Q3 2024 Cytek Biosciences Inc Earnings Call

November 5, 2024

The

Speaker Change: Thank you for spending by. As this time I'd like to welcome everyone to the site at Biast Sciences, third quarter, 20, 24 earnings conference call. All lines have been placed on mute to prevent any background noise.

After this picture marks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number on your telephone keypad.

Speaker Change: If you would like to withdraw your questions, again press the star 1. I will now turn the conference over to Paul Goodson. Investor Relations. Please go ahead.

Paul Goodson: Thank you, operator. Earlier today, Sytech Biocyntz has released the natural results for the quarter ended September 30, 2024.

Paul Goodson: 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 siteechpyo.com

Joining me today from Fitech, our Wenbin Jiang CEO and CFO Bill McCombe

Paul Goodson: Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of the federal securities laws, including statements regarding psychics, business plans, strategies, opportunities and financial projections.

Paul Goodson: These statements are based on the company's current expectations and inherently the ball of significant risks and uncertainties. That could cause actual results or events to materially differ from those anticipated.

The digital information regarding these risks and uncertainties appears in the section and vital forward-looking statements in this press release. Site Tech Dishon today and in Site Tech's filings with the SEC.

Paul Goodson: This call will include a discussion of certain conventional measures that are not calculated in accordance with generally accepted accounting principles.

Reconciliation for the most directly comparable, Gap Financial Major, or maybe found in today's earnings release submitted to the SEC.

Paul Goodson: Accept as required by law, Sytech Disclans, any duty to update any forward-looking statements, whether because of new information, future events or changes in a sex expectation.

Paul Goodson: The conference call contains time-sensitive information and is accurate only as of the live broadcast November 5, 2024.

Paul Goodson: Finally, I would like to announce that ClayTech is hosting a full day user group meeting in Boston on December 12th.

Paul Goodson: The meeting will feature presentations by users of our technology and site-tech scientists to share their research experience and ideas for how best to use site-tex products.

Paul Goodson: We have a limited amount of space for analysts and investors so please let me know as soon as possible if you would like to attend.

Speaker Change: Without, I would like to turn the call over to Wenbin.

Wenbin Jiang: Thanks Paul, welcome everyone and thank you for your interest in architects.

Wenbin Jiang: I will provide an overview of our performance in the third quarter and the progress achieved on our strategic initiative to drive sustainable growth and profitability.

Paul Goodson: Then I will turn the call over for Bill for a more detailed look at our financials before we open a lot of

Paul Goodson: We delivered solid growth with 10% year over year growth and the total revenue reaching $51.5 million.

Paul Goodson: Our growth list quarter would triple in time with a rate by strong double digits year over year total revenue growth across a year in April and from our service revenue globally.

Paul Goodson: We will please to see continue the process despite the ongoing stop market conditions.

Paul Goodson: On the mentally, this is because we are a technology leader in a core instrument category that many large, considered essential as compared to more discretionary technologies.

Paul Goodson: We believe our instruments of higher multiprocymbal data quality sensitivity and ease of use.

Paul Goodson: Re-capability to the basis for our strong reputation and value of customer base. Geography, we continued to see post-immumment in a near-and-a-a-pact and a return toward the more normal spending patterns in the U.S.

Paul Goodson: While market conditions for instruments in the U.S. continued to be softer than last year.

Paul Goodson: We would encourage to speak sequential quarterly improvements for safe and standard across our customers in particular with the Bauer Pharmaceuticals.

Paul Goodson: We expect strong demands from our global farmer and the T.R.O. customers.

Paul Goodson: who are increasingly focused on harmonizing their instruments across different regions for translational discovery work. Which our technology is uniquely capable of delivering.

Paul Goodson: Additionally, we posted another quarter of possible against the end of the cornerstone of our path to deliver sustainable profitability.

Paul Goodson: This was driven by our discipline and focus on extensive management combined with our revenue growth.

Paul Goodson: Hello, we are seeing the durability of our DeLicipides portfolio. Clearly demonstrated that we effectively navigate macro-headwinds.

Paul Goodson: We believe our site that sale another fish portfolio is becoming a core technology in lab discovery and the comprehensive research of our customers need in their analysis.

Paul Goodson: Importantly, the high degree of geographic and the customer's expectations in our business provides us with confidence in delivering our expectations and our long term objective of sustainable profitable growth.

Paul Goodson: We are working hard to solidify science at the next chapter as a master leader in self-analysis.

Paul Goodson: To that time, our team is the first on driving forward for key pillows.

Paul Goodson: Each of which is integral to our long term growth, instruments, applications, biochematic and clinical.

Paul Goodson: In the further quarters, we expanded our global footprint with 164 inch among fold.

Paul Goodson: Reaction a total installable of 2,821 units.

Paul Goodson: including 318 Amnes and the Boaba Incements, shift to the acquisition of the luminous business.

Paul Goodson: Within these photos, the crisis of Laura and the Northern Lights systems are showing good growth both in the third quarter and the year to date compared to the 20th and the 3rd. While the star further is showing consistent demand.

Paul Goodson: We breathe the growing install base of our instrument. We'll continue to serve as a strong foundation to drive adoption of our product and service offering going forward.

Paul Goodson: Turning to part in the mathematics. Our primary objective is to enable our customers to streamline their experiment workflow through our software tool, which drives adoption and the utilization of our cell analysis solution.

Paul Goodson: We continue to empower the scientific community with better tools to advance their research. Most recently with the special panel tool and enhancements of our panel do the tool within site-to-cloud.

Paul Goodson: We are receiving great feedback from our press emotes.

Paul Goodson: who are benefiting from this expanded capability that automates under the mood of labor-intensive media process and allow scientists to jump start their panoramic artwork and have been strong initial adoption.

Paul Goodson: Among our growing database.

Paul Goodson: As a result, a number of our customers have already integrated use of the special panel tool into their work flow. Navigating is a advanced capability to optimize panel design and streamline their research.

Paul Goodson: and part of this adoption, we have already begun receiving the latest, generated from the site's cloud.

Paul Goodson: with special panel lungs only in late July this year, we are quite pleased with its performance today.

Paul Goodson: Noteable and the more broadly, we extended our site to cloud the user base, which now has over 13,600 users. More than doubling our user base at the start of the year.

