Q3 2023 Cytek Biosciences Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the <unk> Biosciences third quarter 2023.
Earnings Conference 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 you will then hear an automated message advising your hand is right.
To withdraw the question. Please press star one one again.
Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your speaker for today, Paul Goodson head of Investor Relations. Paul. Please go ahead.
Yeah.
Okay.
Thank you operator earlier today, So high Tech Biosciences released financial preliminary results for the quarter ended September 32023. 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 sci-tech bio dot com.
Joining me today from <unk> are when Ben Zhang CEO, and Patrick John Malone CFO before we begin I'd like to remind you that we 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.
<unk> 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.
Vince 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 Sci-tech issued today and in <unk> SEC filings, including the upcoming Form 10-Q that is expected to be filed with the SEC on Thursday.
November 9th 2023.
This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles.
A reconciliation to the most directly comparable GAAP financial measure may be found in today's earnings release submitted to the SEC.
Except as required by law Sci-tech 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 7th 2023.
I would like to mention that <unk> will be hosting a number of flow cytometry events over the coming months.
While these are primarily geared to our scientific user base they may be of interest to our analysts and investors alike.
These include the Sci-tech reveal roadshow, which is currently underway.
Several high Tech user group meetings, and a variety of industry conferences.
Where we will have a product booth and we will be sponsoring user outreach events.
These events offer an opportunity for you to interact with users of our technology and get their comments directly on why they chose Sci-tech. We have a limited number of spaces to accommodate members of the financial community. So if you're interested in attending please contact me.
With that I will turn the call over to Wendell.
Thanks, Paul and welcome everyone.
Our third quarter conference call.
On the call today.
I will discuss our results for the third quarter as well as our progress across our four key strategies will drive growth.
Then I will turn the call Michael Patrick for a more detailed look at our financial.
And update our outlook for Wednesday, 23, before we open it up for Q&A.
Starting with our third quarter and $8.
Okay difficult macro environment.
We achieved 48 million.
<unk> total revenue.
Representing growth up 19% year over year.
This included approximately six $8 million up revenue.
The product line acquired founded Mitch.
Excluding acquisition related revenue.
Our organic revenue was $41 $2 million.
A 2% increase year over year.
We are pleased with the continued growth we saw in the third quarter from our legacy portfolio and our services.
Yes.
We expect to be leading growth drivers for our business in the future.
The pocket of a trend.
182, the strong utilization of our instruments.
The price effect attached to program.
In the third quarter like many of the company, we were not immune to the increasing headwinds within our industry.
We expanded and extended sales cycle and the order delays.
We expect that Brexit could persist into the fourth quarter.
As a result of these factors.
We expect full year revenue from our organic business to be approximately flat the prior year and $25 million to $30 million of revenue contribution.
The business acquired from <unk>.
Taken together.
We expect full year revenue in the LNG off $188 million to $192 million.
Representing growth of 15% to 17% over the prior year.
Patrick will provide more detail on our financial results momentarily.
Despite this challenging backdrop.
Our team's commitment to adapt and navigate the evolving environment.
We remain focused on driving our product strategy forward and delivering commercial growth at profitable levels across our diversified revenue streams.
We believe that the underlying.
Interest in our four special profiling Paul.
Technology continues to be high.
And we are making good progress.
With both new and existing customers in our pipeline.
We are adjusting well established in the market across the scientific community, where there is a large need for tools looking rational.
We are well positioned clinique this demand.
Industrial leader offering and expansive product portfolio purpose built to advance next generation cell analysis.
We'll deliver on our long term objectives.
We continue to focus our business.
Four key pillars.
Excellent.
Applications.
Informatics and the clinical.
Starting with instruments.
During the third quarter weighted.
We placed 119 instrument brown, our organic site portfolio.
Resulting in an installed base of 1997 type of instruments.
Excluding the installed instruments.
Imaging and the guava micro catheter late product lines acquired Brown eliminates.
We extended the slower growth in organic instrument sales in the third quarter.
<unk> welcomed <unk> customer spending patterns and debt extending the purchasing delays as a result.
Despite this we believe that customer interest in our program instrument portfolio continues to be strong and we remain focused on driving adoption.
Longer term we believe.
This growing installed base will provide us with a receptive market for new instrument that we intend to launch in the future.
I would like to turn next to applications, which include our reagents in the case, where we continue to see strong performing.
Importantly, with increasing instrument placements, we expect this positive trend to continue with higher pull through of consumables down the road.
Our legal benefit.
Our optimized or unit.
Our instruments, which helps make the user job easier faster and more accurate.
In addition, our scientists have created a new agents that have pushed the boundaries of the spectral response.
Further strengthening their performance and the utility to our customers.
We continue to actively collaborate with our partners to broaden our vacant portfolio.
And develop applications specific case.
We are committed to continuously expanding our portfolio of critical reagents.
Lining with our overarching initiative to provide a comprehensive solutions for our customers.
Does that end.
We expect to launch a new product.
Type of Orion cocktail.
Cocktail radio Nitro in the fourth quarter.
This new cost cutting technology to simplify and accelerate laboratory workflow.
Helping assure consistent experimental results saving time, and reducing the Aegean waste.
We showcased our technology at least in the industrial conferences.
And encouragingly customer, we're very interested in this offering.
The launch of our site the Orion radio mixer is part of our strategy to expand our menu of application and products.
At both accelerate research and provide a deeper insights for our existing customers and new customers alike.
The breadth of applications for our instruments and reagents.
Youll be seeing across the wide range of peer reviewed publications that include our technology.
In the third quarter.
171, new peer reviewed publication maintaining sci-tech.
Bringing the all time number of publications for 1400, and the AI tool.
The increasing number of peer reviewed publications that showcase our product refresh the growing acceptance of site innovative solutions among researchers as they continue to leverage our technology to propel scientific advancements.
Bioinformatics is our third area.
A key part of our bioinformatics strategy, enabling our customers to streamline their experiment workflow.
We have reported to you before that user engagement and demand for the site cloud launched late last year has been doing exceptionally well.
At present.
On average more than two sides of the crowd the user per installed sorry debt instrument.
Cyber cloud the digital ecosystem offer a comprehensive suite of spectrum panel design tools.
Seamlessly integrated into a centralized platform.
A unified ecosystem.
