PRA Group Q3 2023 Earnings Call Transcript

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November 7, 2023

There are 11 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the ZYTECH Biosciences Third Quarter 2023 Earnings Conference Call. Advising, your hand is Fiscal. I would now like to hand the conference over to your speaker for today, Paul Goodson, Head of Investor Relations. Paul, please go ahead.

Speaker 1

Thank you, operator. Earlier today, Citec Biosciences released financial preliminary results for the quarter ended September 30, 2023. 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 investorscitecbio.com. Joining me today from Citec are Wenbin Zhang, CEO and Patrick Jean LeNeault, CFO. Before we begin, I'd like to remind you that we will make statements during this call that are forward looking statements within the meaning of the federal securities laws, including statements regarding Citec's business plans, strategies, opportunities and financial projections.

Speaker 1

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. Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements in the press release Citec issued today and in CITEX SEC filings, including the upcoming Form 10 Q that is expected to be filed with the SEC on Thursday, November 9, 2023. This call will also include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP measure may be found in today's earnings release submitted to the SEC. Except as required by law, Citec disclaims any duty to update any forward looking statements whether because of new information, future events or changes in its expectations.

Speaker 1

This conference call contains time sensitive information and is accurate only as of the live broadcast November 7, 2023. I would like to mention that Cytec will be hosting a number of flow cytometry events over the coming months. While these are primarily geared to our scientific user base, that may be of interest to our analysts and investors alike. These include the Scitech Reveal Roadshow, which is currently underway, several Scitech user group meetings and a variety of industry conferences where we will have a product booth and we'll be sponsoring user outreach events. These events offer an opportunity for you to interact with users of our technology and get their comments directly on why they chose Citec.

Speaker 1

We have a limited number of spaces to accommodate members of the financial community. So if you are interested in attending, please contact me. With that, I will turn the call over to Wen Bin.

Speaker 2

Thanks, Paul, and welcome everyone to our Q3 conference call. On the call today, I will discuss our results for the Q3 as well as our progress across our 4 key strategic pillars to drive growth. Then I will turn the call over to Patrick for a more detailed look at our financials and an update on our outlook for 2023 before we open it up for Q and A. Starting with our 3rd quarter results. Against a difficult macro environment, we achieved $48,000,000 of total revenue, representing growth of 19% year over year.

Speaker 2

This included approximately $6,800,000 of revenue from the product lines acquired from the mix. Excluding acquisition related revenue, our organic revenue was $41,200,000 a 2% increase year over year. We are pleased with the continued growth we saw in the 3rd quarter from our leading portfolio and the services, areas that we expect to be leading growth drivers for our business in the future. This positive trend is a testimony to the strong utilization of our instruments and the flywheel effect attached to them. In the Q3, Like many other companies, we were not immune to the increasing headwinds within our industry, where we experienced extended sales cycle and the order delays.

Speaker 2

We expect this pressure to persist into the 4th quarter. As a result of these factors, we expect full year revenue from our organic business to be approximately flat versus the prior year and $25,000,000 to $30,000,000 of revenue contributions from the business acquired from Luminex. Taken together, we expect full year revenue in the range of $188,000,000 to $192,000,000 representing growth of 15% to 17% over the prior year. Patrick will provide more detail on our financial results momentarily. Despite this challenging backdrop, I'm pleased with our team's commitment to adapt and navigate this evolving environment.

Speaker 2

We remain focused on driving our product strategy forward and delivering commercial growth at profitable levels across our diversified revenue streams. We believe that the underlying interest in our full special profiling or FSP technology continue to be high, and we are making good progress with both new and existing customers in our pipeline. We are addressing well established markets across the scientific community where there is a large need for tools beyond the conventional. We are well positioned to meet this demand as an industry leader offering an expansive product portfolio purpose built to advance next generation cell analysis. To deliver on our long term objectives, we continue to focus our business on 4 key pillars: instruments, applications, bioinformatics and clinical.

Speaker 2

Starting with instruments. During the Q3, we placed 119 instruments from our organic seismic portfolio, resulting in an installed base of 19 97 SITC instruments, excluding the installed instruments of Amlanx Imaging and the Guava Microcaprolay product lines acquired from Luminex. We experienced slower growth in organic instrument sales in the Q3 due to more conservative customer spending patterns and experienced the purchasing delays as a result. Despite this, we believe The customer interest in our proven instrument portfolio continues to be strong, and we remain focused on driving adoption. Longer term, we believe this growing installed base will provide us with a receptive market for new instruments that we intend to launch in the future.

