Cytek Biosciences, Inc. (NASDAQ:CTKB) Q2 2025 Earnings Call Transcript

Cytek Biosciences, Inc. (NASDAQ:CTKB) Q2 2025 Earnings Call Transcript August 7, 2025

Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Cytek Biosciences Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Paul Goodson, Investor Relations. You may begin.

Paul Goodson: Thank you, operator. Earlier today, Cytek Biosciences released financial results for the second quarter ended June 30, 2025. 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 e-mail to investors@cytekbio.com. A copy of the news release is also available on the Investor Relations section of Cytek’s website at investors.cytekbio.com. Joining me today from Cytek are Wenbin Jiang, CEO; and Bill McCombe, CFO. Please note that we will be referencing a slide presentation during the call today that has been posted to the Investors 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 Cytek’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 Cytek issued today and in Cytek’s filings with the SEC. This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. 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 the financial information presented in accordance with GAAP. Except as required by law, Cytek 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, August 6, 2025. As I have mentioned on prior conference calls, Cytek sponsors User Group Meetings and participates in a variety of industry events that may be of interest to investors. Coming up soon are two Cytek-sponsored User Group Meetings, the first in Mainz, Germany on September 16; and then in Chicago on September 18.

Upcoming industry conferences include the European Society for Clinical Cell Analysis, or ESCCA, which will take place in Montpellier, France from September 17 through the 20th and the Annual Meeting of the International Clinical Cytometry Society or ICCS, in Philadelphia from September 26 through the 30th. As always, these events are primarily geared to the scientific community, but they may offer an opportunity to investors and analysts to interact with users of our technologies and to learn why Cytek’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 will turn the call over to Wenbin.

Wenbin Jiang: Thanks, Paul. Welcome, everyone, and thank you for your interest in Cytek. On today’s call, I would like to start with a discussion of our performance in the second quarter and first half 2025, followed by an update on our full year 2025 outlook. Next, I will give you some highlights on our progress during the second quarter on our strategic priorities for 2025 before turning the call over to Bill for a more detailed look at our financials and our outlook. Turning to Slide 3. Our second quarter revenue in 2025 was $45.6 million, down $1 million or 2.2% compared to the second quarter of 2024. The decrease in revenue was due to lower product revenue in EMEA and APAC, partially offset by strong growth in service revenue worldwide, which grew 18% and growth in U.S. product revenue.

This was an improvement over the first quarter of this year with a smaller decline versus the prior year second quarter. Turning to Slide 4. Recurring revenue growth continued in the second quarter. Specifically, Service and Reagent revenue each increased by 18% versus the second quarter of 2024. Both our Reagent and Service businesses benefit from our established and expanding installed instrument base. In the second quarter, we continued to see these businesses contribute significant growth to our recurring revenue as a percentage of our total revenue. Our recurring revenue businesses reached 32% of trailing 12-month sales in the second quarter, growing 16% versus last year. Turning to Slide 5. Notably, we saw 3% growth in FSP unit volume in the second quarter, led by Aurora Analyzers.

We saw particular strength in the U.S. with 10% year-over-year growth. We believe the growth in our FSP instrument unit volumes, especially in a difficult environment, speaks strongly to the overall strength of our core business and the fact that our FSP products are essential instruments to our customers’ workflows as distinguished from more discretionary instruments. Turning to Slide 6. Looking more closely at the second quarter, total U.S. revenue was up 7% over the second quarter of 2024, driven by service and reagents. Instruments were flat in the U.S. due to growth in revenue from our pharma, biotech and CRO customers being offset by continued softness among our academic and government customers. Still, instrument sales showed growth sequentially from the first quarter of 2025.

