Q2 2024 Cytek Biosciences Inc Earnings Call

August 6, 2024

Operator: Thank you for standing by. My name is Luella, and I will be your conference operator today. At this time, I would like to welcome everyone to Cytek Biosciences' second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is low Wala and I will be your conference operator today at this time I would like to welcome everyone to say check Biosciences second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any.

Background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1, followed by star 2. By the number 1 on your telephone keypad, if you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Paul Goodson, Head of Investor Relations. You may begin.

The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one followed.

By the number one on your telephone keypad, if you would like to withdraw your question Press Star one again, thank you.

I would now like to turn the conference over to Paul Goodson head of Investor Relations you may begin.

Paul Goodson: Thank you, Operator. Earlier today, Cytek Biosciences released financial results for the quarter ended June 30, 2024. If you haven't received this news release, or if you'd like to be added to the company's distribution list, please send an email to investors at cytekbio.com. Joining me today from Cytek are Wenbin Jiang, CEO, and CFO, Bill McCombe.

Paul Goodson: Thank you operator earlier today.

Paul Goodson: <unk> released financial results for the quarter ended June 32024.

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 at <unk> Tec bio dot com.

Joining me today from <unk>, Tec or wind, Ben Jones, CEO and CFO Bill Mccomb.

Paul Goodson: Before we begin, I'd like to remind you that management will be making statements during this call that are forward-looking statements within the meaning of the federal securities laws, including statements regarding Cytek's 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 Cytek issued today and in Cytek's filings with the SEC.

Speaker Change: Excluding statements regarding <unk> business plans strategies opportunities and financial projections.

Speaker Change: These statements are based on the Companys current expectations and inherently involve significant risks and uncertainties.

Speaker Change: That could cause actual results or events to materially differ from those anticipated.

Speaker Change: 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> filings with the SEC.

Paul Goodson: This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation of the Most Directly Comparable Gap Financial Measure to the corresponding GAAP financial measure may be found in today's earnings release submitted to the SEC.

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

Speaker Change: 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.

Paul Goodson: Except as required by law, Cytek 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 on August 6, 2024. Once again, I would like to invite investors and analysts to attend the industry and academic conferences, meetings, and seminars where we will be exhibiting Cytek's products. There are 43 of these events planned throughout the remainder of 2024 in the U.S. and around the world.

Speaker Change: This conference call contains time sensitive information and is accurate only as of live broadcast.

Speaker Change: Six 2024.

Speaker Change: Once again, I would like to invite investors and analysts to attend the industry and academic conferences meetings and seminars, where we will be exhibiting at <unk> products. There are 43 of these events planned throughout the remainder of 2024 in the U S and around the world. While these are primarily geared to the scientific.

Paul Goodson: While these are primarily geared to the scientific community, they may offer an opportunity to interact with users of our technologies to learn why Cytek's instruments are so highly valued by our customers. There is a cost to attend most events, and we have a limited number of spaces to accommodate members of the financial community, so if you are interested in attending, please contact me. With that, I will turn the call over to Wenbin.

Speaker Change: Community. They may offer an opportunity to interact with users of our technologies to learn <unk> instruments are so highly valued by our customers.

Speaker Change: There is a cost to attend most events and we have a limited number of spaces to accommodate members of the financial community.

Speaker Change: You're interested in attending please contact me.

Ben: With that I will turn the call over to wind Ben.

Thanks, Paul.

Wenbin Jiang: Welcome, everyone, and thank you for your interest in CITES. On the call today, I will discuss our performance for the second quarter of 2024 and the progress achieved on our strategic initiatives to drive sustainable growth and profitability. Then I will turn the call over to Bill for a more detailed look at our financial results and our updated financial outlook for 2024 before we open it up for Q&A. Revenue in the second quarter was $46.6 million, an increase of 4% compared to the first quarter and a 6% decline compared to the second quarter of 2023, which was especially strong as it captured some delayed orders from the first quarter of 2023.

Speaker Change: Everyone.

Speaker Change: For your interest in <unk>.

Wenbin Jiang: Collectively, revenue for the first half of 2024 grew 5% compared to the first half of 2023. Revenue in the second quarter of 2024 was comprised of continued strong double-digit growth in EMEA and APEX, offset by weakness in the U.S. market, where we continued to experience a slowdown in orders and elongated sales cycles, particularly concentrated in the academic and government segments of the U.S. market. Further, while weaker versus the prior year, the biotech, pharma, and CO segment improved sequentially versus the first quarter.

Ben: All of our call today, I will discuss our performance for the second quarter of 2024 and the progress achieved.

Speaker Change: Our strategic initiatives to drive sustainable growth and profitability.

Speaker Change: Then our current COO.

Speaker Change: The full bill for a more detailed look at.

Speaker Change: Okay.

Hello.

Speaker Change: Dated financial outlook for 2024 before we open it up for Q&A.

Speaker Change: Revenue in the second quarter was $46 6 million.

Speaker Change: An increase of 12% compared to the first quarter.

Speaker Change: But that is the kind of competitor.

Speaker Change: Second quarter, often data from phase III.

Speaker Change: Which was.

Speaker Change: Actually Joe as it captured some delayed orders.

Joe: The first quarter of 2023.

Joe: Collectively revenue for the first half of 2024, 5% compared to the first half of 2023.

Joe: Revenue the federal quarter of 10 days from April was comprised of a continued.

Joe: Double digit growth in EMEA and APAC.

Joe: Offset by weakness in the U S market, where we continued to experience a slowdown in orders.

Joe: Elongated sales cycles.

Joe: Particularly concentrated in the academic and government segment of the U S market.

Joe: Further while we could benefit the prior year, the biotech pharma and the <unk> segment improved sequentially.

Joe: First quarter.

Wenbin Jiang: We believe our performance in this academic and government segment of the U.S. market was impacted by turnover on our sales team in SunSales Sandwiches, a slow funding environment, and an overhand of excess capacity from pandemic-era spending. We are working aggressively to bolster our sales team in this area. We believe the elongated sales cycle was primarily a result of these market factors and not a result of a change in competitive dynamics.

Joe: We believe our performance in academic and government the settlement with the U S market was impacted by it.

Joe: Our sales team in certain sales penetrated.

Joe: A slow funding environment.

Joe: And an overhang of excess capacity from pandemic era spending.

Joe: We are working aggressively to bolster our sales team in this area.

Joe: We believe the elongated sales cycle was primarily a result of.

Joe: Is the market effect.

Joe: And a lot as a result of a change in competitive dynamics.

Wenbin Jiang: Importantly, we believe the fundamental drivers of long-term growth remain in place in the U.S. market and expect them to normalize over time. Specifically, we expect the large installed base of conventional technology flow cyclometers will be replaced over time with special instruments and will be a growth driver for Cytek going forward, as a result of our Q2 results and the slower than expected recovery in U.S. market conditions. We are slightly narrowing our guidance range and now expect full-year revenue in the range of $203 to $210 million, representing growth of 5% to 9% over the prior year.

Joe: Importantly, we believe that.

Joe: Fundamental drivers of long term growth remain in place in the U S market and expect it to normalize over time.

Joe: Specifically, we expect the larger installed base of conventional technology pro cyclical.

Joe: Replace overtime will.

Joe: Special instruments, and there will be a growth driver for <unk> going forward.

Joe: As a result of our Q2 results and the slower than expected recovery in the U S market conditions.

Joe: We are slightly narrowing our guidance range and now expect full year revenue in the range of $203 million to $410 million.

Joe: Representing growth of 549% over the prior year.

Wenbin Jiang: Bill will provide more details on our financial results momentarily. In the second quarter, we were pleased to achieve 30% growth in service revenue as compared to the same quarter in the prior year, driven by our increasing installed base of instruments. And a reminder, we expect our recruiting service revenue will be a strong growth driver for Cytek in the longer term. Notably, over the last 12 months, we have leveraged the increasing scale of our service operations to boost labor and overhead productivity. Based on these efforts, we substantially increased our service growth margins by 8% points as compared to a year ago.

Joe: Bill will provide a more detailed our financial results in a moment.

Bill: In the second quarter, we were pleased to achieve 30% growth in service revenue as compared to the same quarter in the prior year.

Joe: Yes.

Bill: Hello, our increasing installed base of instruments.

Joe: As a reminder, we expect our recurring service revenue will be a strong growth driver for the longer term.

Joe: Notably over the last 12 months, we have leverage the increasing scale of our service operation to both the labor and overhead productivity.

Joe: Based on all of these efforts, we substantially increased our service gross margin by eight percentage points as compared to a year ago.

Wenbin Jiang: Overall, while ordering activity continues to be weak in the U.S., and the market recovery was not at the pace we would like to see, we believe that the underlying demand for our cutting-edge analysis solution remains strong, and we are making steady progress with new and existing customers in our pipeline. As we navigate this dynamic environment, we remain focused on driving sustainable growth and productivity, and essential to this objective is strengthening our position as a market leader in flow cytometry. Turning to our growth strategy,

Joe: Although while ordering activity continues to be weak in the U S.

Joe: And the market will recover it was not at the pace, we would like to see we believe that the underlying demand for our cutting edge inadequate solutions remained strong.