Paul Goodson: This represents an average of more than five users per installed Tritac FFP instrument.

Paul Goodson: to the now-to-clinical.

Paul Goodson: We continue to breathe the clinical matrix, the present, and attract to business opportunity for sighted.

Paul Goodson: As a reminder, travel of our crowd are approved for clinical use in both China and the EU.

Paul Goodson: In the third quarter, cited the extended stage to showcase our complete, their analysis solution as a member of industry conferences.

Paul Goodson: One event I'd like to highlight is the ICPS Annual Meeting and the Course in Seattle

Paul Goodson: We are Dr David in the letter of Prophometry and applied AI and A-Lumber Chase

Paul Goodson: Good for the presentation about site at FFP Technology.

Paul Goodson: of the In the Mark, that the integration of special flow cytometry into their work flow has been a gain changer for their resource limited and the space can strengthen the laboratory.

Paul Goodson: The first noted, our technology solutions have dramatically streamlined the wear process, allowing their scientists to focus their time and expertise on high value and high skill analysis.

Paul Goodson: which translates to pasta and a more useful result.

Paul Goodson: In front, William's side-set is uniquely positioned to serve an attractive cell and an arches market with the combination of our industrial leading and to end technology portfolio, global devastation and the clear, long-term growth drivers.

Paul Goodson: We are extremely focused on portfolio enhancement that will accelerate our business strategy.

Paul Goodson: It's billable foundation, provides us with confidence as we seek to deliver high-growth and profitability and the strong cash generation.

Speaker Change: With that, I will now turn the call over to Bill for more details about our financials.

Bill McCombe: Thanks, Wenbin.

Bill McCombe: Pro Revenue for the third quarter was 51.5 million and increased at 10% versus the second quarter and 7% versus Q3 of last year.

Bill McCombe: This revenue resulted a significant recovery in product revenue versus Q2 and robust growth in international markets and service revenue versus Q3 have lost here.

Bill McCombe: Product revenue, which is primarily instruments, increased 14% versus Q2 and 3% versus Q3 of last year.

Speaker Change: The increase of this Q2 was driven by a recovery in the US market, particularly in the biopharmus sector, and continued growth in international markets.

Speaker Change: The increased versus Q3 of last year was driven primarily by growth in international markets

Speaker Change: Service Revenue grew 25% versus Q3 of last year. This Service Revenue growth reflects continued expansion of the install base of our instruments, and active uses of our tools across a board range of disciplines.

Speaker Change: Turning to geographic market performance, total US revenue increased 9% versus Q2, but decline 9% from a strong Q3 of last year.

Speaker Change: International Market Screws strongly with a mere up 25% versus Q2 and 33% versus prior year.

Speaker Change: Asia Pacific was flat vs Q2 but up 32% vs prior year.

Speaker Change: This growth in international markets reflects the fact that psychic technology is a market-leading full-speccial forest-site commentary technology of choice, the recess institutions and biopharmic companies worldwide.

Paul Goodson: Gapgirl's profit was 29 million for the third quarter, an increase of 14% versus the second quarter, and an increase of 7% versus Q3 of Wastia

Paul Goodson: Gapgroge profit margin improves slightly to 66% in the quarter, up from 65% in Q2 due to improved overhead productivity on higher revenues.

Paul Goodson: Compared to a year ago, Gapgross Profit module was down 1% from 67% due to higher product material cost.

Paul Goodson: A just-ed-gross profit margin which excludes stock-based compensation expense, an amortization of acquisition related intangibles was 60% in the quarter, slightly up from 58% in Q2 and 59% in the prior year quarter.

Paul Goodson: Operating expenses were 33.3 million to the third quarter down 2% in Q2, driven by lower G&A expense.

Paul Goodson: Total operating expenses were down 1% from 23 of last year

Paul Goodson: Research and Development Expenses were 9.9 million into the third quarter in line with Q2 and down from the 11.2 million in the prior year period.

Paul Goodson: The decrees was primarily due to lower head count and engineering expense.

Paul Goodson: Sales and marketing expenses were 12.4 million for the third quarter in line with Q2 at 12.3 million and 12.1 million for the prior year period.

Paul Goodson: General Arena miniserated expenses were $10.9 million for the first quarter down from 11.7 million in YouTube, an up from 10.4 million in the prior year period. The D-Chrings for this is Q2 was primarily driven by lower outside services expense.

Paul Goodson: The increase was prior year of 0.6 million, but primarily driven by highest stop-based compensation expense.

Paul Goodson: Laws from Operations was 4.2 million for the third quarter and improvement compared to the Laws from Operations of 6.4 million for the third quarter of 2023. This was driven by a higher-growth profit and lower-upending expenses.

Paul Goodson: I'm pleased to report that we generated positive gap net income of 0.9 million in the third quarter compared to a net loss of 6.5 million in the prior year. This was primarily due to a low loss of operations.

Paul Goodson: higher net other income driven by a foreign exchange gain of 1.1 million versus a loss of 0.6 million in the prior year and a tax benefit of 0.8 million versus a tax expense of 2.3 million in the prior year.

Paul Goodson: Adjusted EBITDA, which excludes stock-based compensation and foreign currency impacts, increased to $7.6 million for the third quarter compared to $2.9 million in Q2 and $3.7 million in the third quarter of last year.

Paul Goodson: This was due to higher revenue and gross profit versus both Q2 and the prior year quarter and lower operating expenses versus the year-ago quarter. We remain committed to improving profitability going forward by driving revenue growth and controlling costs.

Paul Goodson: Total cash and marketable securities increased.

Paul Goodson: by .6 million versus Q2 to $277.8 million despite our spending $12.1 million to repurchase shares in Q3. This demonstrates the strong cash generating capability of the company.

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

Paul Goodson: As I mentioned, during the quarter, we repurchased 2.2 million shares of SciTech stock for approximately $12.1 million at a weighted average price of $5.41 per share.

Paul Goodson: Shares repurchased under these programs are cancelled, leaving us with 128.8 million shares outstanding as of October 31, 2024.

Paul Goodson: We plan to continue to repurchase shares in Q4 and expect to more than offset the dilutive effective shares issued under our stock-based compensation program in the fourth quarter, which will result in a net reduction of our shares outstanding.

Paul Goodson: Now, turning to our outlook for the full year 2024, which Wenbin discussed at a high level earlier.

