Cytek Biosciences, Inc.

time I would like to welcome everyone to SciTech Biosciences second quarter 2024 earnings conference call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press star 1 followed by Buy the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Paul Goodson, Head of Investor Relations. You may begin.

Thank you, Operator. Earlier today, SciTech Biosciences released financial results for the quarter ended June 30th, 2024. If you haven't received this news release or if you'd like to be added to the company's distribution list, please send an email to investors at scitechbio.com. Joining me today from Scitech are Wenbin Zhang's CEO and CFO, Bill McComb. Before we begin, I'd like to remind you that management will be making statements during this call that are forward-looking statements within the meaning of the federal securities laws, including statements regarding Scitech's business plans, strategies, opportunities, and financial projections. These statements are based on the company's current expectations and inherently involve significant risks and uncertainties. that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements in the press release 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. Reconciliation of the most directly comparable GAAP financial measure may be found in today's earnings release submitted to the SEC. Except as required by law, SciTech 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 live broadcast August 6, 2024. Once again, I would like to invite investors and analysts to attend the industry and academic conferences, meetings, and seminars where we will be exhibiting Scitex products. There are 43 of these events planned throughout the remainder of 2024 in the US and around the world. While these are primarily geared to the scientific community, they may offer an opportunity to interact with users of our technologies to learn why Scitex instruments are so highly valued by our customers. There is a cost to attend most events, and we have a limited number of spaces to accommodate members of the financial community. So if you are interested in attending, please contact me. With that, I will turn the call over to Wenbin.

Thanks, Paul. Welcome, everyone, and thank you for your interest in SciTech. On the call today, I will discuss our performance for the second quarter of 2024 and the progress achieved on 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 financial results and our updated financial outlook for 2024 before we open it up for Q&A. Revenue in the second quarter was $46.6 million. an increase of 4% compared to the first quarter and a 6% decline compared to the second quarter of 2023, which was especially strong as it captured some delayed orders from the first quarter of 2023. Collectively, revenue for the first half of 2024 grew 5% compared to the first half of 2023. Value in the second quarter of 2024 was comprised of a continued strong double-digit growth in EMEA and APEX, offset by weakness in the U.S. market, where we continued to experience a slowdown in orders and elongated sales cycles, particularly concentrated in the academic and the government segments of the U.S. market. Further, while weaker versus The prior year, the biotech, pharma, and CRO segments improved sequentially versus the first quarter. We believe our performance in this academic and government segment of the U.S. market was impacted by turnover on our sales team in some sales strategies, a slow funding environment, and an overhang of excess capacity from pandemic-era spending. We are working aggressively to bolster our sales team in this area. We believe the in long-term sales cycle was primarily a result of these market factors and not as a result of a change in competitive dynamics. Importantly, we believe the fundamental drivers of long-term growth remain in place in the U.S. market and expect it to normalize over time. Specifically, we expect the large in-store base of conventional technology flow psychometrics will be replaced over time with special instruments and will be a growth driver for SciTech going forward. As a result of our Q2 results and the slower than expected recovery in the U.S. market conditions, we are slightly narrowing our guidance range and now expect full-year revenue in the range of $203 to $210 million, representing growth of 5% to 9% over the prior year. Bill will provide more details on our financial results momentarily. In the second quarter, we were pleased to achieve 30% growth in service revenue as compared to the same quarter in the prior year. driven by our increasing installed base of instruments. As a reminder, we expect our recurring service revenue will be a strong growth driver for SIDEC longer term. Notably, over the last 12 months, we have leveraged the increasing scale of our service operations to boost the labor and the overhead productivity. Based on these efforts, we substantially increased our service growth margins by 8% points as compared to a year ago. Overall, while ordering activity continues to be weak in the U.S. and the market recovery was not at the pace we would like to see, we believe that the underlying demand for our cutting-edge analysis solutions remains strong. And we are making steady progress with new and existing customers in our pipeline. As we navigate this dynamic environment, we remain focused on driving sustainable growth and productivity. And essential to this objective is strengthening our position as a market leader in flow cytometry. Turning to our growth strategy, as a reminder, our focus is on four key pillars each of which is integral to our long-term growth, instruments, applications, bioinformatics, and clinical. In the second quarter, we expanded our global footprint with 147 instruments sold, reaching a total installed base of 2,656 units, including 299 AMLIS and AGUAVA instruments shipped since the acquisition of the Luminix flow cytometry and imaging business. This total does not include the thousands of installed AMNES and GUAVA instruments sold prior to our acquisition of the Luminix product lines. We believe that this growing interface will serve as a durable foundation to drive adoption of our current and future product offerings. and deliver growth across our diversified revenue base. During the second quarter, we were excited to have announced our Enhanced Small Particle Detection Module, or ESP, a new product that can be added to new or retrofitted to existing Aurora and Northern Lights instruments. This new capability allows our already powerful cell analysis systems to provide the further sensitivity and the resolution improvements for detecting viruses and the other sub-cellular particles, or while maintaining sites with well-known high resolution and the high parameter capabilities for cell analysis. By bringing improved speed and accuracy to the study of extracellular vesicles, cell-to-cell communication and the cell signaling in many physiological states, we expect to accelerate the pace of discovery, therapy, and the diagnostic development and benefit the scientific community as a whole. For SciTech, we believe these new capabilities will further distinguish our cell analysis solutions as the preferred choice among researchers and clinicians. Turning to bioinformatics, our main goal is to enable our customers to streamline their experimental workflow through our software tools, which drive adoption and utilization of our cell analysis solution. Our success in bioinformatics can be measured through user engagement and demand for SciTech Cloud, one of our core bioinformatics offerings. We now have over 11,000 users of the SciTech Cloud. representing an average of about five users per installed Sighted FSP instrument. We are excited to share that just last week, we officially launched a powerful tool to automate panel design and expand the capabilities of the panel builder tool within Sighted Cloud, which we previewed during our last earnings call. Our special panel tool is a proprietary new intelligent algorithm optimized for SciTech SSP technology that automates the assignments of protocols to markers, removing a labor-intensive manual process. This tool will save researchers time and money by jump-starting their panel design process with a tool that suggests to optimize the panels in minutes. As a reminder, SiteCloud supports flow cytometry research from panel design to experiment setup to data acquisition, enabling researchers to design panels with ease, taking into account antigen density, marker expression, and the reagent availability. It consists of a suite of integrated online software tools that streamline workflows, combining all special panel design tools in one place which enables users to prepare experiments remotely. CyclerCloud accelerates time to insight for a wide range of applications and is a vital resource in the research community. On the application front, in the second quarter, we were pleased to share that our one laser and two laser six color TBNK reagent cocktails received the China National Medical Administration approval for clinical use on northern light systems in hospitals, laboratories, and the clinics across China. As a reminder, this is the first one-laser-based six-color assay supported by FFP capability, which gives our one-laser systems a competitive advantage against the more expensive two-laser systems. These reagents help in diagnosing and monitoring various immune-related conditions. Obtaining NNPA clearance is a significant milestone achieved through a rigorous process that validates the safety and the efficacy of phytic TB and K reagents. This achievement enhances our market presence in China and opens new potential opportunities while strengthening our competitive advantage. As we continue to push forward new products and applications, we remain deeply focused on providing a comprehensive sale analysis portfolio to our customers. A critical component of this mission is to expand and enhance our reach and capabilities. We look forward to continuing to provide our powerful cell analysis solutions to the scientific community to accelerate clinical progress and scientific discovery. With that, I will now turn the call over to Bill for more details around our financials.