Joe: And we are making steady progress.

Joe: New and existing customers in our pipeline.

Joe: As we navigate this dynamic environment, we remain focused on driving sustainable growth and productivity.

Joe: And are central to this objective year strengthening our position as a market leader in flow cytometry.

Joe: Turning to our growth strategy.

Wenbin Jiang: As a reminder, our focus is on four key pillars, each of which is integral to our long-term growth: instruments, applications, bioinformatics, and clinical. In the second quarter, we expanded our global footprint with 147 instruments sold, reaching a total installed base of 2,656 units, including 299 amulets and guava instruments shipped since the acquisition of the luminous flow cytometry and imaging business. This total does not include the thousands of installed amulets and guava instruments sold prior to our acquisition of the Luminix product line.

Joe: As a reminder, our focus in our four key pillars, each of which is integral to our long term growth internal application bioinformatics and clinical.

Joe: In the second quarter, we expanded our global footprint.

Joe: 147 instruments sold reaching.

Joe: We shipped a total installed base of 2656 units.

Speaker Change: Including 299, unless in the QUADRA instruments shipped since the acquisition of <unk>.

Speaker Change: Limited flow cytometry and imaging business.

Speaker Change: This total does not include the thousands of installed unless in a quasi instrument.

Speaker Change: Prior to our acquisition of voluminous product cloud.

Wenbin Jiang: We believe that this growing interface will serve as a durable foundation to drive adoption of our current and future product offerings and deliver growth across our diversified revenue base. During the second quarter, we were excited to have announced our Enhanced Small Particle Detection Module, or ESP, a new product that can be added to new or registered to existing Aurora and Northern Lights, This new capability allows our already powerful cell analysis system to provide further sensitivity and resolution improvements, for detecting viruses and other subcellular particles, all while maintaining size as well-known high-resolution and high-parameter capabilities for cell analysis, by bringing improved speed and accuracy to the study of extracellular vesicles, cell-to-cell communication, and cell signaling in many physiological states.

Speaker Change: We believe that this growing installed base well served available foundation to drive adoption of our current and future product offerings and deliver growth across our diversified revenue base.

Speaker Change: During the second quarter, we were excited to have announced our enhanced small particle detection module or <unk>.

Speaker Change: SP, a new product that can be added through new or retrofitted to existing Aurora in another life instrument.

Speaker Change: This new capability allows our already powerful cell analysis system.

Speaker Change: The further cash activity and the resolution improvements.

Speaker Change: Detecting violated and the other sub cellular protocols.

Speaker Change: All while maintaining site is well known high resolution and the high parameter capabilities for sale analysis.

Speaker Change: By bringing improved speed and accuracy through the study of extracellular vesicles.

Speaker Change: Sales of <unk> communications, and Michelle Similarly in mainly a physiological states.

Wenbin Jiang: We expect these new capabilities will further distinguish our cell analysis solutions as the preferred choice among researchers and clinicians. Turning to bioinformatics, our main goal is to enable our customers to streamline their experiment workflow through our software tools, which drives adoption and utilization of our cell analysis solutions. Our success in bioinformatics can be measured through user engagement and demand for Scikit-Cloud, one of our core bioinformatics offerings.

Speaker Change: We expect to accelerate the pace of discovery.

Speaker Change: And the diagnostic development and benefit the scientific community as a whole.

Speaker Change: For <unk> we.

Felipe this new capability will further distinguish our cell analysis solutions.

Speaker Change: The preferred choice among researchers and clinicians.

Speaker Change: Turning to Bioinfomatics, our medical is to enable our customers to streamline their expandable workflow through our software tools.

Speaker Change: Which drive adoption and utilization of our cell analysis solutions.

Speaker Change: Our success in powder format, it can be measured through user engagement and demand for sites across.

Speaker Change: One of our core bio informatics offerings.

Wenbin Jiang: We now have over 11,000 users of the Cytek cloud, representing an average of about five users per installed Cytek SSP instrument. We are excited to share that just last week, we officially launched a powerful tool to automate panel design and expand the capabilities of the panel builder tool within Cytek Cloud, which we previewed during our last earnings call. Our Spectral Panel Tool is a proprietary new intelligent algorithm optimized for Cytek FSP technology that automates the assignment of protocols to markers, removing a labor-intensive manual process.

Speaker Change: We now have over 11000 users.

Speaker Change: The site across the presenting an average of about five users per installed site at FSP instruments.

Speaker Change: We are excited to share that last week, we officially launched a powerful tool to automate panel design and expand the capabilities of the panel builder tool with inside the cloud.

Speaker Change: Which we previewed during our last earnings call.

Speaker Change: Our special Pillow tool is a proprietary new intelligent algorithms optimize the fore sight SSP technology that automates the assignment of protocols for Martha.

Speaker Change: Removing a labor intensive manual process.

Wenbin Jiang: This tool will save researchers time and money by jump-starting their panel design process with a tool that suggests ways to optimize the panels in minutes. As a reminder, Cytek Cloud supports flow cytometry research from panel design to experiment setup to data acquisition. Enabling researchers to design panels with ease, taking into account antigen density, marker expression, and region availability. It consists of a suite of integrated online software tools that streamline workflows, combining all special panel design tools in one place, which enables users to prepare experiments remotely. Cytek Cloud accelerates time-to-insight for a wide range of applications and is a vital resource in the research community.

Speaker Change: This tool well said researcher time and money by Jumpstarting their panel design process with a tool that suggests the optimize the panels in minutes.

Speaker Change: As a reminder, striker cloud support flow cytometry research from panel design to expand level setup to data acquisition <unk>.

Speaker Change: Enabling researchers to design panels.

Speaker Change: Yes.

Speaker Change: Taking into account antigen type of hate Martha expression and reagent availability.

Speaker Change: It consists of a suite of integrated online software tools that streamline workflow combining all special payload design tools in one place, which enabled users to prepare experiments to the Mosley.

Speaker Change: Tighter cloud accelerates time to insight for a wide range of applications and a vital resource in the research community.

Wenbin Jiang: On the application front, in the second quarter, we were pleased to share that our one-laser and two-laser six-color TBNK region cocktails received the China National Medical Administration approval for clinical use on modern life systems in hospitals, laboratories, and clinics across China. As a reminder, this is the first data-based, six-color assay supported by FFP capability, which gives our one-laser system a competitive advantage against the These reagents help in diagnosing and monitoring various immune-related conditions.

Speaker Change: Our application front in the second quarter, we were pleased to share that our one laser and two laser fix color television.

Speaker Change: Costco received the China National Medical administration approval for clinical use our northern light systems in hospital laboratory in the clinic across China.

Speaker Change: As a reminder, this is the first one database fixed color.

Speaker Change: Lauded by FSP capability.

Speaker Change: Which our one day the system.

Speaker Change: Competitive advantage against the more expensive to laser systems.

Speaker Change: These reagents help in diagnosing and monitoring various immune related condition.

Bill McCombe: Obtaining NMTA clearance is a significant milestone achieved through a rigorous process that validates the safety and efficacy of Cytek TBNK reagents. This achievement enhances our market presence in China and opens new potential opportunities while strengthening our competitive advantage, as we continue to push forward new products and applications. We remain deeply focused on providing a comprehensive scale analysis portfolio to our customers. A critical component of this mission is to expand and enhance our reach and capability.

Speaker Change: While Kenny NPA clearly is a significant milestone.

Speaker Change: Cheap through a rigorous process that validate the safety and efficacy of <unk> TV NK Vegas.

Speaker Change: This achievement enhances our market presence in China and opened a new potential opportunities.

Speaker Change: While strengthening our competitive advantage.

Speaker Change: As we continue to push forward new products and applications.

Speaker Change: We remain deeply focused.

Speaker Change: Providing a comprehensive cell analysis portfolio to our customers.

Speaker Change: A critical component of this mission is to expand and enhance our reach and capability.

Bill McCombe: We look forward to continuing to provide our powerful cell analysis solutions to the scientific community to accelerate clinical progress and scientific discovery. With that, I will now turn the call over to Bill for more details on our financials.

Speaker Change: We look forward to continuing to provide our powerful cell analysis solution to the scientific community to accelerate clinical progress and scientific discovery.

Speaker Change: With that I will now turn the call over to bill for more details around our financials.

Bill McCombe: Thanks, Wenbin. Total revenue for the second quarter was $46.6 million, an increase of 4% versus the first quarter and a decrease of 6% from a particularly strong second quarter in 2023. First-class revenue, which averages out this effect, grew 5% versus the prior year's first half. These revenue results reflect continued robust growth in international markets and in service revenue, with the decline versus Q2 23 being attributable to weakness in the U.S. instrument market.

Bill: Thanks Brendan.

Bill: Revenues for the second quarter was $46 6 million, an increase of 4% versus the first quarter and a decrease of 6% from a particularly strong second quarter of 2023.

Bill: First half revenue, which averages out this effect grew 5% versus prior year first half these.

Bill: These revenue results reflect continued robust growth in international markets and in service revenue with the decline versus Q2, 'twenty three being attributable to weakness in the U S instrument market.

