Q3 2022 Cytek Biosciences Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Welcome to <unk> third quarter 2022 earnings call at this time, all participants are in a listen only mode.
After 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 I would now like to hand, the call over to Paul Goodson Investor Relations. Please go ahead.
Thank you operator earlier today <unk> Biosciences released financial results for the quarter ended September 30 of 2022.
We 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 Phi Tech bio Dot com.
Joining me today from <unk> are when Ben Zhang CEO , and Patrick <unk>, Chief Financial Officer.
Before we begin I'd like to remind you that management will make statements. During the 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.
Statements are based on the company's current expectations and inherently involve significant risks and uncertainties that could cause actual results or events to differ materially 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.
This conference call contains time sensitive information and is accurate only as of the live broadcast November nine 2022.
With that I would like to turn the call over to win them.
Okay.
Thanks, Paul and welcome everyone joining the call today.
I wanted to start by.
Again thanking our team at <unk> for their dedication and execution.
We closed out the further quarter opportunities can be cool.
On today's call I will begin with a look at.
Our progress this year and that the Scott sight continues to advance toward our mission and the vision and.
Then I will turn the call over to Patrick for more detailed look at our financial results and outlook.
Our results this quarter demonstrate the success of our efforts to operate our business efficiently and effectively in a challenging macro environment.
We achieved continued improvement across gross margins net income and <unk>.
The EBITDA.
While further growing our sales across the globe.
Our revenue base and executing our product strategy.
Although macro factors continue to impact the broader industry.
I'm proud of our team's achievements and demonstrated our ability to adapt to the evolving environment.
And I'm confident for the remainder of the day for nickel and the payout.
As we look at the industry landscape.
<unk> continues to stand apart in the field as we provide our customers with an end to end solution consisting of instruments.
Software and application services.
Our unique portfolio of comprehensive solutions positions us.
<unk> in the sector.
And we are proud of that demonstrated the value we provide to our customers.
This year, we have consistently highlighted our comprehensive suite of products and services, which has led to a further diversification of our revenue stream.
With the sale of instruments.
As we have said previously.
Our original suite of instruments, which continue to see solid demand.
We expect our lubricants NFL soldiers.
It looks considerably to our future enterprise revenue growth.
I'm pleased to say that our installed base of instruments continue to achieve low basketball in the field.
Clearly the third quarter, we placed 142 instruments.
Bringing our total installed base to 1500, and the one instruments as well.
At the end of Q3.
Furthermore, these placements reflect our cost strategy to achieve growth across many of the users from high negative cell analysis uses two entry level users.
And firstly being introduced in 2017, our cell analysis of trends have gotten a widespread adoption across the globe.
In more than 40 countries.
Along those lines I want to take a moment to speak to how our strategy of expanding our global penetration has demonstrated results for our company.
In last year's third quarter.
Within the U S accounted for 70% of our company's revenue.
The EMEA and APAC regions were only 18% and 8% respectively.
Now in line with our expansion efforts in this past quarter, our EMEA sales grow to account for one quarter of our overall revenue.
Further our APAC region and sales.
Percent of total grew by 10 points now representing 18% of <unk> overall sales.
Clearly our strategy is yielding results.
And I look forward to continue the progress to expand our presence globally.
In addition to continuing to grow our instrument base and the overall revenue.
I want to again acknowledge our team's successful efforts this quarter and throughout the whole of 2022 in operating in the face of challenging macro conditions and achieved strong results.
This quarter, our gross margins was over 66% and adjusted gross margin over 68%.
Both expanding over the prior year.
And on top of that.
Reported net income of one $6 million and our adjusted EBITDA grew significantly from last year's third quarter.
And importantly.
We continue to see increased scale in our reagent business.
All as other higher margin offerings.
Confidence in our ability to continue to consistently achieved strong and stable margins.
I want to reiterate these achievements are the result of the diligent efforts of our entire team from the outside that.
Excellent.
It is this focus on efficient and effective operations.
I believe sets us apart in the field and positions us for further success.
Move ahead.
For example.
We have discussed previously our team is able to with Sterne macro pressures by leveraging our global workforce in order to manage full inflationary in the supply chain pressures.
Furthermore, our intentional strategy to maintain a path inventory buffer provide further mitigation of potential supply chain disruption.
Insulate our operation with some concerns.
Oh.
We continue to be focused on execution.
I remain confident in the size of the team has demonstrated the ability to manage through this environment and continue to succeed despite the ongoing challenges.
At the end of April .