Thanks, Wyndon. Total revenue for the second quarter was $46.6 million, an increase of 4% versus the first quarter and a decrease of 6% from a particularly strong second quarter of 2023. First half revenue, which averages out this effect, grew 5% versus prior year first half. These revenue results reflect continued robust growth in international markets and in service revenue, with the decline versus Q2-23 being attributable to weakness in the U.S. instrument market. Product revenue, primarily instruments, declined 15% in Q2 versus prior year and 4% in the first half, which was driven by weakness in the U.S. market, particularly in the academic and government sector. Service revenue grew 30% in Q2 and 50% in the first half versus a year ago, driven by substantial growth in the installed basis systems needing service contracts. Service business growth reflects how extensively our tools are being used on a daily basis across all disciplines. Turning to geographic market performance, total U.S. revenue declined 29% from a strong Q2 2023 and 15% for the first half of 2024 as product revenue weakness offset service growth. International markets grew strongly with EMEA up 52% versus prior year and 51% for the first half. And Asia Pacific up 27% in Q2 and 16% for the first half as CITEX technology continued to gain traction as the full spectral flow cytometry technology of choice for research institutions and biopharma companies worldwide. Gross profit was $25.4 million for the second quarter, an increase of 11% versus the first quarter, and a decrease of 10% versus a year ago. Gap gross profit margin improved to 55% in the quarter, up from 51% in Q1 due to the absence of inventory adjustments and improved labor and overhead productivity and service. Compared to a year ago, GAAP gross profit margin was down 2% from 57% due to higher product labor expenses offset by a substantially improved service gross margin due to labor and overhead productivity on higher revenue. Adjusted gross profit margin, which excludes stock-based compensation expense and amortization of acquisition-related intangibles, was 58% in the quarter, up from 55% in Q1 and down from 60% in the prior year quarter. Operating expenses were 34 million for the second quarter of 2024, essentially flat with Q1 at 33.7 million, and decreased 9% from 37.3 million in the second quarter of 2023, driven primarily by lower R&D and sales and marketing expenses. Research and development expenses were $10 million for the second quarter, in line with 9.8 million in Q1 and down from 12.1 million in the prior year period. The decrease of 2.1 million was primarily due to lower headcount and engineering expense. Sales and marketing expenses were 12.3 million for the second quarter, a slight decrease from Q1 at 12.5 million, and down from $14.4 million for the prior year period. The decrease of $2.1 million was primarily due to lower headcount. General and administrative expenses were $11.7 million for the second quarter, slightly up from $11.4 million in Q1 and up from $10.8 million for the prior year period. The increase of $0.9 million was primarily driven by higher stock-based compensation expense. Loss from operations was $8.5 million for the second quarter, an improvement compared to a loss from operations of $9.1 million for the second quarter of 2023. This was driven by lower operating expenses in the current quarter, offset by lower gross margin versus the prior year. Net loss in the second quarter was $10.4 million compared to $4.4 million in the prior year. This was primarily due to a non-cash tax expense in the current quarter, driven by a lower effective tax rate and a consequent reversal of a Q1 tax benefit compared to a tax benefit in the prior year quarter, and to a lesser extent, lower net other income due to foreign exchange losses. Adjusted EBITDA, which excludes stock-based compensation expense and foreign currency impacts, increased to 2.9 million for the second quarter compared to a loss of 0.7 million in Q1 and 1.5 million in the second quarter of 2023. This was due to higher revenue and gross profit versus Q1 and lower operating expenses versus the year-ago quarter. We remain committed to improving profitability going forward by driving revenue growth and controlling costs. Total cash and marketable securities increased by $7 million versus Q1 to $277 million due to higher adjusted EBITDA and efficient working capital management, and despite spending $3 million to repurchase shares in the quarter. With healthy cash reserves, no meaningful debt, and positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth initiatives. As I mentioned above, one important use of our strong cash flow and cash position has been to repurchase our stock. Accordingly, in June, we announced an authorization to repurchase 50 million of our stock. During the second quarter, we repurchased approximately 2.7 million worth of Scitec stock in open market transactions at a weighted average price of $5.99 per share. Shares repurchased under these programs are canceled, leaving us with 131.5 million shares outstanding as of June 30, 2024. Now turning to our outlook for the full year 2024, which went then reported at a high level earlier. We are continuing to see market pressures impacting our revenue expectations, including order delays across North America. At the same time, we're seeing signs of normal spending patterns returning to Europe and Asia Pacific. Due to these more mixed market conditions, we are narrowing our full-year revenue outlook to a range of $203 million to $210 million, representing overall growth of 5% to 9% over full-year 2023 and assuming no change in currency exchange rates. We continue to expect modest growth across our products and service lines, and growth rates continue with historical spending patterns at our customer base in the second half of this year. In addition, we do not expect to be GAAP net income positive for the full year due to our outlook for slightly lower gross profit, higher stock-based compensation expense, and lower other incomes. We expect Scitec's GAAP net loss to be in the single-digit millions range for the full year 2024. It remains our objective to deliver a positive net income going forward. Scitec also expects to generate positive cash flow from operations in 2024. With that, I will turn it back over to Wenbin.

