Cytek Biosciences, Inc.

Thank you, operator. Earlier today, SciTech Biosciences released financial results for the quarter and year ended December 31, 2024. If you haven't received this news release, you'd like to be added to the company's distribution list, please send an email to investors at scitechbio.com. A copy of the news release is also available on the investor relations section of SciTech's website at .scitechbio.com. Joining me today from SciTech are Wenbin Zhang, 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 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 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 SciTech Issued Today and in SciTech'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, 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 the live broadcast, February 27th, 2025. Finally, I would like to invite investors and analysts to attend any of the six user group meetings SciTech will be hosting in 2025. These are typically all-day meetings where SciTech scientists and users of SciTech's instruments meet to discuss research initiatives, advances in the field, and use cases for SciTech's products. The full schedule has not yet been established, but the first of these meetings will be in Barcelona on March 12th, followed by the Southern California meeting in La Jolla on May 15th. In addition to SciTech's user group meetings this year, there will be a variety of industry and academic conferences, meetings, and seminars where we will be exhibiting SciTech's products in the US 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 SciTech's 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 Wenbin.

Thanks, Paul. Welcome, everyone, and thank you for your interest in SciTech. On today's call, I will discuss our results for the fourth quarter and the full year 2024 and highlight our achievements towards 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 and our 2025 outlook before we open it up for Q&A. Starting with slide three, full year revenue in 2024 grew 4% over 2023, reaching $200.5 million, driven by strong growth in service revenue and the double digit growth in international markets outside of the US. We did very well in unit volume growth in 2024 with placements of full special profiling or FFP and imaging instruments up by .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 full 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 grow and grow, and we are moving to the cell analysis market as well as to the excellent user support provided by our customer facing teams. SciTech has always had a commitment to profitability and the 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 $22.4 million delivered again of more than 77% above the $12.6 million 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 million shares during 2024 under our share repurchase program. As the inspiration of this program, we announced a new $50 million repurchase program in late December and have been buying shares in the open market year to day. Turning to slide 4 and our fourth quarter results, our revenue was $57.5 million essentially flat compared to the fourth quarter of 2023 after adjusting for the strong appreciation of the US 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 instored base of our instruments. Geographically, we continue to see a strong demand environment in APEC in the fourth quarter. While we are viewing China with a conservative sense due to the dynamic environment, we started to experience some upsets 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 US 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 sci-tech 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 clinicals to solidify sci-tech positions as a market leader in nation-cell analysis solutions. Turning to slide five, starting with instruments. I want to take a moment to reflect how far we have come as a global organization in driving adoption of our core instruments, including our flagship products, the Aurora Analyzer, Aurora Cell Soder 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 a higher density of information with greater sensitivity, more flexibility and increased efficiency, all at a lower cost for performance. From our conversation with -sci-tometry users, it is clear that sci-tech instruments have changed the direction of the entire industry toward full special technology. We believe sci-tech FSP 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 a widespread adoption with nearly 2,000 customers worldwide using our solution today and a global 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 sci-tech products to address critical challenges. In the fourth quarter, we expanded our global footprint with 164 FSP instruments and 49 AMNES and GUAVA systems. This brings sci-tech total install base to 3,034 units, including 377 AMNES and GUAVA instruments shipped since the acquisition of the Luminix business in the first quarter of 2023. Within our portfolio, the Aurora CS cell shoulder and AMNES imaging system 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 .5% in 2024 over 2023. We were pleased to see 13% -over-year growth of the Aurora cell shoulder and 12% -over-year growth of the Northern Life system. We believe this solid growth in placements, despite a challenging and dynamic macroeconomic environment, demonstrates sci-tech continued leadership in FSP flow cytometry and our strength in these product categories. In 2024, we were excited to announce our intense small particle detection module, or ESP, a new technology that can be added to new or retrograde to existing Aurora cell shoulder and Northern Life instruments. This new feature allows our already powerful systems to provide the highest sensitivity to identify and analyze a variety of small particles, including extracellular vesicles, small bacteria, viruses, and viral particles, and nanoparticles, and further distinguish our cell analysis solution as the preferred choice among researchers and clinicians.

Turning

to slide six, in early 2023, we strategically expanded our sci-tech platform with the Luminesq transaction to continue the diversification of our instrument portfolio with both competitive and operational advantages. With the addition of Arminesq and the other two objectives, first, we enhanced our technical capabilities with AI-driven high-revolution imaging. Second, we enabled more effective and efficient service and support through an expanded in-store base, dramatically increasing our service growth margin. And third, we broadened our customer reach within the entry-level market.

