Q2 2022 Cytek Biosciences Inc Earnings Call
Yeah.
Good day and thank you for standing by welcome to the site Biosciences second quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone please be advised that today's conference is being recorded.
I would now like turn the conference over to your Speaker today, Paul Goodson Investor Relations. Please go ahead.
Thank you operator earlier today, so I checked Biosciences released financial results for the quarter ended June 32022.
Haven't received this news release or if you'd like to be added to the cookies distribution list. Please send an email to investors at <unk> Tec bio dot com.
Joining me today from <unk> are Wednesday, John CEO , Patrick John Malone, Chief Financial Officer.
Before we begin I'd like to remind you that we will be making statements. During this call that are forward looking statements within the meaning of the federal securities laws, including statements regarding <unk> business.
Strategies opportunities and financial projections.
These statements are based on the company's current expectations and inherently involve significant 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 in the press release issued 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 duty to update any forward looking statements, whether because of new information future events or changes in its expectations.
Conference call contains time sensitive information.
It is accurate only as of the live broadcast August 10 2022.
With that I would like to turn the call over to win.
Thanks, Paul and welcome everyone joining the call today.
Hi, Walter Scott.
Again banking the incredible team.
The dedication and execution.
<unk> growth outlook, the second quarter of 2008 for Nicole.
On today's call I will begin with a recap of our progress this year and it's Scott.
If I could continue to advance toward our mission and vision.
And then I'll turn the call over to Patrick for a more detailed look at our financial results and outlook.
Cycle continues to extend our park in the field as we provide our customers with an end to end solution consisting of instrument.
Again.
Software and application services.
Since our inception.
We have continued to develop and launch new products and services, which have been validated.
With.
Our robust customer base.
Our unique portfolio of comprehensive solutions positions.
In the sector.
And we are proud that demonstrates the value we provide to our customers.
Beyond our original tweet instrument.
Which should continue to see solid demand.
We expect our ligands and our recently launched that sales product.
Contributed considerably to our future enterprise revenue growth.
We see further diversification of our revenue stream, including a growing contribution from recurring revenue lifting.
Drifting up services in the region.
An important role in <unk> future.
I am pleased to say that our installed base of instruments continues to achieve robust growth in the field.
During the second quarter.
So I think at 30 instruments.
Our total installed base for 1356 instruments at the end of Q2.
These statements are also aligned with our core strategy and we have continued to achieve solid adoption with high dimensional scale analysis to users.
I'll also present in special property co entry level users.
Both being introduced in 2017.
Our cell analysis systems have gone to widespread adoption across the globe.
In more than 40 countries.
As Patrick will discuss later our efforts have once again translated into strong revenue growth quarter.
With revenue increasing 34% over the prior year second quarter.
These results reflect a strong demand driven by the recognition following customer at all.
The advantages of our technology in addressing their needs.
Once again our.
Our team continues to execute well and achieve operational excellence, even in the face of various macro pressure.
Our dedicated team is able to leverage <unk> global workforce in order to manage through inflationary in the supply chain pressures.
Additionally, our cost inventory buffer provide.
Mitigation of potential supply chain disruption.
Insulating our operation while constraining.
In all we continue to be focused on execution and.
We remain confident in the fact that the team demonstrated our ability to manage through this environment and continue to succeed despite the ongoing challenges.
I would like to take a moment to highlight some important recent developments for <unk>, while this past quarter.
As a reminder, at the end of April .
The appointment of <unk> as our Chief commercial officer.
Joining Todd has proven an integral part of our team and has already demonstrated a significant value to our.
Organization.
And we are pleased to have with us as we continue to execute our mission.
At the end of May we announced a series of single currency, probably region and six <unk>.
CE marking.
European Union IBD $98 79.
Okay.
That accept the CE, marking also included in the certification.
We've risk development clinical flow Cytometry laboratory based in the European Union can now purchase like a FIFA CE IBD certified our reagents for a value.
This exciting achievement makes the seafloor region available for clinical diagnostics in hospital laboratory in the clinic across the EU and positions us a path to.
Offering a total sale analysis solution to the European market.
In early June .
Participated title, which is one of the premier flow cytometry concentrate.
At the event, we had the only sale thought that it was actually running the show floor, which enabled us to perform live demonstrations showing the power of combining <unk> with <unk>.
Cost of sales that will finally, Fred Hutch.
I'm not sure tutorial running 59 marker panel using the Aurora system, providing further validation of the transformative power of our technology.
Overall lithium side of confidence was a very successful event for us eyetech.
Significant customer interest there.
Allocated in a record number of sales leads for the company.
Great. Thank you.
Also hosted our inaugural analyst and Investor day.
In addition to our exacting, providing a deep dive into flow cytometry, we showcased for key opinion leader users of our products and our services.