The appointment of Todd Garland.
Our chief commercial officer.
And now only six months into the low part has been instrumental in our company's recent success.
Among his many edits.
Todd.
<unk> has developed an execution plan for our European sales strategy with demonstrated results already and more off okay.
Well I recently, just last week, we announced the appointment of Chris Williams, Our Chief operating officer.
To lead and execute <unk> global operations strategy to scale up our capability to support our mission as a full solution provider to our customers.
Prior to joining sci-tech.
Crystal was a VP of engineering technology operations and innovations for Thermo Fisher's Pharma services group.
And before that he was VP and general manager for single use technologies, and the VP and general manager for Bioprocess equipment and automation.
Both at Thermo Fisher scientific.
I wanted to take a moment to welcome Greg to our team at <unk>.
He joins us at an important time for our company.
We are on the growth trajectory.
The ability to scale.
Around those lines our focus is on ensuring that this growth is conducted efficiently as we target markets with larger scale.
And automation and process improvements are critical components of this.
We are confident that Chris is the right person to help lead us forward and make the most of our growth opportunities.
And we are excited for what comes next for our organization.
As we continue to grow our offerings and the base of instruments and reagents and our services.
Our technology is now being validated by 881 peer reviewed publications as of the end of the quarter.
This quarter alone.
112 peer reviewed publications mention insightec.
I'm very proud of this accomplishment, which speaks to the momentum of our platform and validates the use of our offering in the scientific community.
Yeah.
Off note.
One paper on HIV published in nature by researchers at Scripps Research Institute showed a.
Slower immunization process.
For ethical to vaccine targets.
In the second nature paper.
Researchers from NYU Medical school showed how got back to direct the T cells to adopt distinct functions in the adaptive immune system.
Microbiome research in rapidly growing and we are pleased that our FTE platform provides insights into this promising area.
As you can see these papers and many others demonstrate the proven real world applications of our technology and our services to the scientific community.
Once again I'm pleased with the progress our team has made this quarter and throughout 2022.
We continue to push forward, our cadence of new products and applications.
Deeply focused on providing a complete sale analysis solution to our customers.
We look forward to continuing to provide our novel FSP platform to these customers.
They pushed 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 <unk> bin.
Total revenue for the third quarter of 2022 was $45 million, an 18% increase over the third quarter of 2021.
During the third quarter corporate.
Revenue was adversely affected by the timing of certain sales as well as foreign currency headwinds given the continued strengthening of the U S dollar.
As a greater portion of our sales have shifted towards commercial customers.
Which are calendar year basis, we expect the timing of some sales to transitioning from the third quarter to the fourth quarter of this year.
Gross profit was $26 9 million for the third quarter of 2022.
The increase of 26% compared to a gross profit of $21 $3 million in the third quarter of 2021.
Gross profit margin was 66, 4% in the third quarter of 2022.
Presenting a 450 basis point expansion.
361, 9% in the third quarter of 2021.
Adjusted gross profit margin in the third quarter of 2020 to 16.
68, 4% compared to 63, 5% in the third quarter of 2021.
Adjusting for stock based compensation expense and amortization.
Acquisition related intangibles.
Operating expenses were $25 $5 million for the third quarter of 2022.
39% increase from $18 4 million in the third 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 cost related to operating as a public company.
Research and development expenses were $8 7 million for the third quarter of 2022 compared to $6 1 million in the third quarter of 2021.
Sales and marketing expenses were $8 8 million for the third quarter of 2022 compared to $6 6 million for the third quarter of 2021.
General and administrative expenses were $8 million for the third quarter of 2022.
Increased from $5 7 million for the third quarter of 2021.
Despite our revenue coming in slightly below our expectations as a result of the timing dynamics and FX impact I mentioned, we achieved net income of $1 $6 million this quarter compared to $1 4 million for the third quarter of 2021.
Additionally, adjusted EBITDA in the third quarter of 2022 was $7 3 million compared to $5 5 million barrels in the third quarter of 2021 after adjusting for stock based compensation expense and foreign currency impact.
As we indicated.
Our third quarter revenue was adversely impacted by the timing of certain sales.
As well as foreign currency exchange rates, given the strengthening of the U S dollar.
Despite these headwinds we continue to expect full year 2022 revenue to be closer to the high end of the range of $160 million.
And 68 million and <unk> strong.
Feedback continues to be in a strong position frankly continues to see solid demand and is committed to remaining profitable on an annual EBITDA and net income basis.
