Cytek Biosciences Inc

Previous wording

We are a leading cell analysis solutions company advancing the next generation of cell analysis tools with our novel technical approach of leveraging the full spectrum of fluorescence signatures from multiple lasers to distinguish fluorescent tags on single cells (“Full Spectrum Profiling” or “FSP” technology). Our goal is to become the premier cell analysis company through continued innovation that facilitates scientific advances in biomedical research and clinical applications. Our FSP platform includes instruments, accessories, reagents, software and services to provide a comprehensive and integrated suite of solutions for our customers.

Current wording

We are a leading cell analysis solutions company advancing the next generation of research and clinical tools with our novel technical approach of leveraging the full spectrum of fluorescence signatures from multiple lasers to distinguish fluorescent tags on single cells (“Full Spectrum Profiling” or “FSP” technology). Our goal is to become the premier cell analysis company through continued innovation that facilitates scientific advances in biomedical research and clinical applications. Our FSP platform includes instruments, accessories, reagents, software and services to provide a comprehensive and integrated suite of solutions for our customers.

Previous wording

To date, we have adopted a direct sales model in North America, Europe, China, and several other countries in the Asia-Pacific region, and sell our products through third-party distributors in certain countries in Europe, Latin America, the Middle East, Africa and the Asia-Pacific region. Revenue from direct sales represented 77% and 69% of total revenue for the three months ended March 31, 2024 and 2023, respectively, and revenue from distributors represented 23% and 31% of total revenue for the three months ended March 31, 2024 and 2023, respectively.

Current wording

To date, we have adopted a direct sales model in North America, Europe, China, and several other countries in the Asia-Pacific region, and sell our products through third-party distributors in certain countries in Europe, Latin America, the Middle East, Africa and the Asia-Pacific region. Revenue from direct sales represented 74% and 75% of total revenue for the three and six months ended June 30, 2024, respectively, and 77% and 73% for the three and six months ended June 30, 2023, respectively. Revenue from distributors represented 26% and 25% of total revenue for the three and six months ended June 30, 2024 and 23% and 27% for the three and six months ended June 30, 2023.

Previous wording

We focus a substantial portion of our resources on developing new products and solutions to meet our customers’ needs. Our research and development efforts focus on developing new and complementary instruments, reagents and reagent kits, and continued operating software development. We incurred research and development expenses of $9.8 million and $10.0 million for the three months ended March 31, 2024 and 2023, respectively. We intend to continue to make significant investments in research and development in the future.

Current wording

We focus a substantial portion of our resources on developing new products and solutions to meet our customers’ needs. Our research and development efforts focus on developing new and complementary instruments, reagents and reagent kits, and continued operating software development. We incurred research and development expensesof $10.0 million and $19.8 million for the three and six months ended June 30, 2024, respectively, and $12.1 million and $22.1 million three and six months ended June 30, 2023, respectively. While research and development expense was slightly lower in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, we intend to continue to make significant investments in research and development in the future.

Previous wording

We expect to continue to invest in our commercial infrastructure through hiring additional employees with strong scientific and technical backgrounds to support growth in our instrument sales as well as our planned expansion of reagents offerings and panel design capabilities. We also plan to continue to invest in sales, marketing and business development across the globe to drive commercialization of our products. We incurred sales and marketing expenses of $12.5 million and $11.1 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

We expect tocontinue to invest in our commercial infrastructure through hiring additional employees with strong scientific and technical backgrounds to support growth in our instrument sales as well as our planned expansion of reagents offerings and panel design capabilities. We also plan to continue to invest in sales, marketing and business development across the globe to drive commercialization of our products. We incurred sales and marketing expenses of $12.3 million and $24.8 million for the three and six months ended June 30, 2024, respectively, and $14.4 million and $25.5 million for the three and six months ended June 30, 2023, respectively.

Previous wording

We expect our revenue to increase in absolute dollars as we expand our sales organization and sales territories, broaden our customer base, and expand awareness of our products with new and existing customers. Our revenue was $44.9 million and $37.1 million for the three months ended March 31, 2024 and 2023, respectively. Revenue attributable to the acquired FCI Business was $7.6 million and $3.5 million for the three months ended March 31, 2024 and 2023, respectively. The FCI Acquisition closed on February 28, 2023 and revenue contribution from the sale of FCI Products was included for only a portion of the quarter ended March 31, 2023 as compared to the full quarter ended March 31, 2024.