Paul Goodson: While we are continuing to see a relatively soft market in North America, we did see a recovery toward more normal levels of activity in Q3.

Paul Goodson: At the same time, we see good momentum in Europe and Asia-Pacific. We also expect to see solid growth in our service business.

Paul Goodson: Based on these factors, we reaffirm our full-year revenue outlook in a range of $203 to $210 million, representing overall growth of 5% to 9% over full year 2023, assuming no change in currency exchange rates.

Paul Goodson: In addition, we continue to expect SciTech's gap net loss to be in the single-digit millions range for the full year 2024.

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

Paul Goodson: SciTech also expects to generate positive cash flows from operations in 2024.

Paul Goodson: With that, I will turn it back over to Wenbin.

Wenbin Jiang: Thank you.

Paul Goodson: Our financial strength and our shared beauty in our mission position SciTech well to successfully navigate through today's macro environment while strengthening our foundation for the future.

Paul Goodson: We have a clear roadmap ahead to deliver long-term sustainable growth and profitability.

Paul Goodson: and I'm proud of our team's achievement this quarter.

Paul Goodson: It is their dedication and commitment that drives our progress forward.

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

Paul Goodson: Operator.

Speaker Change: Thank you very much.

Speaker Change: Thank you. We will now begin the question and answer session. 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.

Speaker Change: 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 to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue.

Speaker Change: Thank you for watching. See you next time.

Speaker Change: And your first question comes from the line of Teja Savant with Morgan Stanley. Your line is open.

Teja Savant: Good evening and thanks for the time here.

Teja Savant: Wenbin, maybe just to kick things off...

Teja Savant: I think you called out a more normalized demand environment in the U.S. and maybe even a little bit of sequential improvement in pharma. And I think you also made a comment in your prepared remarks about how

Speaker Change: And in the U.S., any comment on academic and government? I think that end market was a little bit soft in the second quarter for you. Has that gotten better as well?

Speaker Change: For more information visit www.FEMA.gov

Speaker Change: Yes indeed we have seen some improvement on the academic side as well in Q3 versus Q2. Overall in North America the strength come from the biopharma as what we have indicated.

Speaker Change: Now, while we are different from others, as we have indicated, flow cytometry is a basic life science tool used in almost all...

Speaker Change: has played some role with regarding to differentiating sci-tech from some of our peers.

Speaker Change: Got it. Fair enough.

Teja Savant: And then one for you, Bill. I mean, obviously, the guide has a 13 million or so sequential step up in the fourth quarter at the midpoint. So, you know, a lot of your life science peers have actually pulled out any budget flush benefit, just given the software is an expected environment and so on. Can you just help us think through, you know, your underlying assumptions there around the budget flush? Or is it sort of what Wenbin just alluded to in terms of, you know, essential versus discretionary spend that sort of underpins your confidence that the step up will come through here in the fourth quarter?

Bill McCombe: Customarily, we see a step up in the fourth quarter and if you look at

Speaker Change: The fourth quarter as a percent of total revenue in prior years. It's about 30%

Bill McCombe: The theme that Wenbin discussed that our instruments are viewed as more of an essential instrument by many of our customers as opposed to discretionary, so we feel that a normal seasonal pattern is appropriate.

Teja Savant: Got it. Okay. And the last one for me here, any god reals on 25 you'd be willing to share? You know, I think The Street has you doing about mid-teens growth while also expanding your EBITDA margins versus this year's level. Is that a fair framework to use or would you rather folks think of, you know, high single-digit growth, perhaps like 10% or so? Just in light of the moving pieces here, including at what point does China recover, whether the pharma sort of end market continues to improve quarter over quarter, et cetera? There's a bunch of moving pieces here. So I'm just curious as to any preliminary color you guys would be willing to share on 25.

Bill McCombe: Thank you.

Speaker Change: Do you want me to take that, Wenbin?

Speaker Change: Yes.

Speaker Change: If you look at year-to-date EBITDA, you know, we're up significantly versus versus last year you know, we're at about

Speaker Change: just 9.9 million year-to-date EBITDA versus

Speaker Change: I think 2.7 last year.

Speaker Change: Thank you. Bye.

Speaker Change: Our business model is...

Speaker Change: to grow the top line, to control, to maintain gross margins, and to

Speaker Change: control operating expenses and have them grow more slowly than the top line.

Speaker Change: You know, the implication of that is that we would expect to grow a bit, you know, as we go forward. So that's about as much as I can say with respect to 2025.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from the line of Brandon Smith with TD Cowen. Your line is open.

Brandon Smith: Hi guys, thanks so much for taking the questions, and congrats on the quarter. Maybe looking ahead a little bit to this December event, and honestly into 2025.

Brandon Smith: I'm just wondering maybe what we might expect at that event in terms of pipeline or financial updates, really kind of the overview of what you're going to have there. And then maybe heading into 2025, if there's any important new products or product updates on the horizon that you guys think would be especially relevant.

Brandon Smith: Just the top line growth moving forward. Thanks very much.

Speaker Change: At the fourth quarter of earnings call, our first quarter of each year is when we customarily provide our guidance for the year and we would expect to do

Speaker Change: same thing next year give guidance on similar items so nothing you know I don't have an expectation at this point that we'd be doing anything significant significantly different than our normal pattern

Speaker Change: And with respect to new products, I'll ask Wenbin to...

Speaker Change: say what we can about that.

Wenbin Jiang: Yeah, and as you can see, we invest substantially in R&D and naturally, and just like what we have launched this year, and you will continue to see new products being launched over the course of the year, and so.

Wenbin Jiang: and that will reflect how we invest and serve for our shareholders.

Speaker Change: Thank you.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from the line of Mason Kariko with Defense. Your line is open.

Mason Kariko: Hey guys, thanks for the question here.

Mason Kariko: You called out strength in AIPAC. I wanted to dig in a little bit there and ask if you're willing to provide any incremental detail on what countries are really driving the strength there. Are you seeing demand trends in China improve? Any additional colors there would just be appreciated.

Mason Kariko: Our APEC business includes revenues,

Mason Kariko: from Australia, New Zealand, Japan, Southeast Asia, India, and as well as China.

Mason Kariko: So, um...

