, or up 15% at the midpoint. To help you with your modeling, we expect normal seasonality with roughly 48% of revenue in the first half.

This implies organic growth is slightly above the midpoint in the second half of the year and slightly below the midpoint in the first half, due to more pronounced gene therapy headwind in that period. We expect Q1 revenue to only decline low single digits sequentially from the fourth quarter. This positions us well to deliver on our 2026 guidance. We expect modest sequential gross margin expansion in the first quarter. As a reminder, the first quarter of 2025 represented our highest gross margin quarter last year. We expect gross margin expansion for the remainder of the year. We expect OpEx to step up sequentially in the first quarter due to annual compensation increases and Fit for Growth investments. We assume OpEx is flat to modestly higher sequentially through the year.