As well as achieving our long term growth targets and objectives.
In addition.
Our strong balance sheet, including a solid cash position and no debt.
Underpinning the strength of our healthy organization.
We will continue to invest in our core business as it relates to new projects and innovations 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 Wendy.
Thanks, Patrick.
I am proud to once again.
Achievement this quarter and throughout the duration of 2022.
Punctuated by our strong gross profit margin net income and adjusted EBITDA results.
We operate our business according to fall key test.
Each of which is integral to our enterprise mission and the forward vision.
These pillars, which are instruments.
Asian.
Informatics and clinical lay out our road map for operating our business now and in the future.
Intentional and purposeful execution.
As we continue to build out our team at the leadership and operations level.
Ever more confident that our daily work aligned with these four pillars adhered to and execute our overall strategy.
I would like to express my appreciation for our team around the world.
It is excellent hard work and share the belief in our important mission that drives our progress.
Thank you everyone.
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 again Thats Star one one on your telephone to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of <unk> <unk>.
Stanley. Please go ahead.
Hey, guys good evening and thanks for the time here maybe.
Maybe Patrick or and then I will just start with.
Trying to get a sense of how much of.
The softness you saw in the quarter was FX versus instrument slippage.
Then I have a couple of follow ups.
Yes, so Josh thanks for the question.
So.
The majority of more key to bridge into the next quarter.
We are also seeing the FX impact so I would say that the 60% maybe Europe delays.
And the remainder is FX.
Got it.
That's very helpful. Now in terms of just.
Your.
A sense of whether this is a one time thing or given the skew shifting a little bit towards commercial customers you are.
Do you think there's risk.
Lipids your into 2023 for some units that you had hoped.
<unk> in the fourth quarter and then.
The context for the question guys is basically some of the some of your peers have talked about large biopharma customers, perhaps pleasing capex budgets for the rest of the year.
So any any color you can share there would be helpful.
Yes. So at this point, we are not expecting so we reiterated our guidance for the year.
As I mentioned.
At this point, we are not expecting.
Urgent into into next year, yet the environment evolve quickly.
But while we are looking at at this point, we're not expecting any flavors.
Got it.
And then.
One for you and then as you think about your instrument backlog heading into next year I know you reiterated sort of expectations for I think it was 30% growth year over year.
Is that something you still feel good about and can you just at a qualitative level could you shed some color on how.
How much of.
Instrument shipments that Youre looking at in 2003 are essentially covered by the backlog that you will have exiting this year.
Well.
Actually right now working on our budgets for next year, and we don't really have.
A concrete number to share with you, but at time goes by.
Yes.
Lets you know, but in the meantime, I think Patrick just mentioned we are very confident.
Regarding to what we see today.
<unk>.
Achieving overall.
Revenue guidance for the year.
Yes.
Got it so that 30% growth is that still on the table or is that under review as you work on your next year's plan Amendment at <unk>.
Continues to be on the table there.
Okay got it thank you.
Thank you. Our next question comes from the line of Matt sites of Goldman Sachs. Please go ahead.
Thanks, Good afternoon, when Vin and Patrick maybe a first question Patrick you talked about the greater portion of sales in the commercial customers, causing a shift from maybe Q3 to Q4 could you talk about maybe what that level was in terms of commercial customers in terms of percentage than what it is.
Common and should we be thinking in terms of going forward.
More seasonality in the business on a regular basis.
For for <unk>.
Annual revenues.
Yes so.
Matt Thanks for the question.
As you know.
Sure.
Heavily linked to seasonality of the business.
When I look at our business in the last two years.
Typically as soon as the second half to be stronger with the fourth quarter to year six.
Essentially the stronger as well.
Which we expect to translate this year as well looking at our funnel and some of the activity we have there.
We are in the works.
The commercial aspect as we've seen there.
Increasing the commercial.
The activity of biotech and pharma.
So the expectation is sector. This will continue in Q4.
Just to add on top of that if you look at our overall <unk>.
Distribution between academic and industrial customers in first of this year comparing to last year.
The shares of industrial customer has increased quite a lot and certainly also contributors to the timing.
All of this well.
Well this year.
Got it and then as you look at the expansion you've made in Europe and APAC.
This quarter.
And I know when you made the statement about.
When the CCM made a plan about expanding into Europe was one of the first plans that did they made could you maybe talk about the customer segments, where youre, having early success driving that higher level of penetration in these markets is it the biopharma biotech or are there other.
Other customer segments that are driving that growth in Europe and APAC specifically.
