BV Financial Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 9, 2023

There are 9 speakers on the call.

Operator

Afternoon and thank you for standing by. Welcome to the Citec Biosciences First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer To withdraw your questions, simply press star 11 again. As a reminder, today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Paul Goodson, Head of Investor Relations. Paul, please go ahead.

Speaker 1

Thank you, operator. Earlier today, Citec Biosciences Release financial results for the quarter ended March 31, 2023. If you haven't received this news release or if you'd like to be added Joining me today from Cytec are Wenbin Zhang, CEO and Patrick Jameneau, CFO. Before we begin, I'd like to remind you that management 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. These statements are based on the company's current expectations and inherently involve Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements, in the press release Citec issued today and in CITEC's filings with the SEC.

Speaker 1

This call will also include a discussion of certain financial measures that are not calculated in With generally accepted accounting principles, reconciliations to the most directly comparable GAAP financial measure may be found in today's earnings release submitted to the SEC. Except as required by law, Cy iTech 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 May 9, 2023. With that, I would like to turn the call over to Wen Bin.

Speaker 2

Thanks, Paul, and welcome everyone joining our Q1 earnings conference call. On the call today, I will discuss our progress during the Q1, including some of the headwinds impacting our top line results 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 financial results and an update on our outlook for 2023 before we open it up for Q and A. Starting with our Q1 results. We achieved $37,100,000 of total revenue, representing growth of 6% year over year.

Speaker 2

This included approximately $3,400,000 of revenue from the product lines acquired from Lumenex. Excluding acquisition related revenue, our organic revenue accounted for 33,700,000 While we saw strong growth in Europe and APAC with notable growth in China, We faced increasing pressures with our biotech and the pharma customer base in the U. S. Throughout the quarter, particularly at the end of the quarter. Among the factors affecting demand in the quarter were a marked Slowdown in biotech funding, reduced spending among biotech and the pharma companies, a decline in COVID demand and the macroeconomic uncertainties resulting in longer sales cycles and delayed orders.

Speaker 2

Patrick will provide more detail on our financial results shortly. Based on our Q1 results, As well as these headwinds, we now expect full year revenue in the range of 2 0 $5,000,000 to $220,000,000 representing growth of 25% to 34% over the prior year. While our top line growth this year will be slower than our previous expectations, We firmly believe the underlying demand for our full spectrum profiling or FSP platform remains strong. We remain committed to driving growth and diversifying our revenue streams to continue our strong overall performance. We are taking proactive measures in this transition year to optimize our business operations in 2023 As we integrate the newly acquired business from Luminex with ongoing efforts to further our overall strategy.

Speaker 2

At Scitech, we take pride in our distinctive position in the industry as we offer customers a comprehensive end to end solution that includes instruments, regions, software and application offerings. Our recent acquisition and the partnerships have further strengthened our portfolio, allowing us to further stand apart in the field. Our comprehensive suite of products and services has continued to advance adoption of CICE's full spectrum profiling platform as the method of choice for cell analysis. Our core suite of instruments continues to see solid demand, in part because there is a large market of conventional flow cytometers waiting to be converted to our FSP technology. Whether it's ultra high sensitivity needed To resolve more challenging cell populations or easy of use intuitive workflow desired for more routine analysis, Citec's portfolio is uniquely positioned to meet the needs of all cell analysis regardless of assay complexity.

Speaker 2

In addition, our expanding portfolio of panels optimized for use on our instruments We'll continue to advance FFP's adoption and our recent acquisition of the flow cytometry and imaging business For Luminess, we'll open new markets and applications. As I have discussed before, We operate our business according to 4 key pillars, each of which is integral to our long term growth. These fellows, which are instruments, applications, bioinformatics and the clinical, lay out our roadmap for operating our business now and in the future with intentional and purposeful execution. Despite the challenges we faced in the Q1, I remain confident that our daily work Allant under these four pillars excludes our overall strategy and will produce excellent growth over the longer term. Starting with instruments.

Speaker 2

During this quarter, we placed 96 Scitech instruments. Altogether, Sciences' installed base has now reached 1766 instruments as of the Q1 of 2023. These placements reflect our core strategy to achieve Growth across the range of applications and the users from entry level to high dimensional cell analysis applications. This number does not include the installed instruments of AMNEX and the guava product lines we acquired from Luminex, which adds an installed base of more than 7,000 instruments across more than 1500 customers in over 70 countries. Over the longer term, we believe this in solar base will eventually benefit from replacement and upgrades into our Northern Lights and Aurora platforms.