Its cutting edge solution empowers researchers to prepare and to optimize their experiments with locally.
I'm learning the process from panel design tool data acquisition.
Okay.
The demand for the site to cloud is being driven by researchers desire to collect data from every sale they analyze.
Which has been made possible by the advanced capability side.
Instruments and reagents has brought to researchers.
This is resulting in the need for increasingly larger the Aegean panel to gather more biological insights.
Awesome.
That are rare and are very limited in size.
These larger panels.
A much more data, which creates more complexity across the entire lab workflow from panel design tool data acquisition to data analysis.
The pass the time to in fact and ability to analyze larger dataset.
It's extremely valuable across a broad range of research applications.
Our immunology oncology infection as well as inflammatory diseases.
We believe cyber cloud provides a powerful reason for new user adoption and for existing users to continue using our instruments and reagents.
Turning to our clinical opportunity.
As a reminder.
All of our products.
Proved for clinical use in both China and the yield.
Our most common sale for clinical applications.
Northern lights.
LC system.
Our company by our growing C for all reagent product portfolio.
In both China, and the EU the clinical market.
Attractive business opportunity for Playtech.
In the EU, we demand ahead of the curve.
Any update to the European IV Dr regulation.
Im pleased to announce that our site technology like CLC system.
And with the most recent regulation.
Additionally, our specialty flow <unk> are now <unk> certified.
Bringing both the instrument and the BD together.
Half of the IBD system solution.
This past September.
Great to see our IVF system solution showcased at the European Society for clinical cell analysis annual conference.
One of our early adopters.
Well Ron Miller.
He is the director of the unit for sale in a gene therapy at the University of Nino either.
And the focus on <unk>.
Translational research in Pediatrics, Kansas.
<unk> had tested the northern lights, CRT special flow Cytometer on patients with leukemia at diagnosis and building therapy when metals are deeply affected by chemotherapy.
The conference Dr.
Dr. <unk> highlighted the use of northern light CLC is research and the heat confidence in gaining the maximum levels of inflammation, although San postponed workflows.
We were pleased to see one more example of our technology being leveraged to drive forward advancements in scientific research.
Within the U S.
We are continuing to develop our application to the FDA for 500 10-K credentials of our products to be used in clinical applications.
We believe our powerful SP platform.
If FDA create will bring clinical diagnostics labs unparalleled efficiency and analytical power.
Thus, providing a benefit to patients by giving doctors.
Rapid clearance and a more detailed review of each patient's condition.
Further in the third quarter.
<unk> received our ISO 13, 485% quality management system certification all ahead of us.
And the manufacturing operations in Fremont, California, who will produce our flow cytometry vegan and accessories.
This certification bolsters, our plan to focus on translational and clinical market and.
<unk> a strong signal to customers in these segments that we are committed to serving them.
Every step necessary to responsibly to sell in the future.
Lastly, I'll also provide an update on our integration of the Avnet and the guava product lines, we acquired the final illuminate.
Hello late 2008.
As a reminder, we completed the cross training of our sales force.
The end of the second quarter and the conversion of the analyst manufacturing facility to our control around the same time.
During the third quarter.
We completed the transition of the manufacturing of guava instrument from Numerex, Austin, Texas facility two sites at Wuxi, China location.
Our only in any integration tasks is to complete the cross training of our service personnel on the instrument neutral.
We expect to finish the cross training up the service team by the end of the fourth.
Fourth quarter.
This important step will position us to.
To take full advantage of the efficient phase in operating our service organization that we envisioned when we made the acquisition.
The flow Cytometer community has shown tremendous activity in adding imaging to their applications.
To meet this growing interest.
We plan to release, an updated version of our ominous AI analysis software in the first half of 'twenty 'twenty four will.
Take a full advantage of the industry's leading energy quantity from our image stream.
Although we are seeing the value of the aluminum acquisition, both in EMEA and over the long term.
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 2023 was $48 million amount.
Our 19% increase over the third quarter of 2022.
Included approximately $6 8 million of revenue from the products and services acquired from the aluminum transaction, which closed on February 28.
<unk> revenue, excluding the acquired products and services was $41 $2 million.
Increase of 2% compared to the same period of 2022.
As Wendell mentioned, we are continuing to extremes extended sales cycles and order delays.
While the macro environment was challenging during the third quarter.
Did expanding strength in roofing revenue, including religion on service revenue.
Gross profit was $27 2 million for the third quarter of 2022.
An increase of 1% compared to a gross profit of $26 9 million in the third quarter of 2022.
Gross profit margin was seven.
7% in the third quarter of 2023 compared to 66% in the third quarter of 2022.
Adjusted gross profit margin in the third quarter of 2022.
<unk>, 9% compared to 68% in the third quarter of 2022.
After adjusting.
While stock based compensation expense and amortization of acquisition related intangibles.
Operating expenses were $33 6 million for the third quarter of 2023.
32% increase from $25 5 million in the third quarter of 2022.
The increases in operating expenses was primarily due to expenses related to increased headcount from the Numerex acquisition in personal related expenses across sales and marketing.
Search and development and general and administrative.
<unk> expenses included an increase in spiritual and Argos sales.
Research and development expenses were $11 2 million for the third quarter of 2023.
As compared to $8 7 million for the prior year period.
Sales and marketing expenses were $12 1 million for the third quarter of 2022 as compared to $8 8 million for the prior year period.
Reflecting the addition of our new team members from <unk> remarks.
While sales and marketing as a percentage of revenues this quarter.
We expect this ratio will decline as our revenue growth trajectory recovers and our sales and marketing investment is spread over a larger revenue base.
General and administrative expenses were 10 $4 million for the third quarter of 2023 as compared to $8 million for the.
How are you.
Right.
Loss from operations was six $4 million for the third quarter compared to an income from operation of $1 4 million for the third quarter of 2022.
The net loss after tax in the third quarter of $2023 $6 5 million.
Compared to net income after tax of $1 6 million in the third quarter of.
2022.
Additionally, our adjusted EBITDA in the third quarter of 2023 was positive $3 $7 million compared to positive $7 3 million in the third quarter of 2020 after adjusting for stock based compensation expense.
Cash cash equivalents in short term investment were $288 million as of September 32022.
Our strong balance sheet.
