Q1 2022 Cytek Biosciences Inc Earnings Call

May 11, 2022

Thank you for standing by and welcome to the <unk> Biosciences first quarter 2022 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program may be recorded and now.

I'd like to introduce your host for today's poll program, Paul Goodson Investor Relations. Please go ahead Sir.

Thank you operator earlier today Sci-tech Biosciences released financial results for the quarter ended March 31 2022.

Haven't received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investors at site Tech bio dot com.

Joining me today from <unk> are wind, Ben <unk>, CEO and Patrick is on mono Chief Financial Officer.

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 the federal securities laws.

<unk> statements regarding <unk> business plans strategies opportunities and financial projections.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated dish.

Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press.

This release Sci-tech issue today.

And in <unk> filings with the SEC.

This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles.

Reconciliations to the most directly comparable GAAP financial measure maybe found in today's earnings release submitted to the SEC.

Except as required by law <unk> disclaims any intention or obligation to update or revise any forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast may 11th 2022.

With that I would like to turn the call over to Ken.

Yes, Paul.

Welcome everyone joining the call today.

I'll also start by.

The incredible <unk> team for their dedication and execution.

As we close out the first quarter authentic conjectural.

On today's call I will begin with a brief overview of our company.

Next ill discuss our retail progress since the end of 2021, and finally I will turn the call over vessel purchase for a more detailed look at our financials.

For those of you new tool the <unk> story.

We are a leading cell analysis solutions company advancing the next generation of cell analysis tools.

Navigate level technical approach to create our full special profiling.

SP platform.

Our <unk>.

Platform includes instruments reagents software and application services.

Utilizes the full special for our restaurant signatures.

They have a high resolution.

Kent.

Hi, Sal.

Analysis.

Our technology and our solutions I guess sum up the key limitations of conventional methods.

While flow cytometry, why do they use it for single cell analysis converge.

Conventional flow cytometry and the early approach to special flow cytometry have been challenged as we are able to detect only a few marvellous E. A single tool.

Yeah, Let me field that the 19 reality sub optimal resolution.

Sure Paul.

Cost of our performance and with the significant technical expertise required to operate the systems.

Scientific progress, Inc. Advanced sale Im not assess failed.

By contrast.

<unk> is transforming the flow cytometry industry flow technology disruption.

Our patented.

SP technology expense that multiple colors that can be analyzed and optimize the sensitivity and the accuracy through our novel optical and electronic designs.

Arises and innovative methods of light detection and distribution.

This novel technological application allows us to adjust that in.

Inherent limitations.

Technologists.

A higher density of inflammation with greater sensitivity for.

So that stability.

Increased efficiency.

All at a lower cost performance.

Part of our performance and the cost advantage.

Which helps our manufacturing from this country and the operating gross margin.

Due to the application of Lightspeed.

Technology adopted Paul the telecom industry.

Which benefits from decades of development in manufacturing said pharmacy and the cost reduction.

Meanwhile, this is not the case with conventional flow cytometry, which continues to yield expensive that can kill the detection technology.

Our innovative technology has been validated by the 406 phase III build applications as well as over 1200 instrument placements.

At the end of the quarter and a growing number of applications.

At <unk>.

We provide our customers with an end to.

And the solution consisting of instruments.

Software and application services.

In addition to our robust suite of comprehensive solutions.

Last year, we began.

And shifting our sales process, which enable additional downstream genomics and proteomics analysis.

Importantly, our focus allows researchers to isolate a living cell populations from higher complexity panels the flooding biomarkers.

While our sales have been strong drivers of our revenue growth to date.

But the Asians and the sales sources will play an important role in driving our revenue growth over the next three to five years.

I am proud to say that our installed base of instruments continued to achieve robust growth.

In the first quarter.

For 116 instruments, bringing our total installed base to 1425 instruments at the end of Q1.

We continue to execute our core strategy and.

<unk> achieved a solid adoption with highest negative I'm not if its users.

While also bringing full special profiling to entry level users as well.

As Patrick will discuss later.

We once again achieved a strong revenue growth this quarter.

Revenue, increasing 44% over the prior year.

These results reflect strong demand driven by the recognition from customers.

And take us off our technology in addressing their needs.

Even in the face of macro pressure, including global supply chain disruptions.

Our team continues to execute well and achieve operational excellence.

While the industry as a whole is experiencing a difficult operating environment.

That has nothing.

Inflationary pressures.

Our dedicated team is managing flow.

In part by leveraging our global workforce.

Additionally, our global presence has also helped us to mitigate supply chain problems.

And we are further insulated by supply issues.

