Berkeley Lights, Inc. (BLI) Q1 2022 Earnings Call Transcript

Berkeley Lights, Inc. (BLI)
Q1 2022 Earnings Call
May 09, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Stephanie, and I am your conference operator today. At this time, I would like to welcome everyone to Berkeley Lights first quarter 2022 earnings conference call. [Operator instructions] Suzanne Hatcher, vice president of communications and investor relations.

You may begin your conference.

Suzanne Hatcher -- Vice President of Communications and Investor Relations

Thank you. Good afternoon, everyone, and welcome to Berkeley Lights first quarter 2022 earnings call, reporting financial results ended March 31, 2022. My name is Suzanne Hatcher, vice president of communications and investor relations. I'm joined today by members of the Berkeley Lights management team, including Dr.

Siddhartha Kadia, chief executive officer; Paul McCluskey, chief accounting officer; Dr. Eric Hobbs, president of Antibody Therapeutics; and Jeff Brown, vice president of FP&A. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

For more information, please refer to the risks, uncertainties and other factors discussed in our SEC filings. Except as required by law, Berkeley Lights disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as the live broadcast of May 9, 2022. With that, I would like to turn the call over to Siddhartha.

Siddhartha Kadia -- Chief Executive Officer

Thank you, Suzanne, and thank you, everyone, for joining us. I'm excited to participate in my first earnings call as CEO of Berkeley Lights. In this prepared remarks today, I will share a bit about what attracted me to Berkeley Lights, some of my initial business priorities, top-line financial results for the first quarter and our progress against our partnership milestones and workflow advancement. Then Paul McClaskey, our chief accounting officer, will cover a detailed review of our first quarter 2022 financial results.

As a reminder, I joined the company in March, I'd like to thank the Berkeley Lights for their support as I transition from being a member of the company's board of directors into the CEO role. While I was only on the board for less than six months, I certainly appreciated how revolutionary the Berkeley Life technology, workflows and services are and what a significant impact the company can make in the scientific research, discovery and translational markets. Since transitioning to the CEO role, I've also quickly seen that Berkeley Lights is made up of incredibly passionate and talented employees. Their dedication, commitment and care for our customers further validates my decision to join the team.

Now I'd like to spend a few minutes sharing what attracted me to Berkeley Lights. First, I've spent most of my career commercializing disruptive life sciences, technologies and services across the globe. I previously served as CEO of ESG Laboratories, a scientific services company providing analytical testing and consulting solutions, which was acquired by European Scientific. Additionally, I've held several senior executive roles at Life Technologies, including chief marketing officer, managing our business in Asia and leading the $2 billion P&L as the president of life sciences division.

In these roles, I have successfully helped grow organizations from a $100 million of revenue to billions, both organically and inorganically while scaling the organization of 500 employees to 5,000. I saw leading Berkeley Life as an opportunity to apply all my past management experiences along with my knowledge and passion for biology technology to help develop a world-class life sciences company. Second, I saw a highly differentiated technology platform with potential to deliver significant value to scientists and researchers across a number of applications to improve human health and the planet. As a technology platform that can do things that no other technology can, we are only beginning to scratch the surface on the available market ahead.

As part of my 100-day plan, we have started strategizing on how to fully unlock the potential of our technology and make it more accessible by looking at our consumables and reagents model, ease of use for our customers and more. We have a high-value services business that is just getting started in earnest and with an opportunity to transform Berkeley Lights from a platform and tools company to a tools and services company. Last year, our team grew the services business more than threefold from $5.8 million in 2020 to $19.9 million in 2021. A key focus area as part of my 100-day plan is to determine how we can accelerate the growth of our high shop function cleaning services via our BioFoundry strategic partnerships with downstream economics such as milestone payments and royalties.