Speaker 2

We also believe This expanded installed base will provide Citib with a receptive market for new instruments We intend to launch in future years that are based on Citec's advanced technologies, augmented by the powerful technologies we have acquired from Luminex. The applications area includes our diligence and the kits. Here, we are actually collaborating with our partners to expand our regions portfolio and develop application specific kits, and we are making progress in both areas. Revenue from reagents and kits continues to be our fastest product growth area, highlighting the increasing demand for our offerings, which are focused on making the scientists and the clinicians' job easier, faster and more accurate. We are strategically investing in opportunities to grow, As exemplified by our strategic partnership with Bio Rad Laboratories to expand our religion portfolios and enhanced high parameter panels on our cell analysis systems.

Speaker 2

The addition of Bio Rad's Starboard Eyes to our FSP platform, which we announced during the Q1, provides a major advantage for researchers conducting multi parameter experiments and we are excited about with ongoing partnership. We also recently launched our 20 color acute myeloid leukemia AML panel, An effective and sensitive flow cytometric approach for identifying and categorizing normal and valent cells, Immunophenotyping and evaluating multiple disease or MRD in AML samples. This new panel unleashed the power of our SSP technology and the years built on the company's extensive experience, Pioneering and revolutionizing full spectral flow cytometry to offer a more comprehensive Historically, on conventional flow cytometers, markers used for assessing AML are typically split into multiple tubes due to the limitation of detection channels, forcing The use of redundant markers and the greater sample volume. Our single tube 20 chlorofenor AML Increases sensitivity, while ending this wasteful practice, enhancing laboratory operational efficiency by saving time and the labor for sample acquisition and the preparation, as well as preserving precious samples and eliminating the use of redundant solutions. By providing total solutions for specific application areas such as MRD, We are giving researchers and scientists new leverage to jumpstart their discoveries and advance The development of life saving therapies.

Speaker 2

Bioinformatics is our 3rd strategic area. A key part of our bioinformatics strategy is enabling our customers to streamline their experiment workflow. Our Sysiter Cloud product allows customers to design panels faster with a suite of full spectrum panel design tools and the ability to share panels with other Sysir customers. In addition, customers can convert The panels into experimental templates that can be used on any site of instrument with Special Flow Software. We believe providing these benefits to our users increases the attractiveness of our cell analysis solutions, drives demand and creates loyalty among our users.

Speaker 2

Our Cytokloud product launched Late last year was very rapidly adopted by many of our customers and continues to receive growing customer interest. Turning now to clinical opportunities. Several of our products are approved for clinical use in both China and the European Union, where our most common sale for clinical applications is the Northern Lights CLC System accompanied by our C4 reagents. As a reminder, we plan to submit our products for FDA clearance in the U. S, where we believe our powerful FSP platform, If approved, we'll bring enhanced diagnostic power and the visibility to the benefit of patients by giving doctors a clearer and a more detailed view of each patient's condition.

Speaker 2

As in China and the EU, We believe the U. S. Clinical market also represents an attractive long term business opportunity for CITEC. Globally, our approach to the clinical and the laboratory developed test or LDT market is being driven by customer recognition that our technology enables clinical labs to efficiently perform high level multi parameter immuno phenotyping on small amounts of patient samples to identify new cell subtypes and the disease pathways. This approach provides doctors with more refined and detailed insights into their patients' conditions.

Speaker 2

And Because clinical samples are often difficult to obtain and limited in amount, the ability of our system To complete results with only one sample processed in a single tube is important to patients, Doctors and the subsidiaries alike, in a very concrete way, our plan to Have our technology adopted in the clinical market is expected to mirror the success we had beginning 6 years ago when we revolutionized the research market with full spectrum technology. Our full spectrum technology was rapidly recognized as the gold standard for research use, and we plan to establish it as the standard bearer for clinical applications in the future. As these benefits become better known in the clinical communities in China and Europe, we believe our platform will have If the comments of 1 of our European clinical customers are any indication of our success in this area, we are making great progress here. They said we can better define normal by being able to use more markers in a single tube, maintaining full correlation between all markets. Beyond instruments, our kits and the regions are also gaining importance in clinical applications.

Speaker 2

The 20 color panel for AML, I mentioned a few minutes ago, It's a powerful new product for supporting diagnostic studies, clinical evaluations and the patient stratification, In addition to being used as a research tool for the development of new drugs, and we expect it will have strong uptake. All of us at Scitech are gratified that we are making such important contributions to the practice of critical research and medicine. This is part of our mission that drives us to manufacture high performing products and develop new technologies that will enhance the lives of the patients and doctors who depend on our contributions. Regarding peer reviewed publications that include our technology, we are pleased to report That's during this quarter alone, there were 145 peer reviewed publications mentioning Scitech, bringing the all time number of publications to 1152. This remarkable achievement speaks to the momentum of our platform and validates the importance of our offerings to the scientific community.