External financial moves underscores our organizations the pilots.
With a healthy cash reserve.
On a profitable track record with <unk>.
Two upwards from a position of strength.
<unk>, our global growth of ports.
One important use of our cash position has been to repurchase our stock following the $50 million.
Repurchase authorization of the amounts in may of this year.
During the third quarter.
We purchased approximately $8 4 million.
<unk> stock in open market transactions.
Share repurchases under these programs are cancelled, leaving us with approximately $135 million.
Shares outstanding as of September 32.
2023.
Now turning to our guidance for 2022.
Which one been reported at a high level earlier, we're continuing to see market pressure affecting our revenue expectation, including order delays across North America economic challenges in China.
Along with the sales cycle across geographies.
Taking these factors together we.
We expect our full year revenue to be in the range of $188 million $292 million.
<unk> overall growth.
15% to 17%.
Over full year 2022.
We expect.
Used to be composed of approximately flat organic revenue versus the prior year on revenues from the acquired aluminum business to be in the range of 25 million to $30 million.
As we look ahead, we are anticipating some softness in our top line to persist into 2024 due in part to the longer sales timelines we are experiencing.
While it is too early to provide our specific outlook for next year, we continue to keep a close eye on the dynamic global market conditions.
We are also diligently focused on improving operational efficiency across our business and aligning our overall cost structure to ensure that we remain agile organization in the best possible position to drive growth and deliver profitability.
With that I will turn it back over to London.
Thanks, Patrick.
I want to close by thanking our HEICO team for their unwavering dedication to delivering cutting age tool reagents and software.
And the next generation of cell analysis.
While we are facing near term headwinds.
Our financial strength and the organizational commitment.
<unk>.
<unk> successfully weather through these times.
We continue to be excited by the significant opportunity ahead to drive adoption of our expansive and growing product portfolio.
I am confident that we are fundamentally well positioned to drive our mission forward with continued execution across our key strategic pillars and are focused on delivering profitable growth.
I want to thank everyone for joining today's call and we will now open it up for questions.
Operator.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star 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.
The Q&A roster.
The first question comes from the line of David Westenburg of Piper Sandler David. Please go ahead hi.
Hi, Thank you for taking the question. So I just wanted to get a little bit of a sense for the competitive environment, whether or not you're seeing anything out there whether it be maybe cheaper traditional flow cytometer or maybe full spectrum flow cytometer, just any anything on the competitive landscape. It tells us the instrument doing.
Yes, Mike that kind of perspective, this really is a lot more and broader market kind of situations.
Yes, Dave Thanks for asking the question Patrick.
So we continue to see demand for our instruments.
Don't know if this environment as we defined it keeper.
Definition, considering that we see continued demand from biotech pharma and academia, while this quarter was a little softer than expected.
We still remain very positive about the continued demand for for the full spectrum technology that Phi Tech.
<unk> is selling.
One of them.
Indication, where we have seniors.
Based on our pipeline.
Clearly seeing more cases gone code instead of being lost.
When loss ratios.
Constant not really changing over time. So this just links.
The impact is mostly due to the macro environment.
Got it.
So Amy.
I mean traditionally right is the right way to think about it you have a flow cytometer yellow five to seven year kind of replacement Capex cycle.
If we're seeing softness kind of in 2023.
The 2024, but really I mean, like you would be going at the end of the capital equipment cycle is that kind of the right way to think about it as we think about the long term.
<unk> for the instrument.
Thank you.
I think the continuously of course, we see returning customer we also see new customers in our space and the demand certainly is still out there, but on the other hand, as even though due to the high interest rate.
When customers are making a decision on when to purchase this.
Part of the consideration that they have and basically try to delay their purchase decision was as alone.
They can right.
So this is impacting how we perform.
Right here.
Okay got it and maybe just ask one more on again on the kind of this product demand side is there do you offer anything kind of on a little bit more reagent.
Or financing options.
Yes.
In order to help them with kind of the capital purchase cycle.
So clever ways to think about that kind of thing over the next couple of years that helped drive a man and given the high interest rate environment. Thank you.
Okay.
Great question.
We are indeed looking at this options as you know we have a strong.
Cash flow and the balance on our balance sheet and this potentially as a possibility.
But we can help our customers.
To make that decision with regarding to the purchase.
Yes.
Alright, guys. Thank you.
One moment for your next question.
The next question comes from the line of Steven MA of TD Cowen Steven. Please go ahead.
Oh, great. Thanks for taking the questions.
Patrick.
Looking at the New guide if I'm doing my math right. It looks like it's going to be maybe a slightly down to flat.
Sequential quarter over quarter Q3 to Q4.
On the last call you said the cadence of revenues would be would be heavily skewed to the back half of the year could you give us some color on what happened was there some orders that got pushed back and what do you think of those pushback or will they come back eventually or are they going to be lost.
Yes so.
Fourth quarter is going to be up from the third quarter. So.
We expect the fourth quarter to be up from from where we landed in Q Q3. So that's number one.
What we've seen in Q3 is little bit of softness in the in the Academia segment, which typically is strong on the third quarter.
Also has seen a little bit of softness in the biotech we had expected a slightly stronger.
Push on that side.
While we are not expecting.
We are to lose a lot into next year.
We expect Q4 to be stronger than than Q3.
Okay.
Yeah.
Okay, great. Thanks, and then.
Something that <unk> said the customer interest is still strong.
Can you help us.
Reconcile what that means does it mean.
You know the sales cycle really is just being extended and youre not actually are losing business, but just being delayed is that what your centers.
From that.
Yes. This is it.
What do we mean, if not really being lost.
In early July our win loss ratio remained constant.
So.
This just means.
It takes some time for customers to make it to stay under today's macro environment.
Especially when we talk about are really expensive high expense.
High cost capital expenditure.
Yes.
Okay got it and then if I can sneak one last one in.
On your stock buyback thinking how do you balance continuing to buy back stock with your M&A strategy and potentially keeping some dry powder. Thank.
Thank you.
Okay.
Definitely 11th.
You too.
A question with regarding to the stock buyback and you can see we authorized a $50 million so far we spend.
About 10 million.
<unk>.
We still have flooding.
The authorized I wish we would.
Okay.
And then the other window.
Great. Thank you.
Okay.
One moment for your next question.