Inventory buffer.

In all we continue to be focused on execution.

And I am confident in our team's ability to navigate through this environment.

To succeed.

We began the year by announcing the opening of our new facility in Fremont, California.

Which tripled our previous manufacturing capacity to meet growing global demand for cell analysis solutions.

In addition to the new Fremont location.

Also opened new offices in Seattle, Washington, which dedicated at all key R&D initiatives and customer application support.

And at the end of April .

Announced the appointment of Todd Carlin, our Chief commercial officer.

We are excited to have Todd joins Hy Tech.

And are pleased to welcome him to our team.

Cause expensive experience, including previous role at Cardinal Health Carefusion.

Most recently at the BD Biosciences will bring tremendous value to our organization.

Since first being introduced in 2017.

Our cell analysis systems have been widespread adoption across the globe was used in more than 40 countries.

And now we have seen great traction in diversifying our revenue base through the launch of new products, including the flooding sources from the agent sales.

While still a smaller part of our overall revenue.

For our reagents is growing rapidly.

And then we are excited for the potential of this contribution to our enterprise.

As I mentioned earlier.

Our technology has been validated by 460 for EPS really able to publications as of the end of the quarter.

And that this quarter there were 95 peer reviewed publications mentioning cycle.

The highest figure in any quarter, so far since <unk> was founded.

I am proud of this accomplishment, which speaks to the momentum of our platform and validate the use of our offerings in the scientific community.

The walkway to Alphatec.

The technology, we bring to the field continue to demonstrate real world results.

Highly relevant issues that impact the life of the general public.

During the first quarter of this year for example.

There were two particular paper.

In nature and in nature Communications is that many issues related to COVID-19.

The first paper.

Terminal centric maturation of T cell response to mrna vaccination.

Published in nature it in today's.

The reaction of our immune system.

Vaccination. These two long term protection from the virus.

The second paper in nature communications titled Stratification of Costless color is the COVID-19 patients into clinical severity for progression groups by immuno videotaping and the machine learning discovered that COVID-19 patients cluster into three distinct groups.

And these groups to this clinical costs.

As these two papers.

And there are countless other exemplify our technology is being used today in real world applications that address critical issues.

I am grateful for side effects role in these consequential scientific fundings and look forward to sharing further studies of our price of patents for use in future periods.

Oh I'm excited by the progress our team has made in this quarter.

<unk> will make throughout the course of the year.

We continue to establish ourselves as the leading cell analysis solutions company.

As we push forward, our cadence of new products and applications.

We are deeply focused on providing a complete a cell analysis solution to our customers.

We look forward to continuing to provide our novel SP platform to these customers.

Great pushing the bounds of scientific discovery and clinical progress.

With that I will now turn the call over to Patrick for more details around our financials.

Thanks Wayne.

Total revenue for the first quarter of 2022 was $35 $1 million.

44% increase over the first quarter of 2021.

We continued to see demand across the entire portfolio of high tech offering <unk>.

Including service revenues that have more than doubled from one year ago.

<unk> come off warranty.

Gross profit was $20 2 million for the first quarter of 2022.

An increase of 39% compared to a gross profit of $14 5 million dollar into first quarter of 2021.

Gross profit margin.

58% in the first quarter of 2022.

60% in the first quarter of 2021.

Adjusted gross profit margin in the first quarter of 2022 was 61% compared to 60% in the first quarter of 2021 after adjusting for stock based compensation.

<unk> amortization of acquisition related intangibles.

Operating expenses were 22 5 million tons for the first quarter of 2022.

69% increase from $13 $4 million in their first quarter 2021.

The increase was primarily due to expenses to support continued growth of the business.

Including further investment in sales and marketing R&D and costs related to operating as a public company.

Research and development expenses were $8 million for the first quarter of 2022 compared to $5 1 million for the first quarter of 2021.

Sales and marketing expenses were $7 million for the first quarter of 2022 compared to $4 $3 million for the first quarter of 2021.

General and administrative expenses were $7 $5 million for the first quarter of 2022.

Increased from $4 million.

The first quarter of 2021.

Loss from operations in the first quarter of 2022 was $2 4 million compared to income of $1 1 million in the first quarter of 2021.

Net loss in the first quarter of 2022 was $2 $2 million compared to income of <unk>.

$1 billion in the first quarter of 2021.

Adjusted EBITDA in the first quarter of 2022 was $1 9 million compared to $1 1 billion in the first quarter of 2021.

After adjusting for stock based compensation expense and foreign currency exchange impact.

Turning to our guidance with our strong performance in Q1, we now expect full year 2022 revenue to be closer to the high end of the range.