And actually if you look at yes, both Europe and in our international.
Sales in fact has increased substantially this quarter comparing to the pile.
<unk>.
Primary driven.
Modify the industrial customers as you can see right now.
Overall.
Sure.
Customer.
Moving toward more and more toward <unk>.
Both customer segments.
It.
Additionally, in China, we also see.
<unk>.
After the sales moving into clinical as well.
Got it and just my last question.
Just can you give us any sense in terms of.
The cell counter and how that progress is going I know you've called that out in previous quarters.
The launch went very well and the momentum is really good any additional color you can provide on the cell counter specifically.
The sales order.
Sorry, South Florida.
Yes.
The increase.
Although we don't really separate.
A number of sources.
From the analyzers, but share of charters is increasing yes, yes, and maybe I can just add to that.
Sequentially actually the number of stores that we saw has also increased quarter over quarter. So we are seeing continued demand and strong demand for the top photo.
Got it thank you very much.
Thank you. Our next question comes from David Westenburg Piper Sandler. Please go ahead.
Hi, Thank you for taking the question so I'm going to ask something similar to what <unk>, asking maybe maybe a little bit different away.
<unk>.
In terms of.
The slippage from Q3 to Q4, I think you usually talk about backlog or instrument order lead time being.
Three months. So are you fairly comfortable with the fact that almost all of those Q3 expectations are into Q4.
I just wanted to start with just that.
Yes, so the way I would answer it.
We have.
In an accident a higher funding level.
At this point so that's the reason why we feel very confident about our Q4 activity.
Okay perfect perfect that is.
That is helpful.
And.
We're not the best models on Wall Street, so it could be our mistake here, but.
Sure.
The instrument placement number get beat us.
But the the service revenue the product revenue.
Missed us so is there something going on with mix you wanted maybe note or is it maybe something on asps or am I, just a terrible modeler.
And the last one is acceptable.
Yes.
Yeah.
Want to say that.
So the service revenues have come out very strong.
As a result of just more instruments coming out of warranty on the product side.
You bought it might be.
Maybe off a little bit but.
It could be a combination of both.
The number of instrument revenue model.
So im not going back to sure how to answer that question.
Okay got it and then lastly go onto.
What you are talking about outside the U S.
Investments you made outside the U S can you talk about.
How many markets.
Maybe not in relative to Tam outside the U S and I don't know if maybe I can ask just make this a little bit more clear.
What part of market like what percent of market do you feel like youre not yet accessing.
Cause of sales.
I can.
Can you talk about.
Some of the needs to invest in those geographies and I'll stop after this one.
I think firstly.
In the U S definitely.
That large chunk.
Clinical now here, we are not in and we are working on this.
Internationally, we have just started the clinical.
Penetration into European market.
It's going to take us.
A few quarters to see some meaningful.
No.
China, we have done very well in fact across our research clinical site.
And then the clinical data.
Which is another area we think.
Great potential opportunities for us.
In both China and Europe .
Of course, the U S is linked to our overall clinical.
Our strategy.
Thank you.
And our final question comes from the line of Max Masucci of Cowen. Please go ahead.
Hey, this is Joe on for Max.
Gross margins came in ahead of our model in the quarter and saw really nice growth both year over year and sequentially it'd be great to just get some detail on what into the B here.
Yes.
Continued management of our.
Supply chain.
Continued management of the.
What we call the excellence of our manufacturing process.
We're taking full advantage of our global footprint.
Some of that.
<unk> here.
We're working on that are helping drive so overall.
Thanks for pointing that out, but we are very pleased with very good margin number on it.
Got it and then during the Analyst day I believe you mentioned that retail sales as a percent of total revenue and up into mid to high single digit range in 2022.
Wondering how thats shaping up against expectations and if there's any additional color you could offer for demand in your agent business in the quarter. Thanks.
Yes.
Track.
Yes.
Got it and then lastly in the Q2 call there was mention of inventory levels.
An all time high around $45 million, just curious how that trended in the quarter and what keeps building or kind of wind down in Q4.
Yes, so the expectation is.
In Q4, it should be.
That is over Q3.
Okay.
Great. Thanks for taking the question.
Alright.
And thank you that does conclude the Q&A session and our conference for today.
Thank you for participating you may now disconnect.
Okay.
The conference will begin shortly to raise Johan during Q&A, you can dial star one one.
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Welcome to <unk> third quarter 2022 earnings call at this time, all participants are in a listen only mode.