In the near term, we are quickly adding resources to this area to accommodate the growing interest from a diverse set of companies in partnering with us. And finally, I was attracted to where Berkeley Lights is in its life cycle. I look forward to building a world-class life sciences leadership team and expanding our global commercial and innovation capabilities. We are working with top executive search firm to identify a new CFO.

And this is one of the key hires on the management team that I'm building that will be laser-focused on operational excellence. As you can probably hear from my initial remarks, I'm incredibly excited about the future of Berkeley Lights. We look forward to sharing further details on our go-forward strategy in the coming months, including at an Investor Day plan for later this year. Now let's turn to a high-level summary of our first quarter 2022 business results and highlights.

Revenue for the first quarter was $20.2 million, reflecting year-over-year growth of 8.5% and in line with expectations communicated by our team during the last earnings call. Strategic partnership and services business line grew 136% year over year. Consumable and recurring revenue continued to be strong with a 24% increase over the prior year. Our pipeline for our platform technology and workflows remains strong.

In Q1, two Beacon platforms were purchased by Averys, which was acquired by Twist Bioscience late last year giving them ownership of four beacons in total. The two other placements during the quarter were in the APAC region with new customers who were using older technology assets for their antibody discovery and cell line development work and switch to the Berkeley Lights platform to find the hard-to-hit targets and better clones in days. In the services business, we signed a strategic partnership agreement with West alone, making it our third ag bio agreement. Westar on is looking to advance the development of pesticidoseptide as active ingredients to improve the safety and efficacy of crop protection solutions for the global food supply.

In this partnership, Weston will use our proprietary high-throughput functional screening service to optimize the development and manufacturing of novel active ingredients. We look forward to working with them as we kick off our collaboration in just a few weeks. I'd also like to share a positive update on our core developed workflows with Ginkgo Bioworks and Thermo Fisher Scientific. We are on target to successfully complete the first of several workflows later this quarter to Ginkgo.

The Berkeley Lights internal teams will continue to work with Ginkgo as they ramp those workflows into a production setting with their own foundry. We are also on track to conclude our part of the viral vector workflow development that is the focus of our collaboration with Thermo Fisher Scientific. Following development, the workflow will be validated by our partners and accepted for tech transfer, which we expect to finish by the end of the year. Our initial voice of the customer and market research is validating that Berkeley Lights 10-day workflow is an unprecedented time line to screen thousands of producer cell lines for physical capsid and viral genomic titers of an AAV product.

As such, we have made some headway in our discussions with several large global CDMOs who see value in accelerating the time to market for gene therapy developers. In a moment, I will turn over the call to Paul to walk through our Q1 2022 financial results. Before I do, I want to touch on our 2022 guidance. As I shared in my comments, I'm in the middle of my 100-day review of the business and speaking with customers, employees and our investors to evaluate the best parts to unlock our potential as a tools and services company.

In light of that, I plan to provide more specific guidance on our expectations for 2022 on our second-quarter earnings call and discuss further in our planned Investor Day later this year. Now I would like to turn the call over to Paul.

Paul McClaskey -- Chief Accounting Officer

Thank you, Siddhartha. Total revenue for the first quarter 2022 was $20.2 million, up 8.5% year over year. North America accounted for 68% of total revenue, followed by Asia Pacific at 25% and EMEA at 7%. For the first quarter, revenue from direct platform sales totaled $7.4 million.

Our installed base grew by four placements during Q1 to a total installed base of 115 platforms. As Siddhartha mentioned in his remarks, two platforms were purchased by Twist Biosciences and 2 placements were with new customers focused on antibody discovery workflows. Strategic partnership and services revenue was $7.4 million in Q1, $4.2 million or 136% from the prior year. This increase was primarily due to contracts we have previously announced with companies such as Thermo Fisher Scientific, Bayer Crop Sciences and Aanika.

