Q2 2023 Cytek Biosciences Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the Si Tag Biosciences second quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
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I would now like to hand, the conference over to your first speaker today, Paul Goodson with Investor Relations.
Thank you operator earlier today, so I take Biosciences released financial results for the quarter ended June 32023, if you 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.
Bio dot com.
Joining me today from <unk>.
<unk> CEO , Patrick Zambrano, 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, including statements regarding <unk> business plans 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 then slight tax 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 of 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 with conference call contains time sensitive information and is accurate only as of the live broadcast August eight 2023.
Before I finish I want to mentioned that we are planning an investor day in late November in New York.
We will look forward to sharing more about our business. We will update you with details as we get closer to the event.
With that I would like to turn the call over two 1 billion.
Okay.
Thanks, Paul and welcome everyone, joining our second quarter earnings Conference call.
On the call today, I will discuss our results for the second quarter as well as our progress across our four key strategic pillars to drive growth.
Then I will turn the call over to Patrick.
More detailed look at our financials and update our outlook for <unk>.
Before we open it up for Q&A.
Starting with our second quarter results.
We achieved 49 7 million.
Total revenue.
<unk> growth of 24% year over year.
This included approximately $8 million up revenue from the product lines acquired found eminent.
Excluding acquisition related revenue, our organic revenue was $41 5 million.
Our results were driven by enrolment across the U S, particularly with our pharma and biotech customers.
Yeah.
That was delayed at the end of the first quarter that again to come in.
Yet we continued to see impact from our Biopharma customers in Europe regarding the second quarter.
Overall.
While the macro environment continued to be somewhat challenging.
These results.
In April our dedicated efforts to operate our business efficiently and effectively all while further growing our sales across the globe.
Okay electrify our revenue base.
Executing on our product strategy.
Patrick will provide more detail on our financial results momentarily.
Title continue to stand apart in the field.
We provide our customers with an end to end solution.
Lifting up instruments software.
Software and application services.
We are focused on driving growth and diversifying revenue streams.
In addition.
We expect our recent acquisition up flow cytometry and imaging business from luminous will open new markets and applications.
As we complete the integration of <unk>.
Part of the business over the course of this year.
Taking proactive measures to optimize our business operations.
And advance our overall strategy.
I will share more details on our progress with the <unk>.
Integration chuckling.
As I have mentioned before we.
We operate our business according to four key pillars.
Each of which is integral to our long term growth.
These pillars.
Which instrument applications.
<unk> and the clinical.
Help execute our strategy and we believe well drive excellent growth over the longer term.
Starting with instrument.
The second quarter.
We placed 112 instruments from our organic site portfolio.
Altogether. This installed base has now reached 1878 instruments.
This does not include the <unk> instruments.
And the Guava micro capital X product line acquired upon illuminate.
Which also continued to grow during the quarter.
Collectively these organic and acquired a instrument placements represent growth across diverse applications spanning entry level to high dimensional cell analysis.
We cater to a broad spectrum of customers and provide a tailored applications to meet their specific needs.
Looking ahead.
We look forward to driving instrument adoption across our product portfolio.
This growing installed base will also create a receptive market for a new instrument that we plan to launch in the coming years.
Leveraging <unk> advanced the technology alongside that Alpha technology acquired from <unk>.
During the quarter.
We proudly shipped our 100 sighted rollout solar system.
Launched in June containing 21.
<unk> Aurora sale further built upon the remarkable FSP capabilities, our Aurora cell analysis system.
Delivering unparalleled high sensitivity performance at a single cell level.
In power, the researchers to effortlessly and seamlessly resolve and thought even the most challenging cell population.
Preparing discovery and optimizing efficiency in cell analysis workflow.
It is exciting to see how two special profiling analysis, taking hold and defining the new normal in the field.
This was a motivated us to forge ahead with unwavering dedication shaping the future of cell analysis.
Turning next to applications.
Which include our reagents.
Revenue from the agents and.
Continues to be a fast growing product area.
The increase in demand for our offerings, which are focused on making the user job easier faster and more accurate.
We continue to actively collaborate with our partners to expand our reach and portfolio and develop applications specification.
In June we launched the FIFA myeloid derived suppressor cells or <unk>.
Optimized.
Our EFT platform.
Significantly broadening the application menu for our customers by offering them enhance the capabilities and predictability in their research and analysis.
With this launch we are.
Addressing a wide range of research need across the various applications, particularly in cancer research and authentically development were myeloid derived suppressor cells play a crucial role.
