Cytek Biosciences Inc (CTKB) 2021 Q4 法說會逐字稿

Thank you for standing by and welcome to the Cytek Biosciences fourth-quarter 2021 earnings conference call. (Operator Instructions). As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Alex Khan, Investor Relations. Please go ahead, sir.

Thank you. Earlier today Cytek Biosciences released financial results for the quarter and year ended December 31, 2021. 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@cytekbio.com. Joining me today from Cytek are Wenbin Jiang, CEO, and Patrik Jeanmonod, Chief Financial Officer.

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 federal securities laws, including statements regarding Cytek's business plans, strategies, opportunities, and financial projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.

Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements, in the press release Cytek issued today, and in Cytek's filings with the SEC.

This call will also include discussions of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliations to the most directly comparable GAAP financial measure may be found in today's earnings release submitted to the SEC. Except as required by law, Cytek disclaims any intention or obligation to update or revise any forward-looking statements whether because of new information, future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast, February 23, 2022. With that I would like to turn the call over to Wenbin.

Thanks, Alex, and welcome everyone joining the call today. I want to start by thanking the incredible Cytek team for their dedication and their execution as we closed out 2021. On today's call I will begin with a brief overview of our company. Next, I will discuss our exciting progress for the quarter and the year. And finally, I will turn the call over to Patrik for a more detailed look at our financials.

For those of you new to the Cytek story, we are a leading cell analysis solutions company advancing the next generation of cell analysis tools by leveraging novel technical approaches to create our Full Spectrum Profiling, or FSP, platform. Our FSP platform includes instruments, reagents, software and application services and utilizes the full spectrum of fluorescent signatures to deliver high resolution, high content and high sensitivity cell analysis.

Our technology and solutions address some of the key limitations of conventional methods. While flow cytometry is a widely used tool for single cell analysis, conventional flow cytometry and the early approach to spectrum flow cytometry have been challenging. They are only able to detect a few markers in a single tube.

Their limited dimensionality, suboptimal resolution, low throughput, high cost for performance, and the significant technical expertise that is required to operate their systems has really limited the advanced cell analysis field.

By contrast, our patented FSP technology optimizes sensitivity and accuracy through its novel optical and electronic designs that utilize an innovative method of light detection and distribution. This novel technological application allows us to address the inherent limitations of other technologies by providing a higher density of information with greater sensitivity, more flexibility, and increased efficiency all at a lower cost for performance.

Our innovative technology has been validated by 385 peer-reviewed publications to date, over 1,100 instrument placements at the end of the year, and a growing number of applications. At Cytek we provide our customers with an end-to-end solution consisting of instruments, reagents, software, and application services. We launched our initial flagship instrument, the Aurora, in 2017. A year later, we launched the Northern Lights instrument, an entry-level product.

Both instruments are cell analyzers offering high throughput, ultrasensitive analysis, and intuitive workflows that work to address the unmet needs of our customers. These instruments are efficient and compact, making them well suited for clinical research.

In October of 2020, we launched our reagents to capitalize upon the recurring revenue opportunities derived from the installed base we have generated. Our 14 color cFluor immunoprofiling kit and 40 color optimized multicolor immunofluorescent panel provides users with ready to use protocols and antibodies, simplifying the workflow from sample preparation to data analysis.

In October of 2021, we launched our new 25 color immunoprofiling assay and, shortly after, acquired the reagents business of Tonbo Biosciences. Both additions further strengthen our position as a full solution provider to our customers. Our 25 color immunoprofiling assay includes reagents and tools optimized for you with our Aurora full spectrum flow cytometer. We are creating a new novel for flow cytometry by making such a high dimensional panel available as a standardized kit.

This past year, we also began shipping our cell sorters, which enable additional downstream genomic and the propionic analysis. Importantly, our sorters allow researchers to isolate living cell populations from higher complexity panels beyond 40 biomarkers. While our cell analyzers have been strong drivers of our revenue growth to date, we expect that reagents and cell sorters will play an important role in driving our revenue growth over the next three to five years.

As we highlighted previously, once an instrument has been placed, our intuitive workflow allows customers to quickly get up to speed on the technology and begin generating results. Additionally, we routinely work with KOLs engaging with these industry leaders to address their particular scientific questions by optimizing reagents and protocol on our instrumentation. This often creates blueprints for other customers to build upon.

By collaborating with customers to create these novel reagent panels or kits, we are continually opening new applications in the market for our FSP platform. I'm proud to say that our installed base of instruments continues to achieve robust growth. This quarter we placed 140 instruments, bringing our total installed base to 1,110 instruments as of the end of the year.