Third 60 million to $168 million.

Before I conclude I would also like to touch on some assumptions embedded in our 2022 guidance.

We remain in a strong position financially.

Continue to see strong demand for our instruments and remain focused on maintaining our profitability as well as achieving our long term growth targets and objectives.

Because <unk> goal is to be profitable on a net income and EBITDA basis annually, we do not anticipate the need for future capital raises to meet operating.

We are also pleased with our strong balance sheet, including a solid cash position and no debt.

Underpinning our healthy organization.

We will continue to invest in our core business.

As it relates to new project and innovation, while remaining opportunistic in the M&A environment and focus on growth.

All key areas.

With that I will turn it back over to Lindon.

Thanks, Patrick.

<unk> has continued to demonstrate our commitment to developing tools to advance the next generation of cell analysis.

I would like to express my deep gratitude for the team we have here at Phi Tech.

Yeah excellent and share their belief in this important mission tracks our progress.

I'm excited to announce that.

<unk> will be participating in the cycle can take on digital conference in early June in Philadelphia after.

After the event was held virtually for the Australia.

And later that month, we will be hosting our first analyst day in New York City.

Stay tuned for further details as we are excited to host this event and the share further updates on our strategic objectives and the progress towards our goals.

With that we'll now open the call up for questions.

Operator.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one our first question comes from the line of.

<unk> <unk> from Cowen and company your question. Please.

Hi, Thanks for taking the questions just a quick one.

On guidance.

It would just be great to hear what.

To achieve the high end of that range and what you need to see in terms of regional demand trends.

The expectations for <unk>.

Some of the Covid Lockdowns end up progressing and then if you can just make any mention of expectations for.

Specific instrument placements and whether you expect strengths in <unk>.

Instrument or another that'd be great.

Yes, and I can pick the first question Max. Thank you so well we expect to carry the amendment to momentum forward based on what we've seen in Q1, we've continued to see very strong demand on the instruments.

On top of the line northern light and <unk>.

As we rollout the <unk> business as well.

So overall I think we are.

Sure.

Guidance for the year remains.

Our range with.

Under 168.

Great.

Good question.

It would be great.

Tahira any metrics you can share to describe the adoption you've seen from the 20 times color immuno profiling, Kent and whether the adoption.

<unk>.

How that adoption has trended compared to your internal expectations.

We don't have a metrics about adoption.

And with US at this point.

We'll think about providing that.

Upcoming upcoming analyst meeting.

Okay, Great final one.

Open ended question.

Can you just give us a progress update.

Around some of your efforts in MRV monitoring.

Whether it's logical for us to expect.

A dedicated <unk> monitoring and reagent kit application sometime here in 2022 or is that more of a 'twenty train beyond type situation.

Okay.

I'll take that question actually this is one of the R&D project currently.

He is today.

Our.

Bye.

And together with our partners.

<unk>.

We expect.

More data to be shared towards the end of the year.

Great. Thanks for taking the questions congrats on the continued momentum.

Thank you. Our next question comes from the line of Matt <unk> from Goldman Sachs. Your question. Please.

Thanks for taking my questions.

Patrick.

Maybe patrik just first one for you on gross margins.

Could you talk about.

The progression over the course of the year.

I think Q1 was a little lower than we were expecting but.

But it was so high on a relative basis. So can you just talk about what youre thinking in terms of gross margin margin progression, particularly as maybe reagents are RARA as our other higher margin.

Revenue starts coming through over the course of the year.

Yes, thanks for the question so.

As we continue to scale the organization capture some economies of scale.

Overall margins will continue to increase we also.

Launching a renewed the reagent business.

You have a higher gross profit margin so our.

Our expectation is that the gross profit margin will continue to.

Build over time.

Some some pressure that we've seen.

<unk> environment.

We are laser focused trying to keep that gross profit margin moving up.

Got it and then.

In terms of instrument mix I know in previous quarters, you've talked about maybe Aurora outselling northern lights and could you give us any sense for at least for this quarter.

What what's the kind of mix of instruments looks like.

From a high level, just so we can kind of look.

Some of the trajectory of each of the instruments.

So the Aurora top of the line remains the large majority of our instruments.

Second.

Coming to the.

The northern light family and then.

Behind that we have the self order coming in as well.

Got it and then just last question on the <unk>. It sounds like it's making good progress I think in previous quarters, you talked about kind of the.

The flow cytometry instruments, providing a good groundwork for selling that <unk> could you talk maybe a little bit more about customer feedback I know there was a competitor launch.

