Cytek Biosciences Inc (CTKB) 2024 Q4 法說會逐字稿

Thank you for standing by and good day everyone. My name is RJ, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cytek Biosciences Fourth Quarter and Full Year 2024 Earnings Conference Call. (Operator Instructions)

I would now like to turn the call over to Paul Goodson, head of Investor Relations. Please go ahead.

Thank you, operator. Earlier today, Cytek Biosciences released financial results for the quarter and year ended December 31, 2024.

If you haven't received this news release, would like to be added to the company's distribution list. Please send an email to investors at cytekbio.com.

A copy of the news release is also available on the investor relations section of Cytek's website at investors.cytekbio.com.

Joining me today from Cytek are Wenbin Jiang, CEO; and William McCombe, CFO.

Please note that we will be referencing a slide presentation during the call today that has been posted to the investment section of our corporate website.

As a reminder, we will make 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 in these statements.

Additional information regarding these risks and uncertainties appears in our slide presentation in the section entitled forward-looking statements in the press release Cytek issued today and Cytek's filings with the SEC.

This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Additional information regarding our use of non-gap financial measures, including reconciliations to the most directly comparable GAAP financial measures, may be found in our slide presentation and in today's press release.

While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

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 February 27, 2025.

Finally, I would like to invite investors and analysts to attend any of the six user group meetings Cytek will be hosting in 2025.

These are typically all-day meetings where Cytek scientists and users of Cytek's instruments meet to discuss research initiatives, advances in the field, and use cases for Cytek's products.

The full schedule has not yet been established, but the first of these meetings will be in Barcelona on March 12, followed by the Southern California meeting in [La Jolla] on May 15.

In addition to Cytek's user group meetings this year, there will be a variety of industry and academic conferences, meetings, and seminars where we will be exhibiting the Cytek products in the US and around the world.

While these events 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. We have a limited number of spaces to accommodate members of the financial community, so if you are interested in attending any of these events, please contact me.

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

Thanks, Paul. Welcome, everyone, and thank you for your interest in Cytek.

On today's call, I will discuss our results for the fourth quarter and the full year 2024 and highlight our achievements towards our strategic initiatives to drive sustainable growth and profitability.

Then, I will turn the call over to Will for more detailed look at our financials and our 2025 outlook before we open it up for Q&A.

Starting with slide 3, full year revenue in 2024 grew 4% over 2023, reaching $200.5 million driven by strong growth in service revenue and the double-digit growth in international markets outside of the US.

We did very well in unit volume growth in 2024 with placements of full special profiling or FSP and imaging instruments up by 8.5% over 2023.

The growth was achieved despite a challenging year for the industry. We were pleased to outpace the unit volume growth of the flow cytometer market as a whole and importantly, our industry competition.

Our outperformance in 2024 can be attributed to the technological leadership. I tech products continue to bring to the sale analysis market as well as to the excellent user support provided by our customer facing teams.

China has always had a commitment to profitability and the cash generation to support our growth and innovation.

First of all, we have reached an important impression point where small percentage increases in revenue can translate into larger percentage increases in adjusted EBITDA.

While Will will cover more specifics in a few moments. 2024 provides a good example of this.

With revenue up 4%, our adjusted EBITDA of $22.4 million delivered a gain of more than 77% above the $12.6 million of adjusted EBITDA from 2023.

In parallel with our substantial growth in adjusted EBITDA, our focus on cash generation was clearly reflected with positive cash flow achieved again in 2024.

I'm pleased to report that once again, we return this positive cash flow to shareholders in the form of repurchasing 4 million shares during 2024 under our share repurchase program.

At the expiration of this program, we announced a new $50 million repurchase program in late December and have been buying shares in the open market year-to-date.

Turning to slide 4, and our 4th quarter results.

Our revenue was $57.5 million essentially flat compared to the fourth quarter of 2023 after adjusting for the strong appreciation of the US dollar in the quarter.

We saw year over year growth of 8% in our service revenue in the fourth quarter, mainly due to the growth in the total installed base of our instruments.

Geographically, we continue to see a strong demand environment in APEC in the 4th quarter.

While we are viewing China with a conservative stance due to the dynamic environment, we started to experience some up step in orders in the 4th quarter related to the China stimulus program.