Current wording

We expect our revenue to increase as we broaden our customer base, increase our installed base, and expand awareness of our products with new and existing customers.

Previous wording

Comparison of the three months ended March 31, 2024 and 2023

Current wording

Comparison of the three and six months ended June 30, 2024 and 2023

Previous wording

Service revenue increased $4.8 million to $10.7 million, or 82% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to growth in the installed base of Cytek and FCI instruments requiring post warranty service contracts.

Current wording

Service revenue increased $2.8 million to $12.0 million, or 30%; and $7.6 million to $22.8 million, or 50% for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, respectively. The increase was primarily due to growth in the installed base of instruments as compared to prior year periods which drove growth in both service contract revenue and other service revenue.

Previous wording

Total gross profit margin was 51% and 57% of total revenue for the three months ended March 31, 2024 and 2023, respectively. Gross profit margin declined due to higher cost of sales driven by the factors described above. Gross profit margin depends on many factors, including market conditions that might affect our pricing; services; product mix changes between instrument configurations; excess and obsolete inventories; our cost structure for manufacturing operations relative to volume, freight costs and product support.

Current wording

Total gross profit margin was 55% and 57% of total revenue for the three months ended June 30, 2024 and 2023, respectively, and 53% and 57% for the six months ended June 30, 2024 and 2023, respectively. Total gross profit margin declined for the three months ended June 30, 2024 as a result of lower product gross margins driven primarily by higher product overhead costs and lower product revenue. This was partially offset by higher service gross margin driven by higher service revenue, higher service labor productivity and improved absorption of overhead costs. Gross profit margin declined for the six months ended June 30, 2024 due to lower product gross margins related to higher overhead costs and unfavorable inventory adjustments recognized in the three months ended March 31, 2024. The lower product gross margin was partially offset by higher service gross margins. Gross profit margin depends on many factors, including market conditions that might affect our pricing; services; product mix changes between instrument configurations; excess and obsolete inventories; our cost structure for manufacturing operations relative to volume, freight costs and product support.

Previous wording

Product revenue for the three months ended March 31, 2024 increased by 9% as compared to the three months ended March 31, 2023. Product cost of sales for the three months ended March 31, 2024 increased by 32% as compared to the same period in 2023. Product gross profit for the three months ended March 31, 2024 decreased 6% as compared to the three months ended March 31, 2023. The lower product gross profit margins in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were driven primarily by higher material and overhead costs.

Current wording

June 30, 2024 decreased by 5% and increased by 11%, respectively, as compared to the three and six months ended June 30, 2023. Product gross profit for the three and six months ended June 30, 2024 decreased 21% and 14%, respectively, as compared to the three and six months ended June 30, 2023. The lower product gross profit margins in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was driven primarily by lower product revenue and higher overhead costs. The lower product gross profit margins in the six months ended June 30, 2024 compared to the six month ended June 30, 2023 was a result of higher material costs related to unfavorable inventory adjustments in the three months ended March 31, 2024 arising from the integration of Luminex inventories and higher overhead costs.

Previous wording

Service revenue for the three months ended March 31, 2024 increased 82% as compared to the three months ended March 31, 2023. Service cost of sales for the three months ended March 31, 2024 increased by 51% as compared to the same period in 2023. Service gross profit for the three months ended March 31, 2024 increased 122% as compared to the three months ended March 31, 2023. The higher service gross margins in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 were mainly driven by operating efficiencies gained from leveraging operating costs over greater revenues.

Current wording

Service revenue for the three and six months ended June 30, 2024 increased 30% and 50%, respectively, as compared to the three and six months ended June 30, 2023. Service cost of sales for the three and six months ended June 30, 2024 increased by 11% and 27%, respectively, as compared to the three and six months ended June 30, 2023. Service gross profit for the three and six months ended June 30, 2024 increased 52% and 78%, respectively, as compared to the three and six months ended June 30, 2023. The higher service gross margins in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were mainly driven by operating efficiencies from higher service labor productivity and improved absorption of overhead costs by leveraging these costs over greater revenues.