Since

re-acquisition, we achieved significant growth in Arminesq 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 United States, which was one of the goals of re-acquisition. Leveraging an expanded in-store base, our service business growth margin improved from 15% in 2022 before re-acquisition to 57% in 2024, notably one of the highest in the industry. This major increase in growth margin demonstrates one of the advantages that we obtained from the Luminix transaction. We believe the growing in-store base of our instruments, including our core FSP instruments as well as Arminesq and Aguava, will continue to serve as a strong foundation to drive adoption of our products and service offerings going forward. To support the rising global demand for CITES solutions, we recently opened a new manufacturing facility in Singapore. With this facility, we are able to offset low-cost manufacturing, increase our capacity and enhance global supply chain flexibility. Coming to slide 7, we introduced the CITES Cloud two years ago as a digital ecosystem to support full special 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 CITES 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 manual process, allowing scientists to focus their efforts on their own applications. CITES Cloud 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 CITES FSP instrument. We continue to believe that the CITES Cloud is an important factor in earning the loyalty of our users to the CITES brand. Turning to the applications and clinical pillars of our strategy, we continue to believe the clinical market represents an attractive business opportunity for CITES. Several of our products are approved for clinical use in both China and the EU, including our Northern Lights CLC system. In May 2024, we were pleased to receive approval from the China National Medical Administration for clinical use of our one laser and two laser six color CBNK reagent 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 CITES 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 a focus on execution will drive CITES further on our strategic initiatives. Looking ahead, as we continue to strengthen CITES' market leadership position in cell analysis, the buildable 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 to the call to Bill for more details about our financials.

Thanks, Wenbin. Turning to slide A and our fourth quarter financial results. Total revenue for the fourth quarter of 2024 was 57.5 million, a 1% decrease over the fourth quarter of 2023. Growth and 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 2025. Product revenue, which is instruments and reagents, decreased 3% versus Q4 of 2023, but increased 14% sequentially versus Q3 of 2024. The decrease versus Q4 of 2023 was driven by U.S. dollar strength, a softer instrument market in the U.S. and EMEA as compared to a strong Q4 of 2023, and certain orders being delayed into Q1 of 2025. Service revenue grew 8% versus Q4 of 2023. 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 10% and 18% respectively compared to a strong Q4 of last year, driven by lower instrument sales and also foreign exchange in the U.S. and 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 5.3 million in the fourth quarter compared to 1.9 million in the prior year quarter. This growth reflects the fact that PsyTex technology is the full spectral flow cytometry technology of choice in these markets and around the world. Gap growth profit was 33.7 million for the fourth quarter of 2024, an increase of 2% compared to growth profit of 33 million in the fourth quarter of 2023. Gap growth margin was 59% in the fourth quarter of 2024, compared to 57% in the fourth quarter of 2023. Non-Gap adjusted gross margin in the fourth quarter of 2024 was 61% compared to 59% in the fourth quarter of 2023 after adjusting to stock-based compensation expense and amortization of acquisition-related intangibles. In the fourth quarter, we had a total of 8.8 million 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 30.7 million for the fourth quarter. This included 2.6 million of the non-recurring benefit I described above. Excluding this 2.6 million non-recurring benefit, operating expenses were 33.2 million unchanged from both the fourth quarter of the prior year and sequentially from Q3 of 2024. 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 9.7 million for the fourth quarter, down 11% from the fourth quarter of 2023 and down 2% from Q3 of 2024 due to reduced compensation and engineering expense, reflecting our efforts to reduce costs and improve the efficiency of our investment in R&D. Sales and marketing expenses were 11.9 million for the fourth quarter, up 3% from the 11.6 million in the fourth quarter of 2023 due to higher compensation and amortization expenses. General and administrative expenses were 9.1 million for the fourth quarter. This included the 2.6 million non-recurring benefit I described earlier. Excluding this benefit, general and administrative expenses would have been 11.7 million up from Q3 of 2024 due to reduced compensation and engineering expenses. Income from operations was 3 million for the fourth quarter, an improvement over the 0.1 million loss from operations in the fourth quarter of 2023. This included the 2.6 million non-recurring benefit described earlier. Excluding this benefit, profits from operations would have been 0.3 million compared to a loss from operations of 0.1 million in the prior year quarter. This was driven by higher gross profit in the current quarter. Gap net income was 9.6 million in the fourth quarter. This included the 2.6 million non-recurring benefit described earlier and a 6.2 million non-recurring, non-cash interest expense reduction related to the same liability adjustment for a total of 8.8 million of non-recurring benefit. This contributed 6.7 million after tax to net income in the quarter. Excluding this non-recurring benefit, net income would have been 2.9 million compared to a gap net income of 5.5 million in the prior year quarter. This was primarily due to lower net other income driven by a foreign exchange loss of 1.8 million in the current quarter versus a gain of 1.3 million in the prior year. Now for the full year 2024. Total revenue for the year ended December 31, 2024, was 200.5 million, 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 US product revenue. Gap gross profit was 111.1 million for the year ended December 31, 2024, an increase of 2% compared to a gap gross profit of 109.4 million in the prior year. Gap gross margin was 55% in the year ended December 31, 2024, compared to 57% in the prior year. The decline was primarily due to one-time inventory adjustments in Q1 of 2024. Adjusted gross margin, which excludes stock-based compensation and acquisition related intangibles in the year ended December 31, 2024, was 59% flat versus the 59% in the prior year. Operating expenses were 131.6 million for the year ended December 31, 2024. This included the 2.6 million of the year ended December 31 recurring benefit mentioned before. Excluding this 2.6 million benefit, operating expenses were 134.2 million, a 2% decrease from the 137.3 million in the prior year. The decrease was primarily due to lower research and development costs. Research and development expenses were 39.4 million for the year ended December 31, 2024, compared to 44.2 million in the prior year. The reduction was primarily due to lower headcount and engineering expense.