Additionally, we announced a new contract with Vectron during the first quarter that will begin generating revenues in future quarters. Typically, these customers make quarterly payments and we recognize revenue for these customers on a time and material or percentage of completion basis. While some of our contracts include participation in downstream economics through royalties or milestones, these future payments are not included in our revenue. Gross profit for the first quarter of 2022 was $13.8 million compared to $12.5 million in the prior year period.

Gross margin for the first quarter of 2022 was 68%, compared to 67% in the first quarter of 2021. The increase in gross margin year over year was due to higher margins on strategic partnerships and services as we continue to grow that portion of the business with high margin revenue. First quarter 2022 operating expenses were $35.1 million, inclusive of $5.4 million of stock-based compensation. This was compared to $27.6 million in the prior year, which was inclusive of $4.5 million of stock-based compensation.

Operating expenses in Q1 included $17.6 million in research and development, $11.7 million in G&A and $5.8 million in sales and marketing. Net loss for the first quarter of 2022 was $21.4 million compared to a net loss of $15.4 million for the prior year period. All net loss numbers are inclusive of stock-based compensation. We ended the quarter with a cash and cash equivalents balance of $165 million.

Our available liquidity is $175 million, which includes our revolving credit facility. I'd like to end my formal remarks by saying how passionate I am about what is possible with the Berkeley Lights platform and our amazing team members. And after working closely with Siddhartha these past two months, I'm even more excited for our future. With that, I will turn the call back to Siddhartha.

Siddhartha Kadia -- Chief Executive Officer

Thank you, Paul. As I expressed in my earlier comments, as I assess the business in dialogue with our customers, potential customers, employees, investors and other stakeholders. I'm more excited about the work and opportunities ahead of us than when I joined Berkeley Lights just a few weeks ago. The management team in IR dedicated to crafting and executing a go-forward strategy to transform the market for cell-based products and services.

I look forward to sharing a refreshed view of our path forward in the months to come. With that, we'll now open it up for the questions. Operator?

Questions & Answers:

Operator

[Operator instructions] Your first question comes from Julia Qin with J.P. Morgan.

Julia Qin -- J.P. Morgan -- Analyst

Siddhartha, I know you'll probably give much more color later in the year when you finished your 100-day assessment. But just wondering if you can get any preliminary color on your learning so far from talking to customers and assessing the portfolio? And any early thoughts on the potential strategy you think you will maybe do differently to than before to help accelerate the revenue?

Siddhartha Kadia -- Chief Executive Officer

Thank you, Julia. I appreciate your call and appreciate your acknowledgment of my journey. Let me tell you sort of what I see what is the most exciting thing for me right now. As I'm learning, Berkeley Lights technology can do things that no other company can right now, no other technology in the market can do.

And there's actually five or six core capabilities of core competencies that I would like to kind of describe in the future when we have more time together, that are really unique to Berkeley Lights platform. And that will allow us to do things in cell biology space that are incredibly unique. And I am quite focused on how do we leverage the maximum potential from all of that as we look forward to the future strategy for our company. I think as you know, clearly, there is a lot of demand for the services business, as I like to call it, is growing and allocating resources toward that business is one of our -- my high priorities right now.

Julia Qin -- J.P. Morgan -- Analyst

Gotcha. Definitely looking forward to hearing more on that. Separately, on the partnerships. I believe you previously expected over $42 million in new bookings this year.

Could you give an update on the progress achieved with this new investor on partnership you announced? And are you on track to achieve that $42 million for the whole year?

Siddhartha Kadia -- Chief Executive Officer

I think our pipeline for partnership remains robust and strong and actually cyclicity broad. So yes, we are actually on track to deliver. I will tell you that, I mean, is a comprehensive rev of all of our kind of year-long forecast as I'm assessing my current capabilities of the commercial deals that are delivering all those things and adding resource to overall team dynamics as we move forward. But that part of the business is looking extremely strong right now.

Julia Qin -- J.P. Morgan -- Analyst

Great. Last one for me. You mentioned that you are on track to finish that tech transfer to Thermo Fisher by the end of this year. Any framework we can use to think about the ramp of subscription revenue once that tech transfer is completed next year?