Broadening our menu of application.
A critical part of our strategy that helps us both meet the needs of our existing customers.
And helps us attract new customers seeking comprehensive solution.
The breadth of our applications can be seen across the wide range of peer reviewed publications that include our technology.
During the second quarter.
139, new peer reviewed publications mentioning cycle.
Bringing the <unk> number applications to over 1300.
With the growing number of peer reviewed publications featuring our products.
Researchers are embracing sighted innovative solutions to drive advancement in scientific research.
As an example of how significant some of these research efforts.
Two recent papers highlight the power of.
Our technology in immuno oncology applications.
The first paper published by Biotechnology company near looking and Aif apparel in cancer Immunology research elucidate.
Finally, mckinnon ultra melanoma tumors that are resistant to immune checkpoint inhibitors.
They also showed how their therapeutic candidate.
Using synthetic biology techniques improved onset natural therapeutic crowd pace of innate cytokine.
The second paper published in nature by clinicians at Cedars Sinai Medical Center.
If required how bladder cancer cells adapt to survive and identify biomarkers for improving cancer immunotherapy.
Our informatics is our third strategic area.
A key part of our about England Marine strategy.
Enabling our customers to streamline their experiment workflow.
So that and we are excited for sure that the user engagement and demand for the site to cloud launched.
Launched late last year has been doing exceptionally well.
Tight across the digital ecosystem offer a comprehensive suite of spectral panel design tools.
Seamlessly integrated into our centralized platform.
This cutting edge solution empowers researchers to prepare and optimize their experiments remotely.
Streamlining the process from panel designed to data acquisition.
The accelerated time to insight is invaluable across a broad range of applications.
The analogy to oncology infectious diseases and inflammatory diseases.
This is the first outside the cloud not only benefit.
Our extensive existing user base, but also paved the way for future users.
As we continuously enhance its capabilities incorporating data management sharing and analysis features.
With tighter crowd at the forefront.
To revolutionize single cell analysis to drive ground, breaking discovery and to propel scientific research to new Heights.
One topic, we have not discussed the critically insight as news of artificial intelligence and machine learning.
To enhance the value of our instruments.
Hi Tech Sarasota used machine learning to optimize starting as well as to analyze Joplin shape.
Automatically making pro rate adjustments and performing as a function.
The Amex AI software is based on deep machine learning and it is a modified version of an AI platform that won the imaging that challenge.
Turning to our clinical opportunity.
Several of our product.
Approved for clinical use in both China and the European Union.
Our most common sale for clinical applications, yes that doesn't like TLC system, accompanied by our growing fee for our leading product portfolio.
In both China, and the European Union, the clinical market and attractive long term business opportunity for <unk>.
As a reminder, we are preparing to submit our product.
FDA clearance in the U S, where we believe our powerful <unk> platform, we've cleared well bring enhance the diagnostic power and the visibility to the benefit of patients.
By providing doctors are clearer and more detailed review of each patient's condition.
Part of our clinical strategy to collaborate or partner with other organizations for.
Development of clinical applications.
These partnerships underscore our commitment to providing customers with comprehensive solutions and driving innovation with cutting edge technology.
We are actively engaged with partners or opportunities across the product development and clinical advancement.
Towards that end, we are excited to share about our initiative with the fluid flow Cytometry school and the Geneva University hospitals, focusing on minimal residual disease or <unk> detection in leukemia and lymphoma.
We are working diligently with the Geneva University hospital to harness the potential of an Rd analysis, using our advanced technology and tailored solutions.
As we continue to collaborate with key partners and institutions.
We remain dedicated to expanding our clinical rating offering and furthering our full solution provider mission.
Now I would like to spend a moment.
Discuss our progress with the integration of luminaire flow cytometry and imaging business.
As we have shared this acquisition provides important contributions to our technology capabilities product range customer base and the commercial reach.
After approximately five months into integration, we have completed several important milestones and still have some key asset ahead of us.
Our ILS operations in Seattle are now fully integrated and are functioning.
We are pleased with the smooth transfer of operations.
Additionally, we have made remarkable progress in independently manufacturing the guava product lines.
The transfer of Guava manufacturing too tight at facility is nearing a successful completion.
Sure I think it will enable us to consolidate our manufacturing operations.
Which in turn is expected to yield substantial cost saving advantages for the company.
Driving improvements in gross margin call guava instrument.
We are confident that the final stage of this transfer will be executed seamlessly.