Yeah.
The next question comes from the line of Matt Sykes from Goldman Sachs. Matt. Please go ahead.
Hi, good afternoon, Thanks, taking my questions.
If I could just.
Drill down a little bit on the comments you made regarding China, So obviously, well now and that's been a weak spot.
For many of the companies in the sector any additional color you can provide on what you're seeing in China and if there's any particular instrument category there that you're finding that weakness is it similar to the delays and push outs and lengthening the sales cycles. There is something else going on in China relative to what Youre seeing in the rest of the world.
Yes, as you can see.
The very well into Q2 in China, but Q3 I think.
Due to the anti corruption drive over that many.
Lenders got delayed and some of those are continue to be delayed.
We don't know is going to come back in Q4 until a later quarter.
Chip maybe Q1 next year. This is something we are working now and definitely yes.
Something not.
Expected when we got into Q3.
Impacting how we perform over there.
Got it and just to follow up on that.
I'm not aware of any but just any.
Incremental color youre hanging on value based procurement and how that might affect flow cytometry I know you do some clinical work there and so obviously concentrating on.
On other assays, but any impact to your business.
Might see from that dynamic.
So the main clinical in China.
Yes, just a value based procurement programs that are that are rolling out just any potential headwind you see from that at all or is it you feel like you'll be relatively unaffected.
Yes, that's exactly what I have been with regarding to the delay in tendering process in China.
With regarding to the clinical as you know, we did very well previously with regarding to clinical instrument.
Sales in China.
But.
Q3 definitely.
We got impacted over there.
Got it.
And then just last question from me.
Just as you look at sort of the.
Different instrument categories, you have I know you stopped reporting installed base in Q1.
Can you give us any sense for whether it's for northern light sell sort of et cetera, where are you seeing relative pockets of strength or weaknesses in any differentiation and customers' preference for price point or types of instruments and this sort of weaker macro environment.
Although we don't really split.
The instrument types, but overall, if we look at the distribution across different platform, we do see a slowdown in high cost items versus lower priced.
So that's just another indication of the macro environment high interest rate that is impacting customer buying tools.
Got it okay. Thank you.
One moment for your next question.
The next question comes from the line of Andrew Cooper of Raymond James Andrew. Please go ahead.
Hey, thanks for the questions.
Maybe first.
Like you pointed out calling for a bit of a step up here into the fourth quarter. We certainly heard from some other towards players kind of a cautious tone on whether there is a budget question. There just maybe your thoughts around how much budget freeze up in the <unk> like we typically would see.
Verse, maybe anything else going on there to lead the next step up.
Indeed, the typically Q4 is the best quarter for Hi, Tec and if we look at past history.
Certainly as it related to those type of budget flush.
We continue to foresee the same thing that that will happen, but at what magnitude.
This is something a wait and see but Q4 definitely is going to be the best quarter.
Plus high Tech that we still have that confidence.
Okay. Thank you and then maybe just in terms of some of the customer conversations I think it makes sense youre seeing the elongated sales cycle. What you are seeing that question, maybe a little bit lower a little bit lower cost instruments have you seen many of those conversations that maybe get held up and the end result.
We're able to close the close it's al.
The lower end as opposed to the high end instrument has that something is that been something that has occurred or anything that jumped out from those client conversations and client interaction that maybe we get a little bit more of that lower end versus our peers.
Pure push out of those higher end purchases.
Yes, looking at the growth rate across low and high end.
I'll just mention about what do we haven't seen and we do see a higher growth for our lora and instrument, especially the northern lights.
Versus the high end of the instrument.
Okay, and maybe I'll just sneak in one more is there any additional color you can share on.
On the reagent business in the kit business in terms of quantifying sort of the growth there and where that business is today.
Yes, I can take that so.
The region segment is our second.
Fastest growing segment.
It's still small.
About mid two.
High single digit.
As a percent of total revenue.
Growth rate are compelling.
And we will continue to invest in that segment.
We expect to continue to grow that.
Segment substantially going into into 2024.
We like the recurring revenue coming out of it.
Added to the service business, which makes us.
Are so unique to to the extent that we can continue to build the growth.
Our revenue range for the coming year.
I'll put it in perspective LIG in growth rate is more than double of our average growth rate.
Revenue there.
Great I'll stop there. Thank you.
One moment for the next question.
Yeah.
Yeah.
The next question comes from the line of Te Savant of Morgan Stanley. Please go ahead.
Good evening guys. This is edwin thank you for the time I, just kind of want to start out with.
Your EU trends and what you saw in <unk> I think it was a bit soft in <unk> for Biopharma and you guys are calling for a stronger second half did that play out to your expectations.
Yes, I mean, we continue to see softness in the in depth.
Biotech pharma segment for sure I mean, the real risky.
Higher expectation for this segment.
So overall I think it's fair.
It's lower than what we would have.
We expect.
And that's coupled with the academia that's also.
Not growing as much in the third quarter typically you would have expected backdrop.
Yes.
Got it and then.
With the Gulf of manufacturing now transferred to Wuxi.
Im not sure if you guys talked about this but how should we think about the gross margin impacts in <unk> and looking into 'twenty four.
Yes.
Thats a good question. So we completed the transition in Q3 so for.
For those who don't know the guava.
We have a platform where steel manufacturer with the <unk>.
<unk>.
Organizationally.
We have to pay a premium for the for these instruments. So now these instruments now fully being manufacturing within the cyclic environment and the expectation is that the gross profit margin for these instruments.
Gradually as we as we move forward first of all because we have a better manufacturing process for these instruments, but we also looking at doing a curse bound to improve the overall gross profit margin for those.
Got it Super helpful. And then I was wondering if you guys could elaborate a little bit more about your recent sidetrack reveal roadshow.
What kind of people in the audience, what kind of feedback you got and it sounds like you guys kind of more of these industry conferences and user meetings, how should we be thinking about the impact on opex heading into 'twenty four.
Scientists.
<unk> customers.
Existing and new customers.
So far.
Very well.
They saved.
We are continuing with this process.
I think Paul earlier mentioned.
Welcome.
Investment community to John could be part of that and probably investment.
Daniel for you to see firsthand, how sci-tech use us.
Feel about the technology.
We have provided.
Got it that sounds very interesting. Thank you for the time.