In the last quarter I made a little bit before just kind of feedback to yourself.

Alex offering and any other color you can provide on that.

Yes, I will take that question.

Typically it takes.

Quite a few amongst firstly instrument setup today than what it was.

Customer.

It will help them to start to experiment normally.

Okay.

For the presentations it takes probably about 12 to 18 months to see something really start to show up.

So at this time, we don't have any thing we can share publicly but you should expect to see.

Yes.

Any thoughts there.

Great. Thanks, Amit I appreciate the color.

Yes.

Thank you. Our next question comes from the line of David <unk> from Piper Sandler Your question. Please.

Hi, Thanks for taking the question and congrats on a really good quarter.

So I'm going to continue a little bit with <unk> question and ask it differently and hopefully maybe you can't answer this way.

Youre talking about the adopters are your early adopters in your reagent business would you care to maybe give a profile of what they look like are they.

Pharma academic maybe the types of projects Theyre working on disease indication anything to help us kind of understand who might dislike lower hanging fruit customer might look like and if we can apply it to maybe some of the customers that you might get in the future.

I think both type of customers.

As you can see our.

Customer portfolios.

50% of our customers' internal customers are pharma.

Politics.

Okay, Daniel So we actually work with both.

Set up customers trying to get our.

The aging.

I think currently it's going.

Very well as I mentioned, even though it's still a small portion of our <unk>.

Overall revenue.

The growth rate is quite high. So we are very pleased about the progress so far.

Yes.

Got it I appreciate that and then.

And then in terms of.

Yes.

Okay.

Sorry, I lost the place where I was at.

Yes, I asked this last quarter and I guess.

You did see some decline some new competitive launches earlier in the year I at this point are you.

Are you seeing any impacts on the business.

Or are you seeing the customers.

Maybe a freeze or take a look at other products.

You can see based on the momentum we have seen clearly.

We haven't seen any impact to our business.

Very fair.

Alright.

And then thank you very much.

I'll just add I got it from here.

Thank you. Our next question comes from the line of Tejas Savant from Morgan Stanley . Your question. Please.

Hey, guys good evening.

Maybe just to start with sort of operational and supply chain.

<unk> in China. This has been something thats come up on a bunch of other tools companies earnings given the Covid lockdown situation there.

And I know you don't have much of a revenue sort of exposure there to the region, but it's an important sort of clinical.

A priority for you and you've got supply and manufacturing exposure. There. So just curious as to.

Why it is that that you feel you are relatively well insulated there and could that sort of could prolong lockdowns Euro for example.

Change that.

Situation.

Actually this is very difficult to project. However, we have.

Plan very well and this is already taken into account.

Our financial model and.

Also.

Because of the structure, we have built into our process.

Yes.

Sure.

Integrated with <unk>.

Inventory was.

Manufacturing planning I think all of those have been taken into account so at least.

If the markets stay as es situations with all foresee any impact.

Our business for the year.

Got it that's helpful. And then when this is more of a broader.

Industry question really what is your exposure to smid cap pharma, if any if I remember right I think academic versus pharma exposure for you was roughly 50 50, but specifically early stage companies or perhaps even pre revenue companies.

What are they constitute in terms of your funnel and.

Are you seeing any signs of weakness there.

Not today, I think still quite healthy.

In our funnel.

Got it okay.

And then.

In terms of just.

Exactly the things stand on sales reps for the reagent business and how are you thinking about the ramp there and then a related question not just for sales jobs. Good broadly speaking how are you factoring in wage inflation you are into your.

Forecast.

Yeah.

Yes.

Definitely.

Sure.

Impact regarding for the inflation, but.

This has already building to our financial model.

So we have taken.

Measures to deal with this indicated we have leveraged our global reach.

Resources.

And.

Regarding tool.

Logistics.

As well as the cost to mitigate.

Information over to Craig.

So so far this has been managed.

Where do you foresee any.

The impact of what we have presented.

Got it.

Then in terms of the sales ramp for the reagent side of the business Amendment.

Yes. This is al.

Actually your agency is a faster growing.

Sector of our business right now.

<unk>.

It's doing very very well.

Got it.

And then one final one for me.

In the past you've mentioned that the replacement cycle in nature.

Awesome.

The industry and you sort of punching above your weight in terms of gaining share at every time.

I'll just add Amit that comes up for replacement.

Are you seeing the number of units coming up for replacement as a whole go down this year or perhaps I mean, just tighter scrutiny from customers as they think about capex purchases.

No.

Great question.

I think.

Based on our funnel.

<unk>.

We think we.

And there is no real impact to our current forecast.

