Cytek Biosciences Inc (CTKB) 2021 Q3 法說會逐字稿

Good day and thank you for standing by and welcome to Cytek Biosciences' third-quarter 2021 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your host today, Alexander Khan, Investor Relations. Please go ahead.

Thank you. Earlier today, Cytek Biosciences released financial results for the quarter ended September 30, 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 the federal securities laws, including statements regarding Cytek's business plans, strategies, opportunities, and financial projection. 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 a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliations to the most directly comparable GAAP financial measures 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, November 8, 2021. With that, I would like to turn the call over to Wenbin.

Welcome, everyone, to our first earnings call as a public company. I want to start by thanking the incredible Cytek team. This is an exciting milestone for our company made possible by their relentless pursuit of excellence. On today's call I will start with a brief overview of our company. Next I will provide an overview of our progress for the quarter. 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 approach to our Full Spectrum Profiling, or FSP, platform. Our FSP platform, which includes instruments, reagents, software and application services, utilizes the full spectrum of [fluorescence] signatures to deliver high resolution, high content and high sensitivity cell analysis.

While our flow cytometry is a widely used tool for single cell analysis, conventional flow cytometry and the early approach to spectrum flow cytometry have been challenged as 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 significant technical expertise required to operate their systems has really limited the vast cell analysis field.

Our patented FSP technology optimizes sensitivity and accuracy through its novel optical and electronic design that utilizes an innovative method of light detection and distribution. This novel technological application allows us to adjust 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 technology has been validated by the more than 300 peer-reviewed publications, 970 instrument placements and a growing number of applications. To highlight a recent publication of note, two weeks ago a paper was published in science exploring human immune response to the COVID mRNA vaccine. The researchers used our Aurora instrument to collect data on immunological cells after low dose mRNA vaccination.

With the use of our platform, based on how the vaccine improves (inaudible) and functional protection as well as biological mechanisms involved, just one example of the exciting data being generated off our technology. As I mentioned earlier, we provide our customers with an end-to-end solution consisting of instruments, reagents, software and application services.

We launched our 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, ultra-sensitivity analysis, and the intuitive workflows that work to address the unmet needs of our customers. These instruments are efficient [on] contact, making them well suited for clinical research.

In October 2020, we launched our reagents to capitalize upon the (inaudible) opportunities derived from the installed base we have generated. Our 14 color cFluor immunoprofiling commercial kit and the 14 color optimized monoclonal immunofluorescence demonstration panel provides users with ready to use protocols and antibodies, simplifying the workflow from sample preparation to data analysis.

This year we began shipping our first orders, which allows researchers to isolate living cell populations from lower to higher complexity panels beyond the 40 biomarkers, enabling deeper downstream genomics and proteomic analysis. While our cell analyzers have been strong drivers of our revenue growth to date, we expect that reagents and cells sorters will play an important role in driving our revenue growth over the next three to five years.

Our commercial strategy is sequential. Established customers create breakthroughs, attracting the attention of pharmaceuticals who develop their proof of concept further, and then ultimately hand it off to CROs who industrialize [those] protocols. This eventually leads to clinical applications.

This quarter we placed 115 instruments, bringing our total installed base to 970 instruments. 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 industrial leaders to address their particular scientific question by optimizing reagents and protocols 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 markets for our FSP platform. Our customer base includes over 175 biopharma customers, including all of the top tier vaccine developers, more than 10 CROs and a large number of academic institutions, including all of the universities in the top 10 list having medical schools as ranked by QS World University launchings (sic - Rankings).

We are excited by the growing enthusiasm around our products and the value our customers are seeing relative to competing technologies for high-dimensional cell analysis beyond the 30 parameters.

In line with our commitment to provide researchers with a complete cell analysis solution and a jumpstarting scientific discovery, in October of this year we launched a new 35 color immunoprofiling essay and thereafter acquired the reagent business of Tonbo Biosciences, which we will discuss further shortly. Both additions will further strengthen our position as a full solution provider to our customers.

Our 25 color immunoprofiling assay includes reagents and tools optimized for use with our Aurora full spectrum flow cytometer. We are creating a new normal for flow cytometry by making such a high dimensional panel available as a standardized kit. This provides researchers with a ready to use solution for identifying major human immune subpopulations which play important roles in the innate and adaptive immune response to rare diseases.

(inaudible) kits function as the backbone of the cell analysis workflow upon which users can build through the addition of more markers or the expansion of the panel. By providing our customers with pre-optimized panels, we allow them to avoid time consuming, laborious and costly panel design and optimizations.

Simplifying this workflow offers researchers a much more efficient way to obtain their data of interest, thereby shortening the time from biological question to answer and, in this case, hopefully advancing the development of vaccines, personal immunotherapies, and cures for cancer and infectious diseases.

Additionally, we announced the acquisition of Tonbo Biosciences' extensive portfolio of life science research reagents for flow cytometry. The addition of Tonbo reagent offerings, which cover application areas of immunology, of process, and immunoprofiling, will enable Cytek to meet customer needs in protein and cell analysis research. And both high quality, high performance reagents will be a natural complement to our cFluor family of proprietary reagents.

I'm excited by the progress our team has made this quarter as we continue to establish ourselves as a leading cell analysis solutions company. As we push forward the 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 would now turn the call over to Patrik for more details around our financials.

Thanks, Wenbin. Total revenue for the third quarter 2021 was $34.4 million, a 37% increase over the third quarter of 2020. This increase was primarily driven by an increase in product revenue due to higher unit sales of our Aurora, Aurora Cell Sorter and Northern Lights systems.

