CYTEK(CTKB) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) The unaudited interim consolidated financial statements for Cytek Biosciences, Inc. as of June 30, 2025, show a net loss of $17.0 million and a slight decrease in total assets Consolidated Balance Sheets Total assets decreased to $493.3 million as of June 30, 2025, driven by reduced cash, while liabilities increased and stockholders' equity declined due to net losses Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 (audited) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $75,470 | $98,716 | | Marketable securities | $186,552 | $179,145 | | Total current assets | $382,825 | $396,446 | | Total assets | $493,320 | $499,500 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $73,270 | $67,663 | | Total liabilities | $115,763 | $103,763 | | Total stockholders' equity | $377,557 | $395,737 | | Total liabilities and stockholders' equity | $493,320 | $499,500 | Consolidated Statements of Operations and Comprehensive Loss Total revenue decreased 5% to $87.1 million for the six months ended June 30, 2025, resulting in a wider net loss of $17.0 million Statement of Operations Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Product Revenue | $59,525 | $68,698 | | Service Revenue | $27,534 | $22,779 | | Total Revenue, net | $87,059 | $91,477 | | Gross Profit | $44,024 | $48,449 | | Loss from Operations | $(25,598) | $(19,260) | | Net Loss | $(16,985) | $(16,603) | | Net Loss Per Share (basic & diluted) | $(0.13) | $(0.13) | Consolidated Statements of Cash Flows Net cash used in operating activities was $17,000 for the six months ended June 30, 2025, with significant cash outflows from investing and financing activities Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(17) | $10,161 | | Net cash used in investing activities | $(6,961) | $(3,732) | | Net cash used in financing activities | $(14,147) | $(98) | | Net (decrease) increase in cash | $(23,275) | $10,288 | - The significant cash used in financing activities during the first six months of 2025 was driven by $15.1 million in share repurchases[16] Notes to Consolidated Financial Statements Detailed notes explain accounting policies, revenue disaggregation, the 2023 FCI Acquisition, legal proceedings, share repurchases, and material weaknesses in internal controls - The company operates as a single reportable segment, providing cell analysis solutions with its Full Spectrum Profiling (FSP) technology, expanded by the 2023 FCI Business acquisition[19] Revenue Disaggregation - Six Months Ended June 30 (in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Sales Channel | | | | Direct sales channel | $63,439 | $68,869 | | Distributor channel | $23,620 | $22,608 | | Customer Mix | | | | Academia and government | $38,886 | $38,643 | | Biotechnology, pharmaceutical, etc. | $48,173 | $52,834 | - The company's ongoing share repurchase program, authorized for up to $50 million, saw 3.3 million shares repurchased for $15.1 million as of June 30, 2025, with $35.0 million remaining[122] - A patent infringement lawsuit filed by Beckman Coulter, Inc. in August 2024 alleges that Cytek's Aurora and Northern Lights products infringe on their patents, with a trial scheduled for August 17, 2026[152] - In July 2025, the company initiated a plan to transition manufacturing operations from Seattle to Singapore by the end of fiscal year 2025 to optimize efficiency and reduce costs[164] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% revenue decrease, declining gross margin, increased operating expenses due to litigation, and macroeconomic challenges impacting sales Results of Operations Total revenue decreased 5% to $87.1 million, driven by a 13% decline in product revenue, while operating loss widened due to increased general and administrative expenses Revenue Comparison - Six Months Ended June 30 (in thousands) | Revenue Type | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Product | $59,525 | $68,698 | $(9,173) | (13)% | | Service | $27,534 | $22,779 | $4,755 | 21% | | Total | $87,059 | $91,477 | $(4,418) | (5)% | - The 13% decrease in product revenue for the first six months of 2025 was primarily due to lower sales in EMEA and the United States, partially offset by growth in the APAC market[214] - General and administrative expenses increased by $3.3 million (14%) for the six months ended June 30, 2025, primarily due to ongoing patent litigation expenses[223] Liquidity and Capital Resources The company held $262.0 million in cash and investments as of June 30, 2025, deemed sufficient for the next 12 months, despite significant share repurchases - As of June 30, 2025, cash, cash equivalents, and short-term investments totaled approximately $262.0 million[229] - The company has an "at the market" sales agreement to sell up to $150.0 million of its common stock, with no sales made under this agreement as of the report date[235] - Management believes existing cash and anticipated cash flows will be sufficient to meet capital needs for at least the next 12 months[233] Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk stems from foreign currency fluctuations, especially the renminbi and euro, while interest rate risk is considered immaterial - The company's main market risk is foreign currency fluctuations, primarily from the renminbi and the euro, due to its global revenue streams[251] - Interest rate risk is not considered material because cash and investments are held in short-term instruments[249][250] Item 4. Controls and Procedures Management concluded that disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in IT controls and financial reporting procedures, with a remediation plan underway - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were not effective due to material weaknesses in internal controls[254] - Identified material weaknesses include inadequate general information technology controls (GITCs) and ineffective design and/or review procedures for journal entries and balance sheet account reconciliations[256] - A remediation plan is in progress, involving hiring qualified personnel, revising control designs with external consultants, and expanding training and monitoring[257][259] PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 18 for details on ongoing legal proceedings, including a patent infringement lawsuit by Beckman Coulter, Inc - The company is involved in legal proceedings, with details provided in Note 18 of the financial statements[263] Item 1A. Risk Factors Key risks include limited operating history, product dependence, supply chain reliance, international trade issues, internal control weaknesses, and intellectual property litigation - The company has a limited operating history and is highly dependent on a small number of products (Cytek Aurora, Northern Lights, Aurora CS), which have substantial sales cycles[265][267][268] - Reliance on single and sole-source suppliers for key components without long-term contracts poses a significant supply chain risk[265][272] - International operations are subject to risks including tariffs, export controls, and sanctions, with new US government license requirements for exports to countries like China potentially impacting sales and R&D[266][285] - The company has identified material weaknesses in its internal control over financial reporting, which could prevent the accurate or timely reporting of its financial condition[269][330] - The company faces risks from intellectual property litigation, including claims that could prevent product sales or require costly licenses, with an ongoing lawsuit with Beckman Coulter noted[427] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,214,005 shares for $3.71 per share during Q2 2025 under its $50 million program, with $35 million remaining Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Repurchased | Average Price Paid ($) | | :--- | :--- | :--- | | April 2025 | 939,946 | 3.72 | | May 2025 | 274,059 | 3.65 | | June 2025 | — | — | | Total | 1,214,005 | 3.71 | - As of June 30, 2025, approximately $35.0 million remained authorized for purchase under the company's stock repurchase program, expiring on December 31, 2025[481]