We continued to see broad-based pressures in instrument orders from academic and government customers in the U.S., driven by a continuation from the first quarter of the uncertainties in academic funding resulting from U.S. policy change. Turning to EMEA. We saw a different situation where overall revenue declined 11%, driven by weakness in instrument sales to our pharma, biotech and CRO customers, offset by year-over-year growth among our academic and government customers and in service and reagents. In APAC, sales declined following a very strong performance in Q1 due primarily to the longer sales cycle we typically encounter in this region as compared to the U.S. and EMEA. However, on a longer-term basis, this region continues to demonstrate solid growth.

In our Rest of World region, which includes Canada and Latin America, we delivered single-digit percentage revenue growth versus last year’s second quarter. Let me take a moment now to provide a view of our results for the first half of 2025, which we believe smooth out some of the geographic and end user variability inherent in our industry and provides a clearer picture of our business overall. For the first half of 2025, our total revenue was down 5% compared to last year’s first half. This was comprised of weakness in EMEA, which was down 17% and in the U.S., which was down 3%. These declines were partially offset by steady growth across APAC, which grew 9% year-over-year and Rest of World, which grew 14% the prior year’s first half. Overall, our results were supported by strength in service and reagents.

Looking at our first half revenue by customers worldwide. Our academic and government revenue globally is flat compared to last year, with our pharma and biotech revenue down about 9%, largely due to weakness in EMEA. Importantly, our results in both the quarter and for the first half remind us that diversification in multiple geographic regions can combined with a growing recurring revenue stream to smooth our otherwise much more variable results. We believe the policy issues affecting our various markets in the first and second quarters will continue to exert constraints on capital equipment spending through at least the current third quarter. With the first half of the year behind us, we are now in a better position to provide guidance on full year results.

As such, we are narrowing our guidance range and now anticipate full year 2025 revenue to be $196 million to $205 million. Bill will provide more details on this outlook shortly. From an overall perspective, the key takeaways regarding the quarter are the fact that our core business based on our FSP technology continued to grow in unit volume and in revenue and our recurring revenue businesses, including reagent and services, grew in high teens percentages. We think this is a notable performance despite a challenging capital equipment spending environment. I would now like to update you on the progress our team has made across our 4 strategic pillars, instruments, applications, bioinformatics and clinical to further solidify Cytek’s position as a market leader in next-gen cell analysis solutions.

Starting with our core instruments on Slide 7. In the second quarter, we expanded our global footprint by 146 instruments, bringing Cytek’s total installed base to 3,295 units. Within our instrument portfolio, our Aurora Analyzer was the strongest driver of unit growth in the second quarter. This continued core instrument growth clearly demonstrates steady expansion across a diverse customer base worldwide. To solidify our leadership position in the Spectral Flow Cytometry Market, we continue to prioritize innovation and delivering differentiated offerings to shape the future of the cell analysis market. In the second quarter, we announced the launch of the Cytek Aurora Evo system, setting a new standard for full spectral flow cytometry and notably improving on our flagship Cytek Aurora Cell Analyzer that we introduced 8 years ago.

The Aurora Evo system has been designed to address the evolving needs of researchers and accelerate broader adoption with enhanced capabilities, including faster sample throughput, automated instrument startup and shutdown, small particle detection and data harmonization. We believe these enhanced features provide value through higher productivity and empower researchers to accelerate their discovery work and tackle a wider range of applications with confidence. Moving to bioinformatics on Slide 8. The Cytek Cloud continues to serve a critical role for researchers. Our software tools empower customers to streamline their experiment workflow, which drives adoption and utilization of our cell analysis solutions and the growth in our reagent and service businesses.

As of June 30, 2025, we have over 20,500 Cytek Cloud users, representing a remarkable growth of 27% since the beginning of 2025. This represents an average of more than 7 users per installed Cytek FSP instrument and reflects the loyalty our users have to our product portfolio and the halo effect of the Cytek Cloud driving the utilization of our technology platform. As a reminder, our Cytek Cloud is transforming how researchers design and conduct complex flow cytometry experiments. At its core is our proprietary AI-driven panel builder, which saves weeks or months of time by automating critical steps like fluorochrome selection and marker matching. Scientists can then conduct virtual experiments before committing to real wet lab studies, reducing trial and error and improving data quality from the start.

