Investing.com
Published Feb 27, 2025 05:52PM ET
Cytek Biosciences Inc. reported its fourth-quarter 2024 earnings, revealing revenue of $57.5 million, which fell short of the forecasted $61.49 million. The earnings per share (EPS) were not directly provided, but the revenue miss suggests a challenging quarter. Following the announcement, Cytek's stock experienced a 3.8% decline to $4.81 in after-hours trading. According to InvestingPro analysts maintain an average price target of $7.13, suggesting significant upside potential. For deeper insights into Cytek's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
For 2025, Cytek projects revenue between $204 million and $212 million, suggesting a growth rate of 2-6%. InvestingPro analysis shows analysts expect the company to achieve profitability this year, with a forecasted EPS of $0.15. The company plans to focus on back-end loaded growth, continuing investments in its service network and research and development. Cytek remains open to strategic mergers and acquisitions, adhering to specific financial criteria.
CEO Wenbin Jang emphasized the maturity of Cytek's FFP technology, stating, "We believe CITEX FFP technology has matured into the industry standard." CFO Bill McComb reinforced the company's strong market leadership position, while Jang expressed pride in making flow cytometry technology more accessible.
During the earnings call, analysts focused on the impact of NIH funding reductions and geographic market dynamics. Cytek's management detailed strategies for instrument placements and highlighted the rapid growth of Cytec Cloud users, addressing concerns over future growth potential.
Argy, Conference Operator: Thank you for standing by and good day everyone. My name is Argy and I will be your conference operator today. At this time, I would like to welcome everyone to the Citec Biosciences Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Thank you.
I would now like to turn the call over to Paul Goodson, Head of Investor Relations. Please go ahead.
Paul Goodson, Head of Investor Relations, Citec Biosciences: Thank you, operator. Earlier today, Scitech Biosciences released financial results for the quarter and year ended 12/31/2024. If you haven't received this news release, and would like to be added to the company's distribution list, please send an email to investorscitecbio dot com. A copy of the news release is also available on the Investor Relations section of Citec's website at investors.citecbio.com. Joining me today from Citec are Wenbin Jang, CEO and Bill McComb, CFO.
Please note that we will be referencing a slide presentation during the call today that has been posted to the Investor section of our corporate website. As a reminder, we will make statements during this call that are forward looking statements within the meaning of the federal securities laws, including statements regarding CITEC'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 in these statements. Additional information regarding these risks and uncertainties appears in our slide presentation in the section entitled Forward Looking Statements in the press release CITEC issued today and in CITEC'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.
Additional information regarding our use of non GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, may be found in our slide presentation and in today's press release. While the company believes these non GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Except as required by law, Cytec 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 02/27/2025. Finally, I would like to invite investors and analysts to attend any of the six user group meetings Cytec will be hosting in 2025.
These are typically all day meetings where CITEC scientists and users of CITEC's instruments meet to discuss research initiatives, advances in the field and use cases for CITEC's products. The full schedule has not yet been established, but the first of these meetings will be in Barcelona on March 12, followed by the Southern California meeting in La Jolla on May 15. In addition to CITEX user group meetings this year, there will be a variety of industry and academic conferences, meetings and seminars where we will be exhibiting the CITEX products in The U. S. And around the world.
While these events are primarily geared to the scientific community, they may offer an opportunity to interact with users of our technologies to learn why CITEX instruments are so highly valued by our customers. We have a limited number of spaces to accommodate members of the financial community. So if you are interested in attending any of these events, please contact me. With that, I would like to turn the call over to Wen Bin.
Wenbin Jang, CEO, Citec Biosciences: Thanks, Paul. Welcome, everyone, and thank you for your interest in Citec. On today's call, I will discuss our results for the fourth quarter and the full year 2024 and highlight our achievements toward our strategic initiatives to drive sustainable growth and profitability. Then, I will turn the call over to Bill for a more detailed look at our financials and our 2025 outlook before we open it up for Q and A. Starting with Slide three, full year revenue in 2024 grew 4% over 2023, reaching $200,500,000 driven by strong growth in service revenue and the double digit growth in international markets outside of The U.
S. We did very well in unit volume growth in 2024 with placements of full special profiling or FFP and imaging instruments up by 8.5% over 2023. This growth was achieved despite a challenging year for the industry. We were pleased to outpace the unit volume growth of the flow cytometry market as a whole and importantly, our industry competition. Our outperformance in 2024 can be attributed to the technological leadership Scitech products continue to bring to the cell analysis market as well as to the excellent user support provided by our customer facing teams.