From a commercial perspective, we have cross training, our commercial personnel on the new technology.
That is <unk> and acquired a crowded.
Sorry for the employees and the site is product for our new team members from Nevada.
In addition to cross training, we launched across selling plan targeted at site at.
Avnet and guava product.
With our integrated commercial team.
Enhancing our ability to offer comprehensive solutions to our valued customers.
We continue to be excited by the value of the luminous acquisition in both the near and the long term.
The near term value of this acquisition, consisting up significant cross selling opportunities and the further operational efficiency improvements with the fully integrated sales and customer service team.
In the longer term.
There are a number of new products, we plan to introduce.
Combining FSP imaging and the micro capillary technologists.
Hi Tech acquisition and the integration of the Amex and Guava product lines has provided a great opportunity for site technical transition from a technology oriented company to a market driven business.
Historically, our operations have been guided by the technology, we have developed.
The fourth cycle.
The major market opportunities for our full spectrum Technology, Inc. Disease research.
Development translational medicine and clinical applications.
While these opportunities are abundant and growing we now have a larger addressable market and the new product opportunities through Avonex and guava.
To better address these market we have combined the original site sales team with the Avnet and evolve our sales team, which will significantly increase our global reach.
With that I will now turn the call over to Patrick for.
More details around our financials.
Thanks <unk> bin.
Total revenue for the second quarter of 2023 was $49 7 million or <unk>.
24% increase over the second quarter of 2022.
This included approximately $8 2 million of revenue from the products and services.
Right from the Illumina X transaction, which closed on February 28.
This was our first full quarter of recognizing revenue from these product lines.
Organic revenue, excluding the acquired products and services was $41 5 million.
Increase of 3% compared to the same period of 2022.
While the macro environment, we're still somewhat challenging during the second quarter.
We did see improvement across the U S, particularly with our pharma and biotech customers as orders that were delayed at the end of the first quarter began to materialize.
On a non-GAAP constant currency basis for the quarter revenue was $50 million.
Gross profit was $28 2 million for the second quarter of 2023.
<unk> of 15% compared to a gross profit of $24 $6 million in the second quarter of 2022.
Gross profit margin.
Two 7% in the second quarter of 2023 compared to 61% in the second quarter of 2020.
Adjusted gross profit margin in the second quarter of 2023.
60% compared to 64% in the second quarter of 2022.
After adjusting for stock based compensation expense and amortization of acquisition related intangibles.
Operating expenses were $37 3 million for the second quarter of 2023.
47% increase from $25 5 million.
In the second quarter of 2022.
The increases in Opex were primarily due to expenses related to increased headcount from the <unk> acquisition and personnel related expense.
R&D.
Sales and marketing and G&A.
Over time as revenue increases we.
These expenses.
A smaller portion of our overall revenue.
Research and development expenses were $12 1 million for the second quarter of 2023 as compared to $8 4 million for the.
Prior year period.
Okay.
Sales and marketing expenses were $14 four.
<unk> 4 million for the second quarter of 2023 as compared to $8 4 million for the prior year period.
General and administrative expenses were $10 8 million for the second quarter of 2023 as compared to $8 6 million for the prior year period.
Loss from operations was $9 $1 million for the second quarter compared to a loss from operations of $9 million for the second quarter of 2022.
Net loss in the second quarter of 2023 was $4 4 million compared to a net loss of $7 million in the second quarter of 2022.
Additionally.
Adjusted EBITDA in the second quarter of 2020 was positive $1 5 million.
Compared to positive $4 8 million in the second quarter of 2022 after adjusting for stock based compensation expense.
Cash cash equivalents and short term investment were $298 8 million as of June 32023.
Now turning to our guidance for 2023.
We continue to expect our full year revenue to be in the range of $205 million to $220 million, representing overall growth of 25% to 34%.
Over full year 2020.
This was comprised of revenue from our existing organic business to be in the range of $180 million $290 million and a total of $25 million to $30 million of revenue contribution from the business acquired from <unk>.
This assumes no change.
And the rate of foreign exchange.
Some continued impact from elongated sales cycle from our biotech and pharma customers.
With that I will.
I'll turn it back over to Wendy.
Okay.
Thanks, Patrick.
Hi Tech has continued to demonstrate our commitment to developing toward regions and the software to advance the next generation of cell analysis.
I would like to express my deep gratitude for the team we have here at Psi Tech.
Because of their excellent hard work and share the belief in our important mission that drive strong progress.
