Cytek Biosciences, Inc. (CTKB) Earnings Call Transcript & Summary

Thank you. CFO. Thank you both for being here. Good morning to you. And just before we get started, for any disclosures relating to this webcast, to this fireside, please see more dot com forward slash research disclosures, so maybe we can just dive straight in with how 2026 played out so far versus your expectations. Anything that surprised you for the better, anything for the worse, and then we can get into some specifics from there.

Sure. So we guided to 3% to 5% growth at the beginning of the year, and the first half we recorded 6% growth, so higher, above the high end of our expectations. Now, admittedly, that's against a weak comp in the first half of 2025, but the U.S. academic and government market has proved to be very strong. And, you know, pharma globally has been pretty solid as well, with good growth off of that low base. So, you know, those have been positive surprises.

Maybe we can just talk through for those investors, perhaps a bit newer to the name, how your portfolio differentiates from others in the market. Because feedback we get is it's highly innovative and there are some standout features there. But just across the continuum from some of your higher end products to some of your lower end, what is it that makes the Cytek product stand out?

There on the market. Yeah, as you know, 10 years ago, we actually launched our first product, Aurora, at that time. When we were launching that product, clearly at that time, flow cytometry was already talking about a 50-year-old technology and old industry dominated by a few big players, a disruptor at that time. What we come up with what we called at that time full spectral profiling technology based flow cytometers. So what we did, we have so far over the last 10 years changed the industry completely. The whole flow cytometry industry today is about full spectral technology. I don't think anyone will question the future of the flow cytometry will be full spectral technology or not. It's about whose full spectral technology they will go after. And during the last 10 years, we have pretty much established the industry with what we have developed as the standard. And now, especially, I know we started with the key opinion leaders, those key academic labs. From there, we penetrated into all the key pharmaceutical companies. If you go to any of the labs in the U.S., in Europe, probably you'll be surprised not seeing anything from Cytek. Basically, this is what we have build upon what we developed. We continued to evolve from there. We started with analyzer, then go to software. And then from analyzer, we continued investment and engagement with customers. And from there, we developed, launched EVO as the second generation of flow cytometers. And then just very recently, we launched our latest product, which we called Borealis. Borealis is not just a new flow cytometer; in fact, it's a flow cytometer together with the reagents, the dyes, and we launched the product as the whole package as a full solution, including the imaging. With what we have now, we become the first instrument that enables more than 60 colors, which is exactly what many of the academic labs as well as pharma discovery are looking forward to, to enable them to truly improve the efficiency of the drug discovery or help them to truly understand the fundamental technology behind the new diseases and trying to understand it, a tool which they have been looking forward to. So, Cytek, we change the whole industry and now we continue to lead the industry based on the standards we have already very well established over the last 10 years.

That's helpful.

Can you characterize the demand environment today for flow instruments versus maybe six months or 12 months back? Just maybe any trends you've been seeing in the end markets.

Sure. This is a substantial improvement. So, in the first half of last year, we were down, our growth rate was -5%, and it's, I do remember there was a lot of uncertainty about government funding for research at that. Funding the government was going to make available to universities and, you know, about trade policy with respect to pharmaceuticals, and most of the time, most of those issues have, um, have largely receded, and so in the first half of this year, we grew 6%, so 11% better growth rate. Um, so that, um, that that underscores, um, you know, a much more solid environment. We've, you know, we've also seen the NIH come back, um, and had several purchases funded by either by the NIH directly or an NIH-funded grant. So that's been a positive. So in general, in a much more positive environment in the first half of this year.

I think the U.S. is particularly doing very well with regard to the overall growth.

Yes, exactly. Okay, amazing.

We'll dig into some of that in a bit. But maybe on the replacement cycle, I think you've talked about 50k installed base of mostly conventional flow cytometers ready for replacement by FSP. Typical replacement cycle is around 7 to 10 years. Just given how that market is starting to transition more broadly, I think customers are feeling a bit healthier now with where their spend goes. How are you thinking about driving that next wave of replacements? Yes.

Well, as Wenbin mentioned, in 2017 to 2019, we were the disruptor. We were bringing a new technology that customers hadn't decided on yet. And what's become evident, in recent years, is that there's broad acceptance that FSP technology is the way to go for the future. So, you know, as the pioneer of that technology and the leader in that particular sector, you know, we benefit um from the uh uh the replacement cycle, from the replacement of conventional flow cytometers by FSP. We're the incumbent leader. There's a broad population of people that know how to use our instruments. We have a reputation in the marketplace. So we just need to, you know, continue to execute with a strong selling effort, strong service offering, and continuing to introduce the best new products in the marketplace, which we have done both last year with the EVO and this year with the Borealis and the EVO 2. So, you know, if we continue to execute, we're in an advantaged position with respect to that big wave of replacements that are coming. Also, for the low and mid end of the market, we've now established this separate dedicated sales force to go after those opportunities. That's another initiative that we've undertaken to make sure that we benefit as much as possible from that. You know, we formally implemented it this quarter, so it's just getting going. How evolved is that process? They, they, but we expect, you know, we know that that's the right solution because those are different customers with different needs. But, you know, we're bringing them a more economical full-spectrum system, our Northern Lights, so we think it's well-adapted for that market, and we think that dedicated selling effort and having the right products for that market will benefit us.

And maybe just taking instruments by end market, I think Agilent's Life Sciences and Diagnostics Markets Group globally grew 12% in the second quarter. Maybe just unpack geographically where you're seeing pockets and then how we should be thinking about that for the back half of the year. Yeah, so...