Got it okay.

Helpful. Thanks, guys.

Yes.

Thank you. This does conclude the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation you may now disconnect. Good day.

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<unk> recorded and now I'd like to introduce your host for today's call program, Paul Goodson Investor Relations. Please go ahead Sir.

Thank you operator earlier today <unk> Biosciences released financial results for the quarter ended March 31 2022.

Haven't received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investors at <unk> bio dot com.

Joining me today from <unk> are wind, Ben Jon <unk>, CEO , and Patrick <unk>, Chief Financial Officer.

Before we begin I would like to remind you that management will make statements. During this call that are forward looking statements within the meaning of the federal securities laws, including statements regarding <unk> business plans strategies opportunities and financial projections.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements.

Our press release issued today.

And then <unk> filings with the SEC.

This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles.

Conciliation to the most directly comparable GAAP financial measure maybe found in today's earnings release submitted to the SEC.

Except as required by law <unk> disclaims any intention or obligation to update or revise any forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast may 11th 2022.

With that I would like to turn the call over to Jim.

Thanks, Paul and welcome everyone joining the call today.

I'll also start by thanking the incredible <unk> team for their dedication and execution.

As we close out the first quarter of 'twenty funding tool.

On today's call I will begin with a brief overview of our company.

Next I will discuss our retail progress since the end of 2021 and finally I will turn the call over to Patrick for a more detailed look at our financials.

For those of you Youll tool the <unk> story.

We are a leading cell analysis solution with company advancing the next generation of cell analysis tools.

Navigant novel technical approach to create our full special profiling all SP platform.

Our SSP platform includes instruments and reagents software and application services.

Utilizes the full special are far less on the signatures to deliver high resolution.

Content.

So typically cell analysis.

Our technology and our solutions address some of the key limitations of conventional methods.

While flow cytometry, why do they use the tool for single cell analysis.

Invention of flow cytometry, and the early approach to special flow cytometry have been challenged as we are able to detect only a few markets in a single tool.

Yeah, Let me field, the dimensionality sub optimal resolution low throughput high cost of our performance and the first significant technical expertise required to operate the systems.

<unk> scientific progress, Inc. Advanced cell analysis field.

By contrast, <unk> is transforming the flow cytometry industry flow technology disruption.

Our patented SP technology expense that number of colors that can be analyzed and optimizes sensitivity and the accuracy through our novel optical and electronic designs.

Utilizes an innovative methods of light detection and that distribution.

This novel Technology application allows us to address the inherent limitations of other technologies.

Providing a higher density of inflammation with greater sensitivity.

Flexibility and increased efficiency.

At a lower cost for performance.

Part of our performance and cost advantage.

Which helps our manufacturing from this country and the operating gross margin.

Due to the application of Lightspeed.

Technology adopted Paul the telecom industry.

Which should benefit from decades of development in manufacturing supremacy in the cost reduction.

Meanwhile, this is not the case with conventional flow cytometry, which continuously expensive vacuum tube to detection technology.

Our innovative technology has been validated by the 406 phase III build the publications as well as over 1200 instrument placements.

At the end of the quarter and a growing number of applications.

At <unk>.

We provide our customers with an end.

And the solution consisting of instruments Hagens software.

<unk> services.

In addition to our robust suite of comprehensive solutions.

Last year, we began shifting our sales service, which enable additional downstream genomics and proteomics analysis.

Importantly, our focus allow researchers to isolate a living cell populations from higher complexity panels beyond 40 biomarkers.

While our sales have been strong drivers of our revenue growth to date, we expect that.

And the sale of <unk> will play an important role in.

Driving our revenue growth over the next three to five years.

I am proud to say that our installed base of instruments continue to achieve robust growth.

In the first quarter, we placed 116 instruments, bringing our total installed base to 1225 instruments at the end of Q1.

We continue to execute our core strategy.

Achieved a solid adoption with highest negative I'm not if its users.

Ill also bringing food special profiling to entry level users as well.

And Patrick will discuss later.

Once again achieved a strong revenue growth this quarter.

With revenue increasing 44% over the prior year.

These results.

Demand driven by the recognition from customers of the brand.

<unk> of our technology in addressing their needs.

Even in the face of macro pressure.

Including global supply chain disruptions.

Our team continues to execute well and achieve operational excellence.

While the industry as a whole is experiencing a difficult operating environment and the cycle has nothing to inflationary pressures.

Our dedicated team is managing flow.

In part by leveraging our global workforce.

Additionally.

Mobile presence has also helped us to mitigate supply chain problems.

And we are further insulated by supply issues.