Bill McCombe: Product revenue, primarily instruments, declined 15% in Q2 versus the prior year and 4% in the first half, which was driven by weakness in the U.S. market, particularly in the academic and government sectors. Service revenue grew 30% in Q2 and 50% in the first half versus a year ago, driven by substantial growth in the installed base of systems needing service contracts. Service business growth reflects how extensively our tools are being used on a daily basis across all disciplines.

Bill: Product revenues, primarily instruments declined 15% in Q2 versus prior year and 4% in the first half, which was driven by weakness in U S market, particularly in the academic and government sector.

Bill McCombe: Turning to geographic market performance, total U.S. revenue declined 29% from a strong Q2 2023 and 15% for the first half of 2024 as product revenue weakness offset service growth. International markets grew strongly, with EMEA up 52% versus the prior year and 51% for the third half, and Asia-Pacific up 27% in Q2 and 16% for the first half, as Cytek's technology continued to gain traction as the full-spectral flow cytometry technology of choice for research institutions and biopharma companies worldwide.

Bill McCombe: Gross profit was $25.4 million for the second quarter, an increase of 11% versus the first quarter and a decrease of 10% versus a year ago. Gap gross profit margin improved to 55% in the quarter, up from 51% in Q1. This was due to the absence of inventory adjustment and Improved Labor and Overhead Productivity and Service.

Bill: As a year ago.

Bill: GAAP gross profit margin improved to 55% in the quarter up from 51% in Q1.

Bill: Due to the absence of inventory adjustments and improved labor and overhead productivity and service.

Bill McCombe: Compared to a year ago, GAAP gross profit margin was down 2% from 57% due to higher product labor expenses offset by a substantially improved service gross margin due to labor and overhead productivity on higher revenue. Adjusted gross profit margin, which excludes stock-based compensation expense and amortization of acquisition-related intangibles, was 58 percent in the quarter, up from 55 percent in Q1 and down from 60 percent in the prior year quarter. Operating expenses were $34 million for the second quarter of 2024, essentially flat with Q1 at $33.7 million, and decreased 9% from $37.3 million in the second quarter of 2023, driven primarily by lower R&D and sales and marketing expenses.

Bill: Compared to a year ago GAAP gross profit margin was down 2% from 57% due to higher product labor expenses offset by a substantially improved service gross margin due to labor and overhead productivity on higher revenue.

Bill: Adjusted gross profit margin, which excludes stock based compensation expense and amortization of acquisition related intangibles was 58% in the quarter up from 55% in Q1 and down from 60% in the prior year quarter.

Bill: Operating expenses were $34 million for the second quarter of 2024, essentially flat with Q1 at $33 7 million.

Bill: And decreased 9% from $37 3 million in the second quarter of 2023.

Bill: Driven primarily by lower R&D and sales and marketing expenses.

Bill McCombe: Research and development expenses were $10 million for the second quarter, in line with $9.8 million in Q1 and down from $12.1 million in the prior year period. The decrease of 2.1 million was primarily due to a lower head count in engineering. Sales and marketing expenses were $12.3 million for the second quarter, a slight decrease from Q1 at $12.5 million, and down from $14.4 million for the prior year period. The decrease of 2.1 million was primarily due to a lower head count.

Bill: Research and development expenses were $10 million for the second quarter in line with $9 8 million in Q1 and down from $12 1 million in the prior year period. The decrease of $2 1 million was primarily due to lower head count and engineering expense.

Bill McCombe: General and administrative expenses were $11.7 million for the second quarter, slightly up from $11.4 million in Q1, and up from $10.8 million for the prior year period. The increase of $0.9 million was primarily driven by higher stock-based compensation expenses. Loss from operations was $8.5 million for the second quarter, an improvement compared to a loss from operations of $9.1 million for the second quarter of 2020. This was driven by lower operating expenses in the current quarter, offset by lower gross margin versus the prior year.

Bill McCombe: Net loss in the second quarter was $10.4 million compared to $4.4 million in the prior year. This was primarily due to a non-cash tax expense in the current quarter driven by a lower effective tax rate and a consequent reversal of a Q1 tax benefit compared to a tax benefit in the prior year quarter, and to a lesser extent, lower net other income due to foreign exchange losses.

Bill McCombe: Adjusted EBITDA, which excludes stock-based compensation expense and foreign currency impacts, increased to $2.9 million for the second quarter, compared to a loss of $0.7 million in Q1 and $1.5 million in the second quarter of 2023. This was due to higher revenue and gross profit versus Q1 and lower operating expenses versus the year-ago quarter. We remain committed to improving profitability going forward by driving revenue growth and controlling costs. Total cash and marketable securities increased by $7 million versus Q1 to $277 million, due to higher adjusted EBITDA and efficient working capital management and despite spending $3 million to repurchase shares in the quarter.

Bill: Q1 on lower operating expenses versus the year ago quarter.

Bill: We remain committed to improving profitability going forward by driving revenue growth and controlling costs.

Bill: Total cash and marketable securities increased by $7 million versus Q1 to $277 million due to higher adjusted EBITDA and efficient working capital management.

Bill: And despite spending $3 million to repurchase shares in the quarter.

Bill McCombe: With healthy cash reserves, no meaningful debt, and positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth. As I mentioned above, one important use of our strong cash flow and cash position has been to repurchase our stock. Accordingly, in June, we announced an authorization to repurchase 50 million of our stock. During the second quarter, we repurchased approximately 2.7 million shares of Cytek stock in open market transactions at a weighted average price of $5.99 per share.

Bill: With healthy cash reserves no meaningful debt in positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth initiatives.

Bill: Okay.

Bill: As I mentioned above one important use of our strong cash flow and cash position has been to repurchase our stock.

Bill: Accordingly in June, we announced an authorization to repurchase $50 million of our stock.

Bill: During the second quarter, we repurchased approximately $2 7 million worth of <unk> stock in open market transactions at a weighted average price of $5 99 per share.

Bill: Shares repurchased under these programs are cancelled, leaving us with 131 5 million shares outstanding as of June 32024.

Bill McCombe: Shares repurchased under these programs will be cancelled, leaving us with 131.5 million shares outstanding as of June 30, 2024. Now turning to our outlook for the full year 2024, which Wenbin reported at a high level earlier, we are continuing to see market pressures impacting our revenue expectations, including order delays across North America. At the same time, we're seeing signs of normal spending patterns returning to Europe and Asia Pacific.

Bill: Yeah.

Bill McCombe: Due to these more mixed market conditions, we are narrowing our full-year revenue outlook to a range of $203 million to $210 million, representing overall growth of 5% to 9% over full year 2023 and assuming no change in currency exchange rates. We continue to expect modest growth across our products and service lines, and growth rates will continue with historical spending patterns at our customer base in the second half of this year. In addition, we do not expect to be GAAP net income positive for the full year.

Bill McCombe: Due to our outlook for slightly lower gross profit, higher stock-based compensation expense, and lower other income, we expect Cytek's gap net loss to be in the single digit million range for the full year 2024. It remains our objective to deliver a positive net income going forward. Cytek also expects to generate positive cash flow from operations in 2020. With that, I will turn it back over to Wenbin.

Wenbin Jiang: I want to close by thanking our staff team for their continued commitment to delivering cutting-edge tools, reagents, and software to empower the scientific community to advance the next generation of cell analysis. We are serving very attractive end markets across healthcare. And I'm confident that we are strongly positioned to drive our growth strategy forward with continued execution across our key strategic pillars and the focus on delivering sustainable growth and profitability. I want to thank everyone for joining today's call, and we will now open it up for questions.

Speaker Change: H tools reagents and software to empower the scientific community.

Speaker Change: The next generation of cell analysis.

Bill: We are serving very attractive end market.

Bill: Across health care and I am confident that we are strongly positioned to drive our growth strategy forward with continued execution across our key <unk>.

Speaker Change: Pillars and are focused on delivering sustainable growth and profitability.

Speaker Change: I want to thank everyone for joining today's call and we will now open it up for questions.

Bill: Operator.

Speaker Change: Thank you the floor is now open for questions. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead. Hi, this is Jason from Tejas. Thank you for taking our question. So could you...

Bill: Simply press Star one again, if you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Your first question comes from the line of Sages Savant with Morgan Stanley. Please go ahead.

Jason: Hi, this is Jason from Tejas. Thank you for taking our questions. So, could you talk a little bit about your order book and visibility into the second half? At midpoint, it seems to imply a 55 to 56 percent second half ramp to achieve the guidance. So, could you provide some color on what gives you confidence in this ramp? I mean, are you bringing in any benefits from the stimulus in China? Are there any budget flushes? Thank you. So any assumptions about your...

Bill McCombe: both current market conditions and a typical quarterly spending pattern. You'll notice if you look at the prior year's second half and, in particular, fourth quarter that those represent more than 50% of annual revenue, so we wouldn't see any reason why that typical quarterly pattern or first half, second half pattern would be any different than prior years. And our guidance represents 5% growth over the last year at the low end and low double digits at the top, which is broadly consistent with our overall.

Bill McCombe: And on top of that, the Chinese impact is not baked into this forecast or guidance.

Bill McCombe: Thank you. I appreciate that. Then, I guess a follow-up question. Just with the FCI acquisition, now seeing its anniversary, could you provide us with an update on your development roadmap for Guava and Amnesty? And, as a follow-up, where do you currently stand on the development of imaging FSP?