Sales

and marketing expenses were 49.1 million for the year ended December 31, 2024, flat compared to 49.1 million in the prior year. General and administrative expenses were 43.1 million for the year ended December 31, 2024. This included the 2.6 million non-recurring benefit mentioned earlier. Excluding this benefit, general and administrative expenses would have been 45.7 million compared to 44 million in the prior year. The increase was primarily attributable to higher stock-based compensation expense, partially offset by lower outside services expense. Loss from operations in the year ended December 31, 2024 was 20.5 million, which included the 2.6 million non-recurring benefit mentioned before. Excluding this non-recurring benefit, loss from operations would have been 23.1 million compared to a loss of 27.8 million in the prior year. Gap debt loss for the year ended December 31, 2024 was 6 million. This included the 2.6 million non-recurring benefit mentioned earlier and a 6.2 million non-recurring non-cash interest expense reduction related to the same liability adjustment for a total of $8.8 million of non-recurring benefit. This contributed 6.7 million after tax to net income. Excluding this non-recurring benefit, gap net loss would have been 12.7 million, an increase from the net loss of 12.1 million 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 22.4 million in the year ended December 31, 2024, which excludes the non-recurring items mentioned earlier, foreign exchange impacts and stock-based compensation expense. This was up significantly compared to 12.6 million in the prior year. Adjusted EBITDA included investment income of 8 million in the year ended December 31, 2024 and 7.4 million in the prior year. Excluding these amounts, adjusted EBITDA improved from 5.2 million in the year ended December 31, 2023 to 14.4 million in 2024. Consistent with our focus on cost control and profitability, we are committed to improving these metrics going forward. Cash equivalents in marketable securities were 277.9 million as of December 31, 2024. This represents an increase of 15.2 million from the 262.7 million at the end of December 2021 to 16.7 million at the end of December 2021. This is the highest increase in the year, despite repurchasing 21.6 million 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 million shares of Stitex stock for a total cost of approximately 21.6 million at a weighted average cost of $5.43 per share, leaving us with 129.2 million shares outstanding as of December 31, 2024. Concurrent with the expiration of our 50 million stock repurchase plan at the end of 2024, we announced a new 50 million repurchase program for 2025 and have been actively repurchasing shares year to date. Before providing you with our revenue guidance for 2025, I want to address some recent external developments that may affect our 2025 revenue. As you are all aware, the NIH recently announced that it will reduce the amount of funding for indirect costs associated with its grants going forward. Secondly, in January the Biden administration introduced new export controls and licensing requirements for the export of certain flow cytometry products and technologies to certain countries, most notably China. Finally, the 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 204 million to 212 million, representing overall growth of 2 to 6 percent 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 when been 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 Wendon.

Thanks, Joe. I want to take a moment to thank our team at SciTech 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 the 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 accessible, 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.

Thank you. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of David Westenberg of Piper Sandler. Please go ahead.