Siddhartha Kadia -- Chief Executive Officer

Yes, because these are still ongoing dialogue with the customer. I'm not going to specifically mention, but needless to say, they are extremely pleased with the progress we've made. And in addition to the work we are doing with our current client on that bioelectric workflow. There are several large global CDMOs that see the same value where we further value explorating the time to market for gene therapy developers.

So we think a consistent message on the market that this stable producer cell line that we are -- the focus of our work right now is really a key to scaling the global manufacturing for AAV-based gene therapy products. And we are in active dialogue with multiple participants from that market space.

Operator

Your next question comes from Brian Weinstein with William Blair.

Brian Weinstein -- William Blair -- Analyst

I would just ask about kind of the tone of business right now, recognizing that you're not giving formal guidance, but can you talk about what you're seeing as far as interest in the platforms that you have out there, how the funnel is building. And any thoughts on kind of end market demand and what you're seeing out of your customers' willingness to engage with you at this point?

Siddhartha Kadia -- Chief Executive Officer

Brian, thank you. Good to hear from you again. Look, I think I'll start by a couple of general comments. On pipeline remains robust for us.

Our teams around the world are working hard. As you know, there are some constraints with Asia Pacific, which is a very robust market for us already right now. Q2 or Q1 usually has an uptick, and I can -- without giving you sell any more specific on the guidance for any short term or for the full year. I'm not willing to give you a full year guidance on this call.

But what I am -- I will tell you that I'm 50% of my way through my 100-day onboarding process, and I'm really focused on three things: listening to our stakeholders, customers, employees, and investors; and getting a range of internal inputs into my process here; building a world-class sciences leadership team that is focused on operational excellence as well as sales and market excellence around the world; and then finally, working with the leadership team to design this comprehensive strategy for go forward to unlock the full potential of our platform that we have Berkeley Lights. And all of those three things actually lead me to conclude that I'm in a very good place to actually design that growth versus didn't communicate with you when I have more full data to provide for you guys.

Brian Weinstein -- William Blair -- Analyst

Understood. But if I may appreciate just a little bit on that. Just kind of wondering kind of what you are seeing as far as interest in engaging with the company from your various customers? Is there a willingness to engage still at levels that are positive and moving in the right direction? Are you seeing any change in behavior in any of your end markets from any of your customers? Anything that you can provide on qualitative commentary on how things are building?

Siddhartha Kadia -- Chief Executive Officer

Yes. So on the pharmaceutical end market, so the large pharma company, the discussions and the demand remains intact, I think as you know, the small biotechs are going through kind of a reset in the marketplace right now. We haven't seen as of year any sort of a change. If anything, there's a little bit of a slowdown in the pipeline building process and how long it takes to close the transaction.

But the active engagement on sort of what broke platform can offer is in a robust demand. And finally, on the strategic partnerships and services part of it. I think there is an increased demand as we actually -- as the word gets out of our capabilities and our willingness to partner with people on that.

Brian Weinstein -- William Blair -- Analyst

OK. And then one more, if I may. With respect to the beacons in the quarter, you had four into the market. There were a couple that I think got delayed from the fourth quarter of last year that we had talked about when that took place that was supposed to get pushed into 2022.

Can you just talk about were these beacons that were sold this quarter reflective of those? Or what -- when we may be able to think about those coming back into the model?

Siddhartha Kadia -- Chief Executive Officer

Brian, that is correct. The two of the four that has slipped from Q4 into Q1 or the ones that are reflected here.

Brian Weinstein -- William Blair -- Analyst

OK. So then there were two incremental then for the quarter itself.

Siddhartha Kadia -- Chief Executive Officer

Yes.

Operator

Your next question is from Tejas Savant with Morgan Stanley.