By simplifying a previously complex process, we believe that Cytek Cloud will drive broader adoption of our technology and recurring revenue opportunities across our growing installed base. Turning to our next growth pillar applications. Our intention is for the Cytek Cloud to accelerate the utilization of our reagents, which are optimized for use on our instruments. We, therefore, believe our reagent business has attractive long-term growth potential, of which we are still at the early stage. We remain focused on driving our reagent product introduction engine, which will expand our reagent offerings and application-specific kits. We continue to make significant improvements in our reagent operations, resulting in improved execution and dramatically shorter delivery time over the past year.

These enhancements have strengthened customer support and have been a key driver of the strong double-digit reagent sales growth we are seeing in the U.S., EMEA and China. Importantly, we see significant room for reagent growth, both from our installed base as well as from the new instruments we sell. We estimate that our currently installed instrument base consumes at least $150 million worth of reagents annually. With our current reagent revenue capturing less than 10% of this potential, we have substantial room for reagent growth over the longer term. Over time, we expect our recurring reagent and service revenues to be key drivers of strong sustained growth. With that, I will now turn the call over to Bill for more details about our financials.

William D. McCombe: Thanks, Wenbin. Turning to Slide 9 and our second quarter financial results. Total revenue for Q2 was $45.6 million, a 2% decrease versus Q2 of 2024. This reflects continued weakness in instrument revenue in EMEA and APAC, offset by strong growth in service and growth in U.S. product revenue. Product revenue, which is comprised of instruments and reagents, decreased 9% versus Q2 of 2024, driven by a significant decline in EMEA. U.S. product revenue increased 2% versus Q2 of 2024. This was attributable to an increase in revenue from pharma and biotech customers, offset by weakness from academic and government customers. In EMEA, the decline in product revenue was driven by a significant decline in revenue from pharma and biotech customers offset by an increase in revenue from academic and government customers.

Asia-Pac was weaker versus Q2 of 2024 after strong growth in Q1 and showed solid growth for the first half of 2025 versus the prior year. While our reagent revenue remains a single-digit percentage of our total revenue, it achieved its highest ever quarterly revenues in Q2, representing 18% growth over the prior year quarter. As Wenbin mentioned, this was largely due to a concerted effort by our reagents team to shorten delivery times and improve other performance metrics. Service revenue continued to deliver strong growth with 18% in Q2 versus prior year and 21% for the first half. This was driven by growth in the installed base and active usage of our systems. Turning to geographic market performance. U.S. revenue grew 7% in Q2 versus prior year, driven by service and reagent revenue growth.

EMEA declined 11% due to lower instrument revenues, partly offset by growth in services and reagents. APAC declined 12% in Q2 after a very strong Q1 and increased 9% for the first half versus prior year, driven by growth in both instruments and service revenue. GAAP gross profit was $23.9 million, a 6% decline versus Q2 of 2024. GAAP gross profit margin was 52% versus 55% in the prior year quarter due to lower product gross margin as a result of lower product revenues and lower service gross margin due to an increase in material costs, a portion of which was of a onetime nature. Overall gross margin improved from 49% in Q1 due to higher product gross margins on higher product revenues and lower manufacturing overhead. Adjusted gross profit margin, which excludes stock-based compensation and amortization of acquisition- related intangibles, was 56% in Q2, down from 58% in the prior year quarter and up from 52% in Q1.

Operating expenses were $34.5 million in Q2, up $0.5 million or 2% versus Q2 2024, driven by higher general and administrative expenses. Research and development expenses were $8.8 million, down 12% versus the year-ago quarter due to lower headcount and engineering and outside services expenses. Sales and marketing expenses were $12.1 million, down 1% versus the year-ago quarter. General and administrative expenses were $13.5 million, up $1.8 million or 16% from the year-ago quarter. The increase was attributable to higher outside services expenses. Loss from operations was $10.6 million for Q2 versus $8.5 million in the year-ago quarter, driven primarily by lower GAAP gross profit and to a lesser extent, higher operating expenses. Net loss was $5.6 million in Q2 versus $10.4 million in the prior year quarter.