Speaker 2

I would like to turn next to applications, which includes our regions and the kids, where we continue to see strong performance. Importantly, with increasing instrument placements, we expect this positive trend to continue with higher pull through of consumables down the road. Our reagents and kits are optimized for use on our instruments, which helps make the user job easier, faster and more accurate. In addition, our scientists have created new regions that have pushed the boundaries of the spectrum response, further strengthening their performance and the utility to our customers. We continue to actively collaborate with our partners to broaden our reagent portfolio and develop application specific kits.

Speaker 2

We are committed to continuously Expanding our portfolio of clinical measures, aligning with our overarching mission to provide comprehensive solutions for our customers. To that end, we expect to launch a new product, Sisive Oran, a smart cocktail religion mixer in the Q4. This new religion cocktail technology simplifies and accelerate laboratory workflow, helping assure consistent experimental results, saving time and reducing the agent waste. We showcased our technology at recent industry conferences and encouragingly customers were very interested in this offering. The launch of our site Orion, RegenVista, is part of our strategy to expand our menu of applications and the products that both accelerate research and provide deeper insights for our existing customers and new customers alike.

Speaker 2

The breadth of applications for our instruments and the regions can also be seen across the wide range of peer reviewed publications that include our technology. In the Q3, There were 171 new peer reviewed publications mentioned in CITEC, bringing the all time numbers of publications to $14.82 The increasing number of peer reviewed publications that showcase our products reflects the growing acceptance of Cytec's innovative solutions among researchers as they continue to leverage our technology to propel scientific advancements. Bioinformatics is our 3rd strategic area. A key part of our bioinformatics strategy is enabling our customers to streamline their experiment workflow. We have reported to you before that user engagement and demand for the Cytec Cloud launched late last year has been doing exceptionally well.

Speaker 2

At present. There are on average more than 2 Citicloud users per installed Citicloud instrument. SITA Cloud's digital ecosystem offers a comprehensive suite of spectral panel design tools seamlessly integrated into a centralized platform, forming a unified ecosystem. This cutting edge solution empowers researchers to prepare and optimize their experiments remotely, streamlining the process from panel design to data acquisition. The demand for the Cytec Cloud is being driven by researchers' desire to collect more data from every cell they analyze, which has been made possible by the advanced capabilities CITEX FFP Instruments and Reagents has brought to researchers.

Speaker 2

This is resulting in the need for increasingly larger reagent panels to gather more biological insights, often from samples that are rare and or very limited in size. These larger panels result in much more data, which creates more complexity across the entire lab workflow from panel design to data acquisition to data analysis. The faster time to insight and ability to analyze larger data sets is extremely valuable across a broad range of research applications from immunology to oncology, infectious as well as inflammatory diseases. We believe Cytec Cloud provides a powerful reason for new user adoption and for existing users to continue using our instruments and reagents. Turning to our clinical opportunity.

Speaker 2

As a reminder, several of our products are approved for clinical use in both China and the EU. Our most common sale for clinical applications is the Northern Lights CLC system, accompanied by our growing seafloor reagent product portfolio. In both China and the EU. The clinical market is an attractive business opportunity for Citec. In the EU.

Speaker 2

We remain ahead of the curve on any updates to the European IVDR regulation and are pleased to announce that our Citec Northern Lights CLC system is compliant with the most recent regulation. Additionally, our special flow QC beads are now IVDR certified, bringing both the instrument and the beads together as part of the IVDR system solution. This past September, It was great to see our IVDR system solution showcased at the European Society For Clinical Cell Analysis Annual Conference by one of our early adopters, Doctor. Manuel Ramirez. He is the Director of the Unit for Cell and Gene Therapies at the University of Nino HEDES and the focus on translational research in pediatric cancers.

Speaker 2

Doctor. Ramirez had tested the Northern Light CLC Spectralflow Cytometer on patients with leukemia at diagnosis and during therapy when mouse are deeply affected by chemo therapies. At the conference. Doctor. Lemnier highlighted the use of Northern Light CLC in his research and his confidence in gaining the maximum levels of information out of samples from workflows.