Thanks, Bill. I want to close by thanking our scientific team for their continued commitment to delivering cutting-edge tools, reagents, and software to empower the scientific community to advance the next generation of cell analysis. We are serving very attractive end markets across healthcare, and I'm confident that we are strongly positioned to drive our growth strategy forward. with continued execution across our key strategic pillars and a focus on delivering sustainable growth and profitability. I want to thank everyone for joining today's call, and we will now open it up for questions.

Off we go. Thank you.

The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead.

Hi, this is Jason on for Tejas. Thank you for taking our questions. So could you talk a little bit about your order book and visibility into the second half? At midpoint, it seems to imply a 55% to 56% second half ramp to achieve the guidance. So could you provide some color on what gives you confidence in this ramp? So are you baking in any benefits from the stimulus in China? Are there any budget plus dynamic assumptions? So any assumptions about your confidence?

This is Bill.

We baked in a, you know, broadly a continuation of both current market conditions and a typical quarterly spending pattern. You'll notice if you look at the prior year's second half and in particular fourth quarter, that those represent more than 50% of annual revenue. So we don't see any reason why that typical quarterly pattern or first half, second half pattern would be any different than prior years. And our Our guidance represents 5% growth over last year at the low end and low double digits at the top end, which is broadly consistent with our overall year-to-year growth rate.

Yeah, just add on top of that, the China impact is not baked into this forecast or guidance.

Got it. Thank you. I appreciate that. Then I guess a follow-up question, just with the SCI acquisition now seeing its anniversary, could you provide us with an update on your development roadmap with Guava and Amnesty? And as a follow-up, where do you currently stand on the development of imaging FSP?

