Yahoo Finance Cytek Biosciences, Inc. (NASDAQ:CTKB) Q1 2024 Earnings Call Transcript
Cytek Biosciences, Inc. (NASDAQ:CTKB) Q1 2024 Earnings Call Transcript May 12, 2024
Cytek Biosciences, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. My name is Liz, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Cytek Biosciences First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Paul Goodson, Investor Relations. Please go ahead.
Paul Goodson: Thank you, operator. Earlier today, Cytek Biosciences released financial results for the quarter ended March 31, 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@cytekbio.com. Joining me today from Cytek are Wenbin Jiang, CEO; and newly appointed CFO, Bill McCombe. 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 projections. These statements are based on the company's current expectations and inherently involve significant risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release Cytek issued today and in Cytek's filings with the SEC. This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation 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 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, May 8, 2024.
Before Wenbin speaks, I would like to mention that Cytek will be participating in a variety of industry and academic conferences, meetings and seminars throughout 2024. While these are primarily geared to the scientific community, they may offer an opportunity to interact with uses of our technologies to learn by Cytek instruments are so highly valued by our customers. There is a cost to attend most events, and we have a limited number of spaces to accommodate members of the financial community. So if you are interested in attending, please contact me. With that, I would like to turn the call over to Wenbin.
Wenbin Jiang: Thanks, Paul. Welcome, everyone, and thank you for your interest in Cytek. On the call today, I will discuss our performance for the first quarter of 2024 and the progress achieved on our strategic objectives to drive sustainable growth and profitability. Then I will turn the call over to Bill for a more detailed look at our financial results and our outlook for 2024 before we open it up for Q&A. Our strategic priorities in 2024 are centered on strengthening our competitive position with an eye toward improving operational leverage. We are focused on driving revenue growth, margin expansion and the capital efficiencies. These objectives are part of our balanced business strategy to deliver sustainable profitability and maximize free cash flow.
Turning to specifics, in our first quarter revenue results, we achieved $44.9 million, representing growth of 21% year-over-year. Organic revenue grew 11%, excluding acquisition-related revenue of $7.6 million in the first quarter of 2024. We began to see improvement in organic revenue growth in the fourth quarter of 2023, which we were pleased to see continue into the first quarter. Total organic revenue grew 11% in the first quarter, driven by strong growth in our services revenue from our increasing installed base. Organic revenue growth was also driven by continued growth in our products revenue. Longer term, we expect our recurring services and the related revenue will be strong growth drivers for Cytek. In the first quarter, we expanded our global footprint with 99 organic Cytek instruments sold, reaching a total installed base of 2,247 instruments.
This number does not include the thousands of installed Amnis and Guava instruments. Ordering trends in the first quarter for both organic and the inorganic products were largely within our expectations, but we submit activity levels by region. Specifically, we experienced increased strength across Europe and China where Cytek FSP products are also becoming well established as a market leader in flow cytometry. We are seeing customers gradually returning to their level of buying patterns in these regions. However, in the US. and APAC, excluding China, we continued to see some elongated sales cycles. In the first quarter, we continued to make strategic investments to increase the efficiency and the performance of our operations. In March, we announced that we opened a new 50,000 square foot facility in Wuxi, China to meet the rising global demand for our cutting edge cell analysis solutions.
With this facility, we are able to increase our manufacturing capacity and foster unique vendor relationships to drive operational efficiencies and to further our competitive advantage over industry peers. Turning to bioinformatics. Our primary goal is to enable our customers to streamline their experiment workflow through our software tools, which drive adoption and the utilization of our cell analysis solutions. One way we track our success in bioinformatics is through user engagement and demand for our core bioinformatics offerings, the Cytek Cloud. I'm pleased to report that we now have over 8,500 users, representing an average of more than three Cytek Cloud users per installed Cytek FSP instrument. As a reminder, Cytek Cloud's digital ecosystem offers a comprehensive suite of special panel design tools seamlessly integrated into a centralized platform, forming a unified ecosystem.
Our cutting edge solution empowers researchers to prepare and optimize their experiments remotely, streamlining the process from panel design to data acquisition. We are also pleased to share that just this week at the CYTO conference, the primary flow cytometry conference worldwide, we launched our special panel software package through an early access program. Special panel is an intelligent design algorithm that automatically designs high-quality panels for optimal mark resolution and is optimized specifically to use onsite at FSP instruments. We expect the special panel tool to make size of instruments even easier to use and will save researchers time and money by allowing a broader range of reagents to be selected automatically for their design panels to achieve biological objectives with optimized data quality.
We recently preannounced this solution on our social media channels, and we encourage you to follow the discussion there for more information. On the clinical front, we have previously reported our success at obtaining the IVDR compliance for our single-laser, 6-color TBNK panel in the EU market. I'm pleased to report that just last week, our application for the 6-color TBNK panel on our single-laser NL-CLC instrument was approved in China. This approval is unique to Cytek and is an important development as previous regulatory approvals for TBNK analysis have been based on using two laser instruments. Using Cytek's one laser system will provide important advantages to our users in the form of lower cost, more reliable operations and the more consistent results to support laboratory standardization.