After the speaker 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 I would now like to hand, the call over to Paul Goodson Investor Relations. Please go ahead.
Thank you operator earlier today <unk> Biosciences released financial results for the quarter ended September 32022.
If you 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 join.
Joining me today from <unk> are wind, Ben Zhang CEO , and Patrick John Leno, Chief Financial Officer.
Before we begin I'd like to remind you that management will make statements. During the call that are forward looking statements within the meaning of the federal securities laws, including statements regarding <unk> business plans strategies opportunities financial projections. These statements are based on the company's current expectations and.
Currently involve significant risks and uncertainties.
It could cause actual results or events to differ materially 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 on site techs 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 duty to update any forward looking statements, whether because of new information future events or changes in its expectations.
This conference call contains time sensitive information and is accurate only as of the live broadcast November nine 2022.
With that I would like to turn the call over to win them.
Okay.
Thanks, Paul and welcome everyone joining the call today.
I wanted to start.
Again thanking our team at Phi Tech.
Their dedication and execution.
We closed out the further quarter of 'twenty can be cool.
On today's call I will begin with a recap of our progress this year and the discussed.
<unk> continues to advance toward our mission and the vision.
And then I will turn the call over to Patrick for more detailed look at our financial results and outlook.
Our results this quarter demonstrate the success of our efforts to operate our business efficiently and effectively in a challenging macro environment.
We achieved continued improvement across gross margin net income and adjusted EBITDA, all while further growing our sales across the globe diversifying our revenue base.
Executing our broader strategy.
Although macro factors continue to impact the broader industry.
I am proud of our team's achievements and demonstrated our ability to adapt to the evolving environment.
And I'm confident for the remainder of containers from nickel and the PEO.
As we look at the industrial landscape.
Thanks to the continuous to stand apart in the field.
We provide our customers with an end to end solution consisting of instruments.
Software and application services.
Our unique portfolio of comprehensive solutions.
With us as a leader in the sector.
And we are proud of that demonstrated the value we provide to our customers.
This year, we have consistently highlighted our comprehensive suite of products and services, which has led to a further diversification of our revenue stream beyond the sale of instruments.
As we have said previously.
Our original suite of instruments, which continue to see solid demand we.
Expect our agents and our sales forces.
Considerably to our future enterprise revenue growth.
I'm pleased to say that our installed base of instruments continue to achieve low basketball in the field.
Clearly the third quarter.
Please welcome to you for the core Incrementals.
Bringing our total installed base to 1500 and the one instruments.
At the end of Q3.
Furthermore, these placements to affect our cost strategy to achieve growth across many of the users from high negative sale analysis uses two entry level users.
Firstly being introduced in 2017, our cell analysis systems have gotten a widespread adoption across the globe.
Used in more than 40 countries.
Along those lines I want to take a moment to speak to haul our strategy of expanding our global penetration has demonstrated good results for our company.
In last year's third quarter sales within the U S accounted for 70% of our company's revenue.
While the EMEA and APAC regions were only 18% and 8% respectively.
Now in line with our expansion efforts.
In this past quarter, our EMEA sales grew to account for one quarter of our overall revenue.
Further our APAC region and sales.
As a percent of total grew by 10 points now representing 18% of <unk> overall sales.
Clearly our strategy is yielding results and I look forward to continue the progress to expand our presence globally.
In addition to continuing to grow our instrument base and the overall revenue.
Again acknowledge our team's successful efforts this quarter.
And throughout the whole often dates on day two in operating in the face of challenging macro conditions and achieve strong results.
This quarter, our growth margins was over 56%.
The gross margin over 68%.
Both expanding over the prior year.
And on top of that.
Our net income up one $6 million and our adjusted EBITDA grew significantly from last year's third quarter.
And importantly.
We continue to see increased scale in our reagent business as well as other higher margin offerings.
Im confident.
Our ability to continue to consistently achieved strong and stable modules.
I want to reiterate.
<unk> achievements.
The diligent efforts of our entire team through all cycles not by accident.
It is this focus on efficient and effective operations.
I believe set us apart in the field and positions us for further success.
Go ahead.
For example.
We have discussed previously our team is able to with Sterne macro pressures by leveraging our global workforce in order to manage through inflationary in the supply chain pressures.
Furthermore, our intentional strategy to maintain a path inventory buffer provides a further mitigation of potential supply chain disruption.
To insulate our operation with some concerns.
Oh great.
We continue to be focused on execution.