Unknown speaker -- Morgan Stanley -- Analyst

This is Edmond on for Tejas. On one of the conversations that we had last time, one of the things that you said was the company needs to transition from one that's being led by engineers to one that's that needs to be co-led by engineers and biological application specialists as well. So I was wondering, what are your plans here to move [Inaudible] transition?

Siddhartha Kadia -- Chief Executive Officer

Yes, Edmond, you and Myriad as well. Look, I think you're absolutely right. The company needs to develop more workflows and have more biology. I'm currently in the review of our biology, which is fantastic.

I think we just did a lot more of the biology in the company. I think the platform as it is sort of the engineering part of the platform is fully developed and in a good place. And so I think we are in the process of allocating further resources for biology development right now. I will be very happy to share much further details on this at a later Investor Day.

Unknown speaker -- Morgan Stanley -- Analyst

Got it. And I appreciate the color on your CFO search and leveraging and top executive search on. But where does it currently stand? And should we be expecting any other additional personnel changes going forward?

Siddhartha Kadia -- Chief Executive Officer

Great question again, Edmond. Look, the CFO search is going great, a tremendous amount of interest. We are happy with the talent we are seeing. Of course, I would have had -- love to have the role till the next day after I joined, but this is a very important role.

I'm taking my time to make sure that the right split for the company and the business model that we are in and business models that we are moving toward is achieved as we make that progress toward the search. I will tell you that -- the company is a great company with fantastic people. I love the passion of both the management team, existing management team and the company's employees at large. The company does the significant enhancement on the leadership and actually filling in the gaps that we have right now.

So you will be hearing about several further roles. We just announced a fantastic addition of a chief human resources officer that Lucas Vitale has joined us a couple of weeks ago, and he and I are now planning for the next level of organization development and building a great leadership team here.

Unknown speaker -- Morgan Stanley -- Analyst

And then another question on China. It was 25% of APAC was 25% of your sales in the quarter. And I was just wondering if you could talk about some of the impacts you're seeing from the walk-downs in China. -- an operational perspective, are you seeing a slowdown in research activity or site access-related issues were there? And more specifically, how is this impacting your Shanghai demo lab?

Siddhartha Kadia -- Chief Executive Officer

Look, Shanghai has been in a lockdown for last 50 days. The lockdown is slowly softening lift as we speak right now. I am -- I want to take a moment to think all of my colleagues in Asia Pacific. They're listening to this call because I can tell you, I don't think anybody in the Western world has seen the kind of lockdown they're experiencing and their dedication and commitment to the company and to our customer is really unparalleled.

And I am in a tremendous amount of gratitude and in debt of those employees, they are working very hard. Have you seen the slowdown of activity, of course, this is a real lockdown. And so our customers are not able to get to their sites. They are not able to perform their work right now, and the Sunday demo lab is affected by all of that stuff.

However, I think given sort of how successful the team has been operating under even this circle size makes me feel very confident as soon as the rest of the city and the state actually in China are back to normal, if we will be back to business full speed ahead.

Unknown speaker -- Morgan Stanley -- Analyst

Got it. And one last question for me. I just wanted to confirm that you guys sold zero lighting units and zero subscription models in 1Q?

Siddhartha Kadia -- Chief Executive Officer

So on the lighting, you are correct. We haven't sold a lightning in this quarter on subscription. We did sign up for one new client who has done our subscription revenue now.

Operator

Your next question comes from Stephen [Inaudible] with Cowen.

Unknown speaker -- Morgan Stanley -- Analyst

So maybe just to build on Brian's question about the trends that you're seeing in the marketplace. I wanted to talk about any sort of trends you're seeing in the CRO and CDMO space, especially you guys have been talking about kind of this push toward outsourcing versus capital expenditures as a way to conserve cash as becoming a trend that's becoming more prevalent if you can give us some color what you guys are seeing in the CRO and CDMO space.