Guava, as you know, was never a primary reason for the acquisition. we have kept Guava for the reason that some of the Guava customers would like to stay, continue on what they have been familiar with. But Omnic site, and we continue to assess the customer demand and needs on the imaging side, and this is part of the reason for the acquisition, and we are continuing to work on integrating the imaging capability onto the FSP product.

Thank you. If I may ask one more, so you noted weakness among academic customers in the U.S. Could you talk a bit about the intra-quarter trends that you saw play out? Did you see the cadence get better or worsen throughout the quarter?

As you can see, this trend has been continuing even from Q1 through Q2. Of course, this partially also we have indicated due to some of the turnover of our sales representative in some of the territories in North America. We are addressing this subject, and we feel sales is not being lost. It's just not being pushed too close. We will see it to come back.

Thank you. I appreciate the time, guys.

Your next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

Hi, this is Evie Odd for Matt. Thanks for taking the questions. So my first is, can you give us more color on the delayed orders that were captured in the quarter? What would the growth have been excluding those orders? And then is there a risk that elongated sales cycles continue to delay orders in the back half of the year?

As you can see, in the first years, we actually experienced a great growth in Europe and EMEA, but we do have seen the kind of elongated sales cycle in North America, and this evidently continued in Q2. At this time, we don't foresee this will improve over the next couple of quarters for the year, but our guidance has already included this factor.

Great. Thank you. And then can you talk through, with a potential replacement cycle coming up, where we are in this cycle, and given your large install base, when we could start to see this come through? Maybe some detail on your average instrument age versus historic trends of when those start to be replaced.

I think this replacement cycle is not just to replace our own instruments deployed quite a few years ago. It's also a replacement of other conventional instruments. Now, actually, far more of those instruments, in fact, in the field, we feel we are going to benefit from replacing those instruments.

Yeah, that universe of when we talk about replacement instruments, the opportunity is primarily constituted by the thousands of conventional flow cytometry instruments that are out there. We think about 50,000 in total. So it's the replacement of those instruments as they reach end of life that constitutes the most important replacement opportunity.

Very helpful. Thank you.

Your next question comes from the line of David Wessenberg with Piper Sandler. Please go ahead.

Hey, guys. Thanks for your technical questions. This is John on for Dave. Can you give any commentary on the instrument mix during the quarter, what the standard performing instruments were? And if you have any commentary on the consumables across the instruments, that'd be appreciated. Thank you.

Yeah, well, I think we saw strength across all of our categories of instruments with particular strength this quarter in the Northern Lights instruments.

That category was probably the best performer. And then with respect to consumables, I assume you're

referring to reagents, that continues to be a mid-single digits proportion of the overall business. So it doesn't really have a significant impact on growth rate. And as we said in the past, it grows broadly in line with the rest of the portfolio.

Got it. Thank you.

And do you have any thoughts on when capital budget appetites might start to stabilize more or potentially turn more positive in the U.S.?

I think actually looking at the segment, while we see the kind of weakness, elongated sales cycle on the academic and government side, We do see farmers start to come back, and clearly we see the improvement in Q2 versus Q1.

Great. Thank you.

Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Chad Witkowski with TD Cohen. Please go ahead.

Hey, this is Chad on for Stephen Ma. Can you just help contextualize how the bioinformatics improvements and the automated panel design impact instrument consumable demand and sort of break that out among geographic and customer end markets? Is there more or less sensitivity to these improvements in certain segments?

You know, the bioinformatics is a platform that to really help our users to leverage the instruments and the reagents we have. The special panel we have just launched, in fact, it automates the panel design, especially for those high complex panels, and typically takes a lot more time for the users to optimize. Now we have a system, a tool, that will really enable them to speed up their development Afterwards, it not only enabled them to optimize basically the kind of like a virtual experiment on our platform, it also enabled them to purchase the reagents afterwards. So through this process, we feel that it helped our users provide a full set of solutions for our customers to leverage the full special technology CITIC has provided.

That's helpful. And just to pivot sort of to instruments, obviously the new facility, this manufacturing facility open is related to instrument production. So does this create sort of a risk to gross margin just given that fixed cost is already on the books? And could you maybe speak to how you're thinking of the margin cadence sort of in the back half of the year and beyond?

The

The new facility costs of that are already included in our fixed costs, so there's no, we don't see a specific downside risk to gross margins from that. And then as to gross margin cadence, you know, last quarter we said that we expected to move back closer to where our gross margins were last year. So in this quarter, we moved our adjusted gross margin moved up to 58%. And that compares to 60% in Q2 of last year and 59 for the balance of the year. So I think we've recovered most of the margin, a large portion of the margin gap versus last year. And I think While, you know, as revenue grows, we would hope for some margin benefit, the benefits should be fairly modest from this point forward.

That's helpful. Thanks for the time, guys.

