CYTEK(CTKB) - 2024 Q4 - Annual Report

Part I Business Cytek Biosciences specializes in cell analysis solutions using its patented Full Spectrum Profiling technology, generating revenue from instruments, reagents, software, and services globally - Key Financial Performance (2022-2024) | Fiscal Year | Revenue (USD Million) | Net Income/(Loss) (USD Million) | | :--- | :--- | :--- | | 2024 | $200.5 | $(6.0) | | 2023 | $193.0 | $(12.1) | | 2022 | $164.0 | $2.5 | - The company's core business revolves around its patented Full Spectrum Profiling (FSP) technology, which offers high-resolution, high-content, and high-sensitivity cell analysis through its Cytek Aurora™ and Northern Lights™ systems[21][23][24] - In February 2023, Cytek completed the acquisition of the flow cytometry and imaging (FCI) business from Luminex, adding Amnis® and Guava® branded instruments to its portfolio to expand its offerings into new customer segments[27] - The company's customer base is diversified, with approximately 40% of 2024 revenue from academic and government institutions and 60% from pharmaceutical companies, biotechnology firms, distributors, and CROs[144] Our Strategy Cytek's core strategies include accelerating solution adoption, continuous innovation, investing in integrated workflow solutions, and driving clinical research applications - Cytek's core strategies include accelerating the adoption of its solutions through enhanced sales and marketing infrastructure, continuing innovation to offer best-in-class solutions, including new instruments, reagents, and software, investing in integrated workflow solutions to drive recurring revenue from consumables and services, and driving the development of clinical research applications, particularly in disease detection, diagnosis, and treatment monitoring[33] Our Products The company's product portfolio centers on its FSP platform, including Cytek Aurora and Northern Lights systems, complemented by acquired Amnis and Guava cytometers - The company's product portfolio is centered around its FSP platform, including the Cytek Aurora and Northern Lights systems for cell analysis, and the Aurora CS system for cell sorting, complemented by Amnis and Guava imaging and conventional flow cytometers acquired from Luminex[37][40][44] - Cytek offers a suite of integrated solutions including instruments, automated sample loaders, reagents (cFluor and Tonbo brands), and proprietary software (SpectroFlo, InCyte, IDEAS) to provide a comprehensive workflow for customers[49][50][52] - The Northern Lights-CLC system is registered for clinical use in the European Union (under IVDR) and as a Class II In Vitro Diagnostic Medical Device in China, enabling its use in clinical settings in these regions[39] Sales and Marketing Cytek employs a direct sales force in key regions and uses distributors elsewhere, facing lengthy instrument sales cycles - The company utilizes a direct sales force in North America, Europe, and China, and relies on distributors and sales agents in other regions like Latin America, the Middle East, and parts of Asia-Pacific[61] - The sales cycle for instruments is often lengthy, taking six months or longer, due to in-depth customer evaluations and, in some regions, formal tender processes for institutional sales[62][63] Manufacturing and Supply Cytek operates manufacturing facilities globally, including a key site in China, and relies on limited or sole-source suppliers for critical components - Cytek operates manufacturing facilities in Fremont, CA; San Diego, CA; Seattle, WA; Wuxi, China; and Singapore, with the Wuxi facility key for producing clinical-use instruments and reagents[64][65][66] - The company relies on a limited number of, and in some cases sole source, suppliers for key components such as certain lasers and semiconductors, posing a potential supply chain risk[70] Competition Cytek faces significant competition from established life sciences and in vitro diagnostics companies in the cell analysis market - Cytek faces significant competition from established life sciences and in vitro diagnostics companies, including Agilent Technologies, Beckman Coulter (Danaher), Becton, Dickinson and Company, Bio-Rad Laboratories, Standard BioTools, Miltenyi Biotec, Sony Biotechnology, and Thermo Fisher Scientific[71] Intellectual Property The company maintains a patent portfolio across key jurisdictions, with U.S. patents expiring between 2025 and 2038 - Patent Portfolio as of December 31, 2024 | Jurisdiction | Issued Utility Patents | Pending Utility Patent Applications | | :--- | :--- | :--- | | U.S. | 35 | 45 | | Japan | 10 | 4 | | Europe | 7 | 9 | | China | 3 | 9 | | Other International | 7 | 3 | - The company's U.S. issued patents are expected to expire between 2025 and 2038, and its Chinese subsidiaries also hold a significant number of patents in China[73] Human Capital Resources As of December 31, 2024, Cytek employed 648 individuals across various departments, with significant allocations to sales, marketing, and R&D - Employee Headcount by Department (as of Dec 31, 2024) | Department | Number of Employees | | :--- | :--- | | Total Employees | 648 | | Research and Development | 164 | | Sales and Marketing | 244 | | Manufacturing and Operations | 177 | | General and Administrative | 63 | Government Regulation and Product Approval Cytek's products are extensively regulated by the FDA and international bodies, with most U.S. products sold for Research Use Only, and subject to data privacy laws - The company's products are subject to extensive regulation by the FDA and other global authorities, covering design, manufacturing, marketing, and sales, with U.S. clinical devices requiring 510(k) clearance, de novo classification, or PMA approval[87][89] - Most of the company's products in the U.S. are sold as Research Use Only (RUO), exempting them from most FDA premarket