We were also pleased to see strong growth, both quarterly and year over year in the rest of the world region, which includes Canada and Latin America.

Total US revenue was slightly up versus the 3rd quarter and down year over year, driven by a decline in academic and government instrument revenues, partially offset by growth in service.

Looking at our customer myths, we continue to experience strong demand from our global farmer and CRO customers who are focused on harmonizing their instruments across different regions for translational discovery work, which our technology is particularly capable of delivering.

Overall, we believe our growth in 2024 demonstrates the strength of our platform, the unique value proposition of our portfolio.

And how Cytek solutions are becoming a well-established brand in the industry.

I would like to next update you on the strong execution our team has had on our key growth pillars instruments, applications, bioinformatics, and clinical to solidify Cytek's position as a market leader in [NN] cell analysis solutions.

Turning to slide 5.

Starting with instruments, I want to take a moment to reflect how far we have come as an organization in driving adoption of our core instruments, including our flagship products, the Aurora Analyzer, Aurora Cell Solar, and the Northern Lights system.

As a reminder, our core instrument platform is underpinned by our FST technology.

This technology is designed to maximize sensitivity, accuracy, and harmonization across instruments through a normal optical and electronic design.

Our technology enables us to address the inherent limitations of other instruments by providing a higher density of information with greater sensitivity, more flexibility, and the increased efficiency, or at a lower cost for performance.

From our conversation with flow cytometer users, it is clear that Cytek instruments have changed the direction of the entire industry toward a full special technology.

We believe Cytek FSP technology has matured into the industry standard that other technologies are measured against.

Our leadership in FSP technology enables us to benefit from an important first mover advantage with our expanding customer base and validator commercial solutions that deliver superior stability, data quality, and ease of use.

Since the introduction of our first FST instrument in 2017.

Our FSP technology has gained a widespread adoption with nearly 2000 customers worldwide using our solutions today and a broader user base across more than 70 countries.

Our technology has additionally been validated by more than 2,300 peer-reviewed publications regarding the use of Cytek products to address critical challenges.

In the 4th quarter, we expanded our global footprint with 164 FSP instruments and the 49 Amnis and the Guava systems.

This brings Cytek's total installed base to 3,034 units, including 377 Amnis and the Guava instruments shipped since the acquisition of the Luminex business in the first quarter of 2023.

Within our portfolio, the Aurora CS cell sorter and Amnis imaging system showed good growth in the fourth quarter compared to the same quarter of 2023.

Collectively, these instrument placements represent growth across a diverse customer base, offering comprehensive and better solutions tailored to meet their needs.

As I mentioned earlier, the number of placements of our FSP instruments increased 8.5% in 2024/2023.

We were pleased to see 13% year over year growth of the Aurora CS cell sorter and 12% year over year growth of the Northern Lights System.

We believe this solid growth in placements, despite a challenging and dynamic macroeconomic environment, demonstrates the Cytek continued leadership in FSP for cytometry and our strength in these broad categories.

In 2024, we were excited to announce our enhanced small particle detection module, or ESP, a new technology that can be added to new or retrofitted to existing Aurora, Aurorae solar, and Northern Light Instruments.

This new feature allows our already powerful systems to provide the highest sensitivity to identify and analyze a variety of small particles, including extracellular vesicles, small bacteria, viruses, and the viral particles, and nanoparticles, and further distinguish our cell analysis solution as the preferred choice among researchers and clinicians.

Turning to slide 6, in early 2023, we strategically expanded our Cytek platform with the Luminex transaction to continue diversification of our instrument portfolio with both competitive and operational advantages.

With the addition of Amnis and Guava product lines, we accomplished several objectives.

First, we enhanced our technical capabilities with AI-driven high resolution imagery.

Second, we enable the more effective and efficient service and support through an expanded installed base, dramatically increasing our service growth margin.

And third, we broaden our customer reach within the entry level market.

Since the acquisition, we achieved a significant growth in Amnis's imaging revenue and in the entry-level market.

Specifically, our imaging revenue increased by 14% in 2024. In addition, growth in the entry level market is affected by the 12% full year unit volume growth in our Northern Lights Placement, which was one of the goals of the acquisition.

Leveraging and expanded the install base.

Our service business growth margin improved from 15% in 2022 before the acquisition to 57% in 2024, notably one of the highest in the industry.