We continue to execute on our core strategy and have achieved solid adoption with high dimensional cell analysis users while also bringing [true] special profiling to entry-level users as well.

During the fourth quarter of 2021, we achieved the exciting milestone of shipping our 1,000th cell analysis system since first being introduced in 2017. Our cell analysis systems have gained widespread adoption across the growth we've used in more than 40 countries.

Additionally, we continue to make progress in regulated clinical markets, including in China and in the EU. In China we have made progress towards China National Medical Product Administration, or an NMPA IVD Class III certification for the TBMNK assay to run our (inaudible) certified Northern Lights CLC instruments. Data collection has been completed at three hospitals comprising 700 patients. And the data analysis and NMPA submission package preparation has been initiated.

In the EU, we have received [IBDD] certification for our automated sample loader, or ASL, that is an accessory to our previously IBDD certified Northern Lights CLC instrument.

We also closed on our acquisition of Tonbo Biosciences' reagent business, which, along with the launch of our additional cFluor reagent and reagent kits, meaningfully enhanced our reagent portfolio offering. The integration of Tonbo Biosciences business within Cytek is largely complete as we are now preparing to expand these offerings further. We welcome the talented Tonbo team into Cytek and are excited to grow our presence in San Diego.

We are very pleased with the performance of these important new offerings and the value they bring to our platform. And last month we announced the expansion of our Fremont headquarters with the opening of a new facility, tripling our previous manufacturing capacity in order to meet growing global demand for cell analysis solutions.

In addition to the new Fremont facility, we have also opened new offices in Seattle, Washington, which are dedicated to key R&D initiatives and customer application support. This new facility supports our commitment to develop tools that will advance the next generation of cell analysis and become the partner of choice for payers throughout the life sciences field.

As I mentioned earlier, our technology has been validated by 385 peer-reviewed publications to date. These publications cover a wide array of topics with the top five subjects being infectious disease, immunology, immunotherapy, immuno-oncology and oncology.

In the fourth quarter, Cytek had 55 publications in peer reviewed scientific journals. 11 of these publications were about COVID-19, including a Nature paper elucidating which type of [T] cells give rise to human immune system memory and the mechanism for that protection.

HIV continues to be another area of investigation for our customers. In Nature Medicine authors, including Dr. Anthony Fauci, published an article detailing how the human immune system reacts when HIV treatment is interrupted.

I'm excited by the progress our team has made this quarter and throughout the course of the year as we continue to establish ourselves as a leading cell analysis solutions company. As we push forward a cadence of new products and applications, we are deeply focused on providing a complete cell analysis solution to our customers.

We look forward to continuing to provide our novel FSP platform to these customers as they push the bounds of scientific discovery. With that I will now turn the call over to Patrik for more details around our financials.

Thanks, Wenbin. Total revenue for the first quarter of 2021 was $38.9 million, a 27% increase over the fourth quarter of 2020. This increase was driven by instrument sales during the quarter and supported our full-year revenue growth of 38% in 2021. We also saw an increase in contract service sales during this year, which we expected to continue as more instruments shift from warranty coverage and service contracts.

Gross profit was $23.6 million for the fourth quarter of 2021, an increase of 22% compared to a gross profit of $19.4 million in the fourth quarter of 2020. Gross profit margin was 61% in the fourth quarter of 2021 compared to 64% in the fourth quarter of 2020.

Non-GAAP gross profit margin in the fourth quarter of 2021 was 63% compared to 64% in the fourth quarter of 2020 after adjusting for stock-based compensation expense and amortization of acquisition-related intangibles.

Operating expenses were $22.3 million for the fourth quarter of 2021, a 92% increase from $11.6 million in the fourth quarter of 2020. The increase was primarily due to expenses to support continued growth of the business, including costs related to operating as a public company.

Research and development expenses were $7.1 million for the fourth quarter of 2021 compared to $4.4 million for the fourth quarter of 2020. Sales and marketing expenses were $8.3 million for the fourth quarter of 2021 compared to $4.6 million for the fourth quarter of 2020.

General and administrative expenses were at $6.9 million for the fourth quarter of 2021, an increase from $2.6 million in the fourth quarter of 2020. Income from operations in the fourth quarter of 2021 was $1.2 million compared to $7.9 million in the fourth quarter of 2020. Net income in the fourth quarter of 2021 was $0.3 million compared to $5.6 million in the fourth quarter of 2020.