Cytec has always had a commitment to profitability and cash generation to support our growth and innovation. Furthermore, we have reached an important inflection point where small percentage increases in revenue can translate into larger percentage increases in adjusted EBITDA, While Bill will cover more specifics in a few moments, 2024 provides a good example of this. With revenue up 4%, our adjusted EBITDA of $22,400,000 delivered again of more than 77% above the $12,600,000 of adjusted EBITDA from 2023. In parallel with our substantial growth in adjusted EBITDA, our focus on cash generation was clearly reflected with positive cash flow achieved again in 2024. I'm pleased to report that once again, we returned this positive cash flow to shareholders in the form of repurchasing 4,000,000 shares during 2024 under our share repurchase program.
At the expiration of this program, we announced a new $50,000,000 repurchase program in late December and have been buying shares in the open market year to date. Turning to Slide four and our fourth quarter results. Our revenue was $57,500,000 essentially flat compared to the fourth quarter of twenty twenty three after adjusting for the strong appreciation of the U. S. Dollar in the quarter.
We saw year over year growth of 8% in our service revenue in the fourth quarter, mainly due to the growth in the total installed base of our instruments. Geographically, we continue to see a strong demand environment in APAC in the fourth quarter. While we are viewing China with a conservative stance due to the dynamic environment, we started to experience some upskills in orders in the fourth quarter related to the China stimulus program. We were also pleased to see strong growth both quarterly and year over year in the rest of the world region, which includes Canada and Latin America. Total U.
S. Revenue was slightly up versus the third quarter and down year over year, driven by a decline in academic and government instrument revenues, partially offset by growth in service. Looking at our customer mix, we continued to experience strong demand from our global pharma and CRO customers, who are focused on harmonizing their instruments across different regions for translational discovery work, which our technology is particularly capable of delivering. Overall, we believe our growth in 2024 demonstrates the strength of our platform, the unique value proposition of our portfolio and how Scitech solutions are becoming a well established brand in the industry. I would like to next update you on the strong execution our team has had on our key growth pillars instruments, applications, bioinformatics and clinical to solidify Cytec's position as a market leader in next gen cell analysis solutions.
Turning to Slide five, starting with instruments. I want to take a moment to reflect how far we have come as an organization in driving adoption of our core instruments, including our flagship products, the Aurora analyzer, Aurora cell solder and the Northern Light System. As a reminder, our core instrument platform is underpinned by our FSP technology. This technology is designed to maximize sensitivity, accuracy and harmonization across instruments through a novel optical and electronic design. Our technology enables us to adjust the inherent limitations of other instruments by providing us higher density of information with greater sensitivity, more flexibility and increased efficiency, all at a lower cost for performance.
From our conversation with flow cytometry users, it is clear that Citrix instruments have changed the direction of the entire industry toward full special technology. We believe CITEX FFP technology has matured into the industry standard that other technologies are measured against. Our leadership in FSP technology enables us to benefit from an important first mover advantage with our expanding customer base and validated commercial solutions that deliver superior stability, data quality and ease of use. Since the introduction of our first FSP instrument in 2017, Our FSP technology has gained widespread adoption with nearly 2,000 customers worldwide using our solution today and a broader user base across more than 70 countries. Our technology has additionally been validated by more than 2,300 peer reviewed publications regarding the use of Cytec products to address critical challenges.
In the fourth quarter, we expanded our global footprint with 164 FFP instruments and 49 AMNIS and GUAVA system sold. This brings Sytech's total installed base to 3,034 units, including three seventy seven AMLEX and GUAVA instruments shipped since reacquisition of the Luminess business in the first quarter of twenty twenty three. Within our portfolio, the AuroraCS cell quarter and AMOLEDX Imaging Systems showed good growth in the fourth quarter compared to the same quarter of 2023. Collectively, these instrument placements represent growth across a diverse customer base, offering comprehensive and better solutions tailored to meet their needs. As I mentioned earlier, the number of placements of our FSP instruments increased 8.5% in 2024 over 2023.
We were pleased to see 13% year over year growth of the Aurora cell solder and 12% year over year growth of the Northern Light System. We believe this solid growth in placements, despite a challenging and dynamic macroeconomic environment, demonstrates Cytec's continued leadership in FSP flow cytometry and our strength in these product categories. In 2024, we were excited to announce our enhanced small particle detection module or ESP, a new technology that can be added to new or retrofitted to existing Aurora, Aurora cell solder and nozzle light instruments. This new feature allows our already powerful system to provide higher sensitivity to identify and analyze a variety of small particles, including extracellular vesicles, small bacteria, viruses and viral particles and nano particles and further distinguish our cell analysis solution as the preferred choice among researchers and clinicians. Turning to Slide six.
In early twenty twenty three, we strategically expanded our Scitech platform with the Luminex (NASDAQ:LMNX) transaction to continue diversification of our instrument portfolio with both competitive and operational advantages. With the addition of Omniix and Guava product lines, we accomplished several objectives. First, we enhanced our technical capabilities with AI driven high resolution imagery. Second, we enabled a more effective and efficient service and support through an expanded install base, dramatically increasing our service gross margin. And third, we broadened our customer reach within the entry level market.