Illustrated the power of our solutions and the importance of the value we bring to our customers.
For those who may not have attended the event.
In vital to repeal replay of the webcast.
Records section of our website.
Okay.
Who spoke scientists and physicians in the research and the clinical field will both elaborate on oncology, but also HIV diabetes inflammation aging and the multiple effect of the Covid pandemic, demonstrating the breadth of <unk> technology.
These experts spoke to the dramatic expansion in capabilities.
And the accuracy they have achieved bronchitis machines.
And the software as well as the consistency of results and the significant cost savings they have upheld.
One kols, who operate our core clinical laboratory said that protects the machine say, 15% to 100% in cost for running samples, which is due to be 300 per kind of factor than competing technology.
The observed that psychic ability to run more samples you can feel it too.
As a result in less time.
Faster diagnosis.
Our treatment to begin sooner.
I'll have more specific therapeutic approach confirmed resources cost per lead and allows hospitals to make a patient discharge their decisions more quickly.
<unk> further cost.
As I commented.
The advanced capabilities of <unk> analyzer, and the ground breaking nature of side effects.
Further create new opportunities in research and clinical practice.
<unk> said that <unk> has.
The deepwater for spectral analysis, simplifying the technical skills needed and unleashing the power that artificial intelligence can offer.
We are gratified that our in site, enabling such significant scientific and clinical advancement.
As we continue to grow our offerings in the base of instruments.
And our services our technology is now being validated by 768 peer reviewed publications as of the end of the quarter.
This quarter alone there were 116 peer reviewed publications mentioning cycle.
I'm very proud of this accomplishment, which speaks to the momentum of our platform and to validate the use of our offering in the scientific community.
A notable publication was one Roswell Park cancer Center entitled.
Development of 27 color panel for the detection of measurable residual disease.
Agent diagnosed with acute myeloid leukemia.
In which the research use only one tool.
Reducing costs and improving workflow.
This exemplifies our mission at Phi Tech.
The technology, we bring to the field as we continue to demonstrate the proven real world results.
Oh Im pleased with the power our team has made this quarter.
To make for the remainder of the year as we continue to establish ourselves as a leading cell analysis solution company.
As we continue to push forward, our cadence of new products and applications.
We remain deeply focused on providing a concrete analysis solution to our customers.
We look forward to continuing to provide our novel Athene press release customers as they push the following scientific.
Scientific discoveries and clinical progress.
With that I will now turn the call over to Patrick.
What details around our financials.
Thanks <unk> bin.
Total revenue for the second quarter of 2022 was $42 million.
32% increase over the second quarter of 2021.
Gross profit was $24 6 million for the second quarter of 2022.
An increase of 24% compared to a gross profit of $19 7 million in the second quarter of 2021.
Gross profit margin was 61% in the second quarter of 2022 compared to 65% in the second quarter of 2021.
Adjusted gross profit margin in the second quarter of 2022 was 64% compared to 65% in the second quarter of 2021 after adjusting for stock based compensation expense and amortization of acquisition related intangibles.
Operating expenses were $25 5 million for the second quarter of 2022.
60% increase from $15 9 million.
In the second quarter of 2021.
The increase was primarily due to expense.
To support continued growth of the business, including further investment in sales and marketing R&D and cost related to operating as a public company.
Research and development expenses were $8 4 million for the second quarter of 2022 compared to $6 2 million.
For the second quarter of 2021.
Sales and marketing expenses were $8 4 million for the second quarter of 2022 compared.
256 million in the second quarter of 2021.
General and administrative expenses were $8 6 million for the second quarter of 2022, an increase from $4 2 million in the second quarter of 2021.
Adjusted EBITDA in the second quarter of 2022 was $4 8 million.
Compared to $4 7 million in the second quarter of 2021 after adjusting for stock based compensation expense and foreign currency exchange impacts.
Turning to our guidance, we continue to expect full year 2022 revenue to be closer to the high end of the range of $160 million $268 million.
While we have seen an increase in foreign currency exchange headwinds, namely to the euro the growing momentum in our business gives us the confidence and ability to maintain our full year guidance.
We are prudent and will continue to take action to address this ongoing challenge.
Our sales pipeline programs this visibility into future revenue expectation.
I am pleased to say that our organization even in a strong position financially continues to see solid demand and is committed to remaining profitable on an EBITDA and net income basis.
As well as achieving our long term growth targets and objectives.
Such we do not anticipate the need for future capital raise to meet operating needs.
Strong balance sheet, including a solid cash position and no debt.
The strength of our healthy organization.
We will continue to invest in our core business as it relates to new projects and innovation, while remaining opportunistic in the M&A environment and focusing on growth in all key areas.