Mason Kariko: With regarding to China, I think you have seen a lot of reports from other companies and indeed we have seen similar impacts, of course not as severe as what the other...

Mason Kariko: companies have been reporting.

Mason Kariko: clearly and we have seen some impact and but we also expect and they may return to normal sometime next year and we look forward to that.

Speaker Change: Got it. And then as we do think about the fourth quarter here.

Mason Kariko: From a geographic standpoint, it would be great.

Mason Kariko: I think we...

Mason Kariko: We have strong momentum, as Wenbin mentioned, in EMEA and in Asia-Pacific, particularly in the Asia-Pacific countries other than China, so Australia, New Zealand,

Speaker Change: and so on.

Speaker Change: With respect to the fourth quarter, we would continue to expect good momentum in Asia-Pac.

Speaker Change: and in Europe.

Speaker Change: We expect some recovery in the U.S., although the U.S. market is softer, and therefore, you know, that would probably be the lowest growth of any of the three major regions.

Speaker Change: The service business we would expect that to continue to grow driven by the growth in the installed base

Speaker Change: So that's about as much color as we could give.

Speaker Change: Got it. Thank you.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from David Zuckerberg, Cypress County. Your line is open.

Speaker Change: David Westenberg, David Westenberg, David Westenberg,

Speaker Change: Hi, thank you for taking the questions. This is Jon on for Dave.

Jon: I was wondering if you could just give any color on what you're thinking that the longer-term growth rates for your business are going to be looking like.

Speaker Change: because they have been this year a bit below the sort of 20 to 30 percent growth rates that we saw historically. So if you could give any thoughts on what could bring you back potentially up to those levels in the future, what might be some puts and takes on those, that'd be appreciated. Thank you.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Overall, we know life science industry has been challenged, and in some areas you can see the negative growth. What we are striving for is to continue to maintain our growth above the market.

Speaker Change: Thank you.

Speaker Change: Okay, great. Thank you. And can you just give any thoughts on how you're tracking CapEx spending and what you would be looking for that would give you additional optimism about that going forward?

Speaker Change: and if you look at our business today and probably about yeah right now is about 30% in the current including service and reagents

Speaker Change: Long-term, and we are going to continue to invest on reagents, on applications to continue to grow our decoding revenue based on our SOLIDINKS database. So we feel good about our long-term growth.

Speaker Change: Okay, thank you

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from the line of Andrew Cooper with Raymond James. Your line is open.

Andrew Cooper: Hey everybody, thanks for the questions. Maybe just first...

Andrew Cooper: Thinking about some of the commentary around China, seemingly not as big of a headwind for you as some of the others.

Andrew Cooper: should we expect that you get a similarly sized tailwind from some of the stimulus program in that regions or or overall maybe a little bit smoother so not as low of a low and not as high of a high just would love kind of how you think about the the trajectory there as some of those funds start to kick out to potential customers

Speaker Change: I think we are going to benefit.

Speaker Change: Clearly, when China starts to invest in buying new instruments, advanced technology, clearly is on top of their mind, and Scitech technology has been very well established right now in China, and we feel strongly, and as the program takes off.

Speaker Change: and the funding start to go to our user base and we will see the great benefits from those new funds available to them.

Speaker Change: Okay, that's helpful. And then just kind of one more crack at the 4Q step up. Can you give us a sense for...

Speaker Change: The visibility you have as you sit today and look at kind of what's already been delivered, what the order book looks like, relative to hitting, say, you know, the midpoint of the guide, what do you need to go close through the last two months of the quarter versus what's already sort of in hand or at least in a booking?

Speaker Change: David Westenberg, David Westenberg,

Speaker Change: You know, we are a third month company, so most of our order coming during the last few weeks and therefore even though we are now at the early November and we expect actually with regarding to the full quarter and we continue to rely upon pretty much is the last few weeks, last six, seven weeks, and so it's too early for us to comment on this.

Speaker Change: Okay I'll just sneak one more in if I can but would love a little bit more granular of an update on

Speaker Change: sort of the clinical pathway in the U.S., you know, what progress you've made in terms of that process and maybe what are the biggest gating factors to getting into that clinical market here in the States?

Speaker Change: I think there are two parts with regarding to clinical. One is

Speaker Change: The second part is the LDT applications, which we have been working with quite a few partners.

Speaker Change: reputable labs in the U.S. and we feel good about the progress we are making right now.

Speaker Change: Great. Appreciate the time.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: And we have another question, comes from the line of Matt Steist with Goldman Sachs. Your line is open.

Speaker Change: Hi, this is Evian for Matt. Thanks for taking my questions. So within services, you had solid growth there. How are attachment rates trending? And then can you talk through some of the low-hanging fruit to get that attachment rate even higher? So you're mostly going after current instrument users that don't have service contracts, or you're going after more like new customers buying instruments?

Speaker Change: Thank you. Thank you.

Speaker Change: Thank you very much.

Speaker Change: Service revenue is related to the installed base and also relates to how frequently the instruments are being used.

Speaker Change: So, on that regard, of course, and that also...

Speaker Change: First is how...

Speaker Change: Actually, the rapid increase of our install database, second part, is how frequently our instruments are being used regarding to those customers.

Speaker Change: And so, of course, long term, and you cannot continue to expect to see 30, 40 percent kind of growth rate we have enjoyed. But overall, that's going to continue to track the growth of our Insta database.

Speaker Change: Okay, great, thank you. And then, in terms of thinking about how customers have delayed replacements due to CapEx constraints in the weaker funding environment, how do you think about the age of instruments and how that's trended within both your current install base and then those of competitors whose instruments you might be replacing, and just trying to get a sense for when you think the replacement cycle might start to kick in.

Speaker Change: to get funding to buy new instruments. So clearly, we have seen they would like to extend the life of the instruments they have. But on the other hand, we do see new programs kicking in. They really would like to...

Speaker Change: drive to the advanced research

Speaker Change: New technology toward

Speaker Change: high-parameter cell analysis. Also another advantage we have seen is

Speaker Change: and more and more customers, pharma, biotech, they are trying to harmonize.

Speaker Change: their instrument technology across many of their labs globally, and this is where we excel. Our technology clearly has been there to serve for the needs of our customers on standardization and harmonization.

Speaker Change: Super helpful, thank you.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: There are no further questions at this time and this does conclude the meeting. Thank you all for your participation. You may now disconnect.