Speaker 2

We remain committed to advancing scientific research with our innovative products. As an example of how significant some of these research efforts are, in one paper published in Nature, Researchers at the Sloan Kettering Cancer Institute identified a therapeutic strategy for stopping metastatic cancer relapse. In the 2nd nature publication published To Longevity, scientists discovered conditions in which T cell reputation does not stop after a fixed number of divisions, suggesting a research direction for extending human lifespan. Another paper was recently accepted into the clinical section of the journal Cytometry, which used a 3 laser FFP instrument running a 31 color panel and reinforces What we have been reporting to you about the importance of full spectrum profiling in immunology and the running samples in only 1 tube. The abstract of this paper states, immune monitoring of patients on a single cell level is becoming increasingly important in various diseases.

Speaker 2

Due to the often very limited availability of human specimens and our increased understanding of the immune system. There is an increasing demand to Analyze as many markers as possible simultaneously in one panel. Full spectrocytometry is emerging as a powerful tool for immune monitoring. Finally, I would like to spend a moment to discuss our progress With the integration of Luminess Flow Cytometry and Imaging business, as we have shared, The Luminess Photocytometry and Imaging business provides important contributions to our technological abilities, Product range, customer base and the commercial reach. Although we are now only a little more than 2 months into the integration process And still have some key steps ahead of us, we have completed several important milestones already.

Speaker 2

From a commercial perspective, we have cross trained all of our commercial personnel on the technologies new to them. That is the Amnex and AguaBar products to Cytec employees and the Cytec products for our new team members from Luminex. These programs include all sales, technical application specialists and service personnel and provided lessons on each other's marketing programs, product demonstrations, customer training and other areas. In addition to cross training, we launched a cross selling plan targeted at CICEK FSP, ARMYK and Agwaba products. The integration of our service teams will take a bit longer due to the technical training required, but we have established a target date in the Q3 for the completion of that integration.

Speaker 2

From an operations perspective, we are making good progress on business system integration, manufacturing transition and the product harmonization. Over the medium term, we have set 3 milestones regarding the acquisition. The first milestone is focused on accelerating sales of OmniNex products with growth of approaching Cytec's corporate average sales growth rate by penetrating Omnix into the existing customer base. This includes targeting half of the 1,000 Aurora customers to purchase at least 1 AMNex unit over the next 3 to 5 years, potentially generating approximately $200,000,000 in additional revenue. The second milestone is evaluating Guava's cost structure within the next 6 months to determine future product development trends.

Speaker 2

Wabash microcapability technology is an attractive asset and its potential integration with the Northern Lights platform could provide access to a new untapped customer base. Lastly, Sisense aims to convert existing 3 laser guava users to the Northern Lights platform as part of the strategic integration goals for KONEYC. We look forward to updating you on our progress. While we expect modest revenue contributions from the acquisition this year, as a reminder, we think that The real value of this acquisition will be realized in the longer term in 3 primary areas. Most importantly, there are a number of new products we will introduce that represent a combination of the technologies available on each platform.

Speaker 2

Next, there are significant cross selling opportunities we will leverage with the integrated sales teams. And finally, we expect a significant improvement in the efficiency and the gross margin of our service organization with the addition of our new highly trained and experienced team members from Luminess. In all, Once again, I'm pleased with the progress our team has made this quarter as we navigated some challenges on the macro front. We remain focused on providing a complete cell analysis solution to our customers. We look forward to continuing to provide our novel SSP platform, complemented by Luminess products and the technologies to these customers as they push the bounds of scientific discovery and the clinical progress.

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 Q1 of 2023 was $37,100,000 a 6% increase over the Q1 of 2022. As Wendin mentioned, This included approximately $3,400,000 of revenue from the products and services acquired from Luminex Corporation. As a reminder, the agreement closed on February 28, meaning that we recognized 4 weeks of revenue from these product lines in the Q1. Organic revenue excluding the acquired products and services was $33,700,000 a decline of 4% compared to the same period of 2022.

Speaker 3

Keep in mind that our 2022 revenue was particularly strong, posting 44% growth over the prior year and setting a high bar to achieve growth this year. Our organic revenue was impacted by a few key factors. This slowdown was driven by longer sales cycle and delayed ordering from our biotech and pharma customers, which we believe was due to increased conservatism arising from macro uncertainties in the funding environment, a decline in bioprocessing activity, higher