Speaker 2

We were pleased to see one more example of our technology being leveraged to drive forward advancements in scientific research. Within the U. S, we are continuing to develop our applications to the FDA for 510 clearance of our products will be used in clinical applications. We believe our powerful FSP platform, If FDA cleared, we'll bring clinical diagnostics labs unparalleled efficiency and analytical power, thus providing a benefit to patients by giving doctors a rapid, clearer and a more detailed view of each patient's condition. Further, in the Q3, we received our ISO 13,485 Quality Management Systems Certification of our headquarters and the manufacturing operations in Fremont, California to produce our flow cytometers, reagents and accessories.

Speaker 2

This certification bolsters our plans to focus on the translational and the clinical market and sends a strong signal to customers in these segments that we are committed to serving them, taking every step necessary to responsibly do so in the future. Lastly, I want to provide an update on our integration of the Omnis and Guava product lines we acquired from Luminess on February 28. As a reminder, we completed the cross training of our sales force by the end of the Q2 and the conversion of the Amelis manufacturing facility to our control around the same time. During the Q3, we completed the transition of the manufacturing of guava instruments from Luminex Austin, Texas facility to Citec's Wuxi, China location. Our only remaining integration task is to complete the cross training of our service personnel on the instruments new to them.

Speaker 2

We expect to finish the cross training of the service team by the end of the Q4. This important step will position us to take full advantage of the efficiencies in operating our service organization that we envisioned when we made the acquisition. The flow cytometry community has shown tremendous activity in adding imaging to their applications. To meet this growing interest, we plan to release an updated version of our Omniscient AI analysis software in the first half of twenty twenty four to take full advantage of the industry's leading image quality from our image stream. Overall, we are seeing the value of the Luminex acquisition both in the near and over the long term.

Speaker 2

With that, I will now turn the call over to Patrick for more details around our financials.

Speaker 3

Thanks, Wenbin. Total revenue for the Q3 of 2023 was $48,000,000 a 19% increase over the Q3 of 2022. This included approximately $6,800,000 of revenue from the products and services acquired from the Luminex transaction, which closed on February 28. Organic revenue, excluding the acquired products and services, was $41,200,000 an increase of 2% compared to the same period of 2022. As Wendin mentioned, We are continuing to expand external sales cycle and order delays.

Speaker 3

While the macro environment was challenging during the Q3, We did experience strength in working revenue, including reagent and service revenue. Gross profit was $27,200,000 for the Q3 of 2023, an increase of 1% compared to a gross profit of $26,900,000 in the Q3 of 2022. Gross profit margin was 50 7% in the Q3 of 2023 compared to 66% in the Q3 of 2022. Adjusted gross profit margin in the Q3 of 2023 was 59% compared to 68% in the Q3 of 2022 after adjusting for stock based compensation expense and amortization of acquisition related intangibles. Operating expenses were $33,600,000 for the Q3 of 2023, were 32% increase from $25,500,000 in the Q3 of 2022.

Speaker 3

The increases in operating expenses were primarily due to expenses related to increased headcount from the Luminex acquisition and personnel related expenses across sales and marketing, research and development and general administrative. These expenses included an increase in trade show and other sales. Research and development expenses were $11,200,000 for the Q3 of 2023 as compared to $8,700,000 for the prior year period. Sales and marketing expenses were $12,100,000 for the Q3 of 2022 as compared to $8,800,000 for the prior year period, reflecting the addition of our new team members from Luminex. While sales and marketing as a percentage of revenue is up this quarter, over time we expect that this ratio will decline as our revenue growth trajectory recovers and our sales and marketing investment is spread over a larger revenue base.

Speaker 3

General and administrative expenses were $10,400,000 for the Q3 of 2023 as compared to $8,000,000 for the prior year period. Loss from operations was $6,400,000 for the 3rd quarter compared to an income from operation of 1 point $4,000,000 for the Q3 of 2022. The net loss after tax in the Q3 of 2023 was 6 $500,000 compared to net income after tax of $1,600,000 in the Q3 of 2022. Additionally, adjusted EBITDA in the Q3 of 2023 was positive $3,700,000 compared to positive $7,300,000 in the Q3 of 2022 after adjusting for stock based compensation expense. Cash, cash equivalents and short term investment were $288,000,000 as of September 30, 2023.