This major increase in gross margin demonstrates one of the advantages that we obtained from the Luminex transaction.

We believe the growing installed base of our instruments, including our core FSP instruments, as well as Amnis and Guava, will continue to serve as a strong foundation to drive adoption of our products and service offerings going forward.

To support the rising global demand for Cytek solutions. We recently opened a new manufacturing facility in Singapore. With this facility, we are able to access low-cost manufacturing, increase our capacity, and enhance global supply chain flexibility.

Turning to slide 7 and informatics.

We introduced the site cloud 2 years ago as a digital ecosystem to support full special flow cytometer research from panel design to data acquisition and to enable our customers to streamline their work flows through our online software tools.

In 2024, we expanded the capabilities of Cytek cloud with the addition of the special panel tool, a proprietary intelligence algorithm that designs optimize the panels in minutes rather than days or weeks with a major process.

Allowing scientists to focus their efforts on their own applications.

Cytek cloud is becoming a vital resource in the research community.

We now have over 16,000 users growing our base by more than 160% from the start of 2024.

This represents an average of more than 6 users per install the Cytek FSP instrument.

We continue to believe that the Cytek cloud is an important factor in earning the loyalty of our users to the Cytek brand.

Turning to the applications and clinical pillars of our strategy.

We continue to believe the clinical market represents an attractive business opportunity for Cytek.

Several of our products are approved for clinical use in both China and the EU, including our Northern Light CLC system.

In May 2024, we were pleased to receive approval from the China National Medical Administration for clinical use of our one laser and two laser six color CBNK Asian cocktails on our northern light systems.

Specifically in hospitals, laboratories, and clinics across China.

As a reminder, this is the first and only one laser-based 6 color essay supported by FSP capability, which offers higher system reliability and data consistency, a competitive advantage against the more expensive two laser systems.

This achievement broadened our market presence in both China and the Europe, while strengthening our competitive advantage.

Notably, northern light CLC unit placements grew by 15% in 2024 compared to 2023, achieving the highest placement growth rate out of all Cytek instruments across our product portfolio.

As we continue to push forward new products and applications, we remain deeply committed to providing comprehensive sale analysis solutions to our customers.

In some, we believe we are well positioned to serve a large and growing sale analysis market with our industrial leading sales analysis portfolio, global diversification, and the critical first mover advantage with our FSP technology.

This competition paired with our incredible team, strong balance sheet and the focus on execution will drive Cytek further on our strategic initiatives.

Looking ahead as we continue to strengthen the market leadership position in sales analysis, the durable foundation we have built provides us with confidence in our expectations and our long-term objective of delivering sustainable growth and profitability.

With that, I will now turn the call over to Will for more details about our financials.

Thanks, Wenbin.

Turning to fly day and our fourth quarter financial results. Total revenue for the fourth quarter of 2024 was $57.5 million a 1% decrease over the fourth quarter of 2023. Growth in service revenue was offset by a decline in product revenue due to a strengthening in the US dollar and orders that were delayed to the first quarter of 2025.

Product revenue, which is instruments and reagents, decreased 3% versus Q4 of 2023, but increased 14% sequentially versus Q3 of 2024.

The decrease versus Q4 of 2023 was driven by US dollar strength, a softer instrument market in the US and EMEA as compared to a strong Q4 of 2023, and certain orders being delayed into Q1 of 2025.

Service revenue grew 8% versus Q4 of 2023. The service revenue growth reflects continued expansion of our installed base of instruments and active usage of our systems.

Turning to our geographic market performance.

Total US and EMEA revenue declined 10% and 18% respectively, compared to a strong Q4 of last year, driven by lower instrument sales and also foreign exchange effects in EMEA.

Asia Pacific grew 21% driven by strong growth in China.

Other international markets, primarily Canada and Latin America, also grew strongly off a small base, with revenue reaching $5.3 million in the fourth quarter compared to $1.9 million in the prior year quarter. This growth reflects the fact that Cytek technology is the full spectral flow cytometry technology of choice in these markets and around the world.

GAAP growth profit was $33.7 million for the fourth quarter of 2024, an increase of 2% compared to gross profit of $33 million in the fourth quarter of 2023. GAAP gross margin was 59% in the 4th quarter of 2024 compared to 57% in the fourth quarter of 2023.