By our past inventory buffer.

We continue to be focused on execution.

And I'm confident in our teams ability to navigate through this environment.

Thank you to succeed.

We began the year by announcing the opening of our new facility in Fremont, California.

Which tripled our previous manufacturing capacity to meet growing global demand for our cell analysis solution.

In addition to Fremont location.

Also opened new offices in Seattle, Washington, which dedicated at all key R&D initiatives and customer application support.

And at the end of April .

The appointment of Todd Cohen, our Chief commercial officer.

We are excited to have Todd joins Hy Tech.

And are pleased to welcome him to our team.

Cause expensive experience, including previous role at Cardinal Hill Carefusion.

Most recently at the BD Biosciences will bring tremendous value to our organization.

Since first being introduced in 2017.

Our cell analysis systems have been widespread adoption across the globe was used in more than 40 countries.

And now we have seen great traction in diversifying our revenue base through the launch of new products, including the cutting sources from the agent sales.

While still a smaller part of our overall revenue.

And for our reagents is growing rapidly.

We are excited for the potential of this contribution to our enterprise.

As I mentioned earlier.

Our technology has been renovated.

<unk> hundred 63 peer reviewed publications as of the end of the quarter.

And that this quarter there were 95 peer reviewed publications mentioning cycle.

The highest figure in any quarter, so far since <unk> was founded.

I am proud of this accomplishment, which speaks to the momentum of our platform and validate the use of our offerings in the scientific community.

The work, we do at Phi Tech and the technology, we bring to the field.

Continue to demonstrate real world results touch on highly relevant.

That impact the life of the general public.

During the first quarter of this year for example.

There were two particular paper.

In nature and in nature communications examining issues related to COVID-19.

The first paper.

So even though <unk> been maturation of T cell response to mrna vaccination.

Published in nature. It is today, how well the reaction of our immune system.

Vaccination leads to long term protection from the virus.

And these groups to this clinical costs.

As these two pesos.

And the confidence other exemplify our technology is being used today in real world applications.

That's critical.

Is it.

I am grateful for <unk> role in these consequential scientific fundings and look forward to sharing further studies of our price of patents for use in future periods.

In all <unk>.

By the progress our team has made in this quarter.

Expect we'll make throughout the course of the year as we continue to establish ourselves as the leading cell analysis solutions company.

As we push forward, our cadence of new products and applications.

We are deeply focused on providing a complete a cell analysis solution to our customers.

We look forward to continuing to provide our novel SP platform to these customers.

Great pushing the bounds of scientific discovery and clinical progress.

With that I will now turn the call over to Patrick for more details around our financials.

Thanks Ben.

Total revenue for the first quarter of 2022 was $35 $1 million.

44% increase over the first quarter of 2021.

We continued to see demand across the entire portfolio of offerings.

<unk> service revenue that have more than doubled from one year ago.

<unk> come off warranty.

Gross profit was $20 2 million for the first quarter of 2022.

An increase of 39% compared to a gross profit of $14 5 million dollar in the first quarter of 2021.

Gross profit margin was 50.

58% in the first quarter of 2022 compared to 60% in the first quarter of 2021.

Adjusted gross profit margin in the first quarter of 2022 was 61% compared to 60% in the first quarter of 2021.

After adjusting for stock based compensation expense.

Amortization of acquisition related intangibles.

Operating expenses were $22 $5 million for the first quarter of 2022.

69% increase from $13 $4 million in their first quarter of 2021.

The increase was primarily due to expenses to support continued growth of the business.

Including further investment in sales and marketing R&D and costs related to operating as a public company.

Research and development expenses were $8 million for the first quarter of 2022 compared to $5 $1 million for the first quarter of 2021.

Sales and marketing expenses were $7 million for the first quarter of 2022 compared to $4 $3 million for the first quarter of 2021.

General and administrative expenses were $7 5 million for the first quarter of 2022.

Increased from $4 million.

For the fourth quarter of 2021.

Loss from operation in the first quarter of 2022 was $2 4 million compared to income of $1 1 million in the first quarter of 2021.

Net loss in the first quarter of 2022 was $2 $2 million compared to income of <unk>.

$1 billion in the first quarter of 2021.

Adjusted EBITDA in the first quarter of 2022 was $1 9 billion compared to $1 1 million in the first quarter of 2021.

After adjusting for stock based compensation expense and foreign currency exchange impact.

Turning to our guidance with our strong performance in Q1, we now expect full year 2022 revenue to be closer to the high end of the range.

$160 million to $168 million.

Before I conclude I would also like to touch on some assumptions embedded in our 2022 guidance.