With that I will turn it back over to Wayne.
Thanks, Patrick.
Again this quarter.
You guys have continued to demonstrate our commitment to developing towards the agents and the south clinical advance the next generation of cell analysis.
I would like to express my deep gratitude for the team we have here at Mitek.
Excellent.
Work and share the belief in with in part of our mission drive our progress.
I would like to again demand anyone who did not attend our analyst and Investor day that a replay is available.
Our web site.
Thank you everyone and we will now open the call up for questions.
Operator.
As a reminder to ask a question you will need to press star.
One one on your telephone.
Please standby.
Good day roster.
Our first question comes from the line of Matt.
Most of the key from Cowen and company.
No no.
So as far as some had some targets some near term some longer term. This firm the percentage of total revenue can be generated from reagents reagent kits, a few months ago, and clearly theres a lot of macro factors and other regional dynamics in play.
That are impacting both supply and demand in our life Science research tools product shelf.
Would just be curious to hear.
The demand for the reagent offerings has trended.
Over the course of 2022.
And then maybe more specifically.
During Q2.
Okay.
Yes, so Matt maybe I can pick up the first question.
So we had another very solid quarter on there on the reagent.
Obviously up from last year, just because we had a small base from last year.
We're pleased with where we are.
So overall.
In line with our expectation.
We've seen a little bit of.
I would say a headwind on the currency side, so we were impacted with them.
I would say we are impacted adversely with some maybe 3% to 5%.
On the total revenue.
But outside of that I think.
It's marching towards our expectation I think the business is performing very well considering the macro environment.
I would say that.
We delivered another quarter of very solid financials, and I think it is.
Thats, where I well for another great year.
Okay great.
And then.
Another <unk>.
Insight from the analyst day.
The evaluation of clinical flow cytometry labs in terms of the performance of instruments that are supporting clinical application along with their operational efficiency turnaround time et cetera.
Just curious if there if there are similar standards in place for European flow Cytometry Labs, and then if so we saw that the CE Mark announcement.
How much how should we be thinking about.
How much youre prioritizing our commercial push.
In the clinical setting in Europe .
Yes, our pick up that question.
<unk> marketing provides us a new opportunity.
To.
The clinical tenders.
We obtain Europe .
Including our <unk>.
Key approved certified instrument as well as the regionals so.
Certainly, it's still new for us and we have cash.
Scott.
Our reagents cleared but.
Again that.
There will be new opportunities for us going forward.
Okay, great. Thanks for taking the questions.
Thank you. Our next question comes from the line of Matt <unk> from Goldman Sachs.
And then Patrick Thanks for taking my questions, maybe just first.
And I guess at a high level, because I know you don't necessarily breakout.
The different instruments, but I know last year towards the latter half of the year you were.
Generating a decent amount of traction within Aurora relative to northern lights.
It's been a year since you've launched the cell sorter and just given the ASP the cell sorter and the potential impact on margins, maybe just kind of give us an update on the.
The progression of each instrument category or maybe just specifically I'm interested in the cell sorter as well on the progress given the time that has elapsed since launch thanks.
So on the sell side or what I can say that we don't really break out information, but we have a record number of sales sort of this quarter.
And we continue to see demand for.
Every.
Instrument type the Aurora the northern light.
This quarter, we had a very strong quarter on sales order.
Great. Thanks, Patrick and then just.
Maybe another one for you Patrick just on the adjusted gross margin came in it came in about where we were.
Somewhat on par with last year for a high level could you just maybe talk about some of the drivers of gross margins. This quarter and then what your expectations are for gross margin trends adjusted gross margin trends for the balance of the year.
Yes, so the expectation is that the gross profit margin will scale will gradually improve over time, especially as we rollout.
The reagents that typically have a higher gross profit margin and as we also continue to Europe to globalize our processes, we have seen as I said earlier, a little bit of a headwind longer on the FX position, but I think we've been able to manage that quite well.
In this quarter.
Got it thanks very much for taking my questions.
Thank you. Our next question comes from the line of David Westenburg from Piper Sandler.
And congrats.
Congrats again on.
And all the progress I wanted to actually start with.
I have a question probably more for Patrick because it's on inventory, we're picking up a lot of company I mean, you've talked about supply chain on the call.
I appreciate the color there.
Again from a lot of companies that they are having to be opportunistic with with the supply chain and parts in.
When things become available there, they're kind of just buying rate than buying in big numbers.
Should we expect.
Free cash flow due to the fact that inventory maybe you'll have to build a lot of inventory over the next few quarters in order to to kind of keep a lot of the parts on hand, I mean, just how should we think about inventory free cash flow that you'll probably have to do over the next.
Six to nine months right.
So we haven't waited.