Speaker 3

Our strong balance sheet free from external financial needs underscores our organization's vitality. With healthy cash reserve and a profitable track record, we continue to operate it from a position of strength that enables our global growth efforts. One important use of our cash position has been to repurchase our stock following the $50,000,000 repurchase authorization we announced in May of this year. During the Q3, we repurchased approximately $8,400,000 web of Citec stock in open market transactions. Share repurchases under these programs are canceled, leaving us with approximately 135,000,000 shares outstanding as of September 30, 2023.

Speaker 3

Now turning to our guidance for 2023, which when we reported at a high level earlier, We are continuing to see market pressure affecting our revenue expectation, including order delays across North America, economic challenges in China and along with the sales cycle across geographies. Taking these factors together, We expect our full year revenue to be in the range of $188,000,000 to $192,000,000 representing overall growth of 15% to 17% over full year 2022. We expect this to be composed of approximately flat organic revenue versus the prior year and revenues from the acquired Luminess business to be in the range of $25,000,000 to $30,000,000 As we look ahead, we are anticipating some softness in our top line to persist into 2024 due impacts to the longer sales time lines we are experiencing. While it is too early to provide our specific outlook for next year, we continue to keep a close eye on the dynamic global market conditions. We are also diligently focused on improving operational efficiencies across our business and aligning our overall cost structure to ensure that We remain an agile organization in the best profitable position to drive growth and deliver profitability.

Speaker 3

With that, I will turn it back over to Wendell.

Speaker 2

Thanks, Patrick. I want to close by thanking our Sysco team for their unwavering dedication to delivering cutting edge tools, regions and software to advance the next generation of cell analysis. While we are facing near term headwinds, our financial strength and organizational commitment positions us to successfully weather through these times. We continue to be excited by the significant opportunities ahead to drive adoption of our expensive and growing product portfolio. I'm confident that we are fundamentally well positioned to drive our mission forward with continued execution across our key strategic pillars and the focus on delivering profitable growth.

Speaker 2

I want to thank everyone for joining today's call, And we will now open it up for questions. Operator?

Operator

Thank you. At this time, we will conduct a question and answer session. The first question comes from the line of David Westenberg of Piper Sander. David, please go ahead.

Speaker 4

Hi. Thank you for taking the question. So I just wanted to give a little bit of sense for the competitive environment, whether or You're seeing anything out there, whether it be maybe cheaper traditional flow cytometers or maybe full Spectral Flow Cytometer. Just anything on the commutative landscape that tells us the instrument is doing great from like that kind of perspective, this really is a lot more in broader market kind of situations?

Speaker 3

Yes, Dave, thanks for asking the question. That's Patrick. So we continue to see demand for our instruments And I don't know if this environment as you defined it, Kiefer is a right definition considering that we see continued demand from biotech, pharma and Academia, while this quarter was a little softer than expected, we still remain very positive about The continued demand for the full spectrum technology that Citec is selling.

Speaker 5

Yes. One of the indication we have seen is based on our pipeline, we are clearly seeing more Cases gone cold instead of being lost. Our win loss ratios remain constant, not really changing over the time. So this just means the impact is mostly due to the macro environment.

Speaker 4

Got it. So Amy, I mean, traditionally, right, is the right way to think about it, you have a flow cytometer, you have a 5 to 7 year kind of replacement CapEx cycle. If we're seeing softness kind of in 2023 to 2024, but really I mean like you would be going at the end of the capital equipment cycle. Is that kind of the right way to think about it as we think about the long term demand for the instrument. Thank you.

Speaker 5

I think continuously, of course, we see the turning customer, we also see new customers in our space. And The demand certainly is still out there. But on the other hand, as you know, due to the high interest rate and When customers are making a decision when to purchase, this is part of the consideration we have and basically try to delay their purchase decisions as long as they can, right. So this is impacting how we perform obviously here.

Speaker 4

Okay, got it. Maybe just ask one more on, again, on the kind of this product demand side. Is there do you offer anything kind of on a little bit more reagent or financing options with in order to help them with kind of the capital purchase cycle. Any clever ways to think about that kind of thing over the next a couple of years to help drive demand and giving the high interest rate environment? Thank you.

Speaker 5

Great question. In fact, we are indeed looking at this options. As you know, we have a strong cash flow and balance on our balance sheet. And this potentially is a possibility that we can help our customers to make their decisions with regarding to the purchase.