Ladies and gentlemen, that concludes the Q&A session and today's call. Thank you all for joining. You may now disconnect. Thank you. you Thank you. Thank you. Thank you for standing by. My name is Luella and I will be your conference operator today. At this time, I would like to welcome everyone to SciTech Biosciences second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, There will be a question and answer session. If you would like to ask a question during this time, simply press star 1, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Paul Goodson, Head of Investor Relations. You may begin.

Thank you, Operator. Earlier today, SciTech Biosciences released financial results for the quarter ended June 30th, 2024. If you haven't received this news release or if you'd like to be added to the company's distribution list, please send an email to investors at scitechbio.com. Joining me today from Scitech are Wenbin Zhang's CEO and CFO, Bill McComb. Before we begin, I'd like to remind you that management will be making statements during this call that are forward-looking statements within the meaning of the federal securities laws, including statements regarding Scitech's business plans, strategies, opportunities, and financial projections. These statements are based on the company's current expectations and inherently involve significant risks and uncertainties. that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements in the press release 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. Reconciliation of the most directly comparable GAAP financial measure may be found in today's earnings release submitted to the SEC. Except as required by law, SciTech 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 live broadcast August 6, 2024. Once again, I would like to invite investors and analysts to attend the industry and academic conferences, meetings, and seminars where we will be exhibiting Scitex products. There are 43 of these events planned throughout the remainder of 2024 in the US and around the world. While these are primarily geared to the scientific community, they may offer an opportunity to interact with users of our technologies to learn why Scitex instruments are so highly valued by our customers. There is a cost to attend most events, and we have a limited number of spaces to accommodate members of the financial community. So if you are interested in attending, please contact me. With that, I will turn the call over to Wenbin.

Thanks, Paul. Welcome, everyone, and thank you for your interest in SciTech. On the call today, I will discuss our performance for the second quarter of 2024 and the progress achieved on 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 financial results and our updated financial outlook for 2024 before we open it up for Q&A. Revenue in the second quarter was $46.6 million. an increase of 4% compared to the first quarter and a 6% decline compared to the second quarter of 2023, which was especially strong as it captured some delayed orders from the first quarter of 2023. Collectively, revenue for the first half of 2024 grew 5% compared to the first half of 2023. Value in the second quarter of 2024 was comprised of a continued strong double-digit growth in EMEA and APEX, offset by weakness in the U.S. market, where we continued to experience a slowdown in orders and elongated sales cycles, particularly concentrated in the academic and the government segments of the U.S. market. Further, while weaker versus The prior year, the biotech, pharma, and CRO segments improved sequentially versus the first quarter. We believe our performance in this academic and government segment of the U.S. market was impacted by turnover on our sales team in some sales strategies, a slow funding environment, and an overhang of excess capacity from pandemic-era spending. We are working aggressively to bolster our sales team in this area. We believe the in long-term sales cycle was primarily a result of these market factors and not as a result of a change in competitive dynamics. Importantly, we believe the fundamental drivers of long-term growth remain in place in the U.S. market and expect it to normalize over time. Specifically, we expect the large in-store base of conventional technology flow psychometrics will be replaced over time with special instruments and will be a growth driver for phytech going forward. As a result of our Q2 results and the slower than expected recovery in the U.S. market conditions, we are slightly narrowing our guidance range and now expect full-year revenue in the range of $203 to $210 million, representing growth of 5% to 9% over the prior year. Bill will provide more details on our financial results momentarily. In the second quarter, we were pleased to achieve 30% growth in service revenue as compared to the same quarter in the prior year. driven by our increasing installed base of instruments. As a reminder, we expect our recurring service revenue will be a strong growth driver for SIDEC longer term. Notably, over the last 12 months, we have leveraged the increasing scale of our service operations to boost the labor and the overhead productivity. Based on these efforts, We substantially increased our service growth margins by 8% points as compared to a year ago. Overall, while ordering activity continues to be weak in the US and the market recovery was not at the pace we would like to see, we believe that the underlying demand for our cutting edge analysis solution remains strong. And we are making steady progress with new and existing customers in our pipeline. As we navigate this dynamic environment, we remain focused on driving sustainable growth and productivity. And essential to this objective is strengthening our position as a market leader in flow cytometry. Turning to our growth strategy, as a reminder, our focus is on four key pillars each of which is integral to our long-term growth, instruments, applications, bioinformatics, and clinical. In the second quarter, we expanded our global footprint with 147 instruments sold, reaching a total installed base of 2,656 units, including 299 AMLIS and AGUAVA instruments shipped since the acquisition of the Luminix flow cytometry and imaging business. This total does not include the thousands of installed AMNES and GUAVA instruments sold prior to our acquisition of the Luminix product lines. We believe that this growing interface will serve as a durable foundation to drive adoption of our current and future product offerings. and deliver growth across our diversified revenue base. During the second quarter, we were excited to have announced our Enhanced Small Particle Detection Module, or ESP, a new product that can be added to new or retrofitted to existing Aurora and Northern Lights instruments. This new capability allows our already powerful cell analysis systems to provide the further sensitivity and the resolution improvements for detecting viruses and the other sub-cellular particles, or while maintaining scientists' well-known high resolution and the high parameter capabilities for cell analysis. By bringing improved speed and accuracy to the study of extracellular vesicles, cell-to-cell communication and the cell signaling in many physiological states, we expect to accelerate the pace of discovery, therapy, and the diagnostic development and benefit the scientific community as a whole. For SciTech, we believe these new capabilities will further distinguish our cell analysis solutions as the preferred choice among researchers and clinicians. Turning to bioinformatics, our main goal is to enable our customers to streamline their experimental workflow through our software tools, which drive adoption and utilization of our cell analysis solution. Our success in bioinformatics can be measured through user engagement and demand for SciTech Cloud, one of our core bioinformatics offerings. We now have over 11,000 users of the SciTech Cloud. representing an average of about five users per installed Sighted FSP instrument. We are excited to share that just last week, we officially launched a powerful tool to automate panel design and expand the capabilities of the panel builder tool within Sighted Cloud, which we previewed during our last earnings call. Our special panel tool is a proprietary new intelligent algorithm optimized for SciTech SSP technology that automates the assignments of protocols to markers, removing a labor-intensive manual process. This tool will save researchers time and money by jump-starting their panel design process with a tool that suggests to optimize the panels in minutes. As a reminder, SiteCloud supports flow cytometry research from panel design to experiment setup to data acquisition, enabling researchers to design panels with ease, taking into account antigen density, marker expression, and the reagent availability. It consists of a suite of integrated online software tools that streamline workflows, combining all special panel design tools in one place which enables users to prepare experiments remotely. CyclerCloud accelerates time to insight for a wide range of applications and is a vital resource in the research community. On the application front, in the second quarter, we were pleased to share that our one laser and two laser six color TBNK reagent cocktails received the China National Medical Administration approval for clinical use on northern light systems in hospitals, laboratories, and the clinics across China. As a reminder, this is the first one-laser-based six-color assay supported by FFP capability, which gives our one-laser systems a competitive advantage against the more expensive two-laser systems. These reagents help in diagnosing and monitoring various immune-related conditions. Obtaining NNPA clearance is a significant milestone achieved through a rigorous process that validates the safety and the efficacy of phytic TB and K reagents. This achievement enhances our market presence in China and opens a new potential opportunity while strengthening our competitive advantage. As we continue to push forward new products and applications, we remain deeply focused on providing a comprehensive sale analysis portfolio to our customers. A critical component of this mission is to expand and enhance our reach and capabilities. We look forward to continuing to provide our powerful cell analysis solutions to the scientific community to accelerate clinical progress and scientific discovery. With that, I will now turn the call over to Bill for more details around our financials.