requirements, though diagnostic intent could lead to enforcement action[97] - In the European Union, the company must comply with the In Vitro Diagnostic Medical Devices Regulation (IVDR), which establishes a comprehensive framework for device safety, traceability, and surveillance[103] - The business is also subject to various data privacy and security laws, including GDPR in Europe, PIPL in China, and CCPA in California, which govern the processing of personal data[113] Risk Factors The company faces numerous risks, including limited operating history, reliance on core products and single-source suppliers, intense market competition, internal control weaknesses, and extensive regulatory and legal exposures - Business & Operational Risks: The company has a limited operating history, relies heavily on its core Aurora and Northern Lights systems, and depends on single-source suppliers for key components, creating potential for business disruption[122][126][129] - Market & Competition Risks: The cell analysis market is highly competitive, with success depending on increasing penetration, expanding into new markets like clinical diagnostics, and continuous new product development[123][144][154] - Financial & Control Risks: The company has identified material weaknesses in its internal control over financial reporting, which could impact financial statement accuracy and timeliness, making future performance difficult to predict[124][187] - Regulatory & Legal Risks: Products may become subject to more onerous FDA regulation, and the company is exposed to risks from data privacy laws, anti-corruption laws, and intellectual property litigation, potentially incurring significant costs and penalties[124][227][240] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[335] Cybersecurity The company's cybersecurity risk management is overseen by the CFO and IT department, with board oversight, involving threat identification, mitigation, and third-party risk management - The company has implemented processes to identify, assess, and manage cybersecurity risks, overseen by the CFO and IT department, with board-level oversight[335][336][342] - Management of cybersecurity risks is integrated into the company's overall risk management framework, and the board receives periodic reports on significant threats and mitigation efforts[338][346] Properties Cytek's principal executive offices are in a leased Fremont, CA facility, complemented by an owned manufacturing building in Wuxi, China, and other leased global sites - The company's headquarters are in a leased 99,000 sq. ft. facility in Fremont, CA, with the lease expiring in February 2029[347] - Cytek owns a 56,000 sq. ft. manufacturing and office facility in Wuxi, China, and leases additional manufacturing space in Singapore (8,500 sq. ft.) and Seattle, WA[348][349][350] Legal Proceedings The company is involved in ongoing legal proceedings, notably a patent infringement lawsuit filed by Beckman Coulter, Inc. regarding its core products - The company is currently being sued by Beckman Coulter, Inc. for alleged patent infringement related to its core flow cytometer and cell sorter products, with Cytek vigorously defending itself and filing a counterclaim[649] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[352] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cytek's common stock trades on Nasdaq under 'CTKB,' with no cash dividends planned, and the company executed a share repurchase program in 2024, succeeded by a new authorization in 2025 - The company does not intend to pay cash dividends in the foreseeable future, retaining earnings to finance business growth[357] - 2024 Share Repurchase Program Summary | Period | Total Shares Repurchased | Average Price Paid per Share | Remaining Authorization (at period end) | | :--- | :--- | :--- | :--- | | June 2024 | 444,319 | $5.99 | $47.3M | | Aug 2024 | 1,113,843 | $5.45 | $41.5M | | Sep 2024 | 1,080,512 | $5.37 | $35.5M | | Oct 2024 | 959,007 | $5.12 | $30.5M | | Nov 2024 | 373,943 | $5.44 | $28.5M | | Total for Program | 3,971,624 | $6.19 (Life to Date) | $28.5M | - A new $50 million share repurchase program was approved by the board to commence on January 1, 2025, succeeding the program that expired at the end of 2024[441] Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2024, Cytek's revenue grew 4% to $200.5 million, driven by service revenue, narrowing its net loss to $6.0 million, while facing inflation and fundraising challenges, ending with $277.9 million in cash - Consolidated Results of Operations (2023 vs. 2024) | Metric (in thousands) | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue, net | $200,453 | $193,015 | 4% | | Product Revenue | $153,263 | $156,717 | (2)% | | Service Revenue | $47,190 | $36,298 | 30% | | Gross Profit | $111,106 | $109,426 | 2% | | Gross Margin | 55% | 57% | (2 p.p.) | | Loss from Operations | $(20,523) | $(27,845) | (26)% | | Net Loss | $(6,020) | $(12,148) | (50)% | - The 4% revenue growth in 2024 was primarily driven by a $10.9 million (30%) increase in service revenue from a growing installed base of instruments, which offset a $3.5 million (2%) decrease in product revenue[412][413][414] - Operating expenses decreased by $5.6 million, primarily due to a $4.7 million reduction in R&D expenses from streamlining efforts, with net loss improving significantly aided by a one-time $7.3 million benefit related to a change in estimate for the BD royalty settlement liability[411][419][425] - The company ended 2024 with $277.9 million in cash, cash equivalents, and short-term investments, up from $262.7 million in 2023, with net cash provided by operating activities at $25.4 million[431][443] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency fluctuations, particularly the renminbi and euro, with interest rate risk considered minimal due to short-term investments - The company's main