Gross profit was $21.4 million for the third quarter of 2021, an increase of 37% compared to a gross profit of $15.6 million in the third quarter of 2020. Gross profit margin was 62% in the third quarter of 2021 as compared to 62% in the third quarter of 2020. Adjusted gross margin in the quarter was 64% as compared to 62% in the third quarter of 2020 after adjusting the stock-based compensation expense.

Operating expenses were $18.3 million in the third quarter of 2021, a 106% increase from $8.9 million in the third quarter of 2020. Over 50% of this increase came from R&D and sales and marketing expenses. Research and development expenses were $6.1 million for the third quarter of 2021 as compared to $3.4 million for the third quarter of 2020. The increase in R&D expenses was primarily due to the expansion of our R&D team. We plan to continue to invest in R&D going forward as we continue to develop new products and enhance existing instruments and technologies.

Sales and marketing expenses were $6.3 million for the quarter as compared to $3.8 million for the same quarter last year. The increase in expense was primarily due to headcount and personnel related expenses, as well as an increase in advertising and marketing activities. We expect our sales and marketing expenses to increase as we hire additional sales and marketing personnel, expand our sales support infrastructure, and invest in our brand and product awareness to further penetrate the United States and international market.

General and administrative expenses were $5.9 million for the third quarter of 2021, an increase from $1.7 million in the third quarter of 2020. The increase of $4.2 million in general and administrative expenses was primarily due to the cost of becoming a public company as well as infrastructure service to support the growth of our overall operations.

Income from operations in the third quarter of 2021 was $3.1 million compared to $6.7 million in the third quarter of 2020. Net income in the third quarter of 2021 was $1.6 million as compared to net income of $6.5 million in the third quarter of 2020. We ended the quarter with approximately $376 million in cash and cash equivalents. With that, I will turn it back over to Wenbin.

Thanks, Patrik. Over the last few years, 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.

Going forward our team aims to become the full sales analysis solutions partner of choice for players throughout the life science field as we leverage our novel technology to continuously 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). Max Masucci, Cowen and Company.

The first one, is Tonbo Biosciences generating revenues from the sale of their reagents? And if so, how should we think about any contribution in Q4? And then curious if you're acquiring any sales reps from the company as well.

Thanks for the question. So, Tonbo Biosciences will be a small [accretion] to our revenue in Q4. And yes, we're adding two sales reps from Tonbo.

Okay, great. And then just on the quarter, revenues came in above our estimate. I'm just trying to understand if the beat came from a higher mix of Aurora placements or higher than expected reagent sales for those that are internally developed.

Yes, so the beat comes from a better mix of the instruments we sold in Q3.

Tejas Savant, Morgan Stanley.

This is Edmund on for Tejas. Thanks for taking the questions. I was wondering if you guys can talk a little bit more about the traction of your Aurora cell sorter. Specifically the demand that you're seeing in the market, is this meeting up to your expectations?

And for some of these are emerging platforms, they have an expected six- to nine-month window for users to ramp up and optimize their workflow, run some pilot experiments before they start doing larger scale experiments.

I noticed you guys said in your prepared remarks the management of your platform is an expedited onboarding process. So, I was wondering if you can talk about your expectations there in terms of how long it will take people to get used to the cell sorter before we actually see a significant ramp-up in consumable [posters].

You are correct actually. Typically for a new instrument, normally it takes some time for the training, to get used to the workflow, and to establish a process. Then they start to do their own experiments. This is basically what's going on at present. And the market continues to welcome our product and traction is going very well for our sorters. So, we'll continue to see more and more sorters being distributed and appraised over the next few quarters.

Got it. That was very helpful. And then I guess a follow-up question would be -- it seems like your instruments, they have come a little shorter than what we were expecting in terms of placements. I was wondering if you could speak to the operating environment that you guys are seeing? Have you seen any sort of increased logistics pressures or longer lead times to deliver the instruments to your customers? Or in terms of maybe supply chain, are you seeing any pressures there?

First, in terms of the number of instruments, in fact, it basically is a mix of products. In fact, we are seeing more high-end instruments coming from our customers. Now in terms of the supply chain logistics, yes, indeed we are seeing various kind of issues over time, which is the same as others right now. However, we have been trying to work through those problems and we don't see any (inaudible) short-term impact yet.

(Operator Instructions) David Delahunt, Goldman Sachs.

this is Dave on for Matt. Thanks for taking the questions. Congrats on the strong quarter. Could you give us any additional color on what you're seeing in the consumables reagents market and what there is you're seeing the most strength?

So, looking at the -- our full revenue we see the instrument revenue remains the strongest for Cytek. The second largest would be service revenue and then following with the reagent revenue. And we're not going to expand too much on the reagents on the ramp. We might do that next year, but not at this point. Overall, the revenue for the quarter on the instrument was in line with our expectation. We had a better mix overall.

Also we do see the Tonbo acquisition is going to help us on the revenue side as well there.

And what are you seeing in the market in terms of the supply chain tightness we've seen? Any thoughts on pricing as it relates to inflation and your strategy there?

No, we do see actually because of the shortage of the parts out there, especially the IC, and there's some price pressure, but internally we have been working through this to improve our efficiency. And also leveraging our international distribution to really help us adjusting such issues.

And I'm showing no further questions. This concludes today's conference call. Thank you for participating, you may now disconnect.