We remain in a strong position financially.

Continue to see strong demand for our instruments and remain focused on maintaining our profitability as well as achieving our long term growth targets and objectives.

Because <unk> goal is to be profitable on a net income and EBITDA basis annually, we do not anticipate the need for future capital raises to meet operating.

We are also pleased with our strong balance sheet, including a solid cash position and no debt.

Underpinning our healthy organization.

We will continue to invest in our core business.

As it relates to new project and innovation, while remaining opportunistic in the M&A environment and focus on growth in all key areas.

With that I.

I will turn it back over to Lindon.

Thanks, Patrick.

<unk> has continued to demonstrate our commitment to developing tools to advance the next generation of cell analysis.

I would like to express my deep gratitude for the team we have here at Phi Tech.

Yes excellence and share their belief in this important mission track our progress.

I'm excited to announce now.

<unk> will be participating in the cycle can take on digital conference in early June in Philadelphia after.

After the event was held virtually for the Australia.

And later that month, we will be hosting our first analyst day in New York City.

Stay tuned for further details as we are excited to host this event and the share further updates on our strategic objectives and the progress towards our goals.

With that we'll now open the call up follow up questions.

Operator.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one our first question comes from the line of.

<unk> <unk> from Cowen and company your question. Please.

Hi, Thanks for taking the questions just a quick one.

On guidance.

Would just be great to hear what.

To achieve the high end of that range, what you'd need to see in terms of regional demand trends.

The expectations for <unk>.

Some of the Covid Lockdowns end up progressing and then if you can just make any mention of expectations for.

Specific instrument placements and whether you expect strengthen.

Instrument or another that'd be great.

Yes, and I can pick that first question on Max. Thank you. So well we expect to carry the amendment to momentum forward based on what we've seen in Q1, we've continued to see very strong demand on the instrument Aurora topic Your line northern light and <unk>.

As we rollout the <unk> business as well.

So overall I think.

Our.

Guidance for the year remains.

Range with.

Under 168.

Great.

Question.

It would be great.

Here any metrics you can share to describe the adoption you've seen from the 25 color immuno profiling Kent.

The adoption.

<unk>.

How that adoption has trended compared to your internal expectations.

We don't have the metrics about adoption.

Handy with us at this point.

We'll think about providing better.

Upcoming upcoming analyst meeting.

Okay, Great final one.

Open ended question.

Can you just give us a progress update.

Around some of your efforts in MRV monitoring.

Whether it's logical for us to expect.

A dedicated <unk> monitoring and reagent kit application sometime here in 2022 or is that more of a two train beyond type situation.

Okay.

It will take that question actually this is one of the R&D project currently.

Being studied.

Our.

Scientists and together with our partners.

But.

We expect we'll have more data to be shared towards the end of the year.

Great. Thanks for taking the questions congrats on the continued momentum.

Thank you. Our next question comes from the line of Matt <unk> from Goldman Sachs. Your question. Please.

Hi, Thanks for taking my questions Patrick.

And maybe Patrick just first one for you on gross margins.

Could you talk about the progression over the course of the year.

I think Q1 was a little lower than we were expecting but.

But it was so high on a relative basis. So can you just talk about what youre thinking in terms of gross margin margin progression, particularly as maybe reagents or sort of Aurora as our other higher margin.

Revenue starts coming through over the course of the year.

Yes. Thanks for the question. So as we continue to scale the organization capture some economies of scale.

Overall.

Margins will continue to increase we also.

Launching of you know the reagent business typically have a higher gross profit margin. So.

Spectation means that the gross profit margin will continue to.

Build over time.

Despite some some pressure that we see.

On the supply chain environment.

So we laser focused trying to keep that gross profit margin moving up.

Got it and then.

In terms of instrument mix I know in previous quarters, you've talked about maybe Aurora outselling northern lights and could you give us any sense for at least for this quarter.

What what's the kind of mix of instruments looks like.

A high level just so we can kind of look at some of the trajectory of each of the instruments.

So.

The Aurora top of the line remains the large majority of our instruments.

Second.

Coming to the.

The northern lights family and then.

Behind that we have the south Florida coming in as well.

Got it and then just last question on the <unk>. It sounds like it's making good progress I think in previous quarters, you talked about kind of the.

The flow cytometry instruments, providing a good groundwork for selling that <unk> could you talk maybe a little bit more about customer feedback I know there was a competitor launch.

Last quarter, I made a little bit before just kind of feedback to yourself.

Alex offering and any other color you can provide on that.

Yes, I will take that question.

Typically it takes.