This quarter to build our inventory, so and youll see that looking at the balance sheet, our inventory level now at the highest it's been $45 million.
Up from 32.
So substantially higher if I look at last year and I think what we're doing here is.
To your point I mean, we.
We tried to ensure that we have sufficient.
In stock inventory, so that we can continue to deliver and provide.
The best service to our customers. So I think we've done a pretty good job handling cost.
Which is having.
It'd be higher our inventory so we will probably continue I'm expecting the inventory too.
Continue to build a little bit over time, but it should not be dramatic, but we've seen since December .
Got it Okay and then probably this one is more of a question for <unk> when.
We did see a partnership between B E.
And lab core using flow cytometer in a potential for CTX.
On the Analyst day, you did show a lot of indications around our usage around minimal residual disease.
Is are there any other maybe clinical applications that you see.
As being particularly are particularly.
Interesting from full stack flow cytometry, and maybe anything outside of minimal residual disease or <unk>.
How do you think some of those Cds kind of partnerships. Good luck in the future if you ever did.
Plan on doing some of those.
Yes.
Addition to the EMR.
<unk>.
We have talked about in fact that we have.
Quite a few collaboration partnerships ongoing today.
So clinical laboratory in the world across several countries.
So that in coal.
Patients in such as immuno profiling.
And the other type of.
Research projects.
Clinical.
Activity.
Got it.
Okay. Okay.
Alright, and then just released for the last one this one should be nice.
Sure.
Sorry, if I cut out.
Can you guys hear me okay.
Yeah.
Yes, we can hear you okay perfect cut out for a little bit and then just maybe just one last question if I can.
Patrick.
On the guidance.
It's still about 160 to 168, you did mentioned kind of the high end of guidance.
Is there a reason why you didn't just bring up the low point of guidance and I will accept the answer it's just the stylistic thing.
Versus.
I just was wondering if maybe there is some.
Things that could happen that would still hit the low end of guidance for example, maybe supply chain recession in Europe .
Again, I'm just trying to get comes some color, whether that's stylistic or.
So this is the first time I've worked with you as the CFO and you guys are only about a year and a half out from IPO and so anyway.
It might be.
But no I.
I think we will see.
Feel pretty good about.
You reiterated reiterating our guidance.
Despite the somewhat.
Some some FX headwind if I can call. It this way and it will be on there.
Yes.
I don't know.
Thats good.
Thank you.
Yes, I've got enough of your time I appreciate it.
Thank you. Our next question comes from the line of Provence from Morgan Stanley .
Good evening.
So when when I want to start with Europe , I mean, I know you mentioned sort of FX.
The exposure there, but outside of that Im curious if youre seeing any elongation of sales cycles, our guidance for timing of Capex purchases among your customers and if you are not.
Any color on that because we're starting to pick up sort of signs of that happening with some of the other.
Tremendous focus life science plays out there so just curious as to what Youre seeing and why.
Okay, and then it depends on the region creditors.
I think U S APAC, especially China would have been going well okay.
But in Europe , we can see.
Some delayed process takes longer time to close but the business is still again and we.
We expect all.
All of those things and they will continue to come back maybe towards the second half of the year.
Got it that's helpful and then Patrick one for you I mean implicit in the guide what are you assuming for <unk>.
<unk> flash this year and I.
I guess, a normalized budget flush essential too.
For Q uplift that you that you are im assuming youre modeling into your projections.
Yes. So currently as I said I mean, we we.
I mean, we can with our guidance.
We've seen a little bit of a headwind, especially coming from Europe .
On the on the FX side I mean.
Euro against dollar has weakened substantially so for us.
We feel good about the second half to be 60.
68 range.
And I've only been answers your questions.
Got it okay.
And what.
And then just given your manufacturing facility in Shanghai Office, you've got anything about 200 employees on the ground in China any color of current operating conditions and what are your assumptions around the recovery in the region.
Our manufacturing.
Outside Shanghai Wuxi.
<unk>.
Impact is very minimal.
Possibly.
Our nation.
We have been building inventory not only on the property color of current operating conditions and what are your assumptions around the recovery in the region.
Our manufacturing.
Outside of Shanghai Wuxi.
The impact is very minimal.
Possibly.
Our nation.
We have been building inventory not only on the top side as.
On the instrument.
Sorry that will make sure we will be able to serve our customers.
Got it okay.
And then finally last one for me here.
In terms on that.
Nextgen clinical flow instruments that you are working on.
Can you just give us an update I know you'd mentioned at the analyst day being in contact with the FDA for system requirements et cetera.
Just curious as to any color on how those conversations Wang.
Progress update on the development.
Thank you for participating you may now.
For some it takes.
A couple of years.
We don't really have much new updates.
Got it okay. Thank you.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
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