Q4 2023 Cytek Biosciences Inc Earnings Call

February 28, 2024

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Okay.

Good day, and thank you for standing by welcome to the <unk> Biosciences fourth quarter and full year 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 on your telephone you will then hear an automated message advising.

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Withdraw your question. Please press star one again.

Today's conference is being recorded.

I'd now like to hand, the conference over to your first speaker today, Paul Goodson head of Investor Relations. Please go ahead.

Thank you operator earlier today, so I checked Biosciences released financial preliminary results for the quarter and year ended December 31st 2023.

You Havent received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investors outside check bio dot com.

Joining me today from Sci-tech, Arlington, Zhang CEO, and Patrick <unk>, Chief Financial Officer.

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

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 on site techs filings with the SEC.

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

A reconciliation to the most directly comparable GAAP financial measure maybe found in today's earnings release submitted to the FCC.

Except as required by law sidetrack disclaims any duty to update any forward looking statements, whether because of new information future events or changes in its expectations.

Conference call continuous time sensitive information and is accurate only as of the live broadcast February 28 2024.

Finally, I would like to mention that <unk> will be participating in a variety of industry and academic conferences throughout 2024.

While these are primarily geared to the scientific community. They may offer an opportunity to interact with users of our technologies to learn why say, Texas instruments are so highly valued by our customers.

There was a cost to attend most events and we have a limited number of spaces to accommodate and members of the financial community. So if you're interested in attending please contact me.

With that I will turn the call over to wind down.

Thanks, Paul.

Welcome everyone and thank you for it.

Interest in Hi Tech.

On the call today, I will discuss our results for the fourth quarter and full year of 2008 on de fleet.

What do you say highlight our acumen in container fleet and to provide some details on our strategic objectives for the year.

Then I will turn the call virtual Patrick for a deeper look at our financials and our outlook for some data on before we open it up for Q&A.

We can.

Delivered solid total revenue growth in the fourth quarter, which brought our total revenue for <unk> III to exceed our guidance range.

Typically in the fourth quarter, we grew revenue totaled $58 6 million, an increase of 21% over the prior year.

Total revenue for <unk> was $193 4 million, representing an increase of 18% over a container for mutual.

This included approximately $9 8 million.

And the $28 $7 million of revenue from the product lines acquired Loopnet.

In the last three and 12 months and data December 30 foot 23, which included only 10 months off the revenue contribution from that product line.

Notably we continued to see steady demand for our organic instrument in our data from phase III.

The majority of which were our sidekick Aurora in our northern light instruments.

Okay.

We also saw increased demand for our all of our sales soda.

Yeah.

While our fourth quarter performance is encouraging containing Colgate three overall was challenging with dynamic macroeconomic market conditions impacting our business and the growth across our sector.

We took proactive steps to address these temporary headwinds and execute our balanced business strategy to drive continued growth and academic profitability.

As a part of this initiative, we implemented actions to align our cost structure to remain an agile organization.

Following the completion of our integration of the Avnet and evolve our product lines and <unk> X.

Earlier this quarter, we streamlined our organization to eliminate redundancies.

Arising out of the acquisition and the folks area, where we see the greatest potential for long term value creation.

While it is very hard to part ways with.

Valued member of our team the right sizing of our organization will enable us to increase our operational efficiency as we execute our growth strategy and support our commitment to remaining a profitable company.

<unk> hundred three we expanded our global footprint with 478 organic high Tech and a 219 amex and guava instrument. So.

These 478 organic instrument.

The all time total organic instrument pace to 2148.

Our instruments are used for today in over 70 countries and the regions.

For the year ended December 31st 10 based on Big Fleet.

Our revenue distribution.

Perhaps a balance of 53% attributed to the U S.

In Oklahoma.

We are also pleased to see some early successes.

Versions of quasi user to another nights as well as some high margin sales through the bundling of IMAX image stream with Aurora in our Sarasota.

Although we are excited continue to value the amex and the guava acquisition.

An important success for our company.

In the fourth quarter.

We also launched the site of Orange Smart cocktail mixer that simplifies and accelerates the workflows and the legal system the agent waste.

Notably the cycle Orion system is unique in that it is focused solely on cocktail making for sample preparation.

Enabling a smaller footprint and making it ideal for applications such as drug discovery that will use the same culture multiple times.

It also ensures that users are only paying for features that they need at a lower price point than competitive solutions.

The introduction of this unique new preparation device moves.

Hi Tech roadmap forward.

Expand our suite of solutions for the cell analysis market and.

<unk> strengthens our offering for pharma biotech and see how customers.

To drive the utilization of our solutions and to accelerate the new adoption, we deliver software enhancements and functionalities to cite a crowd in 10 days on May three.

Supporting our growing customer base with an integrated end to end operating system for our cell analysis platform.

Customer adoption of cycle crowd has surpassed expectations.

We now have over 6000 users and an average of three excited crowd users per installed sites at FSP instrument.

On the clinical front.

Congrats on the fleet, we continued to stay ahead of the laboratory curve.