Speaker 6

Got it, guys. Thank you.

Speaker 7

The next question comes from

Operator

the line of Stephen Ma of TD Cowen. Stephen, please go ahead.

Speaker 8

Great. Thanks for taking the questions. Patrick, looking at the new guide, if I'm doing my math right, it looks like it's going to be Maybe a slightly down to flat sequential quarter over quarter Q3 to Q4. On the last call, you said the cadence of revenues Would be heavily skewed to the back half of the year. Could you give us some color on what happened?

Speaker 8

Was there some orders that got pushed back? And what do you think of those Back order, will they come back eventually or are they going to be lost?

Speaker 3

Yes. So, Steve, so the Q4 is going to be up from the 3rd quarter. So we expect the Q4 to be up from where we landed in Q3. So that's the number one. What we've seen in Q3 is little bit of softness in the Academia segment, which typically is strong on the Q3.

Speaker 3

We've also seen a little bit of softness in the biotech. We had expected a slightly Stronger push on that side. While we are not expecting to lose a lot into next year. We expect Q4 to be stronger than Q3.

Speaker 8

Okay, great. Thanks. And then something that Wen Bin said, the customer interest is still strong. Can you help us reconcile what that means? Does it mean that The sales cycle really is just being extended and you're not actually losing business, but just being delayed.

Speaker 8

Is that what your sense is?

Speaker 3

Just want to reconfirm that.

Speaker 5

Yes. This is exactly what we mean. It's not really being lost. As what I hope Ingrid has an early line. Our win loss ratio remain constant.

Speaker 5

So this just means and it takes more time for customer to make a decision under today's macro environment, especially when we talk about really expensive High cost capital expenditure.

Speaker 8

Okay, got it. And if I can sneak one last one in. On your stock buyback thinking, how do you balance continuing to buy back stock with your M and A strategy and potentially keeping some dry powder? Thank you.

Speaker 5

Definitely, we're going to continue to Be aggressive with regarding to the stock buyback. And as you can see, we authorized the $50,000,000 So far we spent about 10,000,000 And we still have $40,000,000 being authorized, which we will do this aggressively during the open window.

Speaker 4

Great. Thank you.

Speaker 7

The next question comes from

Operator

the line of Matt Sykes from Goldman Sachs. Matt, please go ahead.

Speaker 9

Hi, good afternoon. Thanks for taking my questions. If I could just drill down a little bit on the comments you made regarding China. It's obviously well known, it's been a weak spot for many of the companies in the sector. Any additional color you can provide on what you're seeing in China?

Speaker 9

If there's any particular instrument category there that You're finding that weakness. Is it similar to the delays and push outs and lengthening of the sales cycles or something else going on in China relative to what you're seeing in the rest of the

Speaker 3

world? Yes.

Speaker 5

As you can see, we did very well in Q1 and Q2 in China. But Q3, I think, due to the anti corruption drive over there. Many tenders got delayed and some of those are continued to be delayed. We don't know it's going to come back in Q4 or until later quarter, actually maybe Q1 next year. This is something we are working on and definitely this is something not being expected when we got into the Q3.

Speaker 5

It's impacting how we perform over there.

Speaker 9

Got it. And just to follow-up on that, I'm not aware of any, but just any incremental color you're hearing on value based procurement and how that might affect flow cytometry. I know it's You do some clinical work there and so obviously concentrating on other assays, but any impact to your business that you might see from that dynamic?

Speaker 5

You mean clinical in China?

Speaker 9

Yes. Just the value based procurement programs that are rolling out, just any potential headwind you see from that at all? Or is it you feel like you'd be relatively unaffected?

Speaker 5

Yes. That's exactly what I mean with regarding to the delay in tendering process in China. With regarding to the clinical, as you know, we did very well previously With regarding to clinical instrument sales in China. But Q3 definitely is a quarter we got impacted over there.

Speaker 9

Got it. And then just last question for me. Just as you look at sort of The different instrument categories you have. I know you stopped reporting installed base in Q1. But just give us any sense for whether it's Aurora Northern Lights, Cell sorter, etcetera, where you're seeing relative pockets of strength or weaknesses and a differentiation and customers preference for price points or types of instruments In this sort of weaker macro environment?