Since the acquisition, we achieved significant growth in ARMENIX imaging revenue and in the entry level market. Specifically, our imaging revenue increased by 14% in 2024. In addition, growth in the entry level market is reflected by the 12% full year unit volume growth in our Northern Lights placement, which was one of the goals of reacquisition. Leveraging an expanded installed base, our service business gross margin improved from 15% in 2022 before reacquisition to 57% in 2024, notably one of the highest in the industry. This major increase in gross margin demonstrates one of the advantages that we obtained from the Luminess transaction.
We believe the growing installed base of our instruments, including our core FFP instruments, as well as AMLEX and GUAVA, will continue to serve as a strong foundation to drive adoption of our product and service offerings going forward. To support the rising global demand for SiTech solutions, We recently opened a new manufacturing facility in Singapore. With this facility, we are able to access low cost manufacturing, increase our capacity and enhance global supply chain flexibility. Turning to Slide seven and Bioinformatics. We introduced the Cytec Cloud two years ago as a digital ecosystem to support full spectral flow cytometry research from panel design to data acquisition and to enable our customers to streamline their workflows through our online software tools.
In 2024, we expanded the capabilities of Cytec Cloud with the addition of the special panel tool, a proprietary intelligent algorithm that designs optimized panels in minutes rather than days or weeks with a major process, allowing scientists to focus their efforts on their own applications. Sitecore is becoming a vital resource in the research community. We now have over 16,000 users growing our base by more than 160% from the start of 2024. This represents an average of more than six users per installed Scitech FFP instrument. We continue to believe that the Scitech Cloud is an important factor in earning the loyalty of our users to the Scitech brand.
Turning to the applications and clinical pillars of our strategy. We continue to believe the clinical market represents an attractive business opportunity for CITEC. Several of our products are approved for clinical use in both China and The EU, including our Northern Light CLC system. In May 2024, we were pleased to receive approval from the China National Medical (TASE:BLWV) Administration for clinical use of our one laser and two laser six color CBN K3 agent cocktails on our Northern Lights systems, specifically in hospitals, laboratories and clinics across China. As a reminder, this is the first and only one laser based six color assay supported by FSP capability, which offers higher system reliability and data consistency, a competitive advantage against the more expensive two laser systems.
This achievement broadened our market presence in both China and Europe, while strengthening our competitive advantage. Notably, Northern Lights CLC unit placement grew by 15% in 2024 compared to 2023, achieving the highest placement growth rate out of all Scitech instruments across our product portfolio. As we continue to push forward new products and applications, we remain deeply committed to providing comprehensive cell analysis solutions to our customers. In sum, we believe we are well positioned to serve a large and growing cell analysis market with our industry leading cell analysis portfolio, global diversification and the critical first mover advantage with our FSP technology. This combination, paired with our incredible team, strong balance sheet and the focus on execution will drive Slice further on our strategic initiatives.
Looking ahead, as we continue to strengthen Saika's market leadership position in sales analysis, the durable foundation we have built provides us with confidence in our expectations and our long term objective of delivering sustainable growth and profitability. With that, I will now turn the call over to Bill for more details about our financials.
Bill McComb, CFO, Citec Biosciences: Thanks, Wendy. Turning to Slide eight and our fourth quarter financial results. Total revenue for the fourth quarter of twenty twenty four was $57,500,000 a 1% decrease over the fourth quarter of twenty twenty three. Gross in service revenue was offset by a decline in product revenue due to a strengthening in the U. S.
Dollar and orders that were delayed to the first quarter of twenty twenty five. Product revenue, which is instruments and reagents, decreased 3% versus Q4 of twenty twenty three, but increased 14% sequentially versus Q3 of twenty twenty four. The decrease versus Q4 of twenty twenty three was driven by U. S. Dollar strength, a softer instrument market in The U.
S. And EMEA as compared to a strong Q4 of twenty twenty three and certain orders being delayed into Q1 of twenty twenty five. Service revenue grew 8% versus Q4 of twenty twenty three. This service revenue growth reflects continued expansion of our installed base of instruments and active usage of our systems. Turning to our geographic market performance.
Total U. S. And EMEA revenue declined 1018% respectively compared to a strong Q4 of last year, driven by lower instrument sales and also foreign exchange effects in EMEA. Asia Pacific grew 21% driven by strong growth in China. Other international markets, primarily Canada and Latin America, also grew strongly off a small base with revenue reaching $5,300,000 in the fourth quarter compared to $1,900,000 in the prior year quarter.