Wenbin Jiang: Guava, as you know, was never a primary reason for the acquisition, although we have kept guava for the reason that some of the guava customers would like to stay and continue on what they have been familiar with. But our next site, and we continue to assess customer demand and needs on the imaging side, and this is part of the reason for the acquisition, and we are continuing to work on integrating the imaging capability into the FSP product.

Sages Savant: To stay continue on what they have been.

Sages Savant: Familiar with.

Bill: But.

Speaker Change: <unk> site, and we continue to assess and.

Bill: Sure.

Speaker Change: The customer demand.

Speaker Change: Needs on the imaging side.

Speaker Change: This is part of the <unk>.

Bill: Reason for the acquisition and we are continuing to work on.

Speaker Change: Integrating the imaging capability onto the.

Speaker Change: The <unk> product.

Wenbin Jiang: And if I may ask one more, you noted a weakness among academics. David Westenberg, Could you talk a bit about the intra-quarter trends that you saw play out? Did you see the cadence get better or worse throughout the quarter?

Speaker Change: Thank you and if I may ask one more just thoughts. So you noted weakness Ahmad academic customers in the U S could you talk a bit about the intra quarter trends that you saw play out did you see the cadence get better or worse than throughout the quarter.

Wenbin Jiang: As you can see, this trend has been continuing from Q1 through Q2. Of course, this is partially due to some of the turnover of our sales representatives in some of the territories in North America. We are addressing this subject, and we feel sales are not being lost, it's just not being pushed too close. We will see it come back.

Speaker Change: As you can see and this trend has been continuing even from Q1 through Q2.

Speaker Change:

Speaker Change: Of course this partially also we have indicated that due to some of the <unk>.

Speaker Change: Our sales.

Speaker Change: Preventative too.

Speaker Change: Some of the penetration in the North America, we are addressing this subject and we feel.

Speaker Change: Sales has not been lost it's just not being pushed to growth we will see it will come back.

Jason: Thank you; I appreciate the time, guys.

Speaker Change: Got it. Thank you I appreciate the time guys.

Operator: Your next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead. Hi, this is...

Evie: Hi, this is Evie on format. Thanks for taking the questions. So my first question is, can you give us more color on the delayed orders that were captured in the quarter? What was the growth? What would the growth have been excluding those orders? And then is there a risk that elongated sales cycles continue to delay orders in the back half of the year?

Wenbin Jiang: As you can see, in the first year, we actually experienced great growth in Europe and EMEA, but we did see a kind of elongated sales cycle in North America, and this evidently continued in Q2, and at this time, we don't foresee this improving over the next couple of quarters for the year, but our guidance has already included this factor.

Wenbin Jiang: And then can you talk through, with the potential replacement cycle coming up, like where we are in this cycle and given your large installed base, when we could start to see this come through, maybe some detail on your average instrument age versus historic trends of when those start to be replaced?

Wenbin Jiang: I think this replacement cycle is not just to replace our own instrument deployed quite a few years ago, but it's also to replace other conventional instruments. Now, actually, far more of those instruments, in fact, in the field, we feel we are going to benefit from replacing those instruments. Yeah, that universe of when we talk about replacement.

Wenbin Jiang: When we talk about replacement instruments, the opportunity is primarily constituted by the thousands of conventional flow cytometry instruments that are out there. We think about 50,000 in total. So it's the replacement of those instruments as they reach end of life that is the most important.

Operator: Your next question comes from the line of David Westenberg with Piper Sandler. Please go ahead. Hey guys, thanks for taking the questions. This is John.

John: Hey guys, thanks for taking the questions. This is John on behalf of Dave. Can you give any commentary on the instrument mix during the quarter, what the standard performing instruments were, and if you have any commentary on the consumables across the instruments, that would be appreciated. Thank you. Yeah, well, I think we show strength across, you know, all of our instruments.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah, well I think we saw strength.

Speaker Change: Across.

Bill McCombe: You know, all of our categories of instruments with particular strength this quarter were the Northern Lights instruments. That category was probably the best performer. And then with respect to consumables... I assume you're referring to reagents, you know, that continues to be a mid single-digit proportion of the overall business, so it doesn't it doesn't really have a significant impact on growth rates, and as we said in the past, it grows broadly in line with the rest of

Speaker Change: All of our categories of instruments with particular strength this quarter in the northern lights instruments.

Speaker Change: That was that category was probably the best performer.

Speaker Change: Okay, and then with respect to consumables.

Speaker Change: I assume you are.

Speaker Change: Referring to reagents that continues to be a mid single digits.

Speaker Change: Proportion of the overall business so.

Speaker Change: It doesn't it doesn't really have a significant impact on growth rate and as.

Speaker Change: As we've said in the past it grows broadly in line with the rest of the.

Speaker Change: Sure.

Speaker Change: The portfolio.

Bill McCombe: Got it, thank you. And do you have any thoughts on when capital budget appetites might start to stabilize more or potentially turn more positive in the U.S.? I think, uh...

Speaker Change: Got it. Thank you and do you have any thoughts on when capital budget appetite.

Speaker Change: Start to stabilize more.

Speaker Change: Or a potential to turn more positive in the U S.

Bill McCombe: I think actually looking at the segment, while we see the kind of weakness, an elongated sales cycle on the academic and the government side, we do see farmers start to come back, and clearly we see improvement in Q2 versus Q1.

Speaker Change: I think.

Speaker Change: Actually.

Speaker Change: Looking at the settlement.

Speaker Change: We see the kind of weakness elongated sales cycle on the academic and government side, we do see pharma as starts will come back in.

Operator: Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Chad Wiatrowski with T.D. Cohen. Please go ahead.

Chad Wiatrowski: Hey, this is Chad speaking on behalf of Steven Mah. Can you just help contextualize how the bioinformatics improvements and the automated panel design impact instrument consumable demand and sort of break that out among geographic and customer end markets? Is there more or less sensitivity to these improvements in certain segments?

Wenbin Jiang: The bioinformatics platform is a platform to really help our users to leverage the instruments and the regions we have, such as Spectrum Panel, which we have just launched. In fact, it automates the panel design, especially for those highly complex panels. And typically, it takes a lot more time for the users to optimize. Now we have a system, a tool that will really enable them to speed up their development. Afterward, not only enable them to optimize, basically like a virtual experiment on our platform, but it also enables them to purchase the new agent software. So through this process, we feel that we help our users provide a full set of solutions for our customers to leverage the full special technology Cytek has provided.

Bill McCombe: That's helpful. And just to pivot sort of the instruments, obviously, the new facility, this manufacturing facility open, is related to instrument production. So does this create sort of a risk to gross margin, just given that fixed costs are already on the books? And could you maybe speak to how you're thinking of the margin cadence sort of in the back half of the year and beyond? The... The...

Bill McCombe: The new facility, the costs of that are already included in our fixed costs, so there's no, we don't see a specific downside risk to gross margins from that. And then as to gross margin cadence, you know, last quarter, we said that we expected to move back closer to where our gross margins were last year. And, you know, so in this quarter, our adjusted gross margin moved up to 58%. And that compares to 60% in Q2 of last year and 59% for the balance of the year.

Bill McCombe: So I think we've recovered a large portion of the margin gap versus last year. And I think while as revenue grows, we would hope for some margin benefit, the benefits should be fairly modest from this point forward.

Speaker Change: [music].

Chad Wiatrowski: That's helpful. Thanks for the time, guys. Ladies and gentlemen, that concludes the Q&A session and today's call. Thank you all for joining us. You may now disconnect.

LaBella: Thank you for standing by my name is labella and I will be your conference operator today at this time I would like to welcome everyone to Phi Tech Biosciences second quarter 2024 earnings Conference call. All lines have been placed on mute to prevent any background noise.

Operator: Ladies and gentlemen, that concludes the Q&A session and today's call. Thank you all for joining. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Thank you for standing by.

LaBella: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one followed.

LaBella: By the number one on your telephone keypad, if you would like to withdraw your question Press Star one again, thank you.

Operator: My name is Luella, and I will be your conference operator today. At this time, I would like to welcome everyone to Cytek Biosciences' second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Paul Goodson, Head of Investor Relations. You may begin.

LaBella: I would now like to turn the conference over to Paul Goodson head of Investor Relations you may begin.

Paul Goodson: Thank you, Operator. Earlier today, Cytek Biosciences released financial results for the quarter ended June 30th, 2024. If you haven't received this news release or if you'd like to be added to the company's distribution list, please send an email to investors at CytekBio.com. Joining me today from Cytek are Wenbin Jiang, CEO, and CFO, Bill McCombe.

Speaker Change: Thank you operator earlier today.

Speaker Change: <unk> released financial results for the quarter ended June 32024.

Speaker Change: If you haven't received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investors at <unk> Tec bio dot com.

Wyndham Zhang: Joining me today from <unk> Tec, our Wyndham, Zhang CEO and CFO Bill Mccomb.

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

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

Speaker Change: That could cause actual results or events to materially differ from those anticipated additional.

Speaker Change: 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> filings with the SEC.