Recurring IBD, our compliance in the EU and the continued growth in clinical applications in China.

Relevant to our worldwide operations. We also received our ISO 13, $4 85 quality management system certification.

Our headquarters and manufacturing operations in Fremont, California.

<unk> produced our first Cytometer.

Regions and accessories.

This certification bolsters, our plans from folks on the translational under critical market and defense a strong signal to customers in these segments.

We are committed to serving them, taking every step necessary to responsibly do so in the future.

Recently, we were excited to announce that we signed an agreement with <unk>.

Center for genomic regulation, and therefore improve Fabra University.

CRT Upa in spend to drive technological innovation and accelerate the discovery for the scientific community.

The <unk> flow cytometry unit is used by more than 500 researchers for more than 100 research projects every year.

Under the terms of the agreement <unk> will provide its special for all cytometry platforms.

With trend support personnel to <unk> flow Cytometry unit headquarters.

Together with the integration of these institutes and a car facilities.

We will work to explore new applications and develop new tools and solutions to address the challenges faced by the scientific community.

In summary, I'm proud of our team's achievements in 2023 amidst challenging market conditions.

Importantly, I remain confident in our long term growth trajectory and the value creation across our business. Despite near term headwinds that we cannot control.

Our strategic priorities in 2018 before.

And fortify our competitive position.

<unk> focus on financial discipline, and operational excellence and efficiency.

Our team is laser focused on three key items to drive our business.

Revenue growth margin expansion and capital efficiency to deliver sustainable profitability.

And Ah maximize free cash flow.

With this balance the focus on driving profitable growth.

We are making prudent investments in the growth to position ourselves as a leader in flow cytometry.

Romance.

We'll front of innovation and industry leadership.

And we are excited for our bright future.

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

Thanks Ben.

Total revenue for the fourth quarter of 2023 was $58 $6 million.

21% increase over the fourth quarter of 2022.

This included approximately $9 $8 million of revenue from the products and services acquired from the Lumi next transaction, which closed on February 28 2023.

Organic revenue, which excludes revenue from the acquired products and services.

$48 $8 million, an increase of 1% compared to the fourth quarter of 2022.

For the quarters following the one year anniversary.

Our Lumi next acquisition, we will no longer provide the breakout of this inorganic revenue therefore.

Therefore, while we will report organic and inorganic revenue for our first quarter of 2024, we will cease providing the breakout for the second and future quarters.

Gross profit was $33 $7 million for the fourth quarter of 2023.

An increase of 15% compared to a gross profit of $29 $4 million in the fourth quarter of 2022.

Gross profit margin was 57% in the fourth quarter of 2023 compared to 61% in the fourth quarter of 2022.

Adjusted gross profit margin in the fourth quarter of 2023 was 60% compared to 62% in the fourth quarter of 2022 after adjusting for stock based compensation expense and amortization of acquisition related intangible.

Operating expenses were $32 8 million for the fourth quarter of 2023.

A 12% increase from $29 $3 million in the fourth quarter of 2022.

The increase in operating expenses was primarily due to expenses related to the Illumina X transaction and personnel related expenses.

Sales and marketing and research and development.

Research and development expenses were $10 $9 million for the fourth quarter of 2023 as compared to $9 $7 million for the prior year period.

Sales and marketing expenses were $11 $6 million for the fourth quarter of 2023 as compared to $9 million for the prior year period.

General and administrative expenses were $10 $3 million for the fourth quarter of 2023.

As compared to $10 $5 million in the prior year period.

Income from operation was <unk> 9 million for the fourth quarter compared to an income from operation of $1 million for the fourth quarter of 2022.

The net income in the fourth quarter of 2023 was $6 $3 million compared to net income of $3 $7 million into the fourth quarter of 2022.

Additionally.

Adjusted EBITDA in the fourth quarter of 2023 was positive $11 million compared to positive $6 $6 million in the fourth quarter of 2022.

After adjusting for stock based compensation expense.

Now for the full year 2023.

Total revenue for the year ended December 31, 2023 was $193 $4 million.

An 18% increase over the year ended December 31 2022.

This included approximately $28 $7 million of revenue from their product and services are quiet from the Illumina X transaction.

Which closed on February 28, 2023.

On a constant currency basis total revenue was $194 1 million donlin.

An increase of 13% over the full year of 2022.

The total revenue in 2023 was driven by revenue contribution from the products acquired from the Illumina X transaction.

With continued sales of the <unk> full spectrum instruments.

Gross profit was $110 $1 million for the year ended December 31st 2023, an increase of 9% compared to a gross profit of $101 million in the year ended December 31 2022.

Gross profit margin.

57%.

December 31st 2023.

3rd% to 62% in the year ended December 31 2022.

Adjusted gross profit margin in the year ended December 31, 2023, it was 59% compared to 62% in the year ended December 31st 2022, after adjusting for stock based compensation expense and amortization of acquisition related intangibles.

The lower product gross margin was driven primarily by higher material cost.