Non-GAAP adjusted gross margin in the fourth quarter of 2024 was 61% compared to 59% in the fourth quarter of 2023 after adjusting for stock-based compensation expense and amortization of acquisition related intangibles.

In the fourth quarter, we had a total of $8.8 million of non-recurring, non-cash reductions in operating and interest expense from adjustments based on our re-evaluation of a license and royalty settlement liability.

Operating expenses were $30.7 million for the fourth quarter. This included $2.6 million of the non-recurring benefit I described above. Excluding this $2.6 million benefit, operating expenses were $33.2 million, unchanged from both the fourth quarter of the prior year and sequentially from Q3 of 2024.

This demonstrates our focus on controlling expenses as an important driver of delivering on our goal of growing profitability and cash flow.

Research and development expenses were $9.7 million for the fourth quarter, down 11% from the fourth quarter of 2023, and down 2% from Q3 of 2024 due to reduced compensation and engineering expense, reflecting our efforts to reduce costs and improve the efficiency of our investment in R&D.

Sales and marketing expenses were $11.9 million for the fourth quarter, up 3% from the $11.6 million in the fourth quarter of 2023 due to higher compensation and amortization expenses.

General and administrative expenses were $9.1 million for the fourth quarter. This included the $2.6 million non-recurring benefit I described earlier.

Excluding this benefit, general and administrative expenses would have been $11.7 million, up from $10.8 million in the fourth quarter of 2023 due to higher stock-based compensation expense.

Income from operations with $3 million for the fourth quarter, an improvement over the $0.1 million lost from operations in the fourth quarter of 2023.

This included the $2.6 million non-recurring benefit described earlier. Excluding this benefit, profits from operations would have been $0.3 million compared to a loss from operations of $0.1 million in the prior year quarter. This was driven by higher gross profit in the current quarter.

GAAP net income was $9.6 million in the fourth quarter. This included the $2.6 million non-recurring benefit described earlier and a $6.2 million non-recurring non-cash interest expense reduction related to the same liability adjustment for a total of $8.8 million of non-recurring benefit.

This contributed $6.7 million after tax to net income in the quarter.

Excluding this non-recurring benefit, net income would have been $2.9 million compared to a GAAP net income of $5.5 million in the prior year quarter.

This was primarily due to low and yet other income driven by a foreign exchange loss of $1.8 million in the current quarter, versus a gain of $1.3 million in the prior year.

Now for the full year 2024, total revenue for the year ended December 31, 2024, was $200.5 million, a 4% increase over the prior year.

The increase in total revenue in 2024 was driven by 30% growth in services revenue and double-digit growth in product revenues from international markets offset by a slowdown in US product revenue.

GAAP gross profit was $111.1 million for the year end of December 31, 2024, an increase of 2% compared to a GAAP gross profit of $109.4 million in the prior year.

GAAP gross margin was 55% in the year ended December 31, 2024, compared to 57% in the prior year. The decline was primarily due to one-time inventory adjustments in Q1 of 2024.

Adjusted gross margin, which excludes stock-based compensation and acquisition related intangibles in the year end of December 31, 2024, was 59% flat versus the 59% in the prior year.

Operating expenses were $131.6 million for the year end of December 31, 2024. This included the $2.6 million of non-recurring benefit mentioned before. Excluding this $2.6 million benefit, operating expenses were $134.2 million a 2% decrease from the $137.3 million in the prior year. The decrease was primarily due to lower research and development costs.

Research and development expenses were $39.4 million for the year end of December 31, 2024, compared to $44.2 million in the prior year. The reduction was primarily due to lower headcount and engineering expense.

Sales and marketing expenses were$ 49.1 million for the year end of December 31, 2024, flat compared to $49.1 million in the prior year.

General and administrative expenses were $43.1 million for the year end of December 31, 2024. This included the $2.6 million non-recurring benefit mentioned earlier.

Excluding this benefit, general and administrative expenses would have been $45.7 million compared to $44 million in the prior year. The increase was primarily attributable to higher stock-based compensation expense, partially offset by lower outside services expense.

Loss from operations in the year end of December 31, 2024, was $20.5 million, which included the $2.6 million non-recurring benefit mentioned before. Excluding this non-recurring benefit, loss from operations would have been $23.1 million compared to a loss of $27.8 million in the prior year.