I remain confident in the size of the team has demonstrated the ability to manage through this environment and the continued to succeed despite the ongoing challenges.
At the end of April .
The appointment of Todd Gordon, our Chief commercial officer.
And now only six months into the role path have been instrumental in our company's recent success.
Among his many areas of focus.
Paula has developed an execution plan for our European sales strategy with demonstrated results already and.
Okay.
More recently I guess.
Last week we.
Alex.
Frontline of quick Williams, our Chief operating officer.
To lead and execute <unk> global operations strategy to scale up our capability to support our mission.
Full solution provider to our customers.
Prior to joining sci-tech.
This was the VP of engineering technology operations and innovations for Thermo Fisher's Pharma services group.
And before that he was VP and general manager for single use technologies, and the VP and general manager for Bioprocess equipment and automation.
Both at Thermo Fisher scientific.
I wanted to take a moment to welcome Greg to our team at <unk>.
He joins us at an important time for our company.
We are all the growth trajectory that required the ability to scale.
Along those lines our focus is on ensuring that this growth is conducted efficiently as we target a market with larger scale.
And automation and process improvements are critical components of this.
We are confident that quick.
The last person to help lead us forward and make the most of our growth opportunities.
And we are excited for what comes next for our organization.
As we continue to grow our offerings and the base of instruments.
And our services.
Technology has now being renovated by 881 peer reviewed publications as of the end of the quarter.
This quarter alone.
112 peer reviewed publications mentioned psychic.
I'm very proud of this accomplishment, which speaks to the momentum of our platform and validates the use of our offering in the scientific community.
Also note.
On paper HIV published in nature by researchers at Scripps Research Institute showed a slower immunization process holds promise for ethical to vaccine targets.
In the second nature paper.
Researchers from NYU Medical school showed how cutbacks here to let the T cells to adopt distinct functions.
Immune system.
Microbiome research in rapidly growing and we are pleased that our FTE platform provides insights into this promising area.
As you can see these papers and many others demonstrate the proven real world applications of our technology and our services to the scientific community.
Once again I'm pleased with the progress our team has made this quarter and that's a little out of 'twenty to 'twenty two.
We continue to push forward, our cadence of new products and applications.
Deeply focused on providing a complete sale analysis solution to our customers.
We look forward to continuing to provide our novel FSP platform to these customers.
They pushed the bounds of scientific discovery and the clinical progress.
With that I will now turn the call over to Patrick for more details around our financials.
Thanks <unk> bin.
Total revenue for the third quarter of 2022 was $45 million, an 18% increase over the third quarter of 2021.
During the third quarter.
Revenue was adversely affected by the timing of certain sales as well as foreign currency headwinds given the continued strengthening of the U S dollar.
As a greater portion of our sales have shifted towards commercial customers.
Which are calendar year base, we expect the timing of some sales to transitioning from the third quarter through the fourth quarter of this year.
Gross profit was $26 9 million for the third quarter of 2022.
An increase of 26% compared to a gross profit of $21 $3 million in the third quarter of 2021.
Gross profit margin was 66.4.
4% in the third quarter of 2022.
Presenting our 450 basis point expansion.
361, 9% in the third quarter of 2021.
Adjusted gross profit margin in the third quarter of 2022 was 68, 4% compared to 63, 5% in the third quarter of 2021.
After adjusting for stock based compensation expense and amortization of acquisition related intangibles.
Operating expenses were $25 $5 million for the third quarter of 2022.
39% increase from $18 4 million in the third quarter of 2021.
The increase was primarily due to <unk>.
Expenses 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 7 million for the third quarter of 2020 compared to $6 1 million in the third quarter of 2021.
Sales and marketing expenses were $8 8 million for the third quarter of 2022 compared to $6 6 million for the third quarter of 2021.
General and administrative expenses were $8 million for the third quarter of 2022.
The increase from $5 7 million for the third quarter of 2021.
Despite our revenue coming in slightly below our expectations as a result of the timing dynamics and FX impact I mentioned, we achieved net income of $1 $6 million this quarter compared to $1 4 million for the third quarter of 2021.
Additionally, adjusted EBITDA in the third quarter of 2022 was $7 $3 million.
Two to $5 5 million barrels in the third quarter of 2021 after adjusting for stock based compensation expense and foreign currency impact.
As we indicated.
Our third quarter revenue was adversely impacted by the timing of certain sales.
Foreign currency exchange rates, given the strengthening of the U S dollar.
Despite these headwinds we continue to expect full year 2022 revenue to be closer to the high end of the range of $160 million.