This was driven by two factors. First, net other income increased to $3.8 million versus $1.3 million in the prior year quarter. This was primarily driven by $1.6 million of foreign exchange gains in the quarter versus $1.8 million of foreign exchange losses in the prior year quarter and was offset by lower interest income of $0.9 million. Second, we had a tax benefit of $1.2 million in the current quarter as a result of a higher effective tax rate versus a tax expense of $3.2 million in the prior year quarter. Adjusted EBITDA, which excludes stock-based compensation and foreign exchange impacts, declined to $1.3 million from $2.9 million in the year-ago quarter due to lower gross profit. Positive free cash flow of $0.9 million was offset by $4.5 million of share repurchase in the quarter, decreasing our total cash and marketable securities by $3.6 million to $262 million.

In the second quarter, we repurchased $4.5 million of Cytek stock or 1.2 million shares. In the first half of 2025, we repurchased $15.1 million of Cytek stock or 3.3 million shares, reducing our total shares outstanding to 127.2 million shares as of June 30. Lastly, turning to our full year guidance on Slide 10. As Wenbin mentioned earlier, we are narrowing our full year 2025 revenue outlook. Given our first half results and the conditions prevailing in our markets, we do not believe the high end of our existing revenue guidance range for 2025 is reasonably attainable. Accordingly, we are now guiding to a range of $196 million to $205 million, representing overall growth of minus 2% to plus 2% over full year 2024 assuming no change from current currency exchange rates.

In summary, our market leadership position remains strong. Our core business is showing positive growth and our recurring revenue continues to increase. We believe we will perform well relative to the overall flow cytometry market. Our strong balance sheet also gives us the ability to continue investing for growth. With that, I will turn it back over to Wenbin.

Wenbin Jiang: Thanks, Bill. Turning to Slide 11. Before closing, I want to thank our Cytek team for their continued commitment to delivering our industry-leading tools, reagents and software to empower the scientific community to advance the next-generation of cell analysis. I believe the progress we have achieved and the continued momentum we are building is notable while navigating a macro environment that remains challenging. Our strategy to expand our installed base globally is expected to produce growth in instrument revenue while simultaneously driving long-term sustainable recurring revenue growth in our service and reagent businesses. We further continue to strengthen our market leadership through innovation that redefines industry standards, accelerate adoption and create new markets.

We expect the instrument market to recover over time, and we are poised to emerge in an even stronger position than we are today with a focus on these longer-term growth drivers for our business. I want to thank everyone for joining today’s call, and we will now open it up for questions. Operator?

Operator: [Operator Instructions] Our first question comes from David Westenberg from Piper Sandler.

David Michael Westenberg: So just I wanted to start with your performance versus the market and just be sure that there are not maybe competitive things going on. So if you can just maybe give some color on your estimate of how the flow cytometry market is performing right now? And if there have been any product launches that have been of any kind of concern?

Q&A Session

Wenbin Jiang: We believe overall, based on the market report, we have seen the overall flow cytometry market seems reducing and going down and partially due to the funding reduction or challenge in our industry, especially for the capital expenditure. But within that domain, we continue to grow our core business. As you can see, the number of FSP instruments and actually the unit volume is going up.

David Michael Westenberg: So that would imply that we’re taking share. Okay. And then, Bill, maybe if I can ask you one. I know it’s hard to — I know in CapEx cycles I think it’s the third month of every quarter where you normally see kind of sales. But I just want to — based on funnel and any other kind of experience, how comfortable are you with the second half guidance in terms of — and how much does it need the market to say, improve or is this kind of steady-state guidance? And again, I realize that CapEx happens in the third quarter of every quarter — third month of every quarter. So I know this is tough.

