Thank you for standing by. And welcome to the Cytek Biosciences Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [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, 20 21. 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 at cytekbio.com.

Joining me today from Cytek are when Wenbin Jiang, CEO; and Patrik Jeanmonod, Chief Financial Officer.

Before we begin, I’d like to remind you that manager will make statements during this call that are forward-looking statements within the meetings 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. 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, 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 execution as we close 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 sale analysis solutions company advancing the next-generation of cell analysis tools by leveraging novel technical approach 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 higher resolution, high content and the high sensitivity cell analysis.

Our technology and solutions address some of the key limitations of conventional methods, while our flow cytometry is widely used tool for single cell 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.

Their limited dimensionality, sub-optimal resolution, low throughput, high cost for performance and the significant technical XP 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 life 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 the 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 instruments and entry level product. Both instruments are cell analyzers offering high throughput, ultra-sensitive 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 cFluorimmunoprofilingkit and the 40-color Optimized Multicolor Immunofluorescence Panel provide 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 immunoprofilingassay and shortly after acquired the reagents business of Tonbo Biosciences. Both editions further strengthen our position as a full solution provider to our customers.

Our 25-color immunoprofilingassay includes reagents and tools optimized for use with our Aurora full spectrum flow cytometry. We are creating a new normal 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 genomics and proteomics 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 years 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 the 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 and markets for our FSP platform. I’m proud to say that our installed base of instruments continued 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 achieved solid adoption with high dimensional cell analysis users, while also bringing Full Spectrum Profiling to entry level users as well.

During the fourth quarter of 2021, we achieved the exciting milestone of shipping our 1,000 cell analysis system. Since first being introduced in 2017, our cell analysis systems have gained widespread adoption across the globe with us 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 NMPA IVD Class III Certification for the TBNK assay to run on our previously certified Northern Lights CLC instruments.

Data collection has been completed at three hospitals comprising 700 patients and the data analysis and an NPA submission packet preparation has been initiated. In the EU, we have received IVDD Certification for our automated sample loader or ASL that is an accessory to our previously IVDD 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 the reagent kits meaningfully enhanced our reagents 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 the new offices in Seattle, Washington, which are dedicated to key R&D initiatives and the 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 players 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, human knowledge, immunotherapy, immune-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 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 fourth 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 contracts service sales during this year, which we expected to continue as more instruments shift from warranty coverage to 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 first quarter -- 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. This increase was primarily due to expensive to support continued growth of the business, including cost related to operating as a public company.

Research and development expenses were $7.1 billion 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 $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 $1.3 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 first 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 non-recurring 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 expect 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 have 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 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 the share the belief in this important mission drive 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 while continue to grow through product launch and expansions 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 cell 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 a call up for questions.

Operator?.

Certainly. [Operator Instructions] Our first question comes from the line of Tejas Savant from Morgan Stanley. Your question, please..

Hi, guys. Good evening and thanks for the time here this evening. So, perhaps, one to kick things off for Wenbin and Allen feel free to chime in as well.

So I am curious about in light of some of these pandemic headwinds and the macro environment, some of your instrument focused peers, particularly those with a presence in academic labs have talked about sort of a little hesitancy in CapEx purchases and delays in the purchasing process.

Have you seen any sort of like impact at all in terms of the elongation of your flow cytometer replacement cycles in an industry-wide basis? And if not, why do you think that’s the case especially for Cytek?.

Yeah. That’s a good question in fact. In fact, it’s dependent on where we are talking about, right? And overall, we don’t see much impact in the U.S. and Europe, but we do see some delay, especially on the installation and service side for the countries in APAC region.

So -- and I think part of the reason why we don’t really see much impact is because, as you can see, from the number of publications and the number -- for those related to COVID, right? Quite a lot of those applications are actually COVID related, which actually they need our tools..

Got it. That’s helpful.

And then, Wenbin, can you provide a little bit color on just attraction for cell sorter, if you can give us some commentary around just the demand you’re seeing for bundled instruments and what you are seeing in terms of the mix of new versus existing Cytek customers, as well as perhaps multi-unit placements here? That would be helpful..

The current deployment of our cell analyzers actually had prepared for the need for our cells orders.

As many customers, when they start to use our tools and start to study and they find -- they actually, many times they would like to look further deep into the cells we have looked at in their situation, they actually would like to use the same sorter as because our sorter allow the compatibility in terms of panel we have used, so they can transfer the panel between analyzers and a cells, I’m sorry, the cell sorter freely back and forth.