Speaker Change: Please wait, the conference will begin shortly.

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Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

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Speaker Change: My name is Patrick Jeanmonod, and I am the CEO of Patrik Jeanmonod. Patrik Jeanmonod is the founder of Patrik Jeanmonod. Patrik Jeanmonod is the founder of Patrik Jeanmonod. Patrik Jeanmonod is the founder of Patrik Jeanmonod. Patrik Jeanmonod is the founder of Patrik Jeanmonod.

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Speaker Change: Thank you for standing by. At this time, I'd like to welcome everyone to the SciTech Biosciences 3rd Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Speaker Change: After this 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 followed by the number 1 on your telephone keypad.

Speaker Change: If you would like to withdraw your question, again press the star 1. I will now turn the conference over to Paul Goodson, Investor Relations. Please go ahead.

Speaker Change: Thank you.

Paul Goodson: Thank you, Operator. Earlier today, SciTech Biosciences released financial results for the quarter ended September 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 SciTechBio.com.

Speaker Change: Joining me today from SciTech are Wenbin Jiang, CEO, and CFO Bill McCombe.

Speaker Change: 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.

Speaker Change: Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in this Press Release, SciTech issued today and in SciTech's filings with the SEC.

Speaker Change: This call will 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 gap financial measure may be found in today's earnings release submitted to the SEC.

Speaker Change: Except as required by law, SciTech disclaims any duty to update any forward-looking statements, whether because of new information, future events, or changes in its expectation.

Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast November 5, 2024.

Speaker Change: Finally, I would like to announce that Plytech is hosting a full-day user group meeting in Boston on December 5th. The meeting will feature presentations by users of our technology and SciTech scientists to share their research experience and ideas for how best to use SciTech's products.

Speaker Change: We have a limited amount of space for analysts and investors, so please let me know as soon as possible if you would like to attend.

Wenbin Jiang: With that, I would like to turn the call over to Wenbin.

Wenbin Jiang: Thanks, Paul. Welcome, everyone, and thank you for your interest in SciTEX.

Wenbin Jiang: On today's call, I will provide an overview of our performance in the third quarter and the progress achieved on our strategic initiative to drive sustainable growth and profitability.

Speaker Change: Then, I will turn the call over to Bill for a more detailed look at our financials before we open it up for Q&A, starting with our third quarter results.

Speaker Change: We deliver solid growth with 7% year-over-year growth and the total revenue reaching $51.5 million.

Wenbin Jiang: Our growth this quarter was driven primarily by strong double-digit year-over-year total revenue growth across EMEA and APAC, and from our service revenue globally.

Speaker Change: We are pleased to see continued growth despite the ongoing soft market conditions.

Speaker Change: Fundamentally, this is because we are a technology leader in a core instrument category that many labs consider essential as compared to more discretionary technologies.

Speaker Change: We believe our instruments offer higher multi-percent data quality, sensitivity, and ease of use.

Speaker Change: These capabilities serve the basis for our strong reputation and loyal customer base. Geographically, we continue to see positive momentum in EMEA and APAC.

Speaker Change: and a return toward more normal spending patterns in the U.S.

Speaker Change: while market conditions for instruments in the U.S. continued to be softer than last year.

Speaker Change: We were encouraged to see sequential quality improvement for site-based products across our customers, in particular with the biopharma sector.

Speaker Change: David Westenberg, David Westenberg, David Westenberg

Speaker Change: We expect strong demand from our global pharma and CRO customers.

Speaker Change: who are increasingly focused on harmonizing their instruments across different regions for translational discovery work, which our technology is uniquely capable of delivering.

Speaker Change: Additionally, we posted another quarter of positive adjusted evidence, a cornerstone of our path to deliver sustainable profitability.

Speaker Change: This was driven by our disciplined focus on expense management combined with our revenue growth.

Speaker Change: Of all, we are seeing the durability of our diversified portfolio clearly demonstrated as we effectively navigate macro headwinds.

Speaker Change: We believe our SciTech cell analysis portfolio is becoming a core technology in lab discovery and comprehensively serving our customers' needs in cell analysis.

Speaker Change: Importantly, the high degree of geographic and customer diversification in our business provides us with confidence in delivering on our expectations and our long-term objective of sustainable profitable growth.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: We are working hard to solidify sci-tech's next chapter as a master leader in cell analysis.

Speaker Change: To that end, our team is focused on driving forward four key pillars.

Speaker Change: Each of which is integral to our long-term growth, instruments, applications, bioinformatics, and clinical.

Speaker Change: In the third quarter, we expanded our global footprint with 164 instruments sold.

Speaker Change: reaching a total installed base of 2,821 units.

Speaker Change: including 328 amulet and the Baba instruments shipped since the acquisition of the luminous business.

Speaker Change: Within these totals, the sighted aurora and the northern light systems are showing good growth both in the third quarter and the year-to-date compared to 2023, while the stealth soldier is showing consistent demand.

Speaker Change: We believe the growing in-store base of our instrument will continue to serve as a strong foundation to drive adoption of our product and service offerings going forward.

Speaker Change: Turning to bioinformatics, our primary objective is to enable our customers to streamline their experiment workflow through our software tool, which drives adoption and utilization of our cell analysis solutions.

Speaker Change: We continue to empower the scientific community with better tools to advance their research, most recently with the special panel tool and enhancement of our panel builder tool within SciTech Cloud.

Speaker Change: We are receiving great feedback from our customers who are benefiting from this expanded capability that automates and removes a labor-intensive manual process and allows scientists to jump start their panel design work and has been strong initial adoption.

Speaker Change: among our growing user base.

Speaker Change: As a result, a number of our customers have already integrated use of the SpectralPanel tool into their workflow, leveraging its advanced capabilities to optimize panel design and streamline their research.

Speaker Change: With special panel launched only in late July this year, we are quite pleased with its performance to date.

Speaker Change: Notably, and more broadly, we expanded our Cypher cloud user base, which now has over 13,600 users, more than doubling our user base at the start of the year.

Speaker Change: This represents an average of more than 5 users per installed Trisect FFT instrument.

Speaker Change: Thank you for watching. Please subscribe to my channel. I hope to see you again soon.

Speaker Change: Turning now to clinical.

Speaker Change: We continue to believe the clinical market represents an attractive business opportunity for SciTech.