Quite a few amongst firstly instrument set up today and.

What was.

Our customer.

It will help them to start Panama normally.

Yes.

While the presentations it takes probably about 12 to 18 months to see something really start to show up.

So at this time, we don't have any thing we can share publicly but you should expect to see.

Yes.

Any thoughts there.

Great. Thanks, Amit I appreciate the color.

Yes.

Thank you. Our next question comes from the line of David Westerberg from Piper Sandler Your question. Please.

Hi, Thanks for taking the question and congrats on a really good quarter.

So I'm going to continue a little bit with Max's question I'm going to ask it differently and hopefully maybe you can't answer this way.

Youre talking about the adopters are your early adopters of any reagent business would you care to maybe give a profile of what they look like are they.

Okay.

I think both type of customers.

As you can see our.

Customer portfolios.

50% of our customers' internal customers are pharma.

Politics and the.

Okay, Danielle so we actually work with both.

Set up customers trying to get our.

The aging.

In Korea.

I think currently it's going very well as I mentioned and even though it's still a small portion of our overall revenue.

The growth rate is quite high so we're very pleased about the progress so far.

Yes.

Got it I appreciate that and then.

And then in terms of.

Yeah.

Okay.

Sorry, I lost the place where it was at.

Yes, I asked this last quarter.

And I guess.

You did see some of the some new competitive launches earlier in the year.

At this point are you.

Are you seeing any impacts on the business.

Or.

Are you seeing the customers.

At least maybe freeze or take a look at other products.

You can see it based on the momentum we have seen clearly.

We haven't seen any impact to our business.

Very fair.

Alright.

And then thank you very much John .

I'll just I got it from here.

Thank you. Our next question comes from the line of Tejas Savant from Morgan Stanley . Your question. Please.

Hey, guys. Good evening, so maybe just to start with sort of operational and supply chain.

<unk> in China. This has been something thats come up on a bunch of other tools companies earnings given the Covid lockdown situation there.

And I know you don't have much of a revenue sort of exposure there to the region, but it's an important sort of clinical priority for you and you've got supply and manufacturing exposure. There. So just curious as to why it is that that you feel you are relatively well insulated there and could that sort of could prolong loss.

Downs here for example changed.

Change that.

Situation.

Actually this is very difficult to project. However, we have.

Plan very well and this is already taken into account.

Our financial model and.

Also.

Because of the structure, we have built into our process.

Uh huh.

Bill.

Indicated was the inventory was.

The manufacturing planning I think it's all of those has been taking into account so at least.

If the market stay as Es while situations.

We don't foresee any impact.

Through our business for the year.

Got it that's helpful. And then when this is more of a broader.

Industry question really what is your exposure to Smith cap pharma, if any if I remember right I think academic versus pharma exposure for you is roughly 50 50, but specifically early stage companies or perhaps even pre revenue companies.

What are they constitute in terms of your funnel and.

Are you seeing any signs of weakness there.

Oh not.

I think still quite healthy.

In our funnel.

Got it okay.

And then.

In terms of just.

Exactly you did thanks, Dan on sales reps for the reagent business and how are you thinking about the ramp there and then a related question not just for sales jobs. Good broadly speaking how are you factoring in wage inflation you are into your.

Forecast.

Sure.

Yes.

Definitely.

Sure.

Impact regarding for the inflation, but.

This has already built into our financial model.

So we have taken.

Just to deal with this indicated we have leveraged our global reach.

Resources.

And.

Regarding to bear risk.

Logistics.

As well as the cost to mitigate.

Inflation or Greg.

So so far this has been managed well.

Where do you foresee any.

It'll impact to what we have presented.

Got it.

Then in terms of the sales ramp for the reagent side of the business Amendment.

Yes. This is al.

Actually the agency is a faster growing.

Sector of our business right now.

It's doing very well.

Got it.

And then one final one for me.

In the past you've mentioned.

Placement cycle nature.

Awesome.

The industry.

You sort of punching above your weight in terms of gaining share at every time.

I'll just add Amit that comes up for replacement are.

Are you seeing the number of units coming up for replacement as a whole go down this year or perhaps I mean, just tighter scrutiny from customers as they think about capex purchases.

Yeah.

Got that.

Great question.

I think.

Based on our funnel separately within.

We think we.

And there is no real impact to our current forecast.

Yeah.

Got it okay.

Helpful. Thanks, guys.

Yes.

Thank you. This does conclude the question and answer session as well as today's program. Thank you ladies and gentlemen for your participation you may now disconnect. Good day.

Q1 2022 Cytek Biosciences Inc Earnings Call

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