Paul Goodson: This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation of the most directly comparable gap financial measure may be found in today's earnings release submitted to the SEC.

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

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

LaBella: 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.

LaBella: This conference call contains time sensitive information and is accurate only as of live broadcast August six 2024.

Speaker Change: Once again, I would like to invite investors and analysts to attend the industry and academic conferences meetings and seminars, where we will be exhibiting site techs products. There are 43 of these events planned throughout the remainder of 2024 in the U S and around the world. While these are primarily geared to the side.

Speaker Change: If a community they may offer an opportunity to interact with users of our technologies to learn <unk> instruments are still highly valued by our customers.

Speaker Change: There is a cost to attend most events and we have a limited number of spaces to accommodate members of the financial community.

Speaker Change: You're interested in attending please contact me.

Winthrop: With that I will turn the call over to win them.

Win: Thanks, Paul.

Wenbin Jiang: Welcome, everyone, and thank you for your interest in Psyche. On the call today, I will discuss our performance for the second quarter of 2024 and the progress achieved on our strategic initiatives to drive sustainable growth and profitability. Then I will turn the call over to Bill for a more detailed look at our financial results and our updated financial outlook for 2034 before we open it up for Q&A. Revenue in the second quarter was $46.6 million, an increase of 4% compared to the first quarter and a 6% decline compared to the second quarter of 2023, which was especially strong as it captured some delayed orders from the first quarter of 2023.

Win Them: Welcome everyone and thank you for your interest in <unk>.

win them: All of our call today, I will discuss our performance for the second quarter of 2024 and the progress achieved.

Speaker Change: Our strategic initiatives to drive sustainable growth and profitability.

Win: Then I'll turn the call over.

Win: For Bill for a more detailed look at our net.

Speaker Change: Great.

Bill: Dated financial outlook.

Bill: Therefore, before we open it up for Q&A.

Bill: Revenue in the second quarter was $46 6 million.

Speaker Change: The increase of 4% compared to the first quarter.

Speaker Change: Compared to the second quarter, often data from phase III.

Speaker Change: Which was thank.

Speaker Change: Essentially show as if captured some delayed orders.

Speaker Change: The first quarter of 2023.

Wenbin Jiang: Collectively, revenue for the first half of 2024 grew 5% compared to the first half of 2023. Revenue in the second quarter of 2024 was comprised of continued strong double-digit growth in EMEA and APEC, offset by weakness in the U.S. market, where we continued to experience a slowdown in orders and elongated sales cycles, particularly concentrated in the academic and government segments of the U.S. market. Further, while weaker versus the prior year, the biotech, pharma, and CO segment improved sequentially versus the first quarter.

Speaker Change: Collectively revenue for the firm.

Speaker Change: First half of 'twenty 'twenty four grew 5%.

Speaker Change: <unk> for the first half of 'twenty three.

Speaker Change: Revenue.

Speaker Change: Favorable quarter of 10 days from April was comprised of a continued strong double digit growth in EMEA and APAC.

Speaker Change: Offset by weakness in the U S market.

Speaker Change: We continued to experience a slowdown in orders and.

Speaker Change: Elongated sales cycles.

Speaker Change: Particularly concentrated in the academic and government segment of the U S market.

Speaker Change: Further while weaker versus the prior year, the biotech pharma and the <unk> segment improved sequentially.

Speaker Change: First quarter.

Speaker Change: We believe our performance in academic and government settlement with the U S market was impacted by it.

Speaker Change: Our sales team in southern sales penetrated.

Speaker Change: A slow funding environment.

Speaker Change: And in overhead of upset capacity from pandemic era spending.

Speaker Change: We are working aggressively to bolster our sales team in this area.

Speaker Change: We believe the elongated sales cycle was primarily a result of the <unk>.

Speaker Change: Market effects.

Speaker Change: And as a result of a change in competitive dynamics.

Wenbin Jiang: Importantly, we believe the fundamental drivers of long-term growth remain in place in the U.S. market and expect them to normalize over time. Specifically, we expect the larger installed base of conventional technology flow cyclometers will be replaced over time with special instruments and will be a growth driver for Cytek going forward, as a result of our Q2 results and the slower than expected recovery in U.S. market conditions. We are slightly narrowing our guidance range and now expect full-year revenue in the range of $203 to $210 million, presenting growth of 5% to 9% over the prior year.

Speaker Change: Importantly, we believe that.

Speaker Change: Fundamental drivers of long term growth the net increase in the U S market and expect it to normalize over time.

Speaker Change: Specifically, we expect the larger installed base of conventional technology pro cyclical.

Speaker Change: We'll pace over time.

Speaker Change: Special instruments, and there will be a growth driver for Pi telco in forward.

Speaker Change: As a result of our Q2 results and the slower than expected recovery in the U S market conditions.

Speaker Change: We are slightly narrowing our guidance range and now expect full year revenue in the range of $203 million to $210 million.

Speaker Change: Representing growth of 549% over the prior year.

Wenbin Jiang: Bill will provide more details on our financial results momentarily. In the second quarter, we were pleased to achieve 30% growth in service revenue as compared to the same quarter in the prior year, driven by our increasing installed base of instruments. As a reminder, we expect our recruiting service revenue will be a strong growth driver for Cytek in the longer term. Notably, over the last 12 months, we have leveraged the increasing scale of our service operation to boost labor and overhead productivity. Based on these efforts, we substantially increased our service growth margins by 8% points as compared to a year ago.

Speaker Change: Bill will provide more details on our financial results in a moment.

Bill: In the second quarter, we were pleased to achieve 30% growth in service revenue as compared to the same quarter in the prior year.

Speaker Change: Yes.

Bill: Children by our increasing installed base of instruments.

Speaker Change: As a reminder, we.

Speaker Change: Our recurring service revenue will be a strong growth driver for the longer term.

Speaker Change: Notably over the last 12 months, we have leverage the increasing scale of our service operation.

Speaker Change: The labor and overhead productivity.

Speaker Change: Based on all of these efforts.

Speaker Change: We substantially increased our service gross margin by eight percentage points as compared to a year ago.

Speaker Change: Although while ordering activity continues to be weak.

Speaker Change: And the market recovery was not at the pace, we would like to see we believe that the underlying demand for our cutting edge inadequate solutions remained strong.

Speaker Change: And we are making steady progress.

Speaker Change: New and existing customers in our pipeline.

Speaker Change: As we navigate this dynamic environment.

Speaker Change: <unk>.

Speaker Change: On driving sustainable growth and productivity.

Speaker Change: In our central to this objective.

Speaker Change: Furthering our position as a market leader in flow cytometry.

Speaker Change: Turning to our growth strategy.

Speaker Change: A reminder, our focus in our four key pillars, each of which is integral to our long term growth instrument applications.

Speaker Change: And with automatics and political.

Speaker Change: In the second quarter, we extended our global footprint.

Speaker Change: 147 instruments sold.

Speaker Change: Reaching a total installed base of 12656 units.

Speaker Change: Including 299 analysts and our QUADRA instruments shipped since the acquisition of the aluminum flow cytometry and imaging business.

Speaker Change: This total does not include the solvency of installed unless in a quasi instrument. So the prior to our acquisition of <unk>.

Speaker Change: Luminous product lines.

Wenbin Jiang: We believe that this growing interface will serve as a durable foundation to drive adoption of our current and future product offerings and deliver growth across our diversified revenue base. During the second quarter, we were excited to have announced our Enhanced Small Particle Detection Module, or ESP, a new product that can be added to new or retrofitted to existing Aurora and Northern Lights instruments. This new capability allows our already powerful cell analysis systems to provide further sensitivity and resolution improvement for detecting viruses and other subcellular particles, all while maintaining the same high-resolution and high parameter capabilities for cell analysis by bringing improved speed and accuracy to the study of extracellular vesicles, cell-to-cell communication, and cell signaling in many physiological states.

Speaker Change: We believe that this growing installed base.

Speaker Change: Available foundation to drive adoption of our current and future product offerings.

Speaker Change: To deliver growth across our diversified revenue base.

Speaker Change: During the second quarter, we were excited to have announced our enhanced small particle detection module asps.

Speaker Change: <unk>.

Speaker Change: A new product that can be added to new or retrofitted to existing Aurora and a lot of life instrument.

Speaker Change: This new capability allows our already powerful cell analysis system, who will provide a further sensitivity and resolution improvements.

Speaker Change: Detecting violated and the other sub cellular protocols.

Speaker Change: All while maintaining site well known high resolution and the high parameter capabilities for sale analysis.

Speaker Change: By bringing improved speed and accuracy through the study of extracellular vesicles.

Speaker Change: So cell communication and the shell similarly in mainly of physiological states.

Wenbin Jiang: We expect these new capabilities will further distinguish our cell analysis solutions as the preferred choice among researchers and clinicians. Turning to bioinformatics, our main goal is to enable our customers to streamline their experiment workflow through our software tools, which drive adoption and utilization of our cell analysis solutions. Our success in bioinformatics can be measured through user engagement and demand for scikit-learn, one of our core bioinformatics offerings. We now have over 11,000 users of the Cytek cloud, representing an average of about five users per installed Cytek SSP instrument.

Speaker Change: We expect to accelerate the pace of this recovery.