Acquisition cost and by less favorable instrument product mix following the looming next transaction.

Operating expenses were $136 $8 million for the year ended December 31st 2023% to 33% increase from $102 $8 million in the year ended December 31st 2022.

The increase was primarily due to the increased head count and personnel related expenses.

R&D and sales and marketing.

Research and development expenses were $44 $2 million for the year ended December 31, 2023, compared to $34 $9 million for the year ended December 31 2022.

Sales and marketing expenses were $49 $1 million for the year ended December 31st 2023, compared to $33 $2 million for the year ended December 31 2022.

General and administrative expenses were $43 $5 million for the year ended December 31, 2023, an increase from $34 $7 million for the year ended December 31st 2022.

Net loss in the year ended December 31, 2023 was $11 $3 million compared to net income of $2 5 million in the year ended December 31 2022.

Adjusted EBITDA in the year ended December 31, 2023 was $13 $7 million compared to $21 $2 million in the year ended December 31 2022.

After adjusting for stock based compensation expense and other non recurring expenses.

We are committed to improving these metrics going forward.

Cash cash equivalents restricted cash and short term investment were $262 $7 million as of December 31st 2023.

This represents a decline of $81 $3 million from the $344 million at the end of December 2022.

Primarily due to the looming next transaction.

Our stock repurchase program, partially offset with cash generated by the business.

Our strong balance sheet free from external operational financial needs.

Underscores our organizations vitality.

With healthy cash reserves and profitability track record, we continue to operate from a position of strength that enables our global growth efforts.

During the fourth quarter, we continued to repurchase our stock.

Following the $50 million repurchase authorization that we announced in May last year.

We repurchased approximately $34 $7 million worth of Phi Tech stock in open market transaction in the fourth quarter.

Share repurchase under this program are cancelled, leaving us with approximately 137 million shares outstanding as of December 31, 2023.

Approximately $44 $2 million of the original $50 million repurchase authorization was completed.

Although that authorization expired at the end of 2023, we are evaluating whether to extend it and if so by how much.

Now turning to our revenue outlook for 2024.

We have been encouraged to see modest improvement in customer spending pattern in the fourth quarter and we are seeing some follow through if that strength in the first quarter of 2024.

For the full year 2024, we expect modest growth across all our product lines with the built of the growth being weighted towards the back half of the year.

Consistent with historical spending happens in our customer base.

Taking these factors into account we are anticipating our 2020 for revenue to be in the range of 200 and $300 million to $213 million.

Representing 5% to 10% growth over 2023 total revenue.

Assuming no change in currency exchange rates.

Today, we are reiterating our long standing commitment to operating the business profitability on an annual basis as measured by adjusted EBITDA.

In addition for the full year 2024, we expect to report positive net income.

As Wendell mentioned, we continued to focus on improving operational efficiencies across our business and aligning our overall cost structure to ensure we remain agile organization in the best possible position to drive growth and deliver profitability.

Within these goals, we are committed to investing in the <unk> brand through a variety of efforts and innovation.

Through our strong commitment to new product development.

As a possible addition to these initiatives. So I think it's continuing to evaluate opportunities to accelerate our revenue growth through M&A and all other corporate development actions, which would be subject to stringent financial operational technology.

And market presence criteria's.

With that I will turn it back over to win.

Thanks, Patrick.

Very proud of our site at pain, along the world for successfully navigating through a cup being available to meet the needs of our customers.

And then their share the belief in our mission.

<unk> with its strong execution of our strategy that positions <unk> as an industry leader in advancing the next generation of cell analysis.

This year, we will continue to deepen our customer relationships to drive greater adoption and utilization of Sci-tech sale analysis solutions and the innovation that supports their priority to push the bounds of scientific discovery and the clinical progress.

I want to thank everyone for joining the call today and that we will now open it up for questions.

I'll take that.

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 stand by while we compile the Q&A roster.

Okay.

Our first question comes from Matt <unk> with Goldman Sachs. Please go ahead.

Hi, Thanks for taking my question. This is <unk> on for Matt What are you seeing in the academic market.

For Q and then what are your expectations for 2024, maybe just talk to what your customers are saying in that market and how your sales funnel looks going into the air.

Yeah.

So looking at Patrick.

Patrick I Hope you can hear me okay.

We continue to see strength in the Kadena, but we've actually seen highest in the into biotech segment.

Okay.

Okay, great. Thank you and then I think you said for 2024, you're expecting sort of a broad range.

And across the different instruments hydrous, but maybe talk through different trends youre seeing within each category.

And maybe talk about the higher end instruments and how those are trending.

I can't give you a first crack and maybe went been can augment so.

One instrument.

<unk> has created a lot of demand is D cell sorter. So we expect the cell. So that you continue to grow nicely in this year. We also expect to see continued growth on the two high end products that we have which is.

The Aurora and the Amnio family products, along with the Northern line. So overall, we expect.

Product to continue to grow this year with a trend of minutes in the second half of 2024.

Yeah.