Hi. Thank you for taking the questions. I wanted to start with the .5% instrument growth. That was a really good number. Growth, of course, on the top line was 4%. Can you talk about some of the things that are happening with the consumer base? I'm guessing this is higher placements of Northern Lights versus some of the other ones and how we should think about that in the coming year. How we should think about consumables used on that mix if there is a difference between Northern Lights and Aurora in terms of whether or not they use your consumables versus a competitor

consumables. Sorry, could you guys hear me? All right. Wenbin, would you like me to take that one?

Yeah, please.

Yeah, so we did see good growth in Northern Lights in the quarter in 2024. And 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. When we came up with our guidance range, we factored in all the recent trends and also the recent headwinds that I mentioned. In terms of reagent consumption, I have to defer to Wenbin on that one.

Clearly, as you can see, we have 16,000 users on site cloud using our tools to design panels, optimizing their panels for their applications. In fact, site cloud is also equipping our users to other reagents, and we expect reagent 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 cite 12% growth year over year on Northern Lights. That's even faster than the overall unit growth of 8.5%.

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.

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 maybe one, two sentence impact statement? There was the first the Biden thing, then the Trump tariff concern. Is there a numbers thing on where you would hit for gross margins, or is there an assumption of lower growth in terms of the tariff? You did also mention on the call that you have some manufacturing in Singapore. Would that help protect some of the tariffs? I don't believe Singapore would be any part of a tariff nation.

From a market perspective, clearly, as a global company, we do business across the world today. The US is less than 50% of our overall business. Europe is one third, with a balance from the rest of the world, including APAC. That can help us to weather the kind of domestic economic conditions we are experiencing in terms of the tariff. Certainly, Singapore today is not part of the impact, but who knows? It may happen going forward. 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 US, in Singapore, in China. We hope with diversification of our manufacturing, that will help going forward.

What I meant when I discussed those three factors was that we have the NIH changes, the export controls, which we talked about at the JP Morgan conference. As it relates to revenue, the major potential impact of tariffs would be from reciprocal tariffs that would affect exports from the US. As it relates to revenue, that is what the tariff risk is. At this point, we have not seen significant impacts from reciprocal tariffs because we largely manufacture our China product in China. The other implication of tariff, of course, is the one that Wenbin 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 science in three places.

I got pretty long answers to my question, so I will kick it off to Nexinos. Thank you.

Your next question comes from the line of Tejas Sevant from Morgan Stanley. Please go ahead.

Hi, thanks. This is Edmond on for Tejas. Thanks for the time. I just wanted to dig in a little bit on your US academic government customers. We just came back from AGBT and the customer sentiment sounds pretty gloomy and we even heard of things like instrument purchase freezes. I was wondering if you could talk to us, first quantify your exposure to the NIH, and then second, talk to us about what you are hearing from the US academic customers and what degree of impact you currently have factored into your 2025

guide. Do you want me to take the first part of that,

Wenbin? NIH exposure, we looked at our revenues for 2024 and analyzed how much of that was funded by NIH grants. The answer was around 5% of total revenue. 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 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. It's a relatively small exposure. We've continued to see ordering activity and shipments to US 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. By that, I mean that a majority of our revenues for a quarter happen in the third month of the quarter. This was obviously just announced in January, so it's still TBD for us at this point.

On one hand, we're still waiting to see how it might potentially impact the US. With our analysis, at least based on what we have seen in 2020-24, the impact is less than 5%. In the meantime, as we all know, we are a global company. We work with actually more than 50% of our revenues are, in fact, from outside of the US. We feel that can help us to weather the up and down domestically.

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 about some of that progression in the quarter. In terms of the instruments that are ordered to harmonize, do you have any sense what percent of these are replacement orders versus capacity expansions?

This is actually very different to Gage. Clearly, we have seen pharma, and they migrate from discovery to translation. They would really like to see the data coming out of different labs across different countries in their institutions to provide the same data quality with a better confidence. In that end, they place orders from Citec to meet the needs across multiple sites in the world, in fact, not just in one country. This is what we have been seeing right now, a kind of shift momentum from those pharmaceutical companies as well as some of the CIOs were benefiting clearly from this harmonization right now.

You'll see when we file the 10K shortly, we'll publish the data for the global customer segments on a global basis. The biotech pharma distributor CRO segment was up 14% in the fourth quarter. That includes more than just the pharma companies, 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 in the fourth quarter. Great. Thanks for the time. I'll pass it along.

