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00:06 Good day, and thank you for standing by, and welcome to Cytek Biosciences third quarter twenty twenty one earnings conference call. At this time, all participants are a listen only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.
[Operator Instructions] 00:31 I would now like to hand the conference over to your host today, [indiscernible], Investor Relations. Please go ahead..
00:40 Thank you. Earlier today, Cytek Biosciences released financial results for the quarter ended September thirty, twenty twenty one. 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.
01:08 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 involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. 01:34 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.
02:04 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 to high-sensitive information and is accurate only as of the live broadcast, November eight, twenty twenty one.
02:25 With that, I would like to turn the call over to Wenbin..
02:31 Thanks, [indiscernible]. And welcome everyone to our first earning 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. 02:51 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 sale analysis solutions company advancing the next generation of sell analysis tools by leveraging novel technical approach to our Full Spectrum Profiling or FSP platform.
03:27 Our FSP platform, which includes instruments, regions, software and application services utilizes the full spectrum of fluorescent signal to deliver higher resolution, high content, and the high sensitivity sale analysis. 03:47 While our flow cytometry is widely yields tool for single sale analysis.
Conventional flow cytometry and early approach to spectro flow cytometry have been challenged as they are only able to detect a few markers in a single tube.
04:05 Their limited [indiscernible], sub-optimal evolution, lower throughput high possible performance and the significant technical efficacies required to operate their systems has really limited the advanced sale analysis fields.
04:23 Our patented FSP technology optimizes sensitivity and accuracy through its novel optical and electronic design that utilize an innovation method of life detection and the 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 the increased efficiency, all at a lower cost for performance.
04:58 Our technology has been validated by the more than three hundred share reviewer publications. Nine hundred and seventy instrument placements and a growing number of applications. 05:13 To highlight a recent publication of note, two weeks ago, a paper world was published in science exploring human immune response to the COVID mRNA vaccine.
The [indiscernible] used our overall instrument to collect data around demonological sales after low dose mRNA vaccination. 05:36 With the use of our platform, they found how the vaccine includes durable and functional protection, as well as the biological mechanism involved. Just one example of the exciting data being generated of our technologies.
05:57 As I mentioned earlier, we provide our customers with an end-to-end solution consisting of instruments, regions, software, and application services. We launched our flagship instrument the aurora in twenty seventeen. A year later, we launched the northern lights instrument and entry level product.
06:23 Both instruments are sale analyzers of a high throughput, our sensitivity analysis, and the intuitive workflows that work to address the unmet needs of our customers. These instruments are efficient and our compact, making them well suited for clinical research.
06:46 In October twenty twenty, we launched our [agents] [ph] to capitalize upon the recuring revenue opportunities derived from the installed base we have generated.
Our working currency for immunoprofiling commercial kit and the fully optimized [indiscernible] demonstration panel provide users with ready to yield protocols and antibodies, simplifying the workflow from sample preparation to data analysis.
07:21 This year, we began shipping our Cell Sorters, which allows researchers to isolate the leading sale operations from lower to higher complexity panels beyond the [indiscernible] biomarkers, enabling deeper downstream genomics and the proteomic analysis.
07:41 While our sale analyzers have been strong drivers of our revenue growth to date, we expect that the agents and the Cell Sorters will play an important role in driving our revenue growth over the next three to five years. 08:00 Our commercial strategy is sequential.
Academic customers create [freight flows], attracting the attention of pharmaceuticals, who developed that proof of concept further. And then ultimately, handed off to CROs who en-visualized those protocols. This eventually leads to critical applications.
This quarter will replace [indiscernible] instruments bringing our total installed base to nine hundred and seventy instruments. 08:37 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 adjust their particular scientific question by optimizing the agents and the protocols on our instrumentation. This often creates footprint for other customers to build upon.
09:10 By collaborating with customers to create these novel reagent panels or kits, we are continually opening new applications and the markets for our FSP platform.
Our customer base includes over one hundred twenty five biopharma customers, including all of the top tier vaccine developers, more than ten CROs and a large number of academic institutions, including all of the universities in the top ten list having medical schools as [indiscernible] University launching.
09:48 We are excited by the growing [indiscernible] around our products, and the value, our customers are seeing relative to competing technology for high [indiscernible] sale analysis on the thirty parameters.
10:05 In line with our commitment to provide researchers with a complete sale analysis solution and the accounts starting scientific discovery in October of this year, we launched a new twenty five color immunoprofiling assay and thereafter acquired the reagents 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. 10:36 Our 25-color immunoprofiling assay includes reagents and tools, optimized for use with our overall full special flow cytometry. 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 sub populations, which pay important roles in innate and adapting immune response to various diseases.
11:12 During [indiscernible] function as the backbone of the sale analysis workflow, upon which users can build the flow, the addition of more markers or like expansion of panel. By providing our customers, we'll pre-optimize the panels, we allow them to avoid the time consuming [indiscernible] and a costly panel design and optimizations.
11:35 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 the cures for cancer and infectious diseases.
11:59 Additionally, we announced the acquisition of Tonbo Biosciences’ extensive portfolio of life science research regions for flow cytometry. The addition of Tonbo reagent offerings, which cover application areas of [indiscernible] and the immune profiling will enable Cytek to meet customer needs in protein and a sale analysis research.
12:26 Tonbo is a high quality high performance regions 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 sale analysis solutions company.
12:47 As we push forward, our cadence of new products and applications, we are deeply focused on providing a complete sale analysis solution to our customers. We look forward to continuing to provide our novel FSP platform to these customers as they push the bonds of scientific discovery.
13:08 With that, I would now turn the call over to Patrik for more details around our financials..