Great. Thank you.

Thank you one moment for our next question.

Sure.

Our next question comes from David Westenburg with Piper Sandler. Please go ahead.

Hi, Thank you for taking the question. So I know you're not breaking out <unk> revenue, specifically, but just for modeling and cadence purposes. I know the Illumina acquisition I think closed in Q like middle of Q1, So how should we think about the revenue growth rate in Q1 or the cadence of Q1 relative to the rest of the year.

Just given the fact that we have.

That org inorganic component.

I have a couple more follow ups after that.

Yeah, David Thanks. Good question. So we expect actually the revenue in Q1 to be slightly above the overall annual growth.

Growth rate for the year, just because of what you just highlighted yes, you're correct.

Okay, Okay, I mean chips.

Small magnitude than in Q1.

But it'll be up correct.

Okay, small, but noticeable okay.

Thank you very much.

And then just on.

Market growth of flow cytometry I mean.

I mean, you you are a big 30% grower and kind of not to harp on the <unk>.

The reduction in and kind of where your growth rate is but can you maybe talk about the market growth rate of flow cytometry total I mean, it's been a pretty mature technology overall, so I'm guessing we're growing significantly faster than the market for a number of years is this 5% kind of like the way, we should think about flow cytometry.

Just as a market hall and maybe that's the steady state and then you know if you could break that out versus the instrument consumables I know.

How much faster each one grows and I don't know if that's possible.

Yes.

So maybe I'll give it a first crack at so the the industry.

It's growing in the 6% to 8% flow cytometry.

Our growth rate now I'll ask you.

If it wasn't visible I think last year was a kind of a more difficult year for the industry, yet or are we coming out from an organic point of view is fairly flat.

With Illumina liquidation, we actually up.

21% in Q4, and 18% for the full year.

The expectation is that the on the go forward, we should see probably similar growth rates kind of a 6% to 8%.

For the industry, probably more skewed towards the second half, that's where the instrument and under.

Our reagent consumable the expectation that it should grow a little faster.

Got it.

No. Thank you very much and then Oh sorry.

I cut you off.

Yeah, No that's fine.

And I guess to add on top of that based on the numbers, we have seen through Q3 last year.

Cell analysis.

It actually flow cytometry as part of the analysis.

The market overall.

So under this environment, we still maintain the car got it no and I get that there probably was a pretty challenging capital equipment environment, just given the fact, where budgets are at right now.

So I I was just curious on you know cause margins, where we're a little bit down. So I'm curious if the if you're seeing kind of industry discounting just given capital equipment environment or and also if I think last quarter you discussed the possibility that you might have been you.

You could be doing kind of some a reagent rental models or working with financing companies.

Talk about any of those kind of dynamics as we get into or as we're dealing with this capital.

Funding environment and just ask one last follow up to that are you getting any indication that maybe things are getting better I mean, there were a few few biotech ipos at the beginning of the year I don't know if you're if we're running maybe NIH budgets or something else for flow in sorry, I know that's a lot there, but I promised that would be my last question. Thank you.

[laughter]. So so I can start with the reagent rental which is the easiest one yes, we've thought it.

Offering the program, but it's very very small so I wouldn't call it any of significance for us, but it's something that we consider continuing to build going forward.

On the margin I'm very pleased to see that overall, our service business margin has gone up substantially from a year ago or eventually even two years ago, where it wasn't profitable. So I think we checked the box on the on this on the service side kind of a nicely.

On the product that you're correct, we've seen more pressure on the gross profit margin and that's really a combination of.

Our funding instruments that have.

A slightly lower gross profit margin.

While at the same time, we are still expecting to continue to see this.

Margin to come back up in the future just because we are continuing to optimize our business.

Finally on the IPO question.

Earlier this year, obviously, it was a positive very positive and welcoming trend.

I think the the one point doesn't make a trend so we welcome other ipos.

And hopefully that will drive some some topics.

It also to win business.

He wants to add anything to my earlier comments.

Yes.

Regarding to the product gross margin.

No we didn't get a Democrat guava product line into our portfolio.

That product line.

Was a low margin business.

However.

We have now moved into the production complete te into our facilities.

And we are.

That concludes here in cooling.

Well, we want to call.

Thank you.

One moment for our next question.

Our next question comes from Tejas Savant with Morgan Stanley. Please go ahead.

Thanks, guys. This is edmund on potatoes, Thank you for taking the questions first.

First Patrick you mentioned modest improvements in customer spending patterns I was wondering if you guys could provide some more details on that maybe across <unk> and <unk>.

Markets geography, and what are you currently baked into our 24 guidance in terms of our assumptions for our recovery.

Right. So just to go up the different geography, so what we've seen in Q4 is actually.

Strength in the EMEA APAC region.

Slightly followed by by unit.

Our Europe.

United States our segment. So overall I think the two segments that have driven some growth for us.

APAC and and.

EMEA.

Overall, when we look at the split of revenue we still see.

50, plus in the U S.