Okay.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
Yeah.
Okay.
[music].
Yeah.
[music].
Yeah.
[music].
Okay.
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
[music].
Good day, and thank you for standing by.
Welcome to the <unk> Biosciences third quarter 2023 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question answer session.
To ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is right.
To withdraw the question. Please press star one one again.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker for today, Paul Goodson head of Investor Relations. Paul. Please go ahead.
Thank you operator earlier today, So high Tech Biosciences released financial preliminary results for the quarter ended September 32023, if you <unk>.
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 outside tech bio dot com.
Joining me today from <unk> are when Ben Zhang CEO, and Patrick John Malone CFO before we begin I'd like to remind you that we 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.
Vince 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> SEC filings, including the upcoming Form 10-Q that is expected to be filed with the SEC on Thursday.
November 9th 2023.
This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles.
Reconciliation 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 7th 2023.
I would like to mention that <unk> will be hosting a number of flow cytometry events over the coming months.
These are primarily geared to our scientific user base they may be of interest to our analysts and investors alike.
These include the slight tech reveal roadshow, which is currently underway.
Several high Tech user group meetings, and a variety of industry conferences.
Where we will have a product booth and we will be sponsoring user outreach events.
These events offer an opportunity for you to interact with users of our technology and get their comments directly on why they chose high Tech we have a limited number of spaces to accommodate members of the financial community. So if you're interested in attending please contact me.
With that I will turn the call over to Wendell.
Thanks, Paul and welcome everyone to our third quarter conference call.
On the call today, I will discuss our results for the third quarter as well as our progress.
Our fall key strategies to drive growth.
Okay.
Then I will turn the call Michael Patrick.
A more detailed look at our financials and an update on our outlook for 2023.
We open it up for Q&A.
Starting with our third quarter results.
Okay difficult macro environment.
We achieved 48 point.
Our total revenue.
Representing growth of 19% year over year.
This included approximately $8 million of revenue from the product line acquired founded niche.
Excluding acquisition related revenue.
Our organic revenue was $41 $2 million.
A 2% increase year over year.
We are pleased with the continued growth we saw in the third quarter from our legacy portfolio and our services.
With that we expect to be leading growth driver for our business in the future.
The pocket of a trend.
In April the strong utilization of our instruments and the flywheel effect attached to program.
In the third quarter.
Many of the company.
We were not immune to the increasing headwinds within our industry.
We expanded and extended sales cycle and the other delays.
We expect that Brexit could persist into the fourth quarter.
As a result of these factors.
We expect full year revenue from our organic business to be approximately flat the.
In the prior year.
<unk> $25 million to $30 million of revenue contribution.
The business acquired from <unk> in the next.
Taken together, we expect full year revenue in the range of 108 eight for $192 million.
Representing growth of 15% to 17% over the prior year.
Patrick will provide more detail on our financial results momentarily.
Despite this challenging backdrop I am pleased with our team's commitment to adapt and navigate the evolving environment.
We demand okay.
Having our product strategy forward and delivering commercial growth at profitable levels across our diversified revenue streams.
We believe that the underlying interest in our four special profiling, Paul SP technology continued to be high.
And we are making good progress with both new and existing customers in our pipeline.
We are adjusting well established in the market across the scientific community.
That is a large need for tools PL.
No.
We are well positioned clinique this demand.
<unk> industrial leader offering and expansive product portfolio purpose built to advance next generation cell analysis.
Well deliver our long term objectives.
We continue to focus our business our four key pillars.
The instrument applications.
Our informatics and the clinical.
Starting with instruments.
During the third quarter.
We placed 119 instrument brown, our organic cited portfolio.
Resulting in an installed base of 1997 site in instruments.
Excluding the installed instruments.
Imaging and the guava micro catheter late product lines acquired from eliminates.
We experienced slower growth in organic instrument sales in the third quarter due to more conservative customer spending patterns and debt.
The purchasing delays as a result.
Despite risk.
That customer interest in our program instrument portfolio continues to be strong and we remain focused on driving adoption.
Longer term.
We believe this growing installed base will provide us with a receptive market for a new instrument that we intend to launch in the future.
I would like to turn next to applications.
Which include our reagents and kits.
We continue to see strong performing.
Importantly, with increasing instrument placements, we expect this positive trend to continue with higher pull through of consumables.
Road.
Our league and penetrate.
Optimized for an hour.
Our instruments, which helps make the user job easier faster and more accurate.
In addition, our scientists have created a new division that have pushed the boundaries up especially on response.
The strengthening their performance and the utility to our customers.
We continue to actively collaborate with our partners to broaden our reach and portfolio and develop application specific case.
We are committed to continuously expanding our portfolio of critical reagents.
Aligning with our overarching mission to provide a comprehensive solutions for our customers.
With that and we expect to launch a new product.
Type of Orion cocktail.
Cocktail the Aegean Nitro in the fourth quarter.
This new cost cutting technology simplifies and accelerates laboratory workflow.
Helping assure consistent experimental results saving time, and reducing the Aegean waste.
We showcased our technology at least in the industrial conferences.
And encouragingly customer, we're very interested in this offering.
The launch of our site the Orion radio Nixer Todd.
Part of our strategy to expand our menu of application and the products that both accelerate research and provide a deeper insights for our existing customers and new customers alike.
The breadth of applications for our instruments and reagents.
Both will be seeing across the wide range of peer reviewed publications that include our technology.
In the third quarter.
171, new peer reviewed publication maintaining sci-tech.
Bringing the all time number of publications for 1400, and the AI tool.
The increasing number of peer reviewed publications that showcase our products reflect the growing acceptance of <unk> innovative solutions among researchers as they continue to leverage our technology to propel scientific advancements.
Bioinformatics is our third Jesse Carroll area.
A key part of our about implementing strategy, enabling our customers to streamline their experiment workflow.
We have reported to you before that user engagement and demand for the site cloud launched late last year has been doing exceptionally well.
At present.
On average more than two sides of the crowd the user per installed sorry debt instrument.
Sorry to cloud the digital ecosystem offer a comprehensive suite of spectrum panel design tools.
Seamlessly integrated into our centralized platform, forming a unified ecosystem.
This cutting edge solution Impala lease ratios.
And the optimized their experiments with locally.
<unk> the <unk>.