Speaker 5

Although we don't really split the instrument types. But Overall, if we look at the distribution across different platform, we do see a slowdown in high cost items versus the lower priced tools. So that's just another indication of the macro environment high interest rate that is impacting how customer buying their tools.

Speaker 9

Got it. Okay. Thank you.

Speaker 7

The next question comes from

Operator

the line of Andrew Cooper of Raymond James. Andrew, please go ahead.

Speaker 6

Hey, thanks for the questions. Maybe first, like you pointed out, calling for a bit of a step up here into the Q4. We certainly have heard from some other tools players kind of a cautious tone on whether there's a budget flush. So just maybe your thoughts around how much budget freeze up in 4Q like we typically would see, versus maybe anything else going on there So lead to that step up.

Speaker 5

Indeed. Typically, Q4 is the best quarter for SciTech and if you look at past history, certainly it is related to those type of budget flush. And we continue to foresee the same thing that will happen, but At what magnitude? This is something a way to see, but Q4 definitely is going to be the best quarter just for Citec that we still have the kind of confidence.

Speaker 6

Okay. Thank you. And then Maybe just in terms of some of the customer conversations, I think it makes sense you're seeing the elongated sales cycles, you're seeing that push to maybe a little bit lower cost instruments. Have you seen many of those conversations that maybe get held up and the end result is you are able Close the sale, but it's the lower end as opposed to the high end instrument. Has that something has that been something that's occurred or Anything that's jumped out from those client conversations and client interactions that maybe mean we get a little bit more of that lower end versus A pure push out of those higher end purchases?

Speaker 5

Yes. Looking at the growth rate across low end and high end, I just mentioned about What we have seen, right? And we do see a higher growth for our lower end instrument, especially the northern lights versus the high end of the instrument.

Speaker 6

Okay. And maybe I'll just sneak in one more. Is there any additional color you can share On the reagent business and the kit business in terms of quantifying sort of the growth there and where that business sits today?

Speaker 3

Yes, I can take that. So the reagent segment is our 2nd fastest growing segment, still small. We're talking about mid to high single digit as a percent of total revenue, but the growth rates are compelling and we will continue to invest in that segment as we expect to continue to grow that segment substantially going into 2024. We like the recurring revenue coming out of it, added to the service business, which makes us So unique to the extent that we can continue to build the growth revenue range for the coming year.

Speaker 5

Yes. And to put it in perspective, the region growth rate is more than double of our average growth rate for the overall revenue.

Speaker 6

Great. I'll stop there. Thank you.

Speaker 7

One moment for the next question. The next question comes from

Operator

the line of Tejas Savant of Morgan Stanley. Tejas, please go ahead.

Speaker 10

Good evening, guys. This is Edmund. Thank you for the time. I just kind of want to start out with your EU trends and what you saw in 3Q. I think it was a bit soft in 2Q for biopharma and you guys were calling for a stronger second half.

Speaker 10

Did that play out to your expectations?

Speaker 3

Yes. I mean, we continue to see softness in that Biotech Pharma segment for sure. I mean, we obviously have a higher expectation for this segment. So overall, I think it's lower than what we would expect. And that's coupled with the academia that's also Not growing as much in the Q3 typically you would have expected that to happen.

Speaker 10

Got it. And then With the guava manufacturing now transferred to Wuxi, I'm not sure if you guys talked about this, but how should we think about the gross margin impacts in 4Q and looking into 24?

Speaker 3

Yes. And that's a good question. So we completed the transition in Q3. So for those who don't know, we have a platform was still manufactured with the diasering organization and we have to pay a premium for these instruments. So now these instruments now are fully being manufactured within the Citec environment and the expectation is that the gross profit margin for these instruments will go up gradually as we move forward.

Speaker 3

First of all, because we have a better manufacturing process for these instruments, but we're also looking at doing a cost down to improve the overall gross profit margin for those.

Speaker 10

Got it. Super helpful. And then, I was wondering if you guys could elaborate a little bit more about your recent And user meetings, how should we be thinking about the impact on OpEx heading to 2024?

Speaker 5

Yes. Citec review is for Cytec customers And existing and also the new customer side of the line. And so far, it's very well received And we are continuing with this process. I think Paul earlier mentioned and we welcome The investment community to join to be part of that and probably that's a good place or venue for you to See firsthand how Citec users feel about the technology we have provided.

Speaker 10

Got it. That sounds very interesting. Thank you for the time.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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