The state the region followed by the EMEA are around 28 and then.

Behind that a pocket other either for.

The remaining balance.

When looking at the growth for this year and obviously, we are we feel so.

The duration wherever you are waiting for some macro events to help us a little bit that could be deferred.

But overall I think what we've seen so far is that there have been some activity with them.

Our customers we are.

We see demand demand for the South, Florida, obviously better.

Especially for this year I think the expectation that the second half is going to be.

Pronounced if not slightly more pronounced than last year.

Got it and appreciating that you guys aren't breaking out contributions from FCA going forward, but with all of your integrations auction completed can we expect Sci revenues in 2023 to be a baseline level and for it to grow year over year in 2024.

That's the expectation yes.

Yes.

Yeah.

Great. Thank you and finally I think some of the larger tools peers have talked about seeing or expecting a modestly later if I have my budget release in 2024 is this a dynamic that youre seeing as well.

Yeah.

And I'll turn it to women.

Oh.

Absolutely that's exactly what we are expecting.

And why we have indicated in the whether it's a fee.

Stronger.

In the second half up something for them.

That's already embedded in our guidance.

Sure.

Got it appreciate the time.

Thank you one moment for our next question.

Our next question comes from Jacqueline Chiesa with TD Cowen. Please go ahead.

Hi, This is Jackie cancer on the call for Steven MA. Thanks for taking the question just to.

Drill down a bit more on your comments regarding your global footprint, how much did China makeup of your APAC revenue and do you expect 2020 margin stabilized with regards to China headwinds.

Yes. So the majority of APAC is a go slow to become a China. So it's it's it's growing.

Yeah.

Great. Thanks, and just a follow up on that could you provide any insight on any exposure you might have the China based companies, which have been recently flagged and the proposed biotech here at such as Wuxi Aflac in Wuxi biologics.

And is that smaller lethal genomics.

We have a fair amount of this company and so for.

For now we don't see any real impact.

Excellent.

I could just get one more in with regard to your clinical effort across the globe.

Are there any specific clinical milestones, we can expect to see this coming year.

And as you can see last year, we see with <unk> and with this clearance in Europe a week.

We expect to see some of this.

Or are the critical thing for our business.

Over there.

Great. Thank you appreciate it.

Thank you one moment for our next question.

Our next question comes from Nathan <unk> with Stephens. Please go ahead.

Hey, guys. This is Jacob on for Mason, Thanks for taking our questions.

So on your new newly launched Orion reagent cocktail mixer.

That you launched in the fourth quarter, just wondering what you know initial customer interest and adoption has been in that and.

It's as much as you're willing how much you're kind of expecting that to contribute in terms of revenue in 2024.

Yes, I can take maybe the contribution to the revenue we don't really break out.

And revenue, but I'll, let <unk> talk to interest customer interest.

Yeah.

This product was primarily in our core pharmaceutical company in the CLO to help Oh, Yeah clinical studies.

Clinical trials right.

So this is our initial customers and Uh huh.

Just long, we're engaging with them and they are working with them.

Nailed down the interest level.

We expect this is going.

Go ahead go ahead go in business class.

Got it understood.

I know you guys arent really breaking out your revenue or anything but I.

I guess, just with respect to your reagents business I know.

Historically, it's been a mid to high single digit percentage of your total revenue I'm just wondering in 2024, if that's still you.

It's still largely hold that expectation or if you see anything any trends there changing.

The same expectation with maybe slight improvement over that yes.

Got it and then just my last one here just.

How do you see opex trending throughout 'twenty 'twenty four and that's my last one thank you guys.

So.

I'm sure, you'll you'll see that in the in the in the filing but.

This quarter actually we landed.

At 32.8 million in Opex and that's the lowest it's been this year.

And the expectation is that going forward, we'll manage around this number are quite tightly.

Thank you I'm showing no further questions at this time. Thank you for your participation in today's conference. This concludes the program you may now disconnect.

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Advising your hand is raised to withdraw your question. Please press star one again, please be averse to today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Paul Goodson head of Investor Relations. Please go ahead.

Thank you operator earlier today Sci-tech Biosciences released financial preliminary results for the quarter and year ended December 31, 2023. If you haven't received this news release or if you'd like to be added to the Companys distribution list. Please send an E.

E mail to investors outside tech bio dot com.

Joining me today from <unk> are Zhang CEO, and Patrick John Bruno <unk>.

Key financial Officer.

These statements are based on the company's current expectations and inherently involve significant risks and uncertainties.

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 <unk> issued today and in <unk> filings with the SEC.

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

A 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 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 will continue as time sensitive information and is accurate only as of the live broadcast February 28 2024.

Finally, I would like to mention that as high tech will be participating in.

Variety of industry and academic conferences throughout 2024.

While these are primarily geared to the scientific community. They may offer an opportunity to interact with users of our technologies to learn Wi <unk> instruments are so highly valued by our customers.

There was a cost to attend most events and we have a limited number of spaces to accommodate numbers of the financial community. So if you're interested in attending please contact me.