Process from panel design tool data acquisition.
<unk>.
Okay.
The demand for the site to cloud is being driven by researchers desire to collect data from every sale re analyzed.
Which has been made possible by the advanced capability side.
Key instruments and reagents has brought to researchers.
This is resulting in the need for increasingly larger the Aegean panel to gather more biological insights.
And post that are there and are very limited in size.
These larger panel result in much more data.
Which creates more complexity across the entire lab workflow from panel design tool data acquisition to data analysis.
At the time to insight and ability to analyze larger dataset.
He is extremely valuable across a broad range of research applications.
While immunology oncology.
Infection as well as inflammatory diseases.
We believe FICA cloud provides a powerful reason for new user adoption and for existing users to continue using our instruments and reagents.
Turning to our clinical opportunity.
As a reminder.
Several of our products approved for clinical use in both China and the yield.
Our most common sale for clinical applications is the northern light CLC system.
Our company by <unk>.
Our growing C for all reagent product portfolio.
In both China, and the EU the critical market.
Attractive business opportunity for Playtech.
In the EU we.
Demand ahead of the curve.
Any update to the European IV Dr regulation.
Im pleased to announce that our site at northern lights CLC system.
And with the most recent regulation.
Additionally, our specialty flow <unk> are now <unk> certified.
Bringing both the instrument and the BD together as <unk>.
Half of the IBD system solution.
This past September.
Great to see our IVF system solution showcased at the European Society for clinical cell analysis annual conference.
One of our early adopters.
<unk> million dollars.
The director of the MIT for cell and gene therapy.
The University of Nino either.
The focus on translational research in pediatrics cancers.
<unk> had tested the northern lights, CRT special flow Cytometer on patients with leukemia at diagnostics and the building therapy when metals are equally affected by chemotherapy.
The conference Dr.
Dr. <unk> highlighted the use of northern light CLC is research and the heat confidence in gaining the maximum levels of inflammation, although San postponed workflows.
We were pleased to see one more example of our technology being leveraged to drive forward advancements in scientific research.
Within the U S.
We are continuing to develop our application to the SBA for five 10-K clearance of our products to be used in critical applications.
We believe our powerful <unk> platform.
If FDA cleared will bring clinical diagnostics labs, and patent load efficiency and analytical PA.
Thus, providing a benefit to patients by getting data.
Rapid career and a more detailed review of each patient's condition.
Further in the third quarter.
<unk> received our ISO 13, $4 85, and quality management systems that a patient all ahead of us and the manufacturing operations in Fremont, California to produce our flow cytometry vegan and access flows.
This certification bolsters our plan to folks.
Translational and clinical market and.
In defence, a strong signal to customers in these segments.
We are committed to serving them.
Looking at least step necessary to responsibly do so in the future.
Lastly, I'll also provide an update on our integration of the Avnet and the guava product lines, we acquired the final illuminate.
Hello late 2008.
As a reminder, we completed the cross training of our sales force.
The end of the second quarter and the conversion of the analyst manufacturing facility to our control around the same time.
During the third quarter.
We completed the transition of the <unk>.
Manufacturing of Guava instrument Brown pneumatic Austin, Texas facility two sites at Wuxi, China location.
Our only in any integration tasks is to complete the cross training of our service personnel all the instruments yields was up.
We expect to finish the cross training of the <unk> by the end of the fourth.
Fourth quarter.
This important step will position us to.
To take full advantage of the efficient phase in operating our service organization that we envisioned when we made the acquisition.
The flow Cytometer community has shown tremendous activity in adding imaging to their applications.
To meet this growing interest.
We plan to release, an updated version of our ominous AI analysis software in the first half of 'twenty 'twenty four will take full advantage of the industry's leading energy quantity from our earnings stream.
Although we are seeing the value of the aluminum acquisition, both in EMEA and over the long term.
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 2023 was $48 million, a 19% increase over the third quarter of 2022.
<unk> included approximately $6 8 million of revenue from the products and services acquired from the aluminum transaction, which closed on February 28.
Although the revenue excluding the acquired products and services was $41 2 million.
Increase of 2% compared to the same period of 2022.
As Wendy mentioned, we are continuing to extremes extended sales cycles and order delays.
While the macro environment was challenging during the third quarter.
Did expanding strength in working revenue, including religion on service revenue.
Gross profit was $27 2 million for the third quarter of 2022.
Increase of 1% compared to a gross profit of $26 9 million in the third quarter of 2022.
Gross profit margin was seven.
7% in the third quarter of 2023 compared to 66% in the third quarter of 2022.
Adjusted gross profit margin in the third quarter of 2023.
<unk>, 9% compared to 68% in the third quarter of 2022.
After adjusting.
Our stock based compensation expense and amortization of acquisition related intangibles.
Operating expenses were $32 6 million for the third quarter of 2023.
32% increase from $25 5 million in the third quarter of 2020.
The increases in operating expenses was primarily due to expenses related to increased short term from the Numerex acquisition in personal related expenses across sales and marketing loops.
Research and development and general administered.
<unk> expenses included an increase in perpetual.
Sales.
Research and development expenses were $11 2 million for the.
Third quarter of 2023.
As compared to $8 7 million for the prior year.
Sales and marketing expenses were $12 1 million for the third quarter of 2022 as compared to $8 8 million for the prior year period.
Collecting the addition of our new team members from <unk>.
While sales and marketing as a percentage of revenue is up this quarter over time do you expect that ratio will decline.
Our revenue growth trajectory recovers and our sales and marketing investment is spread over a larger revenue base.
General and administrative expenses were $10 4 million.
Quarter of 2020 fleet as compared to $8 million for the.
Probably.
Okay.
Loss from operations was $6 $4 million for the third quarter compared to an income from operation of $1 4 million for the third quarter of 2022.
The net loss after tax in the third quarter of $2023 $6 5 million.
Compared to net income after tax of $1 $6 million.
In the third quarter of 2022.
Additionally, adjusted EBITDA in the third quarter of 2023 was positive $3 $7 million compared to positive.
$7 $3 million in the third quarter of 2020 after adjusting for stock based compensation expense.
Cash cash equivalence and short term investments were $288 million as of September 32022.
Our strong balance sheet.
External financial moves underscores our organizations pilots.