William D. McCombe: Well, our business really divides into two parts. We have the recurring revenue businesses, our service business and our reagent business. And those have been growing high double digits. And the drivers of that growth appear to be solid. And so we would — we expect that to continue. We don’t see any reason why that should — that growth rate should change significantly. And then we have the instrument business, which is capital spending driven. And that is obviously back-end weighted. It’s heavily weighted to the third month of the quarter. We are expecting a quarterly pattern that follows — that’s similar to the quarterly patterns of last year. So that would imply a stronger performance in the second half of the year versus the first.

And we — I also would point out that our gap to last year got significantly smaller in Q2 than it was in Q1. So we factored all those things together and together with the market outlook and encapsulated all that and came up with our range based on those factors that change.

David Michael Westenberg: That was great. So just maybe the last one Wenbin. In terms of your last commentary on in a better position post capital cycle, I know the crystal ball here is really hard, but like do you think we could be with lower interest rates and maybe NIH certainty, the CapEx cycle might return next year or is it — do you think a little bit longer than that? And finally, just on your commentary on a better position post cycle, I mean, what do you think are going to be the big drivers of Cytek’s performance post CapEx cycle? And I’ll hop off queue after that.

Wenbin Jiang: As you can see, we continue to invest on developing new technologies to improve the performance and to continue to launch new products, evidenced by the two new products we recently launched. One is our Evo Cytek Aurora Evo, the other one is Micro Muse, one for high end of the market application, the other one really for the entry-level applications to serve for the customers across all the application space. So we feel and we have a product, we have the technology and we have the performance to serve for this market. And when the capital expenditure challenge start to ease, we feel and we are there to serve for the customers.

William D. McCombe: Yeah. As it relates to the macro factors that you referenced, interest rates and NIH funding certainty, we certainly saw growth rates come down as interest rates went up. But we don’t have a real crystal ball on how that would affect capital spending trends. One would expect that it would probably be positive. But I think in the pharma — biotech pharma industry, it’s more industry-specific than interest rate driven. And with respect to the NIH, the more — the clearer the funding there, obviously, the better for us. Our U.S. academic and government sector has been weaker this year as we discussed and more clarity on the NIH funding would help there. But look, we know what we read in the newspapers as were about on those topics, and we don’t have any special insight.

Operator: Our next question comes from Chad Wiatrowski from TD Cowen.

Chad Wiatrowski: It’s Chad on for Brendan Smith. You spoke to using sort of the benefit of having a big balance sheet to reinvigorate growth a little bit. Obviously, nice to see a new product. But are you open to M&A at this point? If so, are there any clear sort of white space or adjacencies you’d be open to looking at or even some noncore technologies maybe to expose yourself to some higher-end growth markets?

William D. McCombe: Yeah. So short answer is yes, we are open to M&A. We continue to evaluate opportunities. We would look for opportunities that have the greatest synergy potential. So by definition, that means opportunities either in our existing markets or in adjacencies, perhaps other products we can sell to the same customers. So I think that’s where we would primarily look for opportunities.

Wenbin Jiang: Yeah. Actually, in addition to the M&A, we are also investing on organic growth. And as you can see, our reagents, our service are growing double-digit, and we continue to invest in those fields to enable us to continue to grow within our space, our sector.

Operator: Our next question comes from Andrew Cooper from Raymond James.

Unidentified Analyst: This is [ Noah ] on for Andrew. So my first question is sort of focused on gross margins. I think you guys came in maybe a little bit shy of the numbers, and I heard you kind of talk about the — some of the onetime offs. So should we expect any change to cadence for gross margins for the rest of the year as like those one-timers go away? And just trying to get a feel for that. And then also tariff headwinds were like 1% to 3% is what you called out last quarter. Any update there? Were those better within range? So what are you seeing there as well?