With that I will turn the call over to wind down.

Thanks, Paul.

Everyone and thank you for your interest in Hi Tech.

On the call today, I will discuss our results for the fourth quarter and full year of 2008 on de fleet.

What are you fully highlight our achievements interim data from phase III and to provide some details on our strategic objectives for the year.

Then I will turn the call back to Patrick for a deeper look at our financials and our outlook for some data from before before we open it up for Q&A.

Okay.

It has led to solid total revenue growth in the fourth quarter, which brought our total revenue for <unk> to exceed our guidance range.

Typically in the fourth quarter, we grew revenue totaled $58 6 million.

And increase of 21% over the prior year.

Total revenue for <unk> was $193 4 million, representing an increase of 18% over conveyed from neutral.

This included approximately $9 8 million.

And at $28 $7 million of revenue from that product line is required to file an <unk>.

The loft fleet and the 12 months ended at December 31, 23, which included only 10 months of revenue contribution from <unk>.

And while that product line.

Notably we continued to see steady demand for our organic instruments, Inc. On data from basically.

The majority of which were our psychic Aurora in northern light instruments.

Yes.

We also saw increased demand for our all of our sales soda.

Yeah.

While our fourth quarter performance is encouraging.

<unk> overall was challenging with dynamic macro economic market conditions impacting our business both across our sector.

We took proactive steps to address these temporary headwinds.

To execute on our balanced business strategy to drive continued growth and profitability.

As a part of this initiative, we implemented actions to align our cost structure to remain agile organization.

Following the completion of our integration of the ominous in Oklahoma product launch <unk> ex <unk>.

Earlier this quarter, we streamlined our organization to eliminate redundancies.

Arising out of the acquisition and the folks area.

Where we see the greatest potential for long term value creation.

Okay.

While it is very hard to part ways with.

Value of the member of our team.

Citing of our organization will enable us to increase our operational efficiency.

We execute our growth strategy and to support our clinical model.

<unk> a profitable company.

<unk> hundred 20 fleet, we expanded our global footprint with 478 organic sighted and a 219 and mix and a guava instrument. So.

These 478 oriented instruments, bringing the all time total organic instrument pace to 2148.

Our instruments are used for today in over 70 countries and regions.

For the year ended December 31st Sunday contains three.

Our revenue distribution.

That's a balance of 53% attributed to the USA and the 8% to EMEA and a 19% to Asia Pacific.

Due to the sales performance.

The acquired Avonex and guava products, our EMEA number was strong in the fourth quarter and the full year and data from phase III.

We have more than 1500 broad base of customers across multiple verticals and the revenue categories represented at the end of 10 days from Q3 by approximately 43% academic and government owned institutions.

And the 57% pharma biotech distributor and CLO.

We delivered growth across our diversified revenue streams.

Including with our Canadian portfolio and with our service business.

That way you expect there'll be a leading growth driver besides that in.

In the future.

This ongoing positive trend reflects the utilization of our instrument and that's gonna get effect of our key revenue drivers.

Religion and the services.

Some of it obviously was a transitional year for <unk>.

We strategically expanded our portfolio and strengthen our near and long term competitive Foundation, Inc flow cytometry.

We acquired Illumina X flow cytometry, and imaging business about a year ago and have successfully completed the integration by year end.

Including cross training both service teams.

This significant milestone enables efficiencies across our organization with first.

Two new cell imaging and a capital raise really good technology.

Second.

<unk> global presence.

With access to new markets in the research area.

And in.

Improve the go to market and operational effectiveness.

A larger installed base and a deep bench of furlough cytometry experts, providing synergies in our service operations.

Yeah.

With the integration complete we have already realized some significant benefits from that transaction.

These benefits include a meaningful growth in our service revenue and the gross margin.

Improvement in Guadeloupe gross margins.

And our strong performance in the EU enabled.

By Avonex in Oklahoma.

We are also pleased to see some early successes there.

Conversions of quasi user tool another legs.

Well as some high margin sales through the bundling of Avnet.

Image stream with Aurora in our sales soda.

Hello.

We continue.

Continue to value the <unk>.

<unk> and the Guava acquisition.

In part of the success for our company.

In the fourth quarter.

We also launched the cited are on smart cocktail and Aegean mixer that simplify.

And accelerate the workflow and the <unk> system to the agent and waste.

Notably the FICA Orion system is a <unk>.

<unk> in that it is focused solely on cocktail, making sample preparation.

Tabling, a smaller footprint and to making it ideal for applications such as drug discovery that will use the same copco multiple times.

It also ensured that.

Are you the only painful feature that they need at a lower price point than competitive solutions.

The introduction of unique new perforation Goodbye moves.

Hi Tech roadmap forward.

Expand our suite of solutions for the cell analysis market.

And strengthens our offering for pharma biotech and <unk> customers.

So driving utilization of our solutions and to accelerate the new adoption.

Deliver software enhancements and functionality society a crowd in 10 days on May three.