Speaker Change: and Amanda, several of our products are approved for clinical use in both China and the EU.

Speaker Change: in the third quarter, cited for center stage to showcase our complete analysis solution at a number of industry conferences.

Speaker Change: One event I'd like to highlight is the ICCS annual meeting and course in Seattle.

Speaker Change: We are Dr. David Ng, Director of Flow Stoichiometry and Applied AI at AWACS Laboratories.

Speaker Change: with a premier presentation about SitesFST technology.

Speaker Change: of the Inc. remarked that the integration of special flow cytometry into their workflows has been a game-changer for their resource-limited and space-constrained laboratories.

Speaker Change: He further noted how our technology solutions have dramatically streamlined their processes, allowing their scientists to focus their time and expertise on high-value and high-skill analysis.

Speaker Change: which translates to faster and more useful results.

Speaker Change: In turn, we believe SISEK is uniquely positioned to serve an attractive sale analysis market with the combination of our industry-leading end-to-end technology portfolio, global diversification, and clear long-term growth drivers.

Speaker Change: We are acutely focused on portfolio enhancements that will accelerate our business strategy.

Speaker Change: This buildable foundation provides us with confidence as we seek to deliver high growth and profitability and strong cash generation.

Speaker Change: With that, I will now turn the call over to Bill for more details about our financials.

Bill McCombe: Thanks Wenbin. Total revenue for the third quarter was $51.5 million, an increase of 10% versus the second quarter and 7% versus Q3 of last year.

Speaker Change: This revenue result reflected a significant recovery in product revenue versus Q2 and robust growth in international markets and service revenue versus Q3 of last year.

Speaker Change: Product revenue, which is primarily instruments, increased 14 percent versus Q2 and 3 percent versus Q3 of last year.

Speaker Change: The increase versus Q2 was driven by a recovery in the U.S. market, particularly in the biopharma sector, and continued growth in international markets.

Speaker Change: The increase versus Q3 of last year was driven primarily by growth in international markets.

Speaker Change: Service revenue grew 25% versus Q3 of last year. This service revenue growth reflects continued expansion of the install base of our instruments and active usage of our tools across a broad range of disciplines.

Speaker Change: Thank you for joining us. Thank you.

Speaker Change: Turning to geographic market performance, total U.S. revenue increased 9% versus Q2, but declined 9% from a strong Q3 of last year.

Speaker Change: International markets grew strongly with EMEA up 25% versus Q2 and 33% versus prior year.

Speaker Change: Asia-Pacific was flat versus Q2, but up 32% versus prior year.

Speaker Change: This growth in international markets reflects the fact that CyTEX technology is the market-leading full-spectral flow cytometry technology of choice for research institutions and biopharma companies worldwide.

Speaker Change: Gap gross profit was $29 million for the third quarter, an increase of 14% versus the second quarter, and an increase of 7% versus Q3 of last year.

Speaker Change: Gap gross profit margin improves slightly to 56% in the quarter, up from 55% in Q2 due to improved overhead productivity on higher revenues.

Speaker Change: adjusted gross profit margin which excludes stock-based compensation expense and amortization of acquisition related intangibles was 60% in the quarter slightly up from 58% in Q2 and 59% in the prior year quarter

Speaker Change: Operating expenses were $33.3 million for the third quarter, down 2% from Q2, given by lower G&A expense.

Speaker Change: Total operating expenses were down 1% from Q3 of last year.

Speaker Change: Research and development expenses were $9.9 million for the third quarter in line with Q2 and down from $11.2 million in the prior year period.

Speaker Change: The decrease is primarily due to lower headcount and engineering expense.

Speaker Change: Sales and marketing expenses were $12.4 million for the third quarter in line with Q2 at $12.3 million and $12.1 million for the prior year period.

Speaker Change: Thank you for watching. I hope you enjoyed it. I'll see you next week.

Speaker Change: General and administrative expenses were $10.9 million for the third quarter, down from $11.7 million in Q2, and up from $10.4 million in the prior year period. The decrease versus Q2 was primarily driven by lower outside services expense.

Speaker Change: The increase versus prior year of 0.6 million was primarily driven by higher stock-based compensation expense

Speaker Change: This was driven by higher gross profit and lower operating expenses.

Speaker Change: I'm pleased to report that we generated positive gap net income of $0.9 million in the third quarter compared to a net loss of $6.5 million in the prior year. This was primarily due to a lower loss from operations.

Speaker Change: higher net other income driven by a foreign exchange gain of 1.1 million versus a loss of 0.6 million in the prior year and a tax benefit of 0.8 million versus a tax expense of 2.3 million in the prior year.

Speaker Change: Adjusted EBITDA, which excludes stock-based compensation and foreign currency impacts, increased to $7.6 million for the third quarter compared to $2.9 million in Q2 and $3.7 million in the third quarter of last year.

Speaker Change: This was due to higher revenue and gross profit versus both Q2 and the prior year quarter and lower operating expenses versus the year ago quarter. We remain committed to improving profitability going forward by driving revenue growth and controlling costs.

Speaker Change: Total cash in marketable securities increased by 0.6 million versus Q2 to $277.8 million despite our spending $12.1 million to repurchase shares in Q3. This demonstrates the strong cash generating capability of the company.

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

Speaker Change: Thank you. Thank you.

Speaker Change: As I mentioned, during the quarter, we repurchased 2.2 million shares of SciTech stock for approximately $12.1 million at a weighted average price of $5.41 per share.

Speaker Change: Shares repurchased under these programs are cancelled, leaving us with 128.8 million shares outstanding as of October 31, 2024.

Speaker Change: We plan to continue to repurchase shares in Q4 and expect to more than offset the dilutive effective shares issued under our stock-based compensation program in the fourth quarter, which will result in a net reduction of our shares outstanding.

Speaker Change: Now turning to our outlook for the full year 2024 which Wenbin discussed at a high level earlier.

Speaker Change: While we are continuing to see a relatively soft market in North America, we did see a recovery toward more normal levels of activity in Q3.

Speaker Change: At the same time, we see good momentum in Europe and Asia-Pacific. We also expect to see solid growth in our service business.

Speaker Change: Based on these factors, we reaffirm our full-year revenue outlook in a range of $203 to $210 million, representing overall growth of 5% to 9% over full year 2023, assuming no change in currency exchange rates.