Your next question comes from the line of Anurag Cooper of Raymond

James. Please go ahead.

Hey everyone, this is Noah on for Andrew. Thanks for taking the question. First one, just looking at your OPEX, looks like the GNA run rate is 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?

It's the one-time benefit. So there's a 2.6 million benefit in the fourth quarter. So if you add that back in, the GNA was about flat with Q3, but it was down in the fourth quarter, and it was about flat with Q4 of last year. So we did make some significant reductions in GNA -on-year basis in Q2 and Q3, but we've been holding pretty flat around 33 million per quarter since then.

Okay, awesome. And then just kind of following up on the question around tariffs, what would be your ability to pass the price through should some of those tariffs turn out to be affecting the business? And I would assume that would

be within 2025? Indeed,

it depends on the magnitude of the pattern of how much we can pass, 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's a delay effect, and we continue to need to be honored for this course already provided

to our customers. Awesome, thank you.

Your next question comes from the line of Matias Sikes of Goldman Sachs. Please go ahead.

Thanks for taking my questions. So the first one, how do you think 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?

I think in terms of investment, I think there are two parts. One is certainly as you can see, the share buyback program. But in the meantime, as you can see, you continue to invest substantially in our internal IMD, close to 20% of our revenue. You invest 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 site called 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 forward.

The other area where we are investing aggressively is in our service network. Revenues are growing quite strongly there. 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.

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?

So the major driver is install base and that drives both service contract revenue and what we call timing materials revenue, which is where customers ask us to come in and service on for a particular project or job. We're always exploring new offerings in the service area, but the major driver is just the growing install base. In terms of the guide, we didn't really go into that 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 know, you could assume that we expect

to continue to see solid growth there.

Great. Thank you.

Your next question comes from the line of Chad Wietroski of TD Cohen. Please go ahead.

Hey guys. Chad Wietroski on for Brendan Smith. I appreciate cash flow positive and your investing heavily in R&D, the share buyback, as you mentioned, service reps. Are you open to additional M&A at this point and can you kind of outline what that criteria would look like, just balancing sort of investing in growth, but also profitability?

Sure. Wendell, would you like me to take a stab at this one? So, yes, we are open to additional M&A. We have a very substantial cash balance. So we have the ability to do significant M&A. In terms of criteria, it has to be something that is, you know, 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&D, G&A or manufacturing or, you know, ideally all four of those. And in terms of financial criteria, our target would be to have a business that's contributing positively within a relatively near-term period, you know, think within 12 months. So our objective would be to buy businesses that have gross margins that are fairly similar to our existing gross margins, you know, at or around that level. And then to be able businesses where we can, you know, 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.

That's helpful. And then just on site to cloud growth, it's just pretty impressive. What's being underappreciated there? I know you have like the AI automated panel product and some other things happening. What's kind of driving that user growth? Thanks.

I think site to cloud really makes it a lot easier for our users to design panels, especially when designing a high parameter, high-dimensional, to do a high-dimensional analysis. Those larger panels typically take many weeks, months to optimize. Now with our algorithm over there, make it very easy for our users. In fact, quite a few CIOs and farmers have already built our site to cloud into their standard workflow to enable them to really become more efficient to work on site and instrument. So we feel this is also, it's the kind of value we have brought to our customers that has been the reason for the rapid growth of our user base from a few thousand to now 16,000 just in the last 12 months. And this momentum continuing, we feel this really will help going forward from a few aspects. One is certainly the loyalty to site solutions. Second part is also will help our regions as well. And our site to cloud, we have carried a very complete catalog of regions that will

enable users to purchase. Thanks for the questions.

Just a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Harrison Parsons of Stevens. Please go ahead.

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?

We didn't make a specific assumption with respect to market growth. I think implicitly we assumed not much change from 2024 and where the market, 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, you know, 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-ended growth profile then

as a result. Okay.

And then could you give us some insight into your expectations in terms of growth this year across your different key geographies?

Once again, we don't want to guide specifically to geography by geography. I think what I can say is that in 2024, the US was significantly softer. That Asia Pacific and Europe were quite a bit stronger. We had double-digit growth in those markets. I think it's fair to assume, as I said, we generally approached our guidance with the view that the market was going to be broadly similar in 2025 to as it was in 2024. So expect that the US market would continue to be flatish 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

US market. Perfect.

I'll leave it there. Thanks for the questions.

That ends our Q&A session and we appreciate your participation. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.