Overall, the start to 2024 was encouraging with a resumption of organic growth and the improved customer purchasing patterns, trends that we began seeing in the fourth quarter that continued through the balance of the first quarter. It is a testimony to our position as an industry leader in comprehensive cell analysis solutions and the clear underlying demand for our products. We are purpose filled to advance next-generation cell analysis with our end-to-end platform, addressing the direct needs of our customers to advance their research, and we believe this continues to be available and important differentiator for Cytek. With that, I will now turn the call over to Bill for more details around our financials.
William McCombe: Thanks, Wenbin. Before reviewing more details around our financials, I wanted to express my gratitude for the opportunity to join this innovative company and play a meaningful role in charting the next chapter of Cytek's continued success. I believe there is tremendous growth potential at Cytek, and I look forward to working alongside this team to drive sustainable growth and long-term value creation. Total revenue for the first quarter of 2024 was $44.9 million, a 21% increase over the first quarter of 2023. The first quarter of 2024 included $7.6 million of revenue acquired in the Luminex transaction, which closed on February 28, 2023, and contributed $3.5 million of revenue to that quarter. Organic revenue, which excludes revenue from the acquired Luminex business, was $37.3 million in the first quarter of 2024, an increase of 11% compared to the first quarter of 2023.
Beginning in the second quarter and going forward, the acquired Luminex business will have been owned for the full prior year quarter, so we will no longer break out this revenue separately. Gross profit was $23 million for the first quarter of 2024, an increase of 9% compared to a gross profit of $21 million in the first quarter of 2023. GAAP gross profit margin was 51% in the first quarter of 2024 compared to 57% in the prior year quarter. Inventory adjustments of a one-time nature arising from the integration of the Luminex inventories into the Cytek system contributed 2% of the margin deterioration. Higher overhead expenses, which were lower than the fourth quarter of 2023 but higher relative to revenue in the first quarter, drove the remainder of the margin decline.
We expect overhead expenses will remain fairly constant over the balance of the year and will gradually decline as a percentage of revenue. Adjusted gross profit margin, which excludes stock-based compensation expense and amortization of acquisition-related intangibles, was 55% in the first quarter of 2024 compared to 59% in the prior year quarter. Operating expenses were $33.7 million for the first quarter of 2024, increasing 1.6% from $33.2 million in the first quarter of 2023, driven primarily by an increase in headcount and personnel-related expenses. Notably, operating expenses increased at a substantially lower rate than our revenue growth in the same period, demonstrating our focus on operating leverage. Research and development expenses were relatively flat at $9.8 million for the first quarter of 2024 as compared to $10 million for the prior year period.
Sales and marketing expenses were $12.5 million for the first quarter of 2024 as compared to $11.1 million for the prior year period. The increase of $1.4 million was primarily due to increased headcount and related expenses. General and administrative expenses were $11.4 million for the first quarter of 2024 as compared to $12.1 million for the prior year period. The decrease of $0.7 million was driven by acquisition-related legal expenses in the prior year period not reoccurring, offset by higher consulting expenses. Loss from operations was $10.7 million for the first quarter compared to a loss from operations of $12.2 million for the first quarter of 2023. Net loss in the first quarter of 2024 was $6.2 million as compared to $6.8 million in the prior year.
This was primarily due to a lower loss from operations, offset by lower other income, which was due to unrealized foreign exchange losses. Adjusted EBITDA, which excludes stock-based compensation expense and foreign currency impacts, for the first quarter of 2024 was a reduced loss of $0.7 million compared to a loss of $2.5 million in the first quarter of 2023. This was due to higher revenue and gross profit. We are committed to continuing to improve our profitability going forward by driving revenue growth and controlling costs. Cash from operations for the first quarter of 2024 was a positive $4 million, and total cash and marketable securities increased by $7.7 million in the quarter to $270.4 million. With healthy cash reserves, no meaningful debt and positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth initiatives.
Now turning to our outlook for the full year 2024, today, we are reiterating our 2024 revenue guidance, which we expect to be in the range of $203 million to $213 million, representing 5% to 10% growth over our 2023 total revenue, and this assumes no change in currency exchange rates. We started the year with the first quarter results showing a continuation of improvements in ordering trends which support our full year outlook. As we look ahead, we continue to expect modest growth across all our product and service lines, with most of that growth being weighted towards the second half of the year, consistent with historical spending patterns of our customer base. We expect that our 2024 revenue growth, combined with our ongoing cost control efforts, will position us to report positive GAAP net income for the full year 2024.
With that, I will turn it back over to Wenbin.
Wenbin Jiang: Thanks, Bill. I want to express my gratitude to our exceptional Cytek team for their dedication to driving our mission forward. It is their unwavering belief in our mission, coupled with the effective execution of our business strategy, that positions Cytek as a frontrunner in advancing the next generation of cell analysis. The increasing application of cell analysis in fields across health care, including immuno-oncology, infectious diseases and immunology has led to rising need for advanced cell analysis solutions. We are uniquely positioned to serve these attractive end markets as an industry leader in next-generation cell analysis solutions, underpinned by long-term recurring growth drivers in services and the reagents.
I'm excited for our road map ahead to address this demand as we build competitive and the competitive solutions and empower scientists directly with the tools and the support they need to advance their research. I want to thank everyone for joining today's call, and we will now open it up for questions. Operator?
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