Speaker Change: And the diagnostic development and benefit the scientific community as a whole.

Speaker Change: Pathetic.

Speaker Change: These new capabilities will further distinguish our cell analysis solutions.

Speaker Change: The preferred choice among researchers and clinicians.

Speaker Change: Turning to Bioinfomatics, our medical is to enable our customers to streamline their experimental workflow through our software tools.

Speaker Change: Which drive adoption and utilization of our cell analysis solutions.

Speaker Change: Our success in volatile format, it can be measured through user engagement and demand for sites across.

Speaker Change: One of our core bio informatics offerings.

Speaker Change: We now have over 11000 users.

Speaker Change: The site across the presenting an average of about five users per installed site at FSP instruments.

Wenbin Jiang: We are excited to share that just last week, we officially launched a powerful tool to automate panel design and expand the capabilities of the panel builder tool within Cytek Cloud, which we previewed during our last earnings call. The spectral panel tool is a proprietary new intelligent algorithm optimized for Cytek FSP technology that automates the alignment of protocols to markers. Removing Unlabeled Intensive Manual Processing. This tool will save researchers time and money by jump-starting their panel design process with a tool that suggests ways to optimize the panels in minutes, as Amanda.

Speaker Change: Which we previewed during our last earnings call.

Speaker Change: Our special panel tool is a proprietary new intelligent algorithms optimize the fore sight SSP technology that automates the assignment of protocols tool market.

Speaker Change: And moving our labor intensive manual process.

Speaker Change: This tool well said research at a time and money by Jumpstarting their panel design process with a tool that suggests to optimize the panels in minutes.

Wenbin Jiang: Cytek Cloud supports flow cytometry research from panel design to experiment setup to data acquisition. Enabling researchers to design panels will be easier, taking into account antigen densities, marker expression, and region availability. It consists of a suite of integrated online software tools that streamline workflows, combining all special panel design tools in one place, which enables users to prepare experiments remotely. Cytek Cloud accelerates time-to-insight for a wide range of applications and is a vital resource in the research community.

Speaker Change: As a reminder, striker cloud support flow cytometry research from panel design, two experimental setup to data acquisition <unk>.

Speaker Change: Enabling researchers to design panels.

Speaker Change: Yes.

Speaker Change: Taking into account antigen type of hate Martha expression, and then reagent availability.

Speaker Change: It consists of a suite of integrated online software tools.

Speaker Change: Streamline workflow combining all special panel design tools in one place, which enabled users to prepare experiments to the mostly.

Speaker Change: Tighter cloud accelerates time to insight for a wide range of applications and a vital resource in the research community.

Wenbin Jiang: On the application front, in the second quarter, we were pleased to share that our one-laser and two-laser six-color TBNK reagent cocktails received the China National Medical Administration approval for clinical use on modern life systems in hospitals, laboratories, and clinics across China. As a reminder, this is the first data-based, six-color assay supported by FFP capability, which gives our one-laser system a competitive advantage These reagents help in diagnosing and monitoring various immune-related conditions.

Speaker Change: On the application front in the second quarter, we were pleased to share that our one data and two laser fix color television.

Speaker Change: Costco received the China National Medical administration approval for clinical use our northern lights systems in hospital laboratory in the clinic across China.

Speaker Change: As a reminder, this is the first one database fixed color.

Speaker Change: Lauded by FSP capability.

Speaker Change: Which our one data systems.

Speaker Change: Competitive advantage against the more expensive to laser systems.

Speaker Change: These reagents help in diagnosing and monitoring various available related condition.

Wenbin Jiang: Obtaining NMPA clearance is a significant milestone achieved through a rigorous process that validates the safety and efficacy of Cytek TB and K reagents. This achievement enhances our market presence in China and opens new potential opportunities while strengthening our competitive advantage, as we continue to push forward new products and applications. We remain deeply focused on providing a comprehensive share analysis portfolio to our customers. The critical component of this mission is to expand and enhance our reach and capability.

Speaker Change: While Kenny NPA criterion is a significant milestone.

Speaker Change: Cheap through a rigorous process that validate the safety and the efficacy of site of PV NK Vegas.

Speaker Change: This achievement enhances our market presence in China and opened a new potential opportunities.

Speaker Change: While strengthening our competitive advantage.

Speaker Change: As we continue to push forward new products and applications.

Speaker Change: We remain deeply focused.

Speaker Change: Providing a comprehensive cell analysis portfolio to our customers.

Speaker Change: A critical component of this mission is to expand and enhance our reach and capability.

Wenbin Jiang: We look forward to continuing to provide our powerful cell analysis solutions to the scientific community to accelerate clinical progress and scientific discovery. With that, I will now turn the call over to Bill for more details on our financials.

Speaker Change: We look forward to continuing who will provide a powerful cell analysis solutions to the scientific community to accelerate clinical progress and scientific discovery.

Speaker Change: With that I will now turn the call over to bill for more details around our financials.

Bill McCombe: Thanks, Wenbin. Total revenue for the second quarter was $46.6 million, an increase of 4% versus the first quarter and a decrease of 6% from a particularly strong second quarter in 2023. First cost revenue, which averages out this effect, grew 5% versus prior year's first high. These revenue results reflect continued robust growth in international markets and in service revenue, with the decline versus Q2'23 being attributable to weakness in the U.S. instrument market.

Bill: Thanks Brendan.

Bill: Revenues for the second quarter was $46 6 million, an increase of 4% versus the first quarter and a decrease of 6% from a particularly strong second quarter of 2023.

Bill: First half revenue, which averages out this effect grew 5% versus prior year first half.

Bill: These revenue results reflect continued robust growth in the international markets and in service revenue with the decline versus Q2 2003 being attributable to weakness in the U S instrument market.

Bill: Service revenue grew 30% in Q2 and 50% in the first half versus a year ago, driven by substantial growth in the installed base of systems meeting service contracts service business growth reflect how extensively are tools that are used on a daily basis across all disciplines.

Bill: <unk>.

Bill McCombe: Turning to geographic market performance, total U.S. revenue declined 29% from a strong Q2 2023 and 15% for the first half of 2024 as product revenue weakness offset service growth. International markets grew strongly, with EMEA up 52% versus the prior year and 51% for the first half, and Asia-Pacific up 27% in Q2 and 16% for the first half, as Cytek's technology continued to gain traction as the full-spectral flow cytometry technology of choice for research institutions and biopharma companies worldwide.

Bill: Turning to geographic market performance hurdle U S revenue declined 29% from a strong Q2, 2023 and 15% for the first half of 2024 as product revenue weakness offset service growth.

Bill: International markets grew strongly with EMEA up 52% versus prior year and 51% for the first half and Asia Pacific up 27% in Q2, and 16% for the first half as <unk> technology continued to gain traction.

Speaker Change: The full spectrum of flow cytometry technology of choice for research institutions and Biopharma companies worldwide.

Bill: Gross profit was $25 4 million for the second quarter, an increase of 11% versus the first quarter and a decrease of 10% versus a year ago.

Bill: GAAP gross profit margin improved to 55% in the quarter up from 51% in Q1.

Bill: Due to the absence of inventory adjustments and improved labor and overhead productivity and service.

Bill McCombe: Compared to a year ago, GAAP gross profit margin was down 2% from 57% due to higher product labor expenses offset by a substantially improved service gross margin due to labor and overhead productivity on higher revenue. Adjusted gross profit margin, which excludes stock-based compensation expense and amortization of acquisition-related intangibles, was 58% in the quarter, up from 55% in Q1, and down from 60% in the prior year quarter. Operating expenses were $34 million for the second quarter of 2024, essentially flat with Q1 at $33.7 million, and decreased 9% from $37.3 million in the second quarter of 2023, driven primarily by lower R&D and sales and marketing expenses.

Speaker Change: <unk> a year ago GAAP gross profit margin was down 2% from 57% due to higher product labor expenses offset by a substantially improved service gross margin due to labor and overhead productivity on higher revenue.

Bill: Operating expenses were $34 million for the second quarter of 2024, essentially flat with Q1 at $33 7 million.

Bill: And decreased 9% from $37 3 million in the second quarter of 2023.

Bill: Driven primarily by lower R&D and sales and marketing expenses.

Bill: Sales and marketing expenses were $12 3 million for the second quarter, a slight decrease from Q1 of $12 5 million and down from $14 4 million for the prior year period.

Bill: The decrease of $2 1 million was primarily due to lower head count.

Bill: General and administrative expenses were $11 7 million for the second quarter slightly up from $11 4 million in Q1 and up from $10 8 million for the prior year period.

Bill: The increase of <unk> 9 million was primarily driven by higher stock based compensation expense.

Bill: Loss from operations was $8 5 million for the second quarter, an improvement compared to a loss from operations of $9 1 million for the second quarter of 2023.

Bill: This was driven by lower operating expenses in the current quarter.

Bill: Set by lower gross margin versus the prior year.

Bill: Net loss in the second quarter was $10 4 million compared to $4 4 million in the prior year.

Bill: This was primarily due to a noncash tax expense in the current quarter driven by a lower effective tax rate and a consequent reversal of the Q1 tax benefit compared to a tax benefit in the prior year quarter and to a lesser extent lower net other income due to foreign exchange.