This growth reflects the fact that Citex technology is the full spectral flow cytometry technology of choice in these markets and around the world. GAAP gross profit was $33,700,000 for the fourth quarter of twenty twenty four, an increase of 2% compared to gross profit of $33,000,000 in the fourth quarter of twenty twenty three. GAAP gross margin was 59% in the fourth quarter of twenty twenty four compared to 57% in the fourth quarter of twenty twenty three. Non GAAP adjusted gross margin in the fourth quarter of twenty twenty four was 61% compared to 59% in the fourth quarter of twenty twenty three after adjusting for stock based compensation expense and amortization of acquisition related intangibles. In the fourth quarter, we had a total of $8,800,000 of non recurring, non cash reductions in operating interest expense from adjustments based on our reevaluation of a license and royalty settlement liability.
Operating expenses were $30,700,000 for the fourth quarter. This included $2,600,000 of the non recurring benefit I described above. Excluding this $2,600,000 benefit, operating expenses were $33,200,000 unchanged from both the fourth quarter of the prior year and sequentially from Q3 of twenty twenty four. This demonstrates our focus on controlling expenses as an important driver of delivering on our goal of growing profitability and cash flow. Research and development expenses were $9,700,000 for the fourth quarter, down 11% from the fourth quarter of twenty twenty three and down 2% from Q3 of twenty twenty four due to reduced compensation and engineering expense, reflecting our efforts to reduce costs and improve the efficiency of our investment in R and D.
Sales and marketing expenses were $11,900,000 for the fourth quarter, up 3% from the $11,600,000 in the fourth quarter of twenty twenty three due to higher compensation and amortization expenses. General and administrative expenses were $9,100,000 for the fourth quarter. This included the $2,600,000 non recurring benefit I described earlier. Excluding this benefit, general and administrative expenses would have been $11,700,000 up from $10,800,000 in the fourth quarter of twenty twenty three due to higher stock based compensation expense. Income from operations was $3,000,000 for the fourth quarter, an improvement over the $100,000 loss from operations in the fourth quarter of twenty twenty three.
This included the $2,600,000 non recurring benefit described earlier. Excluding this benefit, profits from operations would have been $300,000 compared to a loss from operations of $100,000 in the prior year quarter. This was driven by higher gross profit in the current quarter. GAAP net income was $9,600,000 in the fourth quarter. This included the $2,600,000 non recurring benefit described earlier and a $6,200,000 non recurring non cash interest expense reduction related to the same liability adjustment for a total of $8,800,000 of non recurring benefit.
This contributed $6,700,000 after tax to net income in the quarter. Excluding this non recurring benefit, net income would have been 2,900,000 compared to a GAAP net income of $5,500,000 in the prior year quarter. This was primarily due to lower net other income driven by a foreign exchange loss of $1,800,000 in the current quarter versus a gain of $1,300,000 in the prior year. Now for the full year 2024. Total revenue for the year ended 12/31/2024 was $200,500,000 a 4% increase over the prior year.
The increase in total revenue in 2024 was driven by 30% growth in services revenue and double digit growth in product revenues from international markets, offset by a slowdown in U. S. Product revenue. GAAP gross profit was $111,100,000 for the year ended 12/31/2024, an increase of 2% compared to a GAAP gross profit of $109,400,000 in the prior year. GAAP gross margin was 55% in the year ended 12/31/2024, compared to 57% in the prior year.
The decline was primarily due to one time inventory adjustments in Q1 of twenty twenty four. Adjusted gross margin, which excludes stock based compensation and acquisition related intangibles in the year ended 12/31/2024, was 59% flat versus the 59 in the prior year. Operating expenses were $131,600,000 for the year ended 12/31/2024. This included the $2,600,000 of non recurring benefit mentioned before. Excluding this $2,600,000 benefit, operating expenses were $134,200,000 a 2% decrease from the $137,300,000 in the prior year.
The decrease was primarily due to lower research and development costs. Research and development expenses were $39,400,000 for the year ended 12/31/2024, compared to $44,200,000 in the prior year. The reduction was primarily due to lower headcount and engineering expense. Sales and marketing expenses were $49,100,000 for the year ended 12/31/2024, flat compared to $49,100,000 in the prior year. General and administrative expenses were $43,100,000 for the year ended 12/31/2024.
This included the $2,600,000 non recurring benefit mentioned earlier. Excluding this benefit, general and administrative expenses would have been $45,700,000 compared to $44,000,000 in the prior year. The increase is primarily attributable to higher stock based compensation expense, partially offset by lower outside services expense. Loss from operations in the year ended 12/31/2024, was $20,500,000 which included the $2,600,000 non recurring benefit mentioned before. Excluding this non recurring benefit, loss from operations would have been $23,100,000 compared to a loss of $27,800,000 in the prior year.
GAAP debt loss for the year ended 12/31/2024, was $6,000,000 This included the $2,600,000 non recurring benefit mentioned earlier and a $6,200,000 non recurring non cash interest expense reduction related to the same liability adjustment for a total of $8,800,000 of non recurring benefit. This contributed $6,700,000 after tax to net income. Excluding this non recurring benefit, GAAP net loss would have been $12,700,000 an increase from the net loss of $12,100,000 in the prior year, which was primarily due to higher foreign exchange losses and lower tax benefit offset by a lower loss from operations. Adjusted EBITDA was $22,400,000 in the year ended 12/31/2024, which excludes the non recurring items mentioned earlier, foreign exchange impacts and stock based compensation expense. This was up significantly compared to $12,600,000 in the prior year.