With a healthy cash reserve.
Profitable track record with <unk>.
Continued upward move from a position of strength that enables our global growth of ports.
One important use of our cash position has been to repurchase our stock following the $50 million repurchase authorization that we announced in may of this year.
During the third quarter.
We purchased approximately $8 $4 million.
<unk> stock in open market transactions.
Share repurchases under these programs are cancelled, leaving us with approximately 130.
$35 million.
Shares outstanding as of September 30.
2023.
Now turning to our guidance for 2022.
Which when reported other high level earlier.
We're continuing to see market pressure affecting our revenue expectation in keeping all the delays across North America economic challenges in China.
Along with the sales cycle across geographies.
Taking these factors together we.
We expect our full year revenue to be in the range of $188 million to $192 million.
Representing overall growth of 15% to 17%.
Over full year 2022.
We expect.
Used to be composed of approximately flat organic revenue versus the prior year on revenues from the acquired business to be in the range of.
$25 million and $30 million.
As we look ahead.
We think some softness in our top line to persist into 2020 for <unk>, Inc.
In parks to the longer sales timelines, we are experiencing.
While it is too early to provide our specific.
Outlook for next year, we continue to keep a close eye on the dynamic global market conditions.
We are also diligently focused on improving operational efficiency across our business and aligning our overall cost structure to ensure that we remain agile organization in the best possible position to drive growth and deliver profitability.
With that I will turn it back over to London.
Thanks, Patrick.
I want to close by thanking our HEICO team for.
Their unwavering dedication to delivering cutting edge tools and software.
<unk> the next generation of cell analysis.
While we are facing near term headwinds.
Our financial strength and the organizational commitment positions.
<unk> successfully weather through these times.
We continue to be excited by the significant opportunities ahead to drive adoption of our expansive and growing product portfolio.
I am confident that we are fundamentally well positioned.
Our mission forward with continued execution across our key strategic pillars.
And our focus on delivering profitable growth.
I want to thank everyone for joining today's call and we will now open it up for questions.
Operator.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star 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 <unk>.
And any progress there.
The first question comes from the line of David Westenburg of Piper Sandler David. Please go ahead.
Hi, Thank you for taking the question. So I just wanted to get a little bit of a sense for the competitive environment, whether or not you're seeing anything out there whether it be maybe cheaper traditional flow cytometer or maybe full spectrum flow cytometer, just any anything on the competitive landscape. It tells us.
Instrument doing great.
Mike that kind of perspective, this really is a lot more and broader market kind of situations.
Yes, Dave Thanks for asking the question Patrick.
So we continue to see demand for our instruments.
Don't know if this environment as we defined it keeper.
Definition, considering that we see continued demand from biotech pharma and academia, while this quarter was a little softer than expected.
We still remain very positive about the continued demand for for the full spectrum technology that Phi Tech.
<unk> is selling.
One of them.
Indication, where we have seen years.
Based on our pipeline.
Clearly more cases gone code instead of being lost.
A win loss ratio.
And then karsten not really changing over time. So is this just means.
The impact is mostly due to the macro environment.
Got it.
So.
I mean traditionally right is the right way to think about it you have a flow cytometer or you have a five to seven year kind of replacement Capex cycle.
If we're seeing softness kind of in 2023.
The 2024, but really I mean, like you would be going at the end of the capital equipment cycle is that the right way to think about it as we think about the long term.
<unk> for the instrument.
Thank you.
I think the coking is of course, when we see the turning customer. We're also seeing new customers in our space and the demand certainly is still out there, but on the other hand, as even though due to the high interest rate.
When customers, making a decision of when to purchase.
Part of the consideration that they have and basically try to delay their purchasing decisions as alone.
They can right.
So this is impacting how we perform.
Right here.
Okay got it and maybe just ask one more on again on the kind of this product demand side is there do you offer anything kind of on a little bit more reagent.
Or financing options.
Yes.
In order to help them with kind of the catheter purchase cycle.
Any kind of clever ways to think about that kind of thing over the next couple of years that helped drive a man and giving them the high interest rate environment. Thank you.
Okay.
Great question.
We are indeed looking at this option as you know we have a strong cash flow and balance sheet.
<unk>.
This potentially as a possibility.
We can help our customers.
With regarding to the purchase.
Yes.
Alright, guys. Thank you.
One moment for your next question.
The next question comes from the line of Steven MA of TD Cowen Steven. Please go ahead.
Oh, great. Thanks for taking the questions.
Patrick looking.
Looking at the New guide if I'm doing my math right. It looks like it's going to be maybe a slightly down to flat.
Sequential quarter over quarter Q3 to Q4.
On the last call you said the cadence of revenues will be heavily skewed to the back half of the year could you give us some color on what happened was there some orders that got pushed back.
Are those pushed back or will they come back eventually or are they going to be lost.
Yes, so Steve.
The fourth quarter is going to be up from the third quarter. So.
We expect the fourth quarter to be up from where we landed in Q Q3, So that's number one.
Yes.
What we have seen in Q3 is little bit of softness in the in the academia segment, which typically strong on the third quarter.
We've also seen a little bit of softness in the biotech we had expected a slightly stronger.
On that side.
While we are not expecting.
To lose a lot into next year.
We expect Q4 to be stronger than Q3.
Okay.
Yes.
Okay, great. Thanks, and then.
Something that <unk> been said the customer interest is still strong.
Can you help us.
Reconcile what that means does it mean.
The sales cycle really is just being extended and youre not actually losing business. That's just being delayed is that what your centers just want to reconfirm that.
Yes.
So what do we mean, if not really being lost.
I have indicated earlier our win loss ratio remained constant.
So.
Let's just means.
It takes some time for customers to make today's and laterally level.
Especially when we talk about are really expensive high.
High cost capital expenditure.
Yes.
Okay got it and then if I can sneak one last one in.
On your stock buyback thinking how do you balance continuing to buyback stock with your M&A strategy and peninsula, keeping some dry powder. Thank.
Thank you.
Okay.
Definitely 11th.
You too.
A question with regarding to the stock buyback and.
You can see we also had $15 million so far we spend it.
About $10 million and.
We still have 40 million.
The authorized to which we will.
Aggressively.
Although window.
Great. Thank you.
Okay.
One moment for your next question.