Bill: <unk> losses.

Bill: Adjusted EBITDA, which excludes stock based compensation expense and foreign currency impacts increased to $2 9 million for the second quarter.

Bill: Compared to a loss of <unk> 7 million in Q1, and $1 5 million in the second quarter of 2023.

Bill: This was due to higher revenue and gross profit versus Q1, and lower operating expenses versus the year ago quarter.

Bill: We remain committed to improving profitability going forward by driving revenue growth and controlling costs.

Bill: Total cash and marketable securities increased by $7 million versus Q1 to $277 million due to higher adjusted EBITDA and efficient working capital management.

Bill: And despite spending $3 million to repurchase shares in the quarter.

Bill McCombe: With healthy cash reserves, no meaningful debt, and positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth. As I mentioned above, one important use of our strong cash flow and cash position has been to repurchase our stock. Accordingly, in June, we announced an authorization to repurchase $50 million of our stock. During the second quarter, we repurchased approximately 2.7 million shares of Cytek stock in open market transactions at a weighted average price of $5.99 per share.

Bill: With healthy cash reserves no meaningful debt in positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth initiatives.

Bill: Okay.

Bill: As I mentioned above one important use of our strong cash flow and cash position has been to repurchase our stock.

Bill: Accordingly in June, we announced an authorization to repurchase $50 million of our stock.

Bill: During the second quarter, we repurchased approximately $2 7 million worth of <unk> stock in open market transactions at a weighted average price of $5 99 per share.

Bill: Shares repurchased under these programs are cancelled, leaving us with $131 5 million shares outstanding as of June 32024.

Bill: Okay.

Bill: Now turning to our outlook for the full year, 2024, which Wednesday and reported at a high level earlier.

Bill: We are continuing to see market prices impacting our revenue expectations, including order delays across North America.

Bill: At the same time, we are seeing signs of normal spending patterns, returning to Europe and Asia Pacific.

Bill: Due to these more mixed market conditions, we are narrowing our full year revenue outlook to a.

Bill: A range of $203 million to $210 million Rep.

Bill: Representing overall growth of five 9% of our full year 2023, and assuming no change in currency exchange rates.

Bill: We continue to expect modest growth across our products and service lines and growth rates continue with historical spending patterns of our customer base in the second half of this year.

Bill: In addition, we do not expect to be GAAP net income positive for the full year.

Bill: Due to our outlook for slightly lower gross profit higher stock based compensation expense and lower other income.

Speaker Change: <unk> GAAP net loss to be in the single digit millions range for the full year 2024.

Bill: It remains our objective to deliver positive net income going forward.

Bill: So I think it also expects to generate positive cash flow from operations in 2024.

Bill: With that I will turn it back over to Lindon.

Speaker Change: Thanks Bill.

Wenbin Jiang: I want to close by thanking our scientific team for their continued commitment to delivering cutting-edge tools, reagents, and software to empower the scientific community to advance the next generation of cell analysis. We are serving very attractive end markets across healthcare. And I'm confident that we are strongly positioned to drive our growth strategy forward with continued execution across our key strategic pillars and the focus on delivering sustainable growth and profitability. I want to thank everyone for joining today's call, and we will now open it up for questions.

Lindon: I want to close by thanking our team for their continued commitment to delivering cutting edge tools reagents and software to empower the scientific community to advance the next generation of cell analysis.

Speaker Change: We are serving very attractive end market.

Speaker Change: <unk> healthcare and I'm confident that we are strongly positioned to drive our growth strategy forward with continued execution across our key strategic pillars and are focused on delivering sustainable growth and profitability.

Speaker Change: I will also thank everyone for joining today's call and we will now open it up for questions.

Bill: Operator.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Bill: Simply press Star one again, if you are called upon to ask your question and our listening via loud speaker on your device.

Bill: Pick up your handset and ensure that your phone is not on mute when asking your question.

Jason: Your first question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead. Hi, this is Jason speaking on behalf of Tejas. Thank you for taking our question. So, could you...

CHS Lavage: Your first question comes from the line of CHS Lavage.

Speaker Change: Ed Morgan Stanley. Please go ahead.

Jason: Hi, this is Jason on behalf of Tejas. Thank you for taking our question. So could you talk a little bit about your order book and visibility into the second half? At midpoint, it seems to imply a 55 to 56 percent second half ramp to achieve the guidance. So could you provide some color on what gives you confidence in this ramp? So are you bringing in any benefits from the stimulus in China? Are there any budget options... Thank you. So any assumptions about your confidence in QH? All right.

Speaker Change: Hi, This is Jason on for Tito. Thank you for taking our questions.

Jason: So could you talk a little bit about your order book and visibility into the second half at the midpoint seems to imply a 55% to 56% second half ramp to achieve the guidance. So could you provide some color on what gives you confidence in this ramp. So are you baking in any benefits from the stimulus in China are there any budget flush.

Speaker Change: Okay.

Speaker Change: So any assumptions about your comprehensive.

Speaker Change: Sure.

Bill: Alright this is bill.

Speaker Change: We are.

Speaker Change: We baked in.

Speaker Change: Broadly a continuation.

Bill McCombe: both current market conditions and a typical quarterly spending pattern. You'll notice if you look at the prior years, second half, and, in particular, fourth quarter, that those represent more than 50% of annual revenue. So we wouldn't see any reason why that typical quarterly pattern or first half, second half pattern would be any different than prior years. And our guidance represents 5% growth over the last year at the low end and low double digits at the top, which is broadly consistent with Al.

Speaker Change: Both current market conditions, and a typical quarterly spending pattern.

Speaker Change: Youll notice if you look at.

Speaker Change: The prior years.

Speaker Change: Second half and in particular fourth quarter.

Speaker Change: Those represent more than 50% of annual revenue.

Speaker Change: So we would we don't see any reason why that.

Speaker Change: Typical quarterly pattern of first half second half pattern.

Speaker Change: Would be any different.

Speaker Change: Than prior years.

Speaker Change: <unk>.

Speaker Change: Now our guidance represents.

Speaker Change: 5% growth over last year at the low end and low double digits at the top end.

Speaker Change: Which is broadly consistent with our overall year to year growth rate.

Bill McCombe: And just to add on top of that, the China impact is not based on this forecast or guidance.

Speaker Change: Yes, just add on top of the China impact is not.

Speaker Change: Based in Korea.

Speaker Change: Forecast guidance.

Wenbin Jiang: Thank you. I appreciate that. Then, I guess a follow-up question. Just with the SCI acquisition now seeing its anniversary, could you please provide us with an update on your development roadmap for Guava and Amnesty? And, as a follow-up, where do you currently stand on the development of imaging FSP?

Speaker Change: Got it thank you I appreciate that.

Speaker Change: And then I guess a follow up question just what the Sci acquisition anniversary could you provide us with an update on your development roadmap with guava, and Emmis and as a follow up where do you currently stand on the development of imaging FSP.

Speaker Change: Okay.

Speaker Change: On.

Bob: Bob as you know.

Speaker Change: It was never a primary reason for that.

Speaker Change: Our position.

Speaker Change: We have kept.

Speaker Change: So the reason that some of it a lot of our customers are what the length of stay continue.

Speaker Change: <unk>.

Speaker Change: Familiar with.

Speaker Change: But.

Speaker Change: <unk> site, and we continue to assess and.

Speaker Change: The customer demand.

Speaker Change: Needs the imaging side.

Speaker Change: This is a part of it.

Speaker Change: The reason for the acquisition.

Speaker Change: We are continuing to work on.

Speaker Change: Integrating the imaging capability.

Speaker Change: P product.

Speaker Change: Understood. Thank you and if I may ask one more just thoughts. So you noted weakness Ahmad academic customers in the U S could you talk a bit about the intra quarter trends that you saw play out that you see the cadence get better or worse than throughout the quarter.

Wenbin Jiang: Thank you. And if I may ask one more question, it's just so you know the weakness among academic West. Could you talk a bit about the intra-quarter trends that you saw play out? Did you see the cadence get better or worse than throughout the quarter?

Speaker Change: You can see and this trend has been continuing.

Speaker Change: Q1 through Q2.

Speaker Change: Of course this partially also we have indicated that due to some of the <unk>.

Speaker Change: Our sales.

Speaker Change: Preventative too in some of the penetration in the North America, we are addressing this subject and we feel.

Speaker Change: Sales has not been lost it's just not being pushed to close so we will see it will come back.

Jason: Thank you; I appreciate the time, guys.

Speaker Change: Got it. Thank you I appreciate the time guys.

Operator: Your next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead. Hi, this is.

Matt <unk>: Your next question comes from the line of Matt <unk> with Goldman Sachs. Please go ahead.

Speaker Change: Hi, This is <unk> on for Matt Thanks for taking the questions.

Speaker Change: So my first is can you give us more color on the delayed orders that were captured in the quarter what was the growth with the grid.

Speaker Change: It would have been excluding those orders and then is there a risk that elongated selling cycles continue to delay orders in the back half of the year.

Speaker Change: Yes.