Siddhartha Kadia -- Chief Executive Officer

Look, I think CRO and CDMO is one of our most active client segments right now, pending for various reasons. Of course, they seen Berkeley platform and the ability to offer more things to their clients that they cannot offer today. A particular example on the CDMO side actually is this AAV viral vector workflow that we are developing right now, which is of interest to -- as you can imagine, multiple different CROs and CMOs in the space. And then similarly, people are using Berkeley platform to do antibody discovery and there are multiple CROs who are also working with us on that.

More to come on that, but it's the most active segment right now.

Unknown speaker -- Morgan Stanley -- Analyst

OK. Yes. Appreciate the color. And I appreciate the color you gave us on the news flow and workflow releases from Thermo Bayer and Ginkgo.

But could you give us a sense for the cadence of signing new R&D partnerships in 2022?

Siddhartha Kadia -- Chief Executive Officer

Yes. We are on track to sign further develop further strategic partnerships and services agreements. We have an active dialogue with multiple clients. These things, as you can remind us, this is a true partnership and services discussion.

So there's a lot of back and forth with our clients. I cannot tell you exactly when each one of them will get signed, but there's a lot of activity right now in place. And we are also allocating to resources to support that type of business development in the company right now.

Unknown speaker -- Morgan Stanley -- Analyst

OK. Got it. And then last one for me. I know you're not giving formal guidance, but should we still consider the 2022 revenues as being more back-end loaded?

Siddhartha Kadia -- Chief Executive Officer

I think that is a safe assumption. Thank you.

Operator

Your next question comes from Gaurav Goparaju, Berenberg Capital.

Gaurav Goparaju -- Berenberg Capital Markets -- Analyst

I just have two for you. I know you didn't mention the full year 2022 guidance you provided on the last call. that implies 30% year-over-year revenue growth. Was there anything that, I guess, happened between that call and today that prevented you guys from maintaining that guidance? Or is then more so, just waiting to see how more near-term visibility play out?

Siddhartha Kadia -- Chief Executive Officer

Yes. And, Gaurav, if you recall, look, there's nothing that I can point to other than the fact that I have just assumed the leadership subsequent to that call. And my -- I have been about 50 days into the job. So I want to make sure that I do a full review of the business before we actually provide you with more visibility on the full year guidance.

That's all it is.

Gaurav Goparaju -- Berenberg Capital Markets -- Analyst

Got it. Got it. And then just one more for me. Do you have any time line updates or maybe even near-term catalysts that we should expect regarding your internal cell therapy efforts?

Siddhartha Kadia -- Chief Executive Officer

Look, great question. There's a lot of activity going on with cell therapy, and there are three full different versions of it. In the company right now, one is the a tremendous interest in the TCR workflow for all of people who are trying to provide an innovator around cell therapies. There is a potential platform on the QX QC that we are working in partnership with several different people on how the QAQC platform would look like.

As you know, these are all emerging areas right now and a lot of movement and we are defining the exact scope. And then finally, there's a cell therapy manufacturing system, which could be a full-fledged cell-based manufacturing systems that could be used closer to the patient, if you will. And there are three different gradations. And I'm still trying to evaluate what kind of resource is going to play without our own resources and where we might look for partners to do it.

So much more to come on that. I cannot give you more specific guidelines on that.

Operator

There are no further questions at this time. I turn the call back over to the presenters.

Siddhartha Kadia -- Chief Executive Officer

Thank you, everyone, for participating in the Berkeley Lights Q1 2022 financial results. We appreciate your support and look forward to talking with you soon. Thank you.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Suzanne Hatcher -- Vice President of Communications and Investor Relations

Siddhartha Kadia -- Chief Executive Officer

Paul McClaskey -- Chief Accounting Officer

Julia Qin -- J.P. Morgan -- Analyst

Brian Weinstein -- William Blair -- Analyst

Unknown speaker -- Morgan Stanley -- Analyst

Gaurav Goparaju -- Berenberg Capital Markets -- Analyst

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