Supporting our growing customer base with an integrated end to end operating system for our cell analysis platform.

Customer adoption of <unk> cloud has surpassed expectations.

We now have over 6000 users and an average of three excited crowd users per install the site SP instrument.

On the clinical front.

On the fleet. We continued to stay ahead of the laboratory curve by secreting IBD combined in the EU and the continued growth in clinical applications in China.

Relevant to our worldwide operations, we own.

We received our ISO 13, 485 quality management system certification of our headquarter in our manufacturing operations in Fremont, California to produce our flow cytometer vegan and accessories.

This certification bolster our plan.

The translational and critical market and defense a strong signal to customers in the segments that we are committed to serving them taking every step necessary to responsibly do so in the future.

Recently, we were excited to announce that we signed an agreement with the center for economic regulation and that's helpful. Fabra University.

Upa in spend to drive technological innovation and accelerate the discovery Paul the scientific community.

The <unk> flow cytometry unit is used by more than 500 research guys for more than 100 research projects every year.

Under the terms of the agreement <unk> will provide its a special for all cytometry platforms, along with trend support Pavano tool <unk> flow Cytometer unit headquarters.

Hey, guys.

The integration of <unk>.

<unk> institutes and a call facilities.

We will look to explore new applications and develop new tools and solutions to Ajay.

Hi, Jay that challenge faced by the scientific community.

In summary, I'm proud of our team's achievements in 2023.

Challenging market conditions.

Importantly, I remain confident in our long term growth trajectory and the value creation across our business. Despite near term headwinds that we cannot control.

Our strategic priorities in country can before centered on fortifying our competitive position.

<unk> focus on financial discipline, and operational excellence and efficiency.

Our team is laser focused on three key items to drive our business.

Revenue growth margin expansion and capital efficiency to deliver sustainable profitability and.

Maximize free cash flow.

With this balance the focus on driving profitable growth.

We are making prudent investments in the growth to position ourselves as a leader in flow cytometry.

Romance, all the forefront of innovation and industry leadership.

And we are excited for our bright future ahead.

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

Thanks Ben.

Total revenue for the fourth quarter of 2023 was $58 6 million or <unk>.

21% increase over the fourth quarter of 2022.

This included approximately $9 $8 million of revenue from the products and services acquired from the looming next transaction, which closed on February 28 2023.

Organic revenue, which excludes revenue from the acquired products and services.

$48 $8 million, an increase of 1% compared to the fourth quarter of 2022.

For the quarter following the one year anniversary of our Lumi next acquisition, we will no longer provide the breakout of this inorganic revenue.

Therefore, while we will report organic and inorganic revenue for our fourth quarter of 2024, we will cease providing the breakout for the second and future quarters.

Gross profit was $33 $7 million for the fourth quarter of 2023.

An increase of 15% compared to a gross profit of $29 $4 million in the fourth quarter of 2022.

Gross profit margin was 57% in the fourth quarter of 2023 compared to 61% into fourth quarter of 2022.

Adjusted gross profit margin in the fourth quarter of 2023 with.

60% compared to 62% in the fourth quarter of 2022.

After adjusting for stock based compensation expense and amortization of acquisition related intangible.

Operating expenses were $32 8 million for the fourth quarter of 2023.

12% increase from $29 $3 million in the fourth quarter of 2022.

The increase in operating expenses.

Primarily due to expenses related to the Illumina X transaction and personnel related expenses across sales and marketing and research and development.

Research and development expenses were $10 $9 million for the fourth quarter of 2023 as compared to $9 7 million for the prior year period.

Sales and marketing expenses were $11 $6 million for the fourth quarter of 2023 as compared to $9 million for the prior year period.

General and administrative expenses were $10 $3 million for the fourth quarter of 2023 as compared to $10 $5 million in the prior year period.

Income from operation was <unk> 9 million for the fourth quarter compared to an income from operation of.

$1 million for the fourth quarter of 2022.

The net income in the fourth quarter of 2023 was $6 3 million compared to net income of $3 $7 million in the fourth quarter of 2022.

Additionally at.

Adjusted EBITDA in the fourth quarter of 2023 was positive $11 million compared to positive $6 6 million in the fourth quarter of 2022 after adjusting for stock based compensation expense.

Now for the full year 2023.

Total revenue for the year ended December 31, 2023 was $193 $4 million.

An 18% increase over the year ended December 31 2022.

This included approximately $28 $7 million of revenue from the products and services.

Right from the Illumina X transaction.

Which closed on February 28, 2023.

On a constant currency basis total revenue was $194 1 million.

An increase of 13% over the full year of 2022.

The total revenue in 2023 was driven by revenue contribution from products acquired from the Illumina X transaction.

With continued sales of the <unk> full spectrum instruments.

Gross profit was $110 $1 million for the year ended December 31, 2023, an increase of 9% compared to a gross profit of $101 million in the year ended December 31 2022.

Gross profit margin.

57%.

December 31.

2023, compared to 62% in the year ended December 31 2022.