Speaker Change:

Wenbin Jiang: As you can see, in the first year, we actually experienced great growth in Europe and EMEA, but we did see a kind of elongated sales cycle in North America, and this evidently continued in Q2. And at this time, we don't foresee this improving over the next couple of quarters for the year, but our guidance has already included this factor.

Speaker Change: As you can see.

Speaker Change: Firstly, as we actually experienced great growth in Europe, and EMEA, but we have seen.

Speaker Change: The kind of elongated sales.

Speaker Change: Cycle in North America. This evidence they continued in Q2.

Speaker Change: At this time.

Speaker Change: Youll see this.

Speaker Change: We will improve over the next couple of quarters for the year, but our guidance is already.

Speaker Change: Included in this sector.

Speaker Change: <unk>.

Wenbin Jiang: And then can you talk through, with a potential replacement cycle coming up, like where we are in this cycle and given your large installed base, when we could start to see this come through, maybe some detail on your average instrument age versus historic trends of when those start to be replaced?

Speaker Change: Great. Thank you and then can you talk through.

Speaker Change: With.

Speaker Change: Angela replacement cycle coming up like where we are in the cycle and given your large installed base. When we could start to see this come through maybe some detail on like your average instrument age versus historic trends of when those start to be replaced.

Wenbin Jiang: I think this replacement cycle is not just to replace our own instrument deployed quite a few years ago but also to replace other conventional instruments. Now, actually, far more of those instruments, in fact, in the field, we feel we are going to benefit from replacing those instruments. Yeah, that universe of

Speaker Change: Thanks.

Speaker Change: The replacement cycle is not just to replace our old <unk> deployed quite a few years ago.

Speaker Change: So a replacement for.

Speaker Change: The conventional <unk>.

Speaker Change: Instruments.

Speaker Change: <unk> already actually far more of those incremental interest in the field and we feel we are in the benefit from.

Speaker Change: Placing those instruments.

Speaker Change: Sure.

Wenbin Jiang: Yeah, in that universe of when we talk about replacement instruments, the opportunity is primarily constituted by the thousands of conventional flow cytometry instruments that are out there. We think about 50,000 in total. So it's the replacement of those instruments as they reach end of life that constitutes the most important replacement opportunity.

Speaker Change: Yes that universe. So when we talk about replacement insurance group, primarily reflect the opportunity is primarily constituted by.

Speaker Change: The thousands of conventional <unk>.

Speaker Change: Flow cytometry instruments that are out there.

Speaker Change: When we think about 50000 in total so it's the replacement of those instruments as they reach end of life that constitutes the most important replacement opportunity.

Speaker Change: Very helpful. Thank you.

Operator: Your next question comes from the line David Westenberg with Piper Sandler. Please go ahead. Hey guys, thanks for taking the questions.

Speaker Change: Your next question comes from the line of David Larsen Berg with Piper Sandler. Please go ahead.

Speaker Change: Hey, guys. Thanks for taking the question. This is John on for Dave can you give any commentary on the instrument mix during the quarter.

John: Strong performing instruments were and if you have any commentary on the consumables across the instruments that'd be appreciated. Thank you.

Speaker Change: Yes, I think we sure strength.

Bill McCombe: across all of our categories of instruments, with particular strength this quarter in the Northern Lights instruments. That category was probably the best performer. And then with respect to consumables. I assume you're referring to reagents. You know, that continues to be a mid single-digit proportion of the overall business, so it doesn't it doesn't really have a significant impact on growth rates, and as we said in the past, it grows broadly in line with the rest of the business.

Speaker Change: Across.

Speaker Change: All of our categories of instruments with particular strength this quarter in the northern lights instruments.

Speaker Change: That was that category was probably the best performer.

Speaker Change: Got it and then with respect to consumables.

Speaker Change: Our senior.

Speaker Change: Referring to reagents that continues to be a mid single digits.

Speaker Change: Proportion of the overall business so.

Speaker Change: It doesn't it doesn't really have a significant impact on growth rate and.

Speaker Change: As we've said in the past it grows broadly in line with.

Speaker Change: The rest of the.

Speaker Change: Of the portfolio.

Bill McCombe: Got it, thank you. And do you have any thoughts on when capital budget appetites might start to stabilize more or potentially turn more positive in the U.S.? I think, uh...

Speaker Change: Got it. Thank you and do you have any thoughts on when capital budget appetite might start to stabilize more or potentially turn more positive in the U S.

Bill McCombe: I think, actually, looking at the segment, while we see the kind of weakness and elongated sales cycle on the academic and the government side, we do see farmers start to come back, and clearly we see improvement in Q2 versus Q1.

Speaker Change: I think.

Speaker Change: Actually.

Speaker Change: Looking at the settlement.

Speaker Change: We'll see.

Speaker Change: We could ask elongated sales cycle on the academic and government side, we do see pharma has started to come back in.

Speaker Change: Clearly, we see the improvement in Q2 versus Q1.

Speaker Change: Great. Thank you.

Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Chad Wiatrowski with T.D. Cohen. Please go ahead.

Speaker Change: Again, if you would like to ask a question press star one on your telephone keypad.

Speaker Change: Our next question comes from the line of Chad Makowski with TD Cowen. Please go ahead.

Speaker Change: Hey, this is Chad on for Stephen.

Chad Makowski: Can you just help contextualize, how the bioinformatics improvements and the automated panel design impact instrument and consumable demand.

Speaker Change: Sort of break that out among geographic and customer end markets is there more or less sensitivity to these improvements in certain segments.

Speaker Change: Okay.

Wenbin Jiang: The bioinformatics platform is a platform to really help our users to leverage the instruments and the reagents we have, such as the Spectrum Panel, which has just launched. In fact, it automates the panel design, especially for those highly complex panels. And typically, it takes a lot more time for the users to optimize. Now, we have a system, a tool that will really enable them to speed up their development. Afterward, not only enable them to optimize, basically, like a virtual experiment on our platform, but it also enables them to purchase the new agents afterwards. So through this process, we feel that we help our users provide a full set of solutions for our customers to leverage the full special technology Cytek has provided.

Speaker Change: Bioinformatics is a platform that really.

Speaker Change: Really help our users.

Speaker Change: To leverage the <unk>.

Speaker Change: Women and the reagents we have.

Speaker Change: The spec.

Speaker Change: Special Pat always you have just launched <unk> automates repetitive designed especially for those high complex panels and typically it takes a lot more time for the users.

Speaker Change: To optimize no we have a system up towards that will really enable them to speed up the development mode.

Speaker Change: Afterwards in not only enabled them to optimize.

Speaker Change: Basically it's a kind of like a virtual experiment.

Speaker Change: Our platform. It also enables them to purchase a new agents afterwards.

Speaker Change: So with this process we feel.

Speaker Change: Our users provide a full set of solutions for our customers to leverage the full special technology cycle has provided.

Speaker Change: Okay, that's helpful and just to sort of to instruments.

Bill McCombe: That's helpful. And just to pivot sort of to instruments, obviously, the new facility, this manufacturing facility, is related to instrument production. So does this create sort of a risk to gross margin, just given that fixed costs are already on the books? And could you maybe speak to how you're thinking of the margin cadence sort of in the back half of the year and beyond? David Westenberg, Tejas Savant, Mason Carrico, Tejas Savant, Patrick Jeanmonod, Adam Freitsch, Poon Ahad Jaaa

Speaker Change: The new facility.

Speaker Change: Manufacturing for Sony Open is related to instrument production.

Speaker Change: Does this create sort of a risk to gross margin just given that fixed cost is already on the books and could you maybe speak to how youre thinking of the margin cadence sort of in the back half of the year and beyond.

Bill McCombe: The new facility, the costs of that are already included in our fixed costs, so there's no... We don't see a specific downside risk to gross margins from that. And then as to gross margin cadence, you know, last quarter we said that we expected to move back. You know, so in this quarter, our adjusted gross margin moved up to 58%. And, you know, that compares to 60% in Q2 of last year and 59% for the balance of the year.

Speaker Change: The new facility costs of that are already included in our fixed costs.

Speaker Change: There is no.

Speaker Change: We don't see a specific downside risk to gross margins from that.

Speaker Change: And then as to gross margin cadence.

Speaker Change: Last quarter, we said that we expected to move back.

Speaker Change: Closer to.

Speaker Change: Gross margins were last year and.

Speaker Change: So in this quarter, we moved our.

Speaker Change: Our adjusted gross margin moved up to 58%.

Speaker Change: And that compares to 60% in Q2 of last year and 59 for the balance of the year. So I think we've recovered.

Bill McCombe: So I think we've recovered most of the margin, a large portion of the margin gap versus last year. And I think, while, you know, as revenue grows, we would hope for some margin benefit, the benefits should be fairly modest from this point forward.

Speaker Change: Most of the margin.

Speaker Change: A large portion of the of the margin gap versus last year.

Speaker Change: I think.

Speaker Change: While revenue grows we would hope for some margin benefit the benefits should be.

Speaker Change: Fairly modest from this point forward.

Speaker Change: That's helpful. Thanks for the time guys.

Operator: Ladies and gentlemen, that concludes the Q&A session and today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes the Q&A session and today's call. Thank you all for joining you may now disconnect.

Q2 2024 Cytek Biosciences Inc Earnings Call

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