And 68 million and <unk> strong.
Feedback continues to be in a strong position financially continues to see solid demand and is committed to remaining profitable on an annual EBITDA and net income basis.
As well as achieving our long term growth targets and objectives.
In addition.
Our strong balance sheet, including a solid cash position and no debt.
Underpinning 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 Wendy.
Thanks, Patrick.
I am proud to once again achieve.
Achievement this quarter and throughout the duration of 2022.
Punctuated by our strong gross profit margin net income and adjusted EBITDA results.
We operate our business according to our fall key test each.
Each of which is integral to our enterprise mission and the forward vision.
These kind of which our instrument applications.
Informatics and clinical lay out our road map for operating our business now and in the future with intentional and purposeful execution.
As we continue to build out our team at the leadership and operations level.
Ever more confident that our daily work aligned with these four pillars adhere to and execute our overall strategy.
I would like to express my appreciation for our team around the world.
It is their excellence harder work and share the belief in our important mission that drives our progress.
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 again Thats Star one one on your telephone to ask a question. Please standby, while we compile the Q&A roster.
Our first question comment from the line of <unk> of Morgan Stanley . Please go ahead.
Hey, guys good evening and thanks for the time here.
Maybe Patrick O'brien, Ben I'll, just start with.
Trying to get a sense of how much of.
The softness you saw in the quarter was FX versus instrument slippage and then I have a couple of follow ups.
Yes, Josh.
Thanks for the question.
So <unk>.
Majority is more can you bridge it.
Through the next quarter and obviously.
We also see the FX impact so I would say that the 60% maybe delay and the remainder is FX.
Got it.
That's very helpful. Now in terms of just.
Your.
Sense of whether this is a onetime thing or given the skew shifting a little bit towards commercial customers.
Do you think those risks.
Slippage into 2023 for some units that you had hoped to ship in the fourth quarter and then the <unk>.
Thanks for the question guys is basically some of the some of your tools peers have talked about large biopharma customers perhaps.
Leasing capex budgets for the rest of the year.
So any any color you can share there would be helpful.
Yes. So at this point, we are not expecting so we reiterated our guidance for the year.
As I mentioned.
So at this point, we are not expecting server urgent into into next year, yet the environment evolve quickly.
But while we are looking at at this point, we're not expecting any surprises.
Got it.
And then.
One for you and then as you think about your.
Your instrument backlog heading into next year.
I know you reiterated sort of expectations for I think it was 30% growth year over year is that something you still feel good about and can you sort of a qualitative level could you shed some color on.
How much of the.
Instrument shipments that Youre looking at in 2003 are essentially covered by the backlog that you will have exiting this year.
Actually right now working on our budget for next year.
We don't really have.
<unk>.
Concrete number to share with you, but at time goes by.
But in the meantime.
Yes, Nathan we are very confident regarding.
Regarding to what we see today.
<unk>.
Achieving overall.
Yes revenue guidance for the year.
Yes.
Got it so that 30% growth is that still on the table or is that under review as you work on your next year's plan Lindon.
It continues to be on the table there.
Okay got it. Thank you. Thank you. Our next question comes from the line of Matt sites of Goldman Sachs. Please go ahead. Thanks, good afternoon, when and Patrick maybe a first question Patrick you talked about the greater portion of sales in the commercial customers, causing a shift from.
Maybe Q3 to Q4 could you talk about maybe what that level was in terms of commercial customers in terms of percentage than what it has become an and should we be thinking in terms of going forward.
More seasonality in the business on a regular basis.
For for kind of annual revenues.
Yes so.
Matt Thanks for the question.
As you know.
Heavily linked to seasonality of the business under.
When I look at our business in the last two years.
Typically as soon as the second half to be stronger with the fourth quarter to be substantially stronger as well.
Which we expect to translate this year as well looking at our funnel and some of the activity.
In the works.
The congressional aspect as we've seen.
Increasing the commercial.
<unk> activity or biotech or pharma.
The expectation is that it will continue in Q4.
Just to add on top of that if you look at our overall dystrophin.
Distributions between academic and industrial customers in first of this year comparing to last year.
The shares of industrial customer has increased quite a lot and certainly also contributes to the timing.
All of this.
Well this year.
Got it and then as you look at the expansion you've made in Europe and APAC.
This quarter.
And I know when you made the statement about.
When the CCM made a plan about expanding into Europe was one of the first plans that they made could you maybe talk about the customer segments, where you're having early success driving that higher level of penetration in this market is at the biopharma biotech or are there other.