13:17 Thanks Wenbin. Total revenues for the third quarter twenty twenty one was thirty four point four million dollars, thirty seven percent increase over the third quarter of twenty twenty. 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.
13:45 Gross profit was twenty one point four million dollars for the third quarter of twenty twenty one, an increase of thirty seven percent, compared to a gross profit of fifteen point six million dollars in the third quarter of twenty twenty.
Gross profit margin was sixty two percent in the third quarter of twenty twenty one, as compared to sixty two percent in the third quarter of twenty twenty. 14:12 Adjusted gross margin in the quarter was sixty four percent as compared to sixty two percent in the third quarter of twenty twenty, after adjusting the stock based compensation expense.
Operating expenses were eighteen point three million dollars in the third quarter of twenty twenty one, a hundred and six percent increase from eight point nine million dollars in the third quarter of twenty twenty. 14:41 Over fifty percent of this increase came from R and D and sales and marketing expenses.
Research and development expenses were six point one million dollars for the third quarter of twenty twenty one as compared to three point four million dollars for the third quarter of twenty twenty. The increase in R and D expenses was primarily due to the expansion of our R and D team.
15:08 We plan to continue to invest in R and D going forward as we continue to develop new products and enhance existing instruments and technologies. Sales and marketing expenses were six point three million dollars for the quarter as compared to three point eight million dollars 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.
15:41 We expect our sales and marketing expenses to improve 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 the international market.
16:00 General and administrative expenses were five point nine million dollars for the third quarter of twenty twenty one, an increase from one point seven million dollars in the third quarter of twenty twenty.
The increase of four point two million dollars 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.
16:28 Income from operations in the third quarter of twenty twenty one was three point one million dollars, compared to six point seven million dollars in the third quarter of twenty twenty.
Net income in the [third] [ph] quarter of twenty twenty one was one point six million dollars as compared to net income of six point five million dollars in the third quarter of twenty twenty. We ended the quarter with approximately three seventy sixty million dollars in cash and cash equivalents. 17:02 With that, I will turn it back over to Wenbin..
17:06 Thanks Patrik. Over the last few years, Cytek has continually demonstrated our commitment to developing tool to advance the next generation of sale analysis. I would like to express my deep gratitude for the team we have here at Cytek, the excellence and to share the [indiscernible] in this important mission drives our progress.
17:31 Going forward, our team aims to becomes the full sales analysis solutions partner of choice for players throughout the life science sales as we leverage our novel technology to continue to drive innovation, transform the sale analysis market, and enable researchers to make significant scientific advances in key areas of medical discoveries.
17:56 With that, we will now open the call for questions. Operator..
18:02 Thank you. [Operator Instructions] And our first question comes from Max Masucci from Cowen and Company. Your line is now open..
18:24 Hi, Thanks for taking the questions.
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?.
18:49 Matt, thanks for further question. So, Tonbo maybe a small accretion to our revenue in Q4. And yes, we added two sales reps from Tonbo..
19:05 Okay, great.
And then just on the corner, revenues came in above our estimate, I'm just trying to understand if the beat came from a higher mix for placements or higher than expected reagent sales for those that are internally developed?.
19:26 Yeah. So, the beat comes from a better mix of the instruments we sold in Q3..
19:34 Great, thanks..
19:38 Thank you. And our next question from Tejas Savant from Morgan Stanley. Your line is now open..
19:49 Hey, good afternoon guys. 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 emerging technology platforms they have expected six to nine months window for users to ramp up and optimizer work flow run some pilot experiments before they start doing larger scale experiments.
I noticed that you guys said in your prepared remarks, the [indiscernible] 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 [indiscernible]? Thanks..
20:39 Yes, you are correct, actually. Typically for instrument. Normally, it takes some time to [indiscernible] for the training to get used to the workflow and to establish a process and then they start to do their own deployment. This is basically what is going on at present.
And the market has continued to welcome our product and the attraction is going on very well for our sorters. So, we are able to see, continue to see more and more sorters being distributed and replaced over the next few quarters..
21:19 Got it. I mean that was very helpful. And then, I guess a follow-up question will be, it seems like your instruments 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 a supply chain? Are you seeing any pressures there?.
21:48 First, in terms of the number of instruments, it’s basically is a mix of products in fact, we are seeing more of the high-end instruments coming from our customers and now in terms of the supply chain logistics, yes indeed, we are seeing various kind of issues over the time, which is the same as I said right now.
However, we have been trying to work through those problems and we don't see any – indeed a near short-term impact yet..
22:29 Got it. That was very helpful. Thank you for the time..
22:35 Thank you. [Operator Instructions] And our next question comes from [David Biland] [ph] from Goldman Sachs. Your line is now open..
22:49 Hey, guys. This is Dave on for Matt. Thanks for taking the questions. Congrats on the strong quarter.
Can could you give us any additional color on what you're seeing in the consumables and reagents market? And what areas you're seeing the most strength?.
23:09 Yes. So, looking at our total revenue we see, I mean the instrument revenue remains the strongest for [Technical Difficulty]. The second largest would be service revenue and then following with the re-aging revenue. And we're not going to extend too much from the reagent 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 have a better mix overall. Also, we do see the Tonbo acquisition is going to help us on the revenue side by the way..
23:56 Thanks. And what are you seeing in the market of turns of the supply chain tightness.
We've seen any thoughts on pricing as it relates to inflation and in your strategy there?.
24:18 We do see actually because of the shortage of the parts, all there, especially the IC and there's some price pressure, but internally, we have been working through this and improve our efficiency and also leveraging our international distribution to really help us adjusting such issues..
24:43 Great. Thanks..
24:47 And thank you. And I am showing no further questions. This concludes today’s conference call. Thank you for participating. You may now disconnect..