Previous wording

Interest expense was $0.4 million for the three months ended March 31, 2024 as compared to $0.7 million for the three months ended March 31, 2023. The decrease was mainly due to the accretion of the present value discount related to the settlement agreement with Becton, Dickinson and Company (“BD”). See Note 11 to our unaudited interim consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Current wording

Interest expense was $0.1 million and $0.6 million for the three and six months ended June 30, 2024, respectively, as compared to $0.4 million and $1.1 million, for the three and six months ended June 30, 2023, respectively. The decrease in interest expense was mainly due to the accretion of the present value discount related to the settlement agreement with Becton, Dickinson and Company (“BD”). See Note 11 to our unaudited interim consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Previous wording

Interest income was $1.4 million for the three months ended March 31, 2024 as compared to $2.1 million for the three months ended March 31, 2023. The decrease in interest income was the result of lower average balance of cash and cash equivalents and short-term investments as compared to the first quarter of 2023.

Current wording

Interest income was $1.4 million and $2.8 million for the three and six months ended June 30, 2024, respectively, as compared to $1.2 million and $3.3 million for the three and six months ended June 30, 2023, respectively. The decrease in interest income for the six months ended June 30, 2024 compared to interest income for the six months ended June 30, 2023 was the result of lower average balance of cash and cash equivalents due to the funding of the FCI Acquisition on February 28, 2023 and the investment of cash in marketable securities.

Previous wording

Other income, net was $0.8 million for the three months ended March 31, 2024 as compared to other income, net of $1.7 million for the three months ended March 31, 2023. The decline in other income was primarily driven by an increase in realized and unrealized foreign exchange losses of $1.1 million offset by an increase in investment income of $0.3 million.

Current wording

Other income, net was $0.1 million and $0.9 million for the three and six months ended June 30, 2024, respectively, as compared to other income, net of $1.7 million and $3.4 million for the three and six months ended June 30, 2023, respectively. The decline in other income was primarily driven by an increase in realized and unrealized foreign exchange losses for the three and six months ended June 30, 2024.

Previous wording

To date, our primary sources of capital have been through sales of our securities and revenue from the sale of our products and services. As of March 31, 2024 and December 31, 2023, we had approximately $270.4 million and $262.7 million, respectively, in cash and cash equivalents and short term investments, which were primarily held in U.S. short-term bank deposit accounts, money market funds, U.S. Treasury notes, Federal agency security notes, and short term commercial paper.

Current wording

To date, our primary sources of capital have been through sales of our securities and revenue from the sale of our products and services. As of June 30, 2024 and December 31, 2023, we had approximately $277.2 million and $262.7 million, respectively, in cash and cash equivalents, restricted cash, and short term investments, which were primarily held in U.S. short-term bank deposit accounts, money market funds, U.S. Treasury notes, Federal agency security notes, and short term commercial paper.

Previous wording

In addition, we lease certain office facilities under operating lease arrangements that expire on various dates through fiscal year 2029. Under the terms of the leases, we are responsible for certain expenses related to operations, maintenance, repairs and management fees. Future minimum lease payments under non-cancelable operating leases totaled $11.6 million as of March 31, 2024.

Current wording

In addition, we lease certain office facilities under operating lease arrangements that expire on various dates through fiscal year 2029. Under the terms of the leases, we are responsible for certain expenses related to operations, maintenance, repairs and management fees. Future minimum lease payments under non-cancelable operating leases totaled $11.1 million as of June 30, 2024.