Okay.
We believe <unk> is particularly well positioned to address multiple opportunities.
Kevin.
Our advanced technologies.
Trend of our capital base, the growing awareness of our extended product portfolio and the extraordinary talent of our employees.
I am confident that our daily work around under our four pillar adhere to and.
Our overall strategy.
I want to thank everyone for.
Joining today's call and we will now open it up for questions.
Operator.
Thank you we will now conduct a question and answer session. As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby while we compile.
The Q&A roster.
Our first question comes from Andrew Cooper with Raymond James Andrew Go ahead with your question.
Hey, everyone. This is Noah is standing in for Andrew.
Thanks for taking my question. My first question is that given all the noise with the funding environment.
See what youre seeing on that front with your second quarter results coming in pretty healthy.
As well as a contrary each and all the others in the space. So what are you seeing on that front.
Yes, so where we.
You've seen us.
None of them by the way that's Patrick Thanks for the question. So what we've seen is that.
Overall, especially here in the U S.
We've seen increased demand.
And we've been able to turn that over into sales.
The high end product.
Yeah absolutely.
Definitely is an arris.
That would have enjoy some healthy growth here.
Awesome. Thank you so much.
Our next question comes from Matthew Sikes with Goldman Sachs. Matthew Go ahead with your question.
Hi, This is <unk>. Thanks for taking my question. So what gives you confidence in your guide given the pick up of growth applied for the back half versus the first half of the year.
And what kind of visibility you have him for the remainder of the year.
Well, that's a great question so.
Looking at the first of all look into macro environment.
The.
Probability of a recession going down I think we feel more upbeat about the second half.
More boots on the ground with the combined sales team and being fully trained that gives us increased confidence.
But we also expect to see your accelerated growth in the instrument sales.
Again, I'll continue demand of all my life.
But also accelerate demand for the self sorta, which has been very well received remember we crossed at hundred instrument March after a few months ago. So we see continued demand for that.
Finally, he also expecting kitchen growth on some of the recurring business that we have the service business have been very strong fast. So a number of violence that that will drive the growth in the second half.
Okay, Great. That's helpful. Thank you.
China I know last quarter, you know particular strengthen that market has that continued and has there been any changes to the competitive environment. There and also did you have any additional investment in facilities their health your positioning versus local competitors.
Actually total overall or China.
Business continued to enjoy the healthy growth component to the same period last year.
Indeed, local competitors coming but mostly in the entry level and Miller, which.
Tom Daley overlaps that much.
Okay. That's helpful. Thank you.
Standby for our next caller.
Our next question comes from Steven MA with T. D. Cohen Steven go ahead with your question.
Oh, great. Thanks for taking the questions.
Follow up question on the U S pharma and biotech strains that you saw.
Could you give us a sense was it was it broad based amongst your customers or or was it waited to a certain profile of the customer such as like emerging biotech versus.
Larger companies that were catching up.
And actually as you recall and we had some delay in order telling your last month of two one and quite a lot of those actually came back in <unk> that actually helps us with regarding to our overall.
From a business during the pivotal.
On the other hand, we will continue to see in long dated sales cycle phone.
Biotech.
Nevertheless, the business remains over there just take longer time to close.
Okay.
Just to dig in on what you said, so you you're still seeing elongated sales cycles.
Relatively speaking, yes, yes, correct relatively speaking and it takes a longer time and for us.
Too close to you, but they are not <unk>. They are still there the demand is still there.
Okay, Brian Okay. So you're not so is it still the case that year.
You're still seeing demand you're not necessarily losing business is just that the sales cycle is being elongated but still.
You guys are saying.
Craig.
Okay got it and then if I could sneak and one more question.
You talked about specifically some European weakness could you could you give us a little bit more color ma'am market dynamics X U S. And are you already talked about China, but more specifically some of the European weakness that you that you mentioned.
Thank you.
Yeah. So.
The European business has been a little bit lagging.
Lagging behind the U S in APEC at this point yet.
Typically the European market is much stronger on the second half. So we expect that market to pick up in the next six months.
Okay. Thank you.
Please stand by for our next question.
Our next question comes from K J.
<unk> of Morgan Stanley . Okay go ahead with your question.
Hey, guys. This is Edmund amputations. Thank you for taking my question I appreciate all the caller here on China, So far but I just wanted to dig into this a little bit more it sounds like it's been performing very well for you guys, but you'd tools peers are noted, noting deteriorating conditions in China. So I'm just wondering what's causing this difference in views or what you guys are seeing.