Other customer segments that are driving that growth in Europe and APAC specifically.
And actually if you look at yes, both Europe and in our international.
Sales in fact has increased substantially this quarter comparing to the pile.
Uh huh.
Quote us.
Primary driven.
Caused by the industrial customers as you can see that.
Overall.
Sure.
Customer.
Okay.
Moving toward more and more toward this type of customer segments.
In addition in China, we also see.
Great.
<unk>.
Sales moving into clinical as well.
Got it and just my last question.
Can you give us any sense in terms of.
The cell counter and how that progress is going I know you've called it out in previous quarters.
The launch went very well and the momentum is really good any additional color you can provide on the cell counter specifically you mean.
The sale of soda.
Sorry, South Florida.
Yes.
The increase.
Although we don't really separate the thoughts are a number of sources.
From the analyzers, but share of charters is increasing yes, yes, and maybe I can just add to that.
Sequentially actually there are a number of sort of the recall has also increased quarter over quarter. So we are seeing continued demand and strong demand for the stockholders.
Got it thank you very much.
Okay.
Okay.
Thank you. Our next question comes from David Westenburg Piper Sandler. Please go ahead.
Hi, Thank you for taking the question so I'm going to ask something similar to what <unk> asked and maybe maybe a little bit of different away.
<unk>.
In terms of.
The slippage from Q3 to Q4, I think you usually talk about backlog or instrument in order lead time being.
Three months. So are you fairly comfortable with the fact that almost all of those Q3 expectations are into Q4.
Just want to start which is that.
Yes, so the way I would answer it.
We have seen an accident higher funnel level.
At this point so that's the reason why we feel very confident about.
Q4 activity.
Okay perfect that is.
That is helpful.
And.
We're not the best models on Wall Street, so it could be our mistake here, but.
The instrument placement number get beat us.
But the the service revenue the product revenue.
Missed us so is there something going on with mix you wanted maybe note or is it maybe something on asp's or am I, just a terrible modeler.
And the last one is acceptable.
Yes.
No.
Not to say that.
So the service revenue that have come out very strong.
As a result of just more instruments coming out of warranty on the product side.
Your bottom line.
Maybe offer a little bit better.
It could be a combination of both the number of instrument revenue model.
So im not going back to sure how to answer that question.
Okay got it and then I know lastly go onto.
What youre talking about outside the U S in the <unk>.
<unk> you made outside the U S can you talk about.
How many markets.
Maybe not in relative to Tam outside the U S and I don't know if maybe I can ask just make this a little bit more clear.
What part of market like what percent of market do you feel like youre not yet accessing.
Of sales.
Can you talk about.
Some of the needs to invest in those geographies.
Ill stop after this one.
I think firstly.
In the U S today, and there's a large chunk.
Clinical now here, we are not in and we are working on this.
Internationally.
We have just started the clinical.
Penetration into European market.
Going to take us.
A few quarters to see some meaningful.
No.
China, we have done very well in fact across our research clinical site.
And then the clinical data.
Which is another area we think.
Great potential opportunities for us.
In both China and Europe .
Of course, the U S is linked to our overall clinical.
Scott Thank you.
And our final question comes from the line of Max Masucci of Cowen. Please go ahead.
Hey, this is Joe on for Max.
Gross margins came in ahead of our model in the quarter and saw really nice growth both year over year and sequentially it'd be great to just get some detailed let into the b here.
Yes, I think it's continued management of our.
Supply chain.
Continued management of the.
What we call the excellence.
Factory and process.
Taking full advantage of our global footprint for a number of vector here that dollar.
We're working on at a healthier overall.
Overall.
Thanks for pointing that out, but we are very pleased with their group.
Good margin number on it.
Got it and then turning to.
Analyst Day, I believe you mentioned that retail sales as a percent of total revenue and up into mid to high single digit range. In 2022, I was wondering how that's shaping up against expectations and if there's any additional color you could offer for demand that you raised your business in the quarter yes.
Yes, we are on track.
<unk>.
Talk about yet.
Got it and then lastly in the Q2 call there was mention of inventory level.
At an all time high around $45 million, just curious how that trended in the quarter and will it keep building or kind of wind down in Q4.
Yes, so the expectation is.
In Q4, it should be.
Flat ish over Q3, great. Thanks for taking my question.
And thank you that does conclude the Q&A session and our conference for today. Thank you for participating you may now disconnect.