Adjusted EBITDA included investment income of $8,000,000 in the year ended 12/31/2024, and $7,400,000 in the prior year. Excluding these amounts, adjusted EBITDA improved from $5,200,000 in the year ended 12/31/2023, to $14,400,000 in 2024. Consistent with our historical focus on cost control and profitability, we are committed to improving these metrics going forward. Cash, cash equivalents and marketable securities were $277,900,000 as of 12/31/2024. This represents an increase of 15,200,000 from the $262,700,000 at the December 2023, despite repurchasing $21,600,000 in our stock repurchase program during 2024.
Our strong balance sheet and positive cash generation underscore our ability to invest in our global growth initiatives. As mentioned above, during 2024, we repurchased approximately 4,000,000 shares of Citec stock for a total cost of approximately $21,600,000 at a weighted average cost of $5.43 per share, leaving us with 129,200,000.0 shares outstanding as of 12/31/2024. Concurrent with the expiration of our $50,000,000 stock repurchase plan at the end of twenty twenty four, we announced a new $50,000,000 repurchase program for 2025 and have been actively the As you are all aware, the NIH recently announced that it will reduce the amount of fundings for indirect costs associated with its grants going forward. Secondly, in January, the Biden administration introduced new export Trump administration recently announced wide ranging tariffs on imports from several countries, including China. While we are continuing to assess the potential implications for our business, these factors may create headwinds for our instrument revenues going forward.
We expect solid growth in our service business and we see good momentum in our instrument sales in APAC. However, we are currently experiencing softer market conditions in The U. S. And EMEA. Taking all of these factors into account, we expect our full year revenue for 2025 to be in the range of $2.00 $4,000,000 to $212,000,000 representing overall growth of 2% to 6% over full year 2024, assuming no change in currency exchange rates.
We expect this growth to be back end loaded due to current market conditions and the fact that the first quarter is typically our seasonally weakest quarter. As Wenbin noted, our market leadership position remains strong and we are confident we will perform well relative to the overall flow cytometry market. With our strong balance sheet, we are well positioned to continue investing for growth. With that, I will turn it back over to Wenbin.
Wenbin Jang, CEO, Citec Biosciences: Thanks, Phil. I want to take a moment to thank our team at Scitec for their dedication to our mission. Together, we have built a strong platform of cell analysis products to empower the scientific community with better tools to advance their research. In 2024, we were honored to be named overall Biotech Company of the Year in 2024 by the Biotech Breakthrough Organization out of thousands of nominations across 14 different countries. This premier recognition is testimony to our team's commitment and highlights the significant role our technology plays in advancing discovery.
We are proud to make our powerful flow cytometry technology more successful, enabling scientists to accelerate their research and achieve more impactful results. I want to thank everyone for joining today's call and we will now open it up for questions. Operator?
Argy, Conference Operator: Thank you. Your first question comes from the line of David Westenberg of Piper Sandler. Please go ahead.
David Westenberg, Analyst, Piper Sandler: Hi. Thank you for taking the questions. I wanted to start with the 8.5% instrument growth. That was a really good number. Growth, of course, on the top line was 4%.
So can you talk about some of the things that are happening with maybe mix? I'm guessing maybe this is higher placements of maybe Northern Lights versus some of the other ones and how we should think about that in the coming year? And then how we think we should think about like consumables used on that mix if there's a difference between Northern Lights and say Aurora in terms of whether or not they use your consumables versus the competitor consumables?
Wenbin Jang, CEO, Citec Biosciences: Sorry, could you guys hear me?
Bill McComb, CFO, Citec Biosciences: Yes. Wenbin, would you like me to take that one?
Wenbin Jang, CEO, Citec Biosciences: Yes, please.
Bill McComb, CFO, Citec Biosciences: Yes. So we did see good growth in Northern Lights in the quarter in 2024. And we don't give we don't want to give guidance specifically on product categories, but we think that, that momentum will carry forward in terms of unit growth. The product is proving popular. So I won't go beyond that in terms of our guidance.
We when we came up with our guidance range, we factored in all the recent trends and also the recent headwinds
Wenbin Jang, CEO, Citec Biosciences: that
Bill McComb, CFO, Citec Biosciences: I mentioned. In terms of reagent consumption, I have to defer to Wenbin on that one.
Wenbin Jang, CEO, Citec Biosciences: Clearly, as you can see, we have 16,000 users on Cytec Cloud using our tools to design panels, optimizing their panels for their applications. In fact, Cytec Cloud is also equipping our users to other regions and we expect Reliance is one of the areas with faster growth for the company. With regarding to the mix of the instruments, as you can see clearly, we saw a 12 growth year over year on Northern Lights, right, that's even faster than the overall unit growth of 8.5%.