Thanks, Wyndon. Total revenue for the second quarter was $46.6 million, an increase of 4% versus the first quarter and a decrease of 6% from a particularly strong second quarter of 2023. First half revenue, which averages out this effect, grew 5% versus prior year first half. These revenue results reflect continued robust growth in international markets and in service revenue, with the decline versus Q2-23 being attributable to weakness in the U.S. instrument market. Product revenue, primarily instruments, declined 15% in Q2 versus prior year and 4% in the first half, which was driven by weakness in the U.S. market, particularly in the academic and government sector. Service revenue grew 30% in Q2 and 50% in the first half versus a year ago, driven by substantial growth in the installed basis systems needing service contracts. Service business growth reflects how extensively our tools are being used on a daily basis across all disciplines. Turning to geographic market performance, total U.S. revenue declined 29% from a strong Q2 2023 and 15% for the first half of 2024 as product revenue weakness offset service growth. International markets grew strongly with EMEA up 52% versus prior year and 51% for the first half. And Asia Pacific up 27% in Q2 and 16% for the first half as CITEX technology continued to gain traction as the full spectral flow cytometry technology of choice for research institutions and biopharma companies worldwide. Gross profit was $25.4 million for the second quarter, an increase of 11% versus the first quarter, and a decrease of 10% versus a year ago. Gap gross profit margin improved to 55% in the quarter, up from 51% in Q1 due to the absence of inventory adjustments and improved labor and overhead productivity and service. Compared to a year ago, GAAP gross profit margin was down 2% from 57% due to higher product labor expenses offset by a substantially improved service gross margin due to labor and overhead productivity on higher revenue. Adjusted gross profit margin, which excludes stock-based compensation expense and amortization of acquisition-related intangibles, was 58% in the quarter, up from 55% in Q1 and down from 60% in the prior year quarter. Operating expenses were 34 million for the second quarter of 2024, essentially flat with Q1 at 33.7 million, and decreased 9% from 37.3 million in the second quarter of 2023, driven primarily by lower R&D and sales and marketing expenses. Research and development expenses were $10 million for the second quarter, in line with 9.8 million in Q1 and down from 12.1 million in the prior year period. The decrease of 2.1 million was primarily due to lower headcount and engineering expense. Sales and marketing expenses were 12.3 million for the second quarter, a slight decrease from Q1 at 12.5 million, and down from $14.4 million for the prior year period. The decrease of $2.1 million was primarily due to lower headcount. General and administrative expenses were $11.7 million for the second quarter, slightly up from $11.4 million in Q1 and up from $10.8 million for the prior year period. The increase of $0.9 million was primarily driven by higher stock-based compensation expense. Loss from operations was $8.5 million for the second quarter, an improvement compared to a loss from operations of $9.1 million for the second quarter of 2023. This was driven by lower operating expenses in the current quarter, offset by lower gross margin versus the prior year. Net loss in the second quarter was $10.4 million compared to $4.4 million in the prior year. This was primarily due to a non-cash tax expense in the current quarter, driven by a lower effective tax rate and a consequent reversal of a Q1 tax benefit compared to a tax benefit in the prior year quarter, and to a lesser extent, lower net other income due to foreign exchange losses. Adjusted EBITDA, which excludes stock-based compensation expense and foreign currency impacts, increased to 2.9 million for the second quarter compared to a loss of 0.7 million in Q1 and 1.5 million in the second quarter of 2023. This was due to higher revenue and gross profit versus Q1 and lower operating expenses versus the year-ago quarter. We remain committed to improving profitability going forward by driving revenue growth and controlling costs. Total cash and marketable securities increased by $7 million versus Q1 to $277 million due to higher adjusted EBITDA and efficient working capital management, and despite spending $3 million to repurchase shares in the quarter. With healthy cash reserves, no meaningful debt, and positive operational cash flow, we continue to operate from a position of strength and can fully support our global growth initiatives. As I mentioned above, one important use of our strong cash flow and cash position has been to repurchase our stock. Accordingly, in June, we announced an authorization to repurchase 50 million of our stock. During the second quarter, we repurchased approximately 2.7 million worth of Scitec stock in open market transactions at a weighted average price of $5.99 per share. Shares repurchased under these programs are canceled, leaving us with 131.5 million shares outstanding as of June 30, 2024. Now turning to our outlook for the full year 2024, which went then reported at a high level earlier. We are continuing to see market pressures impacting our revenue expectations, including order delays across North America. At the same time, we're seeing signs of normal spending patterns returning to Europe and Asia Pacific. Due to these more mixed market conditions, we are narrowing our full-year revenue outlook to a range of $203 million to $210 million, representing overall growth of 5% to 9% over full-year 2023 and assuming no change in currency exchange rates. We continue to expect modest growth across our products and service lines, and growth rates continue with historical spending patterns at our customer base in the second half of this year. In addition, we do not expect to be GAAP net income positive for the full year due to our outlook for slightly lower gross profit, higher stock-based compensation expense, and lower other incomes. We expect Scitec's GAAP net loss to be in the single-digit millions range for the full year 2024. It remains our objective to deliver a positive net income going forward. Scitec also expects to generate positive cash flow from operations in 2024. With that, I will turn it back over to Wenbin.