William D. McCombe: Sure. So in terms of cadence, as we — there are two things that affect gross margin quarter-to-quarter within the year. One is that our instrument revenues tend to be bigger in the third and fourth quarter than the first and second. So first quarter is our weakest. Second and third in the middle somewhere and fourth is usually our biggest quarter. So what that does is that as those instrument revenues increase, that increases our gross margin because we’re — our fixed costs remain relatively the same, and we drop through more variable margin to the gross margin line. So typically, we would expect as instrument revenue goes up in the third and fourth quarter that we’ll see margin improvement. The other factor is onetimers.

As I mentioned last quarter, we had a significant overhead capitalization charge that I didn’t expect to continue and it did not. So that went away in the second quarter. We wouldn’t expect that to come back in the subsequent quarters. And this quarter, we had an inventory adjustment primarily related to service parts. Some of that is nonrecurring and there may be — so we’ll get some gross margin benefit in the service business from that. I would also expect better utilization of overhead in the service business to — as we go through the year. So I would expect improvement in both our product gross margin and our service gross margin.

Unidentified Analyst: Okay. Awesome. And then just kind of following up more on the top line. You called out biopharma strength in the U.S. I just kind of want to see where like what customer segment are you seeing that from? Is that the large pharma customers looking to harmonize? Are you seeing maybe some better funding with some of the emerging guys? I know you said that the environment is still challenged, but just really trying to get a feel for where there’s strength. And then also if you think that there might be a little bit better in the back half there, even if it’s offset by EMEA?

William D. McCombe: I think the strength was really in the biopharma segment was across the board. The big pharma customers are a much larger portion of the total pharma revenue. So we saw some strength there. We also saw some strength with the small bio players, albeit that’s a small portion of the total. So it was really across the board. For the big pharma players, a significant advantage of our technology is the ability to harmonize it. And so that was an important driver — continues to be an important driver of our business with big pharma. And then we also introduced the Evo, which has some important new capabilities that are highly valued by big pharma, the throughput, the automation, small particle and so on.

Operator: Our next question comes from Mason Carrico from Stephens Inc.

Unidentified Analyst: This is [ Harrison ] on for Mason. I wanted to ask what contribution do you expect from Aurora Evo and the Muse Micro in 2025? Are they margin accretive? And how does that compare to the core Aurora and Northern Lights?

William D. McCombe: So Aurora Evo is by far the larger contributor to overall revenue. It has an ASP in the hundreds of thousands. And we would — we would expect that, that’s going to drive our high-end sales. So that will be, let’s just say, supportive of our margins. The Muse Micro is a small system that sells for less than $100,000. So it doesn’t really have a big impact on margin either way. It’s about a $40,000 product, something like that. Sorry. No. It’s less than $20,000. So it doesn’t have a big impact on margins. But the Evo will — it’s a new product with advanced features, and it will be very supportive of our margins.

Unidentified Analyst: Okay. Got it. That’s helpful. And then reagent service and ex U.S. and EMEA capital sales have been growing over — growing at over a 20% year-over-year pace. Does your current guide assume those segments continue that pace in the second half here this year?

William D. McCombe: We’re not going to guide to specific product lines. I guess what I can — what you should assume or take into account is that the driver of our service growth is the driver — is the installed base — the growth in the installed base with a 1-year lag. So if you look at the rate that our installed base grew 12 months ago, that will give you — that’s the best predictor that we have for the quarterly rate of growth of service revenue. And so we don’t have a reason to expect that that’s going to change significantly. Obviously, as the installed base gets bigger, that percentage increase with each year’s deliveries comes down a little bit, but that’s a gradual process. And then on reagents, our growth there is a function of our existing relationships with a broad set of customers through our instrument sales, our improved execution and our broader product range, and we expect all those drivers are continuing, and we expect them to continue — that growth to continue.

So the short answer is the drivers are all in place. The drivers are long-term drivers, and they should continue to produce similar growth.

Operator: There are no further questions at this time. And this concludes today’s conference call. Thank you for joining. You may now disconnect.