Adjusted gross profit margin in the year ended December 31, 2023 was 59% compared to 62% in the year ended December 31, 2022, after adjusting for stock based compensation expense and amortization of acquisition related intangibles.

The lower product gross margin were driven primarily by higher material cost.

Acquisition cost and by less favorable instrument product mix following the looming next transaction.

Operating expenses were $136 8 million for the year ended December 31st 2023.

33% increase from $102 8 million in the year ended December 31st 2022.

The increase was primarily due to the increased headcount and personnel related expenses across R&D and sales and marketing.

Research and development expenses were $44 2 million for the year ended December 31, 2023, compared to $34 $9 million for the year ended December 31 2022.

Sales and marketing expenses were $49 $1 million for the year ended December 31, 2023, compared to $33 2 million for the year ended December 31 2022.

General and administrative expenses were $43 $5 million for the year ended December 31, 2023 and <unk>.

Increased from $34 $7 million for the year ended December 31 2022.

Net loss in the year ended December 31, 2023 was $11 $3 million compared to net income of $2 5 million in the year ended December 31 2022.

Adjusted EBITDA in the year ended December 31, 2000 23000.

<unk> $13 7 million compared to $21 $2 million in the year ended December 31 2022.

After adjusting for stock based compensation expense and other non recurring expenses.

We are committed to improving these metrics going forward.

Cash cash equivalents restricted cash and short term investment were $262 7 million as of December 31, 2023.

This represents a decline of $81 $3 million from the $344 million at the end of December 2022.

Primarily due to the looming next transaction.

Our stock repurchase program, partially offset with cash generated by the business.

Our strong balance sheet.

From external operational financial needs underscores our organizations vitality.

With healthy cash reserve and profitability track record, we continue to operate from a position of strength.

Enables our global growth efforts.

During the fourth quarter, we continued to repurchase our stock.

Following the $50 million repurchase authorization, we announced in May last year.

We repurchased approximately $34 $7 million worth of <unk> stock in open market transactions in the fourth quarter.

Share repurchase under this program are canceled.

Leaving us with approximately $130 7 million shares outstanding as of December 31, 2023.

Approximately $44 $2 million of the original $50 million repurchase authorization was completed.

Although that was formulation expired at the end of 2023.

Evaluating whether to extend it and if so by how much.

Now turning to our revenue outlook for 2024.

We have been encouraged to see modest improvement in customer spending pattern in the fourth quarter and we are seeing some follow through if that strength in the first quarter of 2024.

For the full year 2024, we expect modest growth across all our product lines.

The built of the growth being weighted towards the back half of the year.

Consistent with historical spending patterns in our customer base.

Taking these factors into account we are anticipating our 2020 for revenue to be in the range of 200 and $300 million to $213 million.

Presenting 5% to 10% growth over 2023 total revenue.

No change in currency exchange rates.

Today, we are reiterating our long standing commitment to operating the business profitability on an annual basis as measured by adjusted EBITDA.

In addition for the full year 2024, we expect to report positive net income.

As Wendell mentioned, we continue to focus on improving operational efficiencies across our business and aligning our overall cost structure to ensure we remain agile organization in the best possible position to drive growth and deliver profitability.

Within these goals, we are committed to investing in the <unk> brand through a variety of efforts and innovation through our strong commitment to new product development.

As a possible addition to these initiatives <unk> continued to evaluate opportunities to accelerate our revenue growth through M&A and all other corporate development actions.

Which would be subject to stringent financial operational technical.

And market presence criteria's.

With that I will turn it back over to win.

Thanks, Patrick I'm very.

Proud of our <unk> around the world for successfully navigating through a cup being available to meet the needs of our customers.

Sure the belief in our mission combined with strong execution of our strategy that position sited.

Industrial leader.

The banking the next generation of cell analysis.

This year, we will continue to deepen our customer relationships to drive greater adoption and utilization of Sci-tech sale analysis solutions and the innovation that supports their priorities to push the bounds of scientific discovery and clinical progress.

I want to thank everyone for joining the call today and that we will now open it up for questions.

Operator.

Okay.

Our first question comes from Matt <unk> with Goldman Sachs. Please go ahead.

Hi, Thanks for taking my question. This is <unk> on for Matt.

What are you seeing in the academic market both in <unk> and then what are your expectations for 2024, maybe just talk through what your customers are saying in that market and how your sales funnel looks going into the year.

Okay.

So looking at the.

Thank you Patrick.

Hear me, Okay. So we continue to see.

Strengthen the kadena, but we've actually seen highest in the into biotech segment.

Yes.

Okay, great. Thank you and then I think you said for 2024, you're expecting sort of a broad range of improvement across the different instrument types, but maybe talk through different trends youre seeing within each category.

And maybe talk about the higher end instruments and how those are trending.

Yes, I can give you a first crack and maybe went bin Kim augment.

So.

One instrument.

It has created a lot of demand is D cell sorter. So we expect to sell so that you continue to grow nicely in this year. We also expect to see continued growth on the two high end.

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