Thanks, Bill. I want to close by thanking our scientific team for their continued commitment to delivering cutting-edge tools, reagents, and software to empower the scientific community to advance the next generation of cell analysis. We are serving very attractive end markets across healthcare, and I'm confident that we are strongly positioned to drive our growth strategy forward. with continued execution across our key strategic pillars and a focus on delivering sustainable growth and profitability.

I want to thank everyone for joining today's call, and we will now open it up for questions.

Off we go.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead.

Hi, this is Jason on for Tejas. Thank you for taking our questions. So could you talk a little bit about your order book and visibility into the second half? At midpoint, it seems to imply a 55% to 56% second half ramp to achieve the guidance. So could you provide some color on what gives you confidence in this ramp? So are you baking in any benefits from the stimulus in China? Are there any budget plus dynamic assumptions? So any assumptions about your confidence?

This is Bill.

We baked in a, you know, broadly a continuation of both current market conditions and a typical quarterly spending pattern. You'll notice if you look at the prior year's second half and in particular fourth quarter, that those represent more than 50% of annual revenue. So we don't see any reason why that typical quarterly pattern or first half, second half pattern would be any different than prior years. And our Our guidance represents 5% growth over last year at the low end and low double digits at the top end, which is broadly consistent with our overall year-to-year growth rate.

Yeah, just add on top of that, the China impact is not baked into this forecast or guidance.

Got it. Thank you. I appreciate that. Then I guess a follow-up question, just with the SCI acquisition now seeing its anniversary, could you provide us with an update on your development roadmap with Guava and Amnesty? And as a follow-up, where do you currently stand on the development of imaging FSP?