Speaker Change: In addition, we continue to expect SciTech's gap net loss to be in the single-digit millions range for the full year 2024.

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

Speaker Change: Sytec also expects to generate positive cash flow from operations in 2024.

Wenbin Jiang: With that, I will turn it back over to Wenbin.

Wenbin Jiang: Thanks, Bill. Our financial strength and our shared belief in our mission position SciTech well to successfully navigate through today's macro environment while strengthening our foundation for the future.

Wenbin Jiang: We have a clear roadmap ahead to deliver long-term sustainable growth and profitability.

Wenbin Jiang: and I'm proud of our team's achievement this quarter.

Wenbin Jiang: It is their dedication and commitment that drives our progress forward.

Wenbin Jiang: and others. Thank you. This concludes today's webinar. Thank you for joining us. We look forward to seeing you again in the future.

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

Wenbin Jiang: Operator.

Speaker Change: Thank you.

Speaker Change: Thank you. We will now begin the question-and-answer session. 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.

Speaker Change: And your first question comes from the line of Tejas Savant with Morgan Stanley. Your line is open.

Tejas Savant: Good evening and thanks for the time here. Wenbin, maybe just to kick things off, I think you called out a more normalized demand environment in the U.S. and maybe even a little bit of sequential improvement in pharma. And I think you also made a comment in your prepared remarks about how

Speaker Change: You know, the flow cytometry for market is more sort of essential versus discretionary spend for your customers. Can you just elaborate on that a little bit? Why is what you're seeing quite different from what some of the other life science instrument vendors are seeing at the moment, including, you know, folks in sequencing, spatial biology, et cetera? And in the U.S., any comment on academic and government? I think that end market was a little bit soft in the second quarter for you.

Wenbin Jiang: David Westenberg, David Westenberg, David Westenberg,

Speaker Change: Yes, indeed, we have seen some improvement on the academic side as well in 2.3 versus 2.2. Overall, in North America, the strength comes from the biopharma as what we have indicated.

Wenbin Jiang: Now, while we are different from others, as we have indicated, flow cytometry is a basic life science tool used in almost all the biology labs, life science labs, and so supporting their daily needs, which is different from many other technologies, which are discretionary.

Wenbin Jiang: has played some role with regarding to differentiating sci-tech from some of our peers.

Speaker Change: Got it. Fair enough.

Speaker Change: And then, one for you, Bill, I mean, obviously, the guide has a 13 million or so sequential step up in the fourth quarter at the midpoint, so, you know, a lot of your life science peers have actually pulled out any budget flush benefit, just given the softer than expected environment and so on. Can you just help us think through, you know, your underlying assumptions there around the budget flush? Or is it sort of what Wenbin just alluded to in terms of, you know, essential versus discretionary spend that sort of underpins your confidence that the step up will come through here in the fourth quarter?

Speaker Change: Customarily, we see a step up in the fourth quarter, and if you look at

Wenbin Jiang: The fourth quarter as a percent of total revenue in prior years. It's about 30%

Speaker Change: So, you know, we are assuming a normal seasonal pattern here, and I think partly underlying that is the ...

Wenbin Jiang: The theme that Wenbin discussed that our instruments are viewed as more of an essential instrument by many of our customers as opposed to discretionary, so we feel that a normal seasonal pattern is appropriate.

Speaker Change: Got it. Okay

Speaker Change: And the last one for me here, any guardrails on 25 you'd be willing to share? You know, I think The Street has you doing about mid-teens growth while also expanding your EBITDA margins versus this year's level. Is that a fair framework to use or would you rather folks think of, you know, high single-digit growth, perhaps like 10% or so, just in light of the moving pieces here, including at what point does China recover, whether the pharma sort of end market continues to improve quarter over quarter, et cetera. There's a bunch of moving pieces here. So just curious as to any preliminary color you guys would be willing to share on 25.

Wenbin Jiang: Thank you.

Speaker Change: Do you want me to take that, Wenbin?

Speaker Change: Yes.

Speaker Change: If you look at year-to-date EBITDA, you know, we're up significantly versus versus last year we're at about

Speaker Change: Thank you for tuning in. I'm William McCombe.

Speaker Change: just 9.9 million year-to-date EBITDA versus

Speaker Change: I think 2.7 last year.

Speaker Change: Thank you. Thank you.

Speaker Change: Our business model is

Wenbin Jiang: to grow the top line to control to maintain gross margins and to Control operating expenses and have them grow more slowly than the top line So the you know, the implication of that is that we would expect to grow either You know as we go forward so that's about as much as I can say with respect to 2025

Speaker Change: Understood. Thanks for the time guys. Appreciate it.

Speaker Change: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from the line of Brandon Smith with TD Cowen. Your line is open.

Brandon Smith: Hi guys, thanks so much for taking the questions, and congrats on the quarter. Maybe looking ahead a little bit to this December event, and on up the end of 2025.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Let me just comment on the first part of the question. We'll, at the fourth quarter of earnings call, our first quarter of each year is when we customarily provide our guidance for the year and you know we would expect to do

Wenbin Jiang: same thing next year give guidance on similar items so nothing you know I don't have an expectation at this point that we'd be doing anything significant significantly different than our normal pattern

Wenbin Jiang: And with respect to new products, I'll ask Wenbin to...

Wenbin Jiang: say what we can about that.

Wenbin Jiang: Yeah and as you can see we invest substantially in R&D and naturally and just like what we have launched this year and you will continue to see new products being launched over the course of the year and so

Wenbin Jiang: and that will reflect how we invest and serve for our shareholders.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from the line of Mason Kariko with Defense. Your line is open.

Mason Kariko: Thank you.

Mason Kariko: Hey guys, thanks for the questions here. You called out strength in AIPAC. I wanted to dig in a little bit there and ask if you're willing to provide any incremental detail on what countries are really driving the strength there. Are you seeing demand trends in China improve? Any additional colors there would just be appreciated.

Speaker Change: Our APEC business includes revenues,

Speaker Change: and Patrik Jeanmonod.

Speaker Change: clearly and we have seen some impact and but we also expect and they may return to normal sometime next year and we look forward to that.

Speaker Change: Got it. And then as we do think about the fourth quarter here.