Non-GAAP net income in the fourth quarter of 2021 was $3.9 million compared to $5.9 million in the fourth quarter of 2020, after adjusting for stock-based compensation expense, acquisition-related amortization, and other nonrecurring expenses. This result reflects our focus on additional investments in our operation to support our anticipated revenue growth in 2022 and beyond.

Now turning to our guidance, we expect full-year 2022 revenue to be in the range of $160 million to $168 million, with a quarterly cadence expected to be in line with the historical seasonality of our business.

Before I conclude I would like to touch on some assumptions embedded in our 2022 guidance. As Wenbin said, we are entering 2022 in a strong position. Further, our guidance does not currently anticipate another COVID wave, yet we will remain ready from an operational standpoint to handle any customer or installation challenges should they arise.

Finally, in line with our objectives, we are planning to increase our capital and operating investment in sales, marketing, and research and development this year by 55% to 60% in the aggregate to support our continued growth initiatives. We remain well-positioned to maintain our profitability and achieve our long-term growth targets and objectives.

We are also pleased with our strong balance sheet, including a solid cash position and no debt, underpinning our healthy organization. We will continue to invest in our core business as it relates to new projects and innovation while remaining opportunistic in an M&A environment and focusing on goals in all key areas. With that, I will turn it back over to Wenbin.

Thanks, Patrik. Cytek has continually demonstrated our commitment to developing tools to advance the next generation of cell analysis. I would like to express my deep gratitude for the team we have here at Cytek, their excellence and shared belief in this important mission drives our progress.

Over the past year we have successfully executed on our strategy of growing the business while remaining profitable and investing in our enterprise for continued growth. Through product launch and expansion of our offerings, along with strategic investments in R&D and the Tonbo acquisition, we have positioned our portfolio for continued future growth.

Our robust established installed instrument base, complemented by a growing contribution of recurring revenue, and supported by our solid financial position, will drive our success in 2022 and beyond.

Going forward our team will continue on our path to become the full [service] analysis solutions partner of choice for players throughout the life sciences field as we leverage our novel technology to continue to drive innovation, transform the cell analysis market and enable researchers to make significant scientific advances in key areas of medical discovery. With that we will now open the call up for questions. Operator?

(Operator Instructions). Tejas Savant, Morgan Stanley.

So, perhaps one to kick things off for Wenbin -- and, [Allen], feel free to chime in as well. So, just curious about, in light of some of these pandemic headwinds in the macro environment here, some of you are instrument focused peers, particularly those with a presence in academic labs, have talked about a little hesitancy in CapEx purchases and delays in the purchasing process.

Have you seen any impact at all in terms of the elongation of your flow cytometer replacement cycle on an industrywide basis? And if not, why do you think that's the case especially for Cytek?

That's a good question in fact. It's dependent on where we are talking about. And overall we don't see much impact in the US and Europe, but we do see some delay, especially on the installation and service side for the countries in APAC region. And I think part of the reason why we don't really see much, in fact, here is because, as you can see from the number of locations, and there's a number -- for those related to COVID, right, a lot of those applications are actually COVID-related which actually need our tools.

Got it, that's helpful. And then, Wenbin, can you provide a little bit of color on just the traction for your cell sorter? If you can give us some commentary around just the demand you are seeing for bundled instruments. And what you're seeing in terms of the mix of new versus existing Cytek customers as well as perhaps multiunit placements here, that would be helpful.

The deployment of our cell analyzers actually had prepared for the need for our cell sorters. As many customers, when they start to use our tools and start to study and -- they actually -- many times they would like to look further deep into the cells they have looked at in their situation. They actually would like to use the same sorter, because our sorter allows the compatibility in terms of panel they have used.

So, we can transfer the panel -- the same analyzers and cells -- I'm sorry, the cell sorters freely back and forth. That basically just saves a lot regarding to the kind of demand for Cytek sorter technology as well.

Now in terms of existing customers as well as new customers, as you can imagine, some are our existing analyzer customers, but there are also customers who actually would like to buy the tools in pairs. In that case those are the new customers.

Got it, that's helpful. And then as we look at your guide here of $160 million to $168 million, perhaps this is best addressed by Patrik here. Just wanted to get a sense of what's embedded at the low versus the high end of the range. Is it just incremental supply chain pressures and COVID creating site access issues and installation delays at the low end? Or is there something else that you're factoring in as you think about that range?

The way we look at the guidance is the low and the upper end. We have a number of instruments that we are planning to move next year, obviously. It's also reagents and service revenue. So, it's a combination of these three components that gives us the lower end and the high end. We feel very good with the lower end and we also see some positive on the upper end.