Is being insulated so it's going to be by innovation versus all other products.
I think.
Even in the tools space you may see the difference between the occurring reagents revenue versus tool.
Clearly will continue to enjoy the incentive plan happens starting 0.2324 last year and now coming back to.
See how it's going to perform during the second half of it.
Something we are assessing and indeed.
Indeed, I think because they are a lot of difficulties at what we have been hearing about in China, but how it may impact us.
In the second half is still something.
To be seen.
Yeah, and I would just add to that.
So it's not a new technology. So we are also enjoying.
A demand for replacement we are enjoying also demand because of the.
The spectrum that we have so overall I think we should we should expect to see continued demand compared to maybe some other tool companies.
Got it is very helpful and on the last call. You guys noted that there were certain features of the guava that needs to be implemented into the northern late before you guys can accelerate.
Accelerate the conversion of the user base can you provide some more details on that and I was just wondering how you guys balancing between incorporating these features into the northern light to drive that user basis adoption versus focusing on the next generation platform that you can develop with the Atlas imaging capabilities.
Okay.
I think these are two different product line, along as the high end up with a.
Folks in poor taste.
Customers in the discovery.
I'll call ups and.
And compare them to the northern lights pop Ah Ah Ah features.
So we do have teams actually working on these two subjects in pedal we have different teams are different project.
Got it and then when being you alluded to potentially larger addressable market now that you have these luminex products in your portfolio could you clarify.
Clarify on that a bit.
Now as you can see clearly previously organic products folks more toward.
Farmer biotech.
It is covered in the translation, though while guava more toward industrial <unk> those type of entry level customers now combining these two now we have product.
Portfolio that can meet.
Meet the needs across varieties of userbase applications.
So how's your overall cam changed since you're probably views.
Not really over time has changed it just that we have.
Have more targeted products to folks from userbase.
Got it thank you.
Yeah Bye for our next question.
Our next question comes from David Westenburg with Piper Sandler David Go ahead with your question.
Hi, Uhm. Thank you guys I'm, so sorry I'm not.
Familiar topic on on China, I don't know if you can quantify it but.
<unk> assumptions in the guide on China, I don't know if you want to give us a number or stayed steady state from what you had but you know it just didn't really help us understand like maybe you know if there is further slowdowns are further commentary you know how much of of that guy would be at risk and that thank you.
So maybe.
Maybe we don't really break out the guide this way, but we've river guide as we do all the time and we do.
You will feel good about where we are with the guide for the year, considering the final and we look at the frontal.
Looking at all the region, so I will.
They will leave you with that.
Okay, great and and and continuing on with the with the guidance and you know I I realized there's some integration between a luminex clothes cytometry products and and the legacy products, but I think you called it out as an 8.2 million of the <unk>.
<unk> revenue in Q Q I think your guidance for 25 to 30, if I kind of take that same run right like I would assume a little bit of growth acceleration for what you had in this quarter is that the right way to think about it. It was like getting there was I reading in the press release correctly when I'm looking at that.
If it doesn't work that way typically Diana and you know the business typically we are spared amongst company and the most of the orders come in getting the third.
But on the other hand.
Upon luminous perspective right.
We only have about 10 bucks for the year.
So if you work that number.
My choice [laughter] that will that will what do we have projected.
Projected for the whole year.
Okay. Okay, great Uhm can you talk about if there's been any surprises positive or negative from from the portfolio now that you've had it since February and then kind of continuation of that that question. You know how does the integration going with their sales team is there any any synergies that you're getting there that maybe he didn't call out at first and is there.
Any you know opportunities to to rationalize this air force of reorganize the salesforce from here.
Not a surprise, but we do have learned a lot through this integration.
And.
Especially with the gardening tool.
Knowledge embedded in the luminous product portfolio more we see more we see the value of this acquisition and we do feel and it's going to help us.
Not just for this year for actually for the years to come.
Got it and you know since I think I am the last of five out squeeze in one more cause you know I can do that and so on the reagent to use the word fast growing and in the in the prepared remarks. So can we assume when when you're using that kind of commentary.
Is growing faster than than than instruments here is that the assumption now.
And thank you.
Uh-huh.
Yeah, maybe it's growing faster than the R.
Total revenue.
Yes.
Thank you guys.
I am showing no further questions at this time. This concludes today's conference call. Thank you for participating you may now disconnect.
Mmm.
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