GAAP debt loss for the year end of December 31, 2024, was $6 million. This included the $2.6 million non-recurring benefit mentioned earlier, and a $6.2 million non-recurring non-cash interest expense reduction related to the same liability adjustment for a total of $8.8 million of non-recurring benefit. This contributed $6.7 million after tax to net income.

Excluding this non-recurring benefit, GAAP net loss would have been $12.7 million, an increase from the net loss of $12.1 million in the prior year, which was primarily due to higher foreign exchange losses.

And lower tax benefit offset by a lower loss from operations.

Adjusted EBITDA was $22.4 million in the year end of December 31, 2024, which excludes the non-recurring items mentioned earlier, foreign exchange impacts and stock-based compensation expense.

This was up significantly compared to $12.6 million in the prior year.

Adjusted EBITDA included investment income of $8 million in the year ended December 31, 2024, and $7.4 million in the prior year. Excluding these amounts, adjusted EBITDA improved from $5.2 million in the year end of December 31, 2023, to $14.4 million in 2024.

Consistent with our historical focus on cost control and profitability, we are committed to improving these metrics going forward.

Cash equivalents and marketable securities were $277.9 million as of December 31, 2024. This represents an increase of $15.2 million from the $262.7 million at the end of December 2023, despite repurchasing $21.6 million in our stock repurchase program during 2024.

Our strong balance sheet and positive cash generation underscore our ability to invest in our global growth initiatives.

As mentioned above, during 2024, we repurchased approximately 4 million shares of Cytek stock for a total cost of approximately $21.6 million at a weighted average cost of $5.43 per share, leaving us with 129.2 million shares outstanding as of December 31, 2024.

Concurrent with the expiration of our 50 million stock repurchase plan at the end of 2024, we announced a new 50 million repurchase program for 2025 and have been actively repurchasing shares year-to-date.

Before providing you with our revenue guidance for 2025, I want to address some recent external developments that may affect our 2025 revenue.

As you are all aware, the NIH recently announced that it will reduce the amount of funding for indirect costs associated with its grants going forward.

Secondly, in January, the Biden administration introduced new export controls and licensing requirements for the export of certain flow cytometry products and technologies to certain countries, most notably China.

Finally, the Trump administration recently announced wide ranging tariffs on imports from several countries, including China.

While we are continuing to assess the potential implications for our business, these factors may create headwinds for our instrument revenues going forward.

We expect solid growth in our service business and we see good momentum in our instrument sales in APAC.

However, we are currently experiencing softer market conditions in the US and EMEA.

Taking all of these factors into account, we expect our full year revenue for 2025 to be in the range of $204 million to $212 million, representing overall growth of 2% to 6% over full year 2024, assuming no change in currency exchange rates. We expect this growth to be back and loaded due to current market conditions and the fact that the first quarter is typically our seasonally weakest quarter.

As when been noted, our market leadership position remains strong, and we are confident we will perform well relative to the overall flow cytometry market.

With our strong balance sheet, we are well positioned to continue investing for growth.

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

Thanks, Will. I want to take a moment to thank our team at Cytek for their dedication to our mission.

Together, we have built a strong platform of cell analysis products to empower the scientific community with better tools to advance their research.

In 2024, we were honored to be named the overall biotech company of the year in 2024 by the biotech breakthrough organization out of thousands of nominations across 14 different countries.

This premier recognition is testimony to our team's commitment and highlights the significant role our technology plays in advancing discovery.

We are proud to make our powerful flow cytometry technology more accessible.

Enabling scientists to accelerate their research and achieve more impactful results.

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

Operator.

(Operator Instructions)

David Westenberg, Piper Sandler.

Hi, thank you for taking the questions. I wanted to start with the 8.5% instrument growth, that was a really good number. Growth of course on the top line was 4%. So can you talk about some of the things that are happening with maybe mix? I'm again I'm guessing maybe this is higher. Placements of maybe northern lights versus some of the other ones and how we should think about that in the coming year and how we think we should think about like consumables used on that mix if there's a difference between northern lights and say Aurora in terms of whether or not they use your consumables versus a competitor consumables.

Sorry, could you guys hear me?

All right, yeah. Wenbin, would you like me to take that one?

Oh yeah, please.

Yeah, so, we did see, good growth in Northern Lights, in the quarter in 2024. And we don't give, we don't want to give guidance specifically on product categories, but we think that that momentum will carry forward in terms of unit growth, that the product is proving popular.

So, I won't, go beyond that in terms of our guidance, when we came up with our guidance range, we factored in, all the recent trends and also the recent, headwinds that I mentioned. In terms of, reagent consumption, I have to defer to win on that one.

Yeah, clearly, and you can see, and, we have 16,000 users on Cytek cloud, using our tools to design panels, optimizing the panels, for their applications. In fact, Cytek cloud is also equipping our users to other regions, and we expect religion is one of the areas, with, faster growth, for the company, with regarding to the mix of the instrument, as you can see clearly, we cited 12% growth year over year on Northern lights, right, that's even faster than the overall unit growth of 8.5%.

Yeah, in terms of reagent consumptions, I don't think that we see significant differences between the northern lights and other instruments. I don't think that that would have a significant impact on our overall reagent revenues. It it's the driver of the reagent revenues would be the overall unit volume growth.

Okay, that's great. No, thank you for that. And this, you gave a lot of great color on the different geographies and tariffs and all that thing going on. Can you maybe give us a quick summary on, like maybe 12 sentence impact statement sorry, there was the first the Biden thing then the Trump tariff concern. So I mean, is there a numbers thing on where you would hit for gross margins or is there an assumption of lower growth and in terms of like just because if you had higher cost? You did also mention on the call that you have some manufacturing in Singapore. Would that help protect some of the tariffs because I don't believe Singapore would be any part of a tariff nation.

And from market perspective and clearly, and as a global company, right, we do business across the world today and US is less than 50% of our overall business and Europe is third and the balance for, from the rest of the world including APAC. So that can help us really to weather the kind of domestic economic conditions we are experiencing or may experience with regarding to tariffs, and certainly, Singapore today is not part of the impact, but who knows, and it may happen going forward.

But again, with our, manufacturing today, across multiple sites, in multiple countries that give us, flexibility, to deal with, all kinds of potential implications going forward. As we manufacture in the US, in Singapore, in China, and, so we hope, with kind of diversification of our manufacturing that will help going forward.

Yeah, what I meant when I discussed those three factors was that we have the. The NIH changes, the export controls, which we talked about, at the JPMorgan conference. And then, as it relates to revenue, the major, potential impact of tariffs is, would be, from reciprocal tariffs that would affect exports from the US. So that's, as it relates to revenue, that, that's what the tariff risk is.

At this point, we haven't seen significant, impacts from reciprocal tariffs, because we largely manufacture our China product, in China. And then the other implication of tariff, of course, is the one that when been mentioned, which is the impact on our, cost of goods and therefore margin, which we expect to be able to deal with and mitigate, by virtue of our flexible, global manufacturing system that now has plants in three places.

Got you. I hope that distinction was clear.

Yeah, no, much clearer, I got pretty long answers to my question, so I'll kick it off the next you.

Thank you.

Tejas Savant, Morgan Stanley.

Hi, thanks. This is Edmund on forages. Thanks for the time. I just wanted to dig in a little bit on your, US academic government customers. So we just came back from AGBT and the customer sentiment sounds pretty gloomy, and we even heard of things like instrument purchase freezes. So I was wondering if you could talk to us, or first quantify your exposure to the NIH and then second, talk to us about what you're sharing from the US academic customers and what degree of impact do you currently have factored into your 2025 guide.

Do you want me to take the first part of that, Wenbin?

So, NAH exposure, we looked at, our revenues for 2024 and, analyzed, how much of that was funded by NIH grants, and the answer was, around 5% of total revenue.

So, obviously, the impact of the, it's a little harder to go from there to what the impact would be. There's a couple of factors. One is that the, of that NIH funding, the estimates we've seen is that 8% of the funding would be reduced.

But then there may be other indirect effects that are harder to estimate. So, it's a relatively small exposure. We've continued to see, ordering activity, and shipments to US academic customers in the first part of this year. So, hard for us to, obviously, there could be disruption, from, the NIH changes, but, for we're a primarily a 3rd month company. But by that I mean that a majority of our revenues for a quarter happen in the 3rd month of the quarter. So, it's still, and this was obviously just announced in January, so it's still TBD.

At this for us at this point.

On one hand, we are still, waiting to see how it might potentially impact, but, with our analysis, at least based on what we have seen in 2024, that the impact is less than 5%. In the meantime, as we all know, and, we are a global company, we work with.

Actually, more than 50% of our revenues are in fact from outside of the US and we feel that can help us to weather the kind of up and down domestically.

Got it. And then just switching gears a little bit on the large farmer and CDMO side, looking to harmonize their work flow with your instruments. I was wondering if you can talk to some of that progression in the quarter and, in terms of the instruments they're ordering to harmonize, do you have any sense what percent of these are replacement orders versus capacity expansions?

And this is actually very difficult to gauge right? And, clearly, we have seen farmer, and they migrate from discovery to translational, and they would really like to see the data coming out of the different labs across different countries in their institution to provide the same data quality with the better. Confidence in that and, they place orders on Cytek to meet all the needs across, multiple sites, in the world, in fact, not just in one country. So this is what we have been seeing right now, a kind of shift momentum, from those pharmaceutical companies as well as some of the CRO and we are benefiting clearly from this harmonization right now.

Yeah, you'll, you'll. See when we publish the, when we file the 10k, shortly, we'll publish the data for the global, customer segments, or customer segments on a global basis, and you, and you'll see that, but the bio, the biotech farmer distributor CRO segment, was up 14%, in the fourth quarter.

But that includes more than just the farmer companies, but, and, obviously, it's all regions around the world, but it shows very good growth in that segment. That's the year on year gross rate. For in the 4th quarter.

Great. Thanks for the time. I'll pass it along.

Andrew Cooper, Raymond James.

Hey everyone, this is Noah on for Andrew. Thanks for taking the question. First one, just looking at your OpEx, looks like the GNA run rate is a little bit like, quite, a little bit lower from where it was in, the back half of last year. So just asking I guess what are you taking out? Is there some dynamics around that that could prove better for margins or are you taking any actions on that or is it the one-time benefit that's really flowing through?

It's the onetime benefit, so there's a $2.6 million benefit. In the 4th quarter. So, if you add that back in, the GNA was about flat with Q3, but it was down, and it was about in the 4th quarter, and it was about flat with Q4 of last year. So, we did make some significant reductions in GNA, in the year-on-year basis in Q2 and Q3, but we, we've been holding pretty flat, around $33 million per quarter since then.

Okay awesome and then just kind of following up on the question around tariffs what would be your ability to pass price through should some of those tariffs are not affecting the business, and I would assume that would be within 2025.

No, indeed, it depends on the magnitude of the tariff, how much we can pass on, at least, based on the current, proposal, or, the tax rate on there indeed, and we are, trying to pass this, through to, customers, but on the other hand, there's a delay effect, right? And, we continue to need to be honored the previous quotes already provided to our customers.

Awesome thank you.

Matthew Sykes, Goldman Sachs.

For Matt, thanks for taking my questions. So the first one, how are you thinking about your capital allocation strategy as it relates to organic investment? Can you talk through your innovation pipeline and any investments you're particularly excited about?

I think other invest, yeah, go ahead.

No, go ahead, Wenbin.

Yeah, no, I think that in terms of investment, I think there are two parts. One is certainly as you can see the, share buyback program, but in the meantime, as you can see, you continue to invest substantially, in our internal R&D close to 20% of our revenue is in fact invested in developing new products and new technology to drive our product forward and we will continue to have, last year we, delivered a few products including our panel, new panel, Cytek cloud, our ESP modules to support a small particle detection. All of those are very much appreciated by our user base, by our customers, and we'll continue to invest and to deliver new products, coming to 2025 and you are going to see what we will do going forward.

Yeah, the other area where we are investing aggressively is in the, our service network. Revenues are growing quite strongly there, and, so we're continuing to build out, our network, by adding more service personnel and in many locations, we're also continuing to invest in, IT automation.

So that we can make our, transaction processing, inventory management, all the more efficient, and that will be particularly useful to us as we grow the reagent business, which is a, obviously a small ticket, business.

Great, that actually leads very well into my next question, which was, can you talk to the growth you saw in services and then any drivers outside of the general installed based growth and then what your expectations are on services for 2025?

We, so the major driver is install base, and that drives both, service contract revenue and what we call time and materials revenue, which is, where customers, ask us to come in and serve us on a, for a particular project or job. We're always exploring, new, offerings in the service area. But the major driver, is just the growing install base.

In terms of, the guide, we didn't want to split out our overall revenue guidance versus, in terms of service versus product, but you can probably infer that we expect a continuation of the good momentum that we've seen in service revenues in 2024.

So you can expect that, you could assume that we expect to continue to see solid growth there.

Great thank you.

Chad Wiatrowski, TD Cohen.

Hey guys, Chad Wiatrowski going for Brendan Smith. I appreciate, cash flow positive and you're investing heavily in R&D the share buybacks you mentioned service reps. Are you open to additional M&A at this point and could you kind of outline what that criteria would look like just balancing sort of investing growth, but also profitability.

Sure. Wenbin, would you like me to take a stab at this one? Sure.

So, yes, we are open to additional M&A. We have a very substantial cash balance. So we have the ability to do significant M&A. In terms of criteria, it has to be something that is in our existing markets or adjacent, so it's got to be something that's, Relevant to our customers, and, where we can extract significant synergies, which could be, sales and distribution, R&D, DNA, or manufacturing, or, ideally, all four of those.

And in terms of financial criteria, we would, our target would be to have a business that's contributing, positively, but, within a relatively, near-term period, I think within 12 months. So, we, our objective would be to buy businesses that have, gross margins that are fairly similar to our existing gross margins, at that, at or around that level.

And then, to be able businesses where we can, through, in most cases, it's going to require, some synergy and integration, but where we can get the business to a positive EBITDA contribution, fairly quickly.

That's helpful and then and just on site tech cloud growth, it's just pretty impressive. What's being underappreciated there? I know you have like the AI automated panel product and some other things happening. What, what's kind of driving that user growth? Thanks.

I think, site cloud really makes a lot easier for our users to, design panel, especially and, when designing a high parameter, high dimensional to do the high dimensional self analysis. Those larger panel typically takes many weeks, months, to optimize. Now, with our algorithm, over there, make it very easy for our users.

In fact, quite a few, CRO and the farmer have already built our Cytek cloud into their standard workflow and to enable them to really become more efficient, to work on Cytek instrument. So, we feel this is a right to, also it's like a kind of value we have brought to our customers that to have been the reason for the rapid growth of our user base right from a few 1,000 to now 16,000 just in the last 12 months.

And this momentum continuing, we feel this really will help going forward from a few aspects. One is certainly the loyalty to Cytek solutions. Second part is also will help our agents as well and on Cytek cloud we have carried a very complete catalog of the regions that will enable users to purchase.

Thanks for the questions.

Harrison Parsons, Stephens.

Hey, great, this is Harrison on for Mason. Thanks for taking the questions. I wanted to ask if you could, tell me what your guidance assumes in terms of flow cytometry, market growth throughout 2025.

We didn't make a specific assumption with respect to market growth. We, I think, implicitly, we assumed not much change from 2024. And, where the market, we, there aren't many reliable studies, if any, of the flow cytometry market. The best indications that we have was that it was in the instrument business was a mildly negative in, so we broadly assumed no significant change upwards or downwards.

But we did Take account of these, the near term, headwind factors that I mentioned, in the prepared remarks. So that, leads to a probably a more back-ended growth profile than, as a result.

Okay, and then, could you give us some insight into your expectations in terms of growth this year across your different key geographies.

Once again, we didn't, we don't want to guide specifically to, geography by geography. I think what I can say is that in, 2024, the US was significantly softer that Asia Pacific and Europe were quite a bit stronger, and we had double digit growth in those markets, I think, It's fair to assume, as I said, we generally approached our guidance with the view that the market was going to be broadly similar in 2025 to as it was in 2024, so I expect that the US market would continue to be flattish.

And that we would see better growth in APAC and EMEA. So broadly speaking, a continuation of the trends that we saw in 2024 with some near-term headwinds probably particularly affecting the US market.

Perfect I'll leave it there, thanks for the questions.

That ends our Q&A session, and we appreciate your participation, ladies and gentlemen, that concludes today's call.

Thank you all for joining. You may now disconnect.