Matt Sykes, Goldman Sachs.

This is Dave on for Matt. Congrats on the quarter. Following up on the outlook for the year, any additional color you can provide on the instrument versus consumable mix and within instruments what you are expecting?

Yes, so the expectation here is we see the large majority will be instrument, yet with a growing base of reagent. And also expecting the service revenues to be slightly stronger than last year. So, it's really still driven by instruments, the analyzer, the cell sorter, followed by the reagent and then other [service] revenue.

Got it. And could you tell us more about the puts and takes affecting operating margin? I appreciate the color on R&D. Any additional color on the levers you're pulling in SG&A?

So, you're talking about gross profit margin?

Operating margin, but gross profit margin as well.

Yes. So, when looking at this year, we are continuing to invest in all the key areas, sales, marketing, R&D, to help us for the future. And that's also going to help us better manage our overall business in the years out past 2022.

David Westenberg, Piper Sandler.

So, congrats on the quarter. So, I want to first maybe talk about some of the reagents and some of the highest [plex] users. Can you talk about their adoption cycle? What kind of -- or how fast they get ramped onto bigger and bigger panels in terms of the reagents? And can we extrapolate some of that behavior to maybe some future customers as you are getting more and more mix shifts into reagents?

As you can see, reagents is a new business to us. And our early customers pretty much have leveraged whatever available on the open market. And then, for those customers, certain reagents are already designed into their application. I think from Cytek's perspective, we are now getting to this space and start to work with our customers to optimize their panels, leveraging the cFluor reagents as well as reagents from our Tonbo acquisition.

So, this may take some time, but we do see great potential out there, especially the kits we have developed, including our 14 color and 25 color amino profiling, those kind of kits. And actually especially the 25 color kit really helps customers to alleviate their type of research workload and enable them to really get onto those sophisticated, complicated panels and get on to the work they want to look at.

So, I think we see great potential for those type of kits we are developing right now. This is also going to continue to be the focus of the company on our R&D side. I expect we'll have more and more of those type of kits coming out.

Appreciate the color there. And this question has come up a lot from investors in terms of a competitor's launch into a new cell sorter. And I believe this competitor is the number one company in terms of placements of flow cytometers just generally.

Do you anticipate any impact from that new flow cell sorter in terms of your instrument placements on the year? Or do you still feel you really do have such a competitive advantage in terms of your technology that it probably won't hesitate any -- or customers won't hesitate to continue to buy your products?

Yes, we have noticed the preannouncement of the tools they are going to launch. But until we have seen it on the market on the customer side, it's very difficult for us to express the kind of impact. But we are paying attention to it.

And then on the last question in terms of your TAM expansion, I think you've given color [on the patent] in the past. You have an $8 billion TAM, this could expand over the years to I think it was $23 billion. Can you give us some of the proof markets that might be near-term TAM expanding markets that you're seeing with customers maybe today and over the next couple years? And I'll stop there. Thank you.

We actually just mentioned about the five areas of publications. Actually pretty much summarizes the type of applications our tools today are supporting. So, certainly this is just kind of a focus area, but there are more beyond that.

Max Masucci, Cowen.

This is Stephanie on for Max. Thanks for taking the question and congrats on a great quarter. Just wanted to follow up on some of the questions on the reagents business. So, it's been just over four months since you launched your 25 color immunoprofiling assay. How has the demand for this assay been ramping? And are you seeing most of your customers order the 18 color kit on a standalone basis? Or are most ordering the assay along with the 7 reagents provided by BioLegend?

I think mostly for both, A plus B parts.

Okay, great. Thanks for that. And then as a follow-up, so if you compare some of your earlier customer wins between 2017 and 2020, to the customers you've won over the past year, are you seeing any difference in their willingness to adopt your internally developed reagents and reagent kits, versus sticking with their original third-party reagent provider?

In fact, we do see a lot of interest in the kits we have developed, in fact. And our team has been very busy and operating in trying to deliver those kits to meet our customer demand.

Okay, great, thank you. And then if I could sneak in one more. So, I'm just curious, has your relationship with BioLegend helped to accelerate your pace of new customer wins or expanded your customer reach? And has your relationship with BioLegend improved your ability to access any new customers?

BioLegend is one of the reagent partners we have been working with actually throughout the lifecycle of our product in its launch. And we, in fact, have been working very closely with quite a few -- several reagent partners as well. As you can clearly see, because the technology -- we have really enabled the use of a lot of various reagents and it definitely helps on both ends for us as well as our reagent partners.

Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, everyone, for your participation. You may now disconnect. Good day.