I don't want to say tale of two cities, tale of two regions. U.S. very strong academic and government was up 50% versus last year. And, you know, for all the reasons I talked about, the uncertainty, cloud of uncertainty over university funding being lifted, the NIH coming back, and the new products. And the leading research labs are big buyers of a new product. You introduce a new high-end product, and there's going to be strong demand from those customers for that. In the other part of the, actually in China, academic, what we classify as sales to distributors actually end up going to academic institutions. So that market was pretty good in the first half. But it shows up in our results in the biopharma segment. We continue to see a soft market because the academic and government market in Europe is almost 100% government funded and governments being under pressure in Europe because of the geopolitical issues in the, you know, the funding of the conflict uh in in uh in Ukraine that that they're all uh engaged in doing. Um, so you know, that we expect that that will bottom out at some point, and that will improve our overall growth rate.

How much visibility do you have on those academic markets for the back half? You know, we book and ship pretty much everything within a quarter.

We don't carry much backlog at all into the second quarter. I can't really comment on backlog. You know, we're in the middle of a pandemic, business end of closing the third quarter and I won't comment until we have the third quarter results in the books, but be more than happy to answer the question in a few weeks. Weeks.

Maybe just moving on to biopharma, I think that was one of the stronger instrument components, up 22% in the second quarter. Was that strength broad-based across, you know, large pharma, biotech, and CROs? Maybe just unpack that a little.

The big pharma companies tend to be, the big pharma and the big biotech, you know, the $50 billion, $100 billion biotech companies tend to be the big drivers. Um, we have had uh significant interest from CROs as well. The CROs tend to, you know, they tend to be fleet buyers, so they're interesting opportunities. But I'd say that big pharma and big biotech are the prime, the primary drivers of that, the distributors. Distributors tend to be more important in markets like Latin America, China, where it goes into the academic market, and Latin America. You know, pretty solid. But big pharma with the investment wave that they're on right now has, has probably been the most important driver in that sector. That was up 17% in the first half. A little bit higher than that, sort of in the 20% in the U.S., because we're seeing some particular focus on reshoring into the U.S. And these are also fleet buyers. And they've evaluated our technology, and they like it.

In consistent customers. I want to touch a little on the China strength. So double digit growth there in Q2, I believe. Rest of APAC seemed flat. So maybe again just unpack what you're seeing in the region there and if there's any kind of emerging regulatory or funding changes you think could be up and coming.

You know, funding in China has always been pretty strong. The amount of research activity going on in China is extraordinary. And that's something that I'm sure other companies will comment on. So the funding mostly comes from the government. And institutions are ambitious about pushing their programs forward there, so we've seen, I think in China they published the, the results of most of the purchasing is done through a tender. And they published the results there, so we know exactly what our market position is, #3, Wenbin, if I'm correct?

That's right, yes. In China, we're #3. Our share, as Yisheng said, is about 15% right now.

And then other APAC, I think the economies there have been a little softer than here in the U.S. I think there's been more impact from fuel prices on those economies. And so they've been a little bit more cautious, been a bit tougher there. I know one of your... You know, our market position is very strong in those regions, so it's just a matter of the economies and interest rates being, you know.

More of a factor there. And just on competition in China, I know one of your competitors is localizing some manufacturing in China that should start picking up, I think, in the back half of the year. How are you thinking about that in relation to just your competitive position in that win rate?

Actually, with the gun for us automated, looking at the market in China, you always need to look at the market segment. And Cytek plays primarily in the high end of the research market, where you, the primary targets are government-funded research institutions. And over there, typically, they all go through the tender process. Pricing is not really a primary factor for that segment. Cytek always wins by performance, technology, instead of pricing. Therefore, localizing manufacturing in China, that is not going to really help. But of course, there's one aspect right now in China is in China and for that part of the subject clearly, and you are going to see some of the international companies maybe disqualified from participation regarding to tenders, but Cytek can participate, whether it's made in China or made in international things. We do manufacturing across multiple regions. We do manufacturing in the U.S., in Singapore, in China. And basically, also, we have this region for region manufacturing process. And uh, so that will enable us to participate in tenders, qualify for tenders, at whatever conditions. But again. And for those type of tenders, pricing is not really a primary subject always. It's about technology, about performance, and about the needs. That's why I don't feel this localizing manufacturing in China is going to change anything.

I don't know if you understood. And Bill, maybe just a double click on EMEA. So, decline again in Q2, just those government budgets remained slightly softer. How long should we think about this remaining under pressure? Do you have any visibility into trends there and any green shoots that perhaps could come about? Yes, look, we're starting to lap.

Easier comps. Um, so we did have a quite a strong Q4 in EMEA. But Q3 last year was weaker. And I think the rate of decline has slowed. And, you know, hopefully that's a precursor to a, you know, flattening out. We're getting to a, you know, a sort of a minimum investment level over there, the replacement cycle should be occurring in Europe as well. Their availability, they don't have the other sources of funding for academic institutions that we have in the U.S., private donations and endowments, nowhere near as big as they are here. College sports is not as big a deal in Europe, which is a big revenue generator here. And so, you know, it's all about fighting for a share of the government budget that, you know, continues to be under pressure. But, look, we've got to hit bottom here pretty soon. And, you know, it's like at the end of last year when Europe was declining 30% and we showed a slide that said, you know, while if Europe was flat, that we would start to grow high single digits. And in Q4, Europe actually went up, and so our growth rate went to 8%. So I think at some point we'll see a replay of that. I just don't know, know exactly when. But certainly the comps are getting easier.

That's a good news. Indeed. And also, its share of the overall high because it's shrinking and everything else is growing, is getting smaller.