Previous wording

Net cash provided byoperating activities for the three months ended March 31, 2024 was $4.0 million due to the non-cash provision for stock-based compensation expense, depreciation and amortization, excess and obsolete inventory and amortization of right-of-use assets of $5.6 million, $1.7 million, $0.9 million, and $0.8 million, respectively; partially offset by a gain on investments, accretion and amortization, net of $1.2 million. Additionally, there was a decrease of inventories of $4.8 million and a decrease of trade accounts receivable of $4.2 million due to seasonality with our first quarter typically being lower than our fourth quarter due to marketing campaign closing activity. These were partially offset by the usage of cash which included the net loss of $6.2 million and an increase in accrued expenses and other liabilities of $4.6 million.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was $10.2 million due to the non-cash provision for stock-based compensation expense, depreciation and amortization, excess and obsolete inventory and amortization of right-of-use assets of $12.8 million, $3.5 million, $1.0 million, and $1.4 million, respectively; partially offset by a gain on investments, accretion and amortization, net of $2.4 million. Additionally, there was a decrease of inventories of $9.2 million and a decrease of trade accounts receivable of $10.2 million due to seasonality with our first quarter typically being lower than our fourth quarter due to marketing campaign closing activity. These were partially offset by the usage of cash which included the net loss of $16.6 million, an increase in accrued expenses and other liabilities of $9.4 million, and an increase prepaid expenses and other assets of $0.5 million.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2023 was $2.9 million includingnet loss of $6.8 million. We also incurred non-cash provision for excess and obsolete inventory, stock-based compensation expense, depreciation and amortization, amortization of right-of-use assets, and interest expenses for accretion of the legal settlement liabilities of $0.5 million, $4.7 million, $1.0 million, $0.8 million, and $0.5 million, respectively. Usage of cash which included and an increase of inventories of $3.2 million, an decrease in lease liability of $0.7 million and a decrease in the legal settlement liability of $0.4 million. This was partially offset by aby a decrease of trade accounts receivable of $6.1 million due to seasonality with our first quarter typically being lower than our fourth quarter due to marketing campaign closing activity, a decrease in prepaid expenses and other assets of $0.1 million, an increase in accrued expenses and other liabilities of $1.8 million, and an increase of trade accounts payables of $0.3 million.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2023 was less than $0.1 million including net loss of $11.2 million. We also incurred non-cash provision for excess and obsolete inventory, stock-based compensation expense, depreciation and amortization, amortization of right-of-use assets, and interest expenses for accretion of the legal settlement liabilities of $0.6 million, $10.6 million, $2.7 million, $1.6 million, and $0.8 million, respectively. Usage of cash which included a decrease in lease liability of $1.4 million, a decrease of inventories of $0.2 million and a decrease in the legal settlement liability of $0.2 million. Additionally, there was a decrease of trade accounts receivable of $0.7 million,, a decrease in prepaid expenses and other assets of $3.2 million, an increase in accrued expenses and other liabilities of $0.3 million, and an increase of trade accounts payables of $1.7 million.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2024 was $5.8 million driven by purchases of marketable securities of $77.1 million. This was partially offset by the proceeds from maturities of marketable securities of $72.0 million and purchase of fixed assets and intangibles of approximately $0.6 million.

Current wording

Net cash used in investing activities during the six months ended June 30, 2024 was $3.7 million driven by purchases of marketable securities of $114.0 million and the purchase of fixed assets and intangibles of approximately $1.6 million. This was partially offset by the proceeds from maturities of marketable securities of $112.0 million

Previous wording

Net cash used in investing activities during the three months ended March 31, 2023 was $168.9 million driven by purchases of marketable securities of $123.2 million, purchase of business of $44.9 million, purchase of property and equipment of $0.5 million, and payment of additional investments in Cytek Japan of $0.2 million.

Current wording

Net cash used in investing activities during the six months ended June 30, 2023 was $166.1 million driven by purchases of marketable securities of $129.1 million, proceeds from maturities of marketable securities of $10.0 million purchase of business of $44.9 million, purchase of property and equipment of $1.8 million, and payment of additional investments in Cytek Japan of $0.2 million.

Previous wording

Net cash provided by financing activities during the three months ended March 31, 2024 was $1.6 million driven by the proceeds from a line of credit of $1.4 million.

Current wording

Net cash used in financing activities during the six months ended June 30, 2024 was $0.1 million driven by the payment for the repurchase of shares of $2.7 million. This was partially offset by the proceeds from a line of credit of $1.4 million and the proceeds from the issuance of common stock under employee stock plans of $0.7 million.

Previous wording

Net cash provided by financing activities during the three months ended March 31, 2023 was driven by the issuance of our common stock under our equity incentive plans, offset by repayment of loan.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2023 was $0.2 million driven by the issuance of our common stock under our equity incentive plans, offset by repayment of loan of $0.3 million and $1.0 million costs related to the repurchase of our shares.

Previous wording

During the three months ended March 31, 2024, there were no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition” which is contained in our Form 10-K and filed with the SEC on March 13, 2024.

Current wording

During the six months ended June 30, 2024, there were no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition” which is contained in our Form 10-K and filed with the SEC on March 13, 2024.