Wenbin Jiang: How much of that sequential increase is really being driven by assumptions around quarter-over-quarter growth in the U.S.? Just really any incremental detail you can give on the assumptions for the Q4 ramp sequentially.

Wenbin Jiang: From a geographic standpoint, it would be great.

Patrik Jeanmonod: Patrik Jeanmonod.

Patrik Jeanmonod: I think we...

Wenbin Jiang: We have strong momentum, as Wenbin mentioned, in EMEA and in Asia-Pacific, particularly in the Asia-Pacific countries other than China, so Australia, New Zealand.

Wenbin Jiang: and so on.

Wenbin Jiang: With respect to the fourth quarter, we would continue to expect good momentum in Asia-Pac and in Europe.

Wenbin Jiang: We expect some recovery in the U.S., although the U.S. market is softer, and therefore, you know, that would probably be the lowest growth of any of the three major regions.

Wenbin Jiang: The service business we would expect that to continue to grow driven by the growth in the installed base

Wenbin Jiang: So that's about as much color as we could give.

Speaker Change: Got it. Thank you.

Speaker Change: Thank you for watching. Please subscribe to my channel. See you next time.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from Vanessa Davies, Custodian, Cypress County. Your line is open.

Speaker Change: Hi, thank you for taking the questions. This is John for Dave.

John: I was wondering if you could just give any color on what you're thinking that the longer-term growth rates for your business are going to be looking like.

Speaker Change: because they have been, this year, a bit below the sort of 20 to 30 percent growth rates that we saw historically. So if you could give any thoughts on what could bring you back potentially up to those levels in the future, what might be some puts and takes on those, that'd be appreciated. Thank you.

Speaker Change: Overall, we know the life science industry has been challenged.

Speaker Change: and in some area you can see the negative growth. What we are striving for is to continue to maintain our growth above the market.

Speaker Change: Thank you.

Speaker Change: what you would be looking for that would give you

Speaker Change: additional optimism about that going forward.

Speaker Change: David Westenberg, David Westenberg, David Westenberg,

Speaker Change: and if you look at our business today and probably about yeah right now is about 30% in the current including service and reagents

Speaker Change: and 70% on capital instrument long-term and we are going to continue to invest on reagents, on applications to continue to grow our recurring revenue based on our solid ink database so we feel good about our long-term growth.

Speaker Change: Okay, thank you.

Speaker Change: For more information visit www.FEMA.gov

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Next question comes from the line of Andrew Cooper with Raymond James. Your line is open.

Andrew Cooper: Hey everybody, thanks for the questions. Maybe just first...

Andrew Cooper: Thinking about some of the commentary around China, seemingly not as big of a headwind for you as some of the others, should we expect that you get a similarly sized tailwind from some of the stimulus program in that region or overall maybe a little bit smoother, so not as low of a low and not as high of a high? Just would love kind of how you think about the trajectory there as some of those funds start to kick out to potential customers.

Speaker Change: I think we are going to benefit.

Speaker Change: Clearly, when China starts to invest in buying new instruments, advanced technology clearly is on top of their mind, and sci-tech technology has been very well established right now in China.

Speaker Change: We feel strongly and as the program kicks off and funding starts to go to our user base, and we will see the great benefits from those new funds available to them.

Speaker Change: Okay, that's helpful. And then just kind of one more crack at the 4Q step up. Can you give us a sense for

Speaker Change: David Westenberg, David Westenberg, David Westenberg

Speaker Change: You know, we are a third month company. So most of our order coming during the last few weeks and therefore even though we are now at the early November and we expect actually with regarding to the full quarter and we continue to rely upon pretty much is the last few weeks last six seven weeks and so it's too early for us to comment on this.

Speaker Change: David Westenberg, David Westenberg, David Westenberg

David Westenberg: Okay I'll just sneak one more in if I can but would love a little bit more granular of an update on

David Westenberg: sort of the clinical pathway in the U.S., you know, what progress you've made in terms of that process and maybe what are the biggest gating factors to getting into that clinical market here in the States?

Speaker Change: I think there are two parts with regarding to clinical. One is the 510k process which is one of the parts we are working on. The second part is the LDT and applications which we have been working with quite a few reputable labs in the U.S. and we feel good about the progress we are making right now.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: And we have another question, comes from the line of Matt Steist with Goldman Sachs. Your line is open.

Speaker Change: Hi this is Evian for Matt. Thanks for taking my questions. So within services you had solid growth there. How are attachment rates trending and then can you talk through some of the low-hanging fruit to get that attachment rate even higher? So you're mostly going after current instrument users that don't have service contracts or you're going after more like new customers buying instruments?

Speaker Change: Thank you very much. Thank you.

Speaker Change: David Westenberg, David Westenberg, David Westenberg,

Speaker Change: Service revenue is related to the INCS database, right, and also relates to how frequently the instruments are being used.

Speaker Change: So, on that regard, of course, and that also is related to how many users will buy service contracts. Basically, it's like an insurance, right? And I think over the last few years, as you can see clearly, our service revenue has been growing quite nicely, and that reflects...

Speaker Change: First is how actually the rapid increase of our installer base. Second part is how frequently our instruments are being used with regarding to those customers.

Speaker Change: Thank you.

Speaker Change: Okay great, thank you. And then in terms of thinking about how customers have delayed replacements due to CapEx constraints in the weaker funding environment, how do you think about the age of instruments and how that's trended within both your current install base and then those of competitors whose instruments you might be replacing and just trying to get a sense for when you think the replacement cycle might start to kick in.

Speaker Change: to get funding to buy new instruments, so clearly we have seen they would like to extend the life of the instruments they have. But on the other hand, we do see new programs kicking in, they really would like to...

Speaker Change: drive to the advanced research

Speaker Change: New technology toward

Speaker Change: high parameter cell analysis. Also another advantage we have seen is

Speaker Change: and more and more customers, pharma, biotech, they are trying to harmonize.

Speaker Change: and their instrument technology across.

Speaker Change: many of their labs globally. And this is where we excel. Our technology clearly has been there to serve for the needs of our customers on standardization, on harmonization.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

Speaker Change: There are no further questions at this time and this does conclude the meeting. Thank you all for your participation. You may now disconnect.

Wenbin Jiang: Patrik Jeanmonod, Wenbin Jiang, William McCombe

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