Guava, as you know, was never a primary reason for the acquisition. We have kept Guava for the reason that some of the Guava customers would like to stay, continue on what they have been familiar with. But on the next site, we continue to assess the customer demand and needs on the imaging side, and this is part of the reason for the acquisition, and we are continuing to work on integrating the imaging capability onto the FSP product.

Thank you. If I may ask one more, so you noted weakness among academic customers in the U.S. Could you talk a bit about the intra-quarter trends that you saw play out? Did you see the cadence get better or worsen throughout the quarter?

As you can see, this trend has been continuing even from Q1 through Q2. Of course, this partially also we have indicated due to some of the turnover of our sales representative in some of the territories in North America. We are addressing this subject, and we feel sales is not being lost. It's just not being pushed too close. We will see it to come back.

Thank you. I appreciate the time, guys.

Your next question comes from the line of Matt Sykes with Goldman Sachs. Please go ahead.

Hi, this is Evie Odd for Matt. Thanks for taking the questions. So my first is, can you give us more color on the delayed orders that were captured in the quarter? What would the growth have been excluding those orders? And then is there a risk that elongated sales cycles continue to delay orders in the back half of the year?

As you can see, first years we actually experienced a great growth in Europe and EMEA, but we do have seen the kind of elongated sales cycle in North America and this evidently continued in Q2. At this time, we don't foresee this will improve over the next couple of quarters for the year, but our guidance has already included this factor.

Great. Thank you. And then can you talk through, with a potential replacement cycle coming up, where we are in this cycle, and given your large install base, when we could start to see this come through? Maybe some detail on your average instrument age versus historic trends of when those start to be replaced.

I think this replacement cycle is not just to replace our own instruments deployed quite a few years ago. It's also a replacement of other conventional instruments. Now already actually far more of those instruments in fact in the field we feel we are going to benefit from replacing those instruments.

That universe of when we talk about replacement instruments, the opportunity is primarily constituted by the thousands of conventional flow cytometry instruments that are out there. We think about 50,000 in total. So it's the replacement of those instruments as they reach end of life that constitutes the most important replacement opportunities.

Very helpful.

Thank you.

Your next question comes from the line of David Wessenberg with Piper Sandler. Please go ahead.

Hey, guys. Thanks for your technical questions. This is John on for Dave. Can you give any commentary on the instrument mix during the quarter, what the standard performing instruments were? And if you have any commentary on the consumables across the instruments, that'd be appreciated. Thank you.

Yeah, well, I think we saw strength across all of our categories of instruments with particular strength this quarter in the Northern Lights instruments.

That category was probably the best performer. And then with respect to consumables, I assume you're

referring to reagents, that continues to be a mid-single digits proportion of the overall business. So it doesn't really have a significant impact on growth rate. And as we said in the past, it grows broadly in line with the rest of the portfolio.

Got it. Thank you.

And do you have any thoughts on when capital budget appetites might start to stabilize more or potentially turn more positive in the U.S.?

I think actually looking at the segment, while we see the kind of weakness, elongated sales cycle on the academic and government side, We do see farmers start to come back, and clearly we see the improvement in Q2 versus Q1.

Great. Thank you.

Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Chad Witkowski with TD Cohen. Please go ahead.

Hey, this is Chad on for Stephen Ma. Can you just help contextualize how the bioinformatics improvements and the automated panel design impact instrument consumable demand and sort of break that out among geographic and customer end markets? Is there more or less sensitivity to these improvements in certain segments?

You know, the bioinformatics is a platform that to really help our users to leverage the instruments and the reagents we have. The special panel we have just launched, in fact, it automates the panel design, especially for those high-complex panels, and typically takes a lot more time for the users to optimize. Now we have a system, a tool, that will really enable them to speed up their development Afterwards, it not only enabled them to optimize basically the kind of like a virtual experiment on our platform, it also enabled them to purchase the reagents afterwards. So through this process, we feel that it helped our users provide a full set of solutions for our customers to leverage the full special technology Cytiv has provided.

That's helpful. And just to pivot sort of to instruments, obviously the new facility, this manufacturing facility open is related to instrument production. So does this create sort of a risk to gross margin just given that fixed cost is already on the books? And could you maybe speak to how you're thinking of the margin cadence sort of in the back half of the year and beyond?

The

The new facility costs of that are already included in our fixed costs, so there's no, we don't see a specific downside risk to gross margins from that. And then as to gross margin cadence, you know, last quarter we said that we expected to move back closer to where our gross margins were last year. So in this quarter, we moved our adjusted gross margin moved up to 58%. And that compares to 60% in Q2 of last year and 59 for the balance of the year. So I think we've recovered most of the margin, a large portion of the margin gap versus last year. And I think While, you know, as revenue grows, we would hope for some margin benefit, the benefits should be fairly modest from this point forward.

That's helpful. Thanks for the time, guys.

Ladies and gentlemen, that concludes the Q&A session and today's call.

Thank you all for joining. You may now disconnect.