That basically just says a lot with regarding to the kind of demand for Cytek sorter technology as well. Now in terms of our existing customers, as well as the new customers, as you can imagine, some of our existing analyzer customers, but there are also customers who actually would like to buy the tools in pairs, in record those 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 sort of incremental supply chain pressures and sort of COVID creating site access issues and installation delays at the low end or is that something else that you’re factoring in as you think about that range?.

While the way we look at the guidance is the low and the upper end. We have a number of spec instruments that we planning to move next year or this year. It’s also reagents and service revenue. So it’s a combination of these three components that gives us the lower end, higher end.

We feel very good with the lower end and we also see some positive on the up -- on the upper end..

Got it. Very helpful. Thank you, guys..

Thank you. Our next question comes from the line of Matt Sykes from Goldman Sachs. Your question, please..

Hey, guys. This is Dave on for Matt. Congrats on the quarter.

Following up on the outlook for the year, any additional color you can provide the instrument versus consumable mix and within instruments what you’re expecting?.

Yeah. So the expectation here is that 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 the 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 leverage point in SG&A?.

So you’re talking about a gross profit margin?.

Operating margin, the gross profit margin as well?.

Yeah. So, I mean, we’re looking -- 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 in better manage our overall business in the years out apart 2022..

Thanks..

Thank you. Our next question comes from line of David Westenberg from Piper Sandler. Your question, please. David, you might have your phone on mute..

Yes. I do. Thank you so much. So congrats on the quarter. So I want to first maybe talk about some of the reagents and some of the highest flex user -- users.

Can you talk about their adoption cycle? What kind of or how fast they get ramped on the bigger and bigger panels in terms of the reagents? And can we extrapolate some of that behavior to maybe some of the future customers, as you’re getting more and more mix shifts into reagents?.

In fact, as you can see, reagent is a new business to us and our early customers pretty much has leveraged whatever available on the open market. And then for those customers, certain reagents are already designed into the application.

Now, I think, from Cytek perspective, we are now getting to this space and start to work with our customers to optimize their panels, leveraging the cFluor reagent, as well as the reagents for our Tonbo acquisition.

And so this may take some time, but we do see a great potential out there, especially the kits we have developed including our 14-color and 25-color immunoprofiling, those type of kits and that actually especially the 25-color kit really helps in customers to alleviate their type of research, workload and enable them to really get onto those sophisticated complicated panel, get onto the work they want to look at.

So I think we see great potential for those types 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 and expect we’ll have more and more those types of kits coming out..

Appreciate the color there. And this come -- questions came up for 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 feel -- still feel you really do have such a competitive advantage in terms of your technology that it probably won’t hesitate any customer -- customers won’t hesitate to continue to buy your products?.

Yeah. We have noticed the preannouncement of the tools they are going to launch. But until we have seen that on the market in the customer -- on the customer side, it’s very difficult for us to access the kind of impact, but we are paying attention to it..

Got you. Okay. And then, on the last question in terms of your TAM expansion, I think, you have given a color on the past -- 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 of years and I’ll stop there. Thank you..

Yeah. I think, we actually just mentioned about the five areas of publications, actually pretty much summarizes the type of applications, our tool today are supporting, right? So we -- certainly this is just kind of focus areas, but there are more beyond that..

Got it. Thank you..

Thank you. Our next question comes from the line of Max Masucci from Cowen. Your question, please..

Hi. This is Stephanie [ph] on for Max. Thanks for taking the question and congrats on a great quarter. So I 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 immunoprofilingassay.

How has the demand for this assay has been ramping and are you seeing most of your customers order the 18-color kit on a standalone basis or most ordering the assay along with the seven reagents provided by BioLegend?.

Yeah. I think mostly for both instead of A plus B products..

Okay. Great. Thanks for that.

And then as a follow up, so if you compare some of your earlier customer win between 2017 and 2022, to 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?.

Yeah. 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 are operating, trying to deliver those goods 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 have your relationship with BioLegend improve 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 products since its launch. And we in fact have been working very closely with quite a few several other reagent partners as well.

As you can clearly see, because the technology we have very enables the use of lots of various agents and it definitely helps on both ends for us, as well as our reagent partners..

Okay. Got it. Thanks for taking my questions..

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..