The next question comes from the line of Matt <unk> from Goldman Sachs. Matt. Please go ahead.
Hi, good afternoon, Thanks, taking my questions.
If I could just.
Drill down a little bit on the comments you made regarding China, So obviously, well now and that's been a weak spot.
For many of the companies in this sector any additional color you can provide on what youre seeing in China, and if there's any particular instrument category there that you're finding that weakness is it similar to the delays and push outs and lengthening the sales cycle is there something else going on in China relative to what Youre seeing in the rest of the world.
Yes.
The very well into Q2 in China, but Q3 I think.
Due to the anti corruption drive over there.
Tender got delayed and some of those are continued to be delayed.
We don't know it's going to come back in Q4 until a later quarter.
Shane maybe Q1 next year. This is something we are working now and definitely yes.
Something not being expected.
Got into the Q3.
It's impacting how we perform over there.
Yeah.
Got it and just to follow up on that.
I'm not aware of any but just any.
Incremental color youre hanging on value based procurement and how that might affect flow cytometry.
You do some clinical work there and so obviously concentrated.
On other assays, but any impact to your business.
Might see from that dynamic.
So the main clinical in China.
Yes, just a value based procurement programs that are that are rolling out just any potential headwind you see from that at all or is it you feel like it'd be relatively unaffected.
Yes, that's exactly what I've been with regarding to the delay in tendering process in China.
With regarding to the clinical as you know, we did very well previously with regarding to clinical instrument.
Sales in China.
But.
Q3 definitely.
We got impacted over there.
Got it.
And then just last question from me.
Just as you look at sort of the.
Different instrument categories, you have I know you stopped reporting installed base in Q1.
Can you give us any sense for whether it's for northern white cell sorter et cetera, where are you seeing relative pockets of strength or weaknesses in any differentiation and customers' preference for price point or types of instruments and this sort of weaker macro environment.
Although we don't really split.
The instrument types, but overall, if we look at the distribution across different platform, we do see a slowdown in high cost items versus lower priced.
So that's just another indication of the macro environment high interest rates that are impacting customer buying tools.
Got it okay. Thank you.
One moment for your next question.
The next question comes from the line of Andrew Cooper of Raymond James Andrew. Please go ahead.
Hey, thanks for the questions.
Maybe first.
Like you pointed out calling for a bit of a step up here into the fourth quarter. We certainly heard from comes from other towards players kind of a cautious tone on whether there is a bunch of questions. There just maybe your thoughts around how much budget frees up in <unk> like we typically would see.
Verse, maybe anything else going on there to lead.
The next step up.
Indeed, the typically Q4 is the best quarter for Hi, Tec and if we look at past history.
Certainly as it related to those type of budget flush.
We continue to see the same thing that that will happen.
What magnitude.
This is something a wait and see but Q4 definitely is going to be the best quarter.
Plus high Tech that we still have the kind of confidence.
Okay. Thank you and then maybe just in terms of some of the customer conversations I think it makes sense youre seeing the elongated sales cycle. What you are seeing that question, maybe a little bit lower.
Little bit lower cost instrument have you seen many of those conversations that maybe get held up and the end result is you are able to close the close a sale, but at the lower end as opposed to the high end instruments has that something is that been something that has occurred or anything that jumped out from those client conversations and client interactions that maybe.
I mean, we get a little bit more of that lower end version.
Push out of those higher end purchases.
Yes, looking at the growth rate across low and high end.
Information about what do we haven't seen and we do see a higher growth.
And instrument, especially the northern lights.
Versus the high end of the instrument.
Okay, and maybe I'll just sneak in one more is there any additional color you can share on.
On the reagent business in the <unk> business in terms of quantifying sort of the growth, there and where that business sits today.
Yes, I can take that so.
The region segment is our second.
The fastest growing segment.
Still small.
We're talking about.
Mid to.
High single digit.
As a percent of total revenue.
Growth rate are compelling.
And we will continue to invest in that segment.
We expect to continue to grow that.
Segment substantially going into into 2024.
We like the recurring revenue coming out of it.
Added to the service business, which makes us.
Our unique to the extent that we can continue to build the growth.
Our revenue range for the coming year.
Yes.
I'll put it in perspective LIG in growth rate is more than double of our average growth rate.
Revenue here.
Great I'll stop there. Thank you.
One moment for the next question.
Yeah.
The next question comes from the line of <unk> of Morgan Stanley. Please go ahead.
Good evening guys. This is edwin thank you for the time I, just kind of want to start out with.
Your EU trends and what you saw in <unk> I think it was a bit soft in <unk> for Biopharma and you guys were calling for a stronger second half did that play out to your expectations.
Yes, I mean, we continue to see softness in that.
Our biotech pharma segment for sure I mean, the real risk.
We have a high expectation for this segment.
So overall I think it's fair.
It's lower than what we would have.
Expect.
And that's coupled with the academia that's also.
Not growing as much in the third quarter typically you would have expected backdrop.
Yes.
Got it and then with.
With the global manufacturing now transferred to Wuxi.
Im not sure if you guys talked about this but how should we think about the gross margin impacts in <unk> and looking into 'twenty four.
Yes.
Thats a good question. So we completed the transition in Q3 so.
For those who don't know.
Our platform was still manufacturer with.
The dinosaurs.
Our organization and we have to pay a premium for the for these instruments. So now these instruments now fully being manufacturing within the cyclic environment and the expectation is that the gross profit margin for these instruments.
Up gradually as we as we move forward first of all because we have a better manufacturing process for these instruments, but we also looking at doing a curse bound to improve the overall gross profit margin photos.
Got it Super helpful. And then I was wondering if you guys could elaborate a little bit more about your recent sidetrack reveal road show just what kind of people in the audience, what kind of feedback you got and it sounds like you guys plan on doing more of these industry conferences and user meetings, how should we be thinking about the impact on opex heading into 'twenty four.
Scientists.
For <unk> customers.
Existing and new customers.
So far.
Very well.
Received.
<unk>.
We are continuing with this process.
I think Paul earlier mentioned.
Youre welcome.
The investment community to join to be part of that and probably that's great.
Great.
Daniel for your two <unk>.
And how <unk> use us.
Feel about the technology.
We have provided.
Got it that sounds very interesting. Thank you for the time.
Okay.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.