market risk is from foreign currency fluctuations, primarily the renminbi and euro, as it expands its international business, with no hedging instruments used to date[478][481][482] - Interest rate risk is considered immaterial due to the short-term nature of the company's cash, cash equivalents, and investments, which are primarily in money market funds and bank deposits[479][480] Financial Statements and Supplementary Data This section presents Cytek's audited consolidated financial statements for 2022-2024, including the auditor's report noting material weaknesses in internal controls, alongside detailed financial position, performance, equity, and cash flow statements - The independent auditor's report issued an adverse opinion on the company's internal control over financial reporting as of December 31, 2024, due to identified material weaknesses, but issued an unqualified (clean) opinion on the financial statements themselves[487][678] Consolidated Balance Sheets This section provides a summary of Cytek's financial position, detailing assets, liabilities, and equity as of December 31, 2024 and 2023 - Key Balance Sheet Data (as of Dec 31) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total Current Assets | $396,446 | $392,060 | | Cash, cash equivalents & marketable securities | $277,890 | $262,741 | | Inventories | $43,893 | $60,877 | | Total Assets | $499,500 | $494,457 | | Total Current Liabilities | $67,663 | $56,226 | | Total Liabilities | $103,763 | $101,393 | | Total Stockholders' Equity | $395,737 | $393,064 | Consolidated Statements of Operations and Comprehensive (Loss) Income This section details Cytek's financial performance, including revenue, gross profit, operating loss, and net loss for fiscal years 2022-2024 - Statement of Operations Summary | (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenue, net | $200,453 | $193,015 | $164,036 | | Gross Profit | $111,106 | $109,426 | $100,974 | | Loss from Operations | $(20,523) | $(27,845) | $(1,804) | | Net (Loss) Income | $(6,020) | $(12,148) | $2,484 | | Net (Loss) Income per Share, basic | $(0.05) | $(0.09) | $0.02 | Consolidated Statements of Cash Flows This section summarizes Cytek's cash inflows and outflows from operating, investing, and financing activities for 2023 and 2024 - Cash Flow Summary (Year Ended Dec 31) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) Operating Activities | $25,379 | $5,281 | | Net cash used in Investing Activities | $(82,974) | $(93,894) | | Net cash (used in) provided by Financing Activities | $(15,822) | $(41,812) | | Net decrease in cash, cash equivalents and restricted cash | $(68,885) | $(131,870) | Notes to Consolidated Financial Statements This section provides detailed explanations of Cytek's accounting policies and significant transactions, including revenue recognition, the Luminex acquisition, and legal settlement revisions - Revenue Recognition: Revenue from product sales is recognized at a point in time upon transfer of control, while service revenue from contracts is recognized ratably over the contract term, with transaction prices allocated based on relative standalone selling prices[541][542][545] - Acquisition: The February 2023 acquisition of Luminex's FCI business for $44.9 million was accounted for as a business combination, resulting in $6.0 million of goodwill and $21.8 million of identifiable intangible assets, primarily customer relationships and developed technology[595][599][601] - Legal Settlement: In Q4 2024, the company revised its forecast for sales subject to royalties under the BD settlement, resulting in a $7.3 million reduction of the legal settlement liability, which was recognized as a benefit to interest income (expense), net[608] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This item is not applicable as there were no changes in or disagreements with accountants on accounting and financial disclosure - Not applicable[665] Controls and Procedures Management concluded that disclosure controls were ineffective as of December 31, 2024, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses in internal control over financial reporting[666][669] - Material weaknesses were identified in the control environment and control activities, specifically related to inadequate IT general controls (access security, change management) and ineffective design of journal entry and reconciliation controls[670][671] - A remediation plan is in progress, focusing on augmenting staff, improving control design with external consultants, enhancing training, and strengthening IT systems and controls[673][676] Other Information The company reported no other information required to be disclosed under this item - None[690] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[691] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[694] Executive Compensation Information regarding executive and director compensation will be incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[696] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership by major shareholders and management will be incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[696] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence will be incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[697] Principal Accountant Fees and Services Information concerning fees paid to and services provided by the principal accountant will be incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement[697] Part IV Exhibits and Financial Statement Schedules This section lists all documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements and required exhibits - This section contains the list of all exhibits filed with the Form 10-K, including material agreements, corporate governance documents, and officer certifications[698][700] Form 10-K Summary A Form 10-K summary was not provided in this report - Not provided[706]