Bill McComb, CFO, Citec Biosciences: Yes. In terms of reagent consumptions, I don't think that we see significant differences between the Northern Lights and other instruments. I don't think that, that would have a significant impact on our overall reagent revenues. The driver of the reagent revenues would be the overall unit volume growth.
David Westenberg, Analyst, Piper Sandler: Okay. That's great. Now thank you for that. And this, you gave a lot of great color on the different geographies and tariffs and all that thing going on. Can you maybe give us a quick summary on like maybe one, two sentence impact statement?
Sorry, there was the first Biden thing, then the Trump tariff concern. So, I mean, is there a numbers thing on where you would hit for gross margins or is there an assumption of lower growth and in terms of like just because if you had higher cost? You did also mention on the call that you have some manufacturing in Singapore. Would that help protect some of the tariffs? Because I don't believe Singapore would be any part of a tariff nation.
Wenbin Jang, CEO, Citec Biosciences: From a market perspective, clearly, as a global company, we do business across the world today. U. S. Is less than 50% of our overall business and Europe is one third with the balance from the rest of the world, including APAC. So that can help us really to weather the kind of domestic economic conditions we are experiencing or may experience.
With regarding to tariff, certainly Singapore today is not part of the impact, but who knows, and it may happen going forward. But again, with our manufacturing today across multiple sites in multiple countries, that gives us flexibility to deal with all kinds of potential implications going forward. As you know, we manufacture in The U. S, in Singapore, in China. And so we hope with kind of diversification of our manufacturing that will help going forward.
Bill McComb, CFO, Citec Biosciences: Yes. What I meant when I discussed those three factors was that we have the NIH changes, the export controls, which we had talked about at the JPMorgan conference. And then as it relates to revenue, the major potential impact of tariffs would be from reciprocal tariffs that would affect exports from The U. S. So that's as it relates to revenue, that's what the tariff risk is.
At this point, we haven't seen significant impacts from reciprocal tariffs because we largely manufacture our China product in China. And then the other implication of tariff, of course, is the one that when being mentioned, which is the impact on our cost of goods and therefore margin, which we expect to be able to deal with and mitigate by virtue of our flexible global manufacturing system that now has plants in three places. Got it.
Wenbin Jang, CEO, Citec Biosciences: I hope
Bill McComb, CFO, Citec Biosciences: that distinction is clear.
David Westenberg, Analyst, Piper Sandler: Yes, yes. No, much more clear. You guys got pretty long answers to my question, so I'll kick it off to Nexinos. Thank you.
Argy, Conference Operator: Your next question comes from the line of Tasia Avant from Morgan Stanley. Please go ahead.
Edmond, Analyst, Morgan Stanley: Hi, thanks. This is Edmond on for Tejas. Thanks for the time. I just wanted to dig in a little bit on your U. S.
Academic government customers. So we just came back from AGBT and the customer sentiment sounds pretty gloomy and we even heard of things like instrument purchase freezes. So I was wondering if you could talk to us or first quantify your exposure to the NIH and then second talk to us about what you're hearing from The U. S. Academic customers and what degree of impact do you currently have factored into your 2025
Bill McComb, CFO, Citec Biosciences: guide? Do you want me to take the first part of that, Brindid?
Wenbin Jang, CEO, Citec Biosciences: Yes, please.
Bill McComb, CFO, Citec Biosciences: So our NIH exposure, we looked at our revenues for 2024 and analyzed how much of that was funded by NIH grants. And the answer was around 5% of total revenue. So obviously, the impact of the it's a little harder to go from there to what the impact would be. There's a couple of factors. One is that the of that NIH funding, the estimates we've seen is that 8% of the funding would be reduced, but then there may be other indirect effects that are harder to estimate.
So it's a relatively small exposure. We've continued to see ordering activity and shipments to U. S. Academic customers in the first part of this year. So hard for us to obviously, there could be disruption from the NIH changes, but we're primarily a third month company.
But by that, I mean that a majority of our revenues for a quarter happened in the third month of the quarter. So it's still and this was obviously just announced in January, so it's still TBD for us at this point.
Wenbin Jang, CEO, Citec Biosciences: On one hand, we are still waiting to see how it might potentially impact Cydek. But with our analysis, at least based on what we have seen in 2024, the impact is less than 5%. In the meantime, as we all know and we are a global company, we work with actually more than 50% of our revenues are in fact from outside of The U. S. And we feel that can help us to weather the kind of up and down domestically.
Edmond, Analyst, Morgan Stanley: Got it. And then just switching gears a little bit. On the large pharma and CDMO side, looking to harmonize their workflow with your instruments. I was wondering if you can talk some of that progression in the quarter. And in terms of the instruments that you're ordering to harmonize, do you have any sense what percent of these are replacement orders versus capacity expansions?
Wenbin Jang, CEO, Citec Biosciences: This is actually very difficult to gauge. Clearly, with housing pharma and they migrate from discovery to translation room and they would really like to see the data coming out of the different labs across different countries in their institutions to provide the same data quality with a better confidence. In that end, they placed orders from Cytec to meet the needs across multiple sites in the world, not just in one country. So this is what we have been seeing, like a kind of shift momentum from those pharmaceutical company as well as some of the CRO. And we are benefiting clearly from this harmonization right now.
Bill McComb, CFO, Citec Biosciences: Yes. You'll see when we publish the when we file the 10 K shortly, we'll publish the data for the global customer segments or customer segments on a global basis, and you'll see that. But the Bio Tech pharma distributor CRO segment was up 14% in the fourth quarter. But that includes more than just the pharma companies, but and obviously it's all regions around the world, but it shows very good growth in that segment. That's the year on year growth rate for in the fourth quarter.
Edmond, Analyst, Morgan Stanley: Great. Thanks for the time. I'll pass it along.
Argy, Conference Operator: Your next question comes from the line of Andrew Cooper of Raymond James. Please go ahead.
Noah, Analyst, Raymond James: Hey, everyone. This is Noah on for Andrew. Thanks for taking the question. First one, just looking at your OpEx, looks like the G and A run rate is a little bit like quite a little bit lower from where it was in the back half of last year. So just asking, I guess, what are you taking out?
Is there some dynamics around that that could prove better for margins? Or are you taking any actions on that? Or is it the one time benefit that's really flowing through?
Bill McComb, CFO, Citec Biosciences: It's the one time benefit. So it's a $2,600,000 benefit in the fourth quarter. So if you add that back in, the G and A was about flat with Q3, but it was down and it was about in the fourth quarter and it was about flat with Q4 of last year. So we did make some significant reductions in G and A in the year on year basis in Q2 and Q3, but we've been holding pretty flat around $33,000,000 per quarter since then.
Noah, Analyst, Raymond James: Okay, awesome. And then just kind of following up on the question around tariffs.
David Westenberg, Analyst, Piper Sandler: What would be your ability to pass price through should some of
Noah, Analyst, Raymond James: those tariffs are not affecting the business? And I would assume that would be within 2025?
Wenbin Jang, CEO, Citec Biosciences: No, indeed, it depends on the magnitude of the tariff, how much we can pass about, at least based on the current proposal or the tax rate out there indeed, and we are trying to pass this through to customers. But on the other hand, there is a delay effect and we continue to be on the previous calls already provided to our customers.
Noah, Analyst, Raymond James: Awesome. Thank you.
Argy, Conference Operator: Your next question comes from the line of Matthew Sykes of Goldman Sachs. Please go ahead.
Matthew Sykes, Analyst, Goldman Sachs: Matt, thanks for taking my questions. So the first one, how are you thinking about your capital allocation strategy as it relates to organic investment? Can you talk through your innovation pipeline and any investments you're particularly excited about?
Wenbin Jang, CEO, Citec Biosciences: I think other investment yes, go ahead.
Bill McComb, CFO, Citec Biosciences: No, no, go ahead, Wendy.
Wenbin Jang, CEO, Citec Biosciences: Yes, no, I think in terms of investment, I think there are two parts. One year is certainly as you can see the share buyback program. But in the meantime, as you can see, we continue to invest substantially in our internal R and D close to 20% of our revenue is invested in developing new products, new technology to drive our product forward and we will continue to have last year, we delivered a few products, including our new panel design Cytec Cloud, our ESP modules to support small particle detection. All of those are very much appreciated by our user base, by our customers. We'll continue to invest and to deliver new products coming to 2025 and you are going to see what we will do going forward.
Bill McComb, CFO, Citec Biosciences: The other area where we are investing aggressively is in the our service network. Revenues are growing quite strongly there. And so we're continuing to build out our network by adding more service personnel in many locations. We're also continuing to invest in IT automation so that we can make our transaction processing, inventory management all the more efficient. And that will be particularly useful to us as we grow the reagent business, which is obviously a small ticket business.
Matthew Sykes, Analyst, Goldman Sachs: Great. That actually leads very well into my next question, which was, can you talk to the growth you saw in services? And then any drivers outside of the general installed base growth? And then what your expectations are around services for 2025?
Bill McComb, CFO, Citec Biosciences: We so the major driver is installed base and that drives both service contract revenue and what we call time and materials revenue, which is where customers are just coming in service on a for a particular project or job. We're always exploring new offerings in service area, but the major driver is just the growing installed base. In terms of the guide, we didn't we didn't want to split out our overall revenue guidance versus in terms of service versus product, but you can probably infer that we expect a continuation of the good momentum that we've seen in service revenues in 2024. So you can expect that you could assume that we expect to continue to see solid growth there.
Matthew Sykes, Analyst, Goldman Sachs: Great. Thank you.
Argy, Conference Operator: Your next question comes from the line of Chad Wojciechowski of TD Cowen. Please go ahead.
Chad Wojciechowski, Analyst, TD Cowen: Hey, guys. Chad Wojciechowski on for Brendan Smith. I appreciate cash flow positive and you're investing heavily in R and D, the share buybacks you mentioned service reps. Are you open to additional M and A at this point? And could you kind of outline what that criteria would look like just balancing sort of investing in growth, but also profitability?
Bill McComb, CFO, Citec Biosciences: Sure. Win, would you like me to take a stab at this one?
Wenbin Jang, CEO, Citec Biosciences: Sure.
Bill McComb, CFO, Citec Biosciences: Yes, we are open to additional M and A. We have a very substantial cash balance. So we have the ability to do significant M and A. In terms of criteria, it has to be something that is in our existing markets or adjacent. So it's got to be something that's relevant to our customers.
And where we can extract significant synergies, which could be sales and distribution, R and D, G and A or manufacturing or ideally all four of those. And in terms of financial criteria, we would our target would be to have a business that's contributing positive EBITDA within a relatively near term period, I think within twelve months. So we our objective would be to buy businesses that have gross margins that are fairly similar to our existing gross margins at or around that level. And then to be able businesses where we can through in most cases, it's going to require some synergy and integration, but where we can get the business to a positive EBITDA contribution fairly quickly.
Chad Wojciechowski, Analyst, TD Cowen: That's helpful. And then just on Cytec cloud growth, it's just pretty impressive. What's being underappreciated there?
Wenbin Jang, CEO, Citec Biosciences: I know
Chad Wojciechowski, Analyst, TD Cowen: you have like the AI automated panel product and some other things happening. What's kind of driving that user growth?
Paul Goodson, Head of Investor Relations, Citec Biosciences: Thanks.
Wenbin Jang, CEO, Citec Biosciences: I think Cytec Cloud really makes it a lot easier for our users to design panel, especially when designing a high parameter, high dimensional total high dimensional cell analysis. Those large panels typically takes many weeks, months to optimize. Now, we call algorithm over there, make it very easy for our users. In fact, quite a few CRO and pharma have already built our Cytec Cloud into their standard workflow to enable them to really become more efficient to work on Cytec instrument. So we feel this is like also it's like a kind of value we have brought to our customers that have been the reason for the rapid growth of our user base from a few thousand to now 16,000 just in the last twelve months.
And this momentum continuing, we feel this really will help going forward from a few aspects. One is certainly the loyalty to Citic Solutions. Second part is also will help our regions as well. And our Cytec Cloud, we have carried a very complete catalog of the regions that will enable users to purchase.
Paul Goodson, Head of Investor Relations, Citec Biosciences: Thanks for the questions.
Argy, Conference Operator: Your next question comes from the line of Harrison Parsons (NYSE:PSN) of Stephens. Please go ahead.
Harrison Parsons, Analyst, Stephens: Hey, great. This is Harrison on for Mason. Thanks for taking the questions. I wanted to ask if you could tell me what your guidance assumes in terms of flow cytometry market growth throughout 2025?
Bill McComb, CFO, Citec Biosciences: We didn't make a specific assumption with respect to market growth. We
Wenbin Jang, CEO, Citec Biosciences: I
Bill McComb, CFO, Citec Biosciences: think implicitly, we assumed not much change from 2024. And where the market we there aren't many reliable studies, if any, of the flow cytometry market. The best indications that we have was that it was in the instrument business was mildly negative. So we broadly assumed no significant change upwards or downwards, but we did take account of these near term headwind factors that I mentioned in the prepared remarks. So that leads to probably a more back end of growth profile than as a result.
Harrison Parsons, Analyst, Stephens: Okay. And then could you give us some insight into your expectations in terms of growth this year across your different key geographies?
Bill McComb, CFO, Citec Biosciences: Once again, we didn't we don't want to guide specifically to geography by geography. I think what I can say is that in 2024, the U. S. Was significantly softer that Asia Pacific and Europe were quite a bit stronger, and we had double digit growth in those markets. I think it's fair to assume.
As I said, we generally approached our guidance with a view that the market was going to be broadly similar in 2025 to as it was in 2024. So expect that The U. S. Market would continue to be flattish and that we would see better growth in APAC and EMEA. So broadly speaking, a continuation of the trends that we saw in 2024 with some near term headwinds probably particularly affecting The U.
S. Market.
Harrison Parsons, Analyst, Stephens: Perfect. I'll leave it there. Thanks for the questions.
Argy, Conference Operator: That ends our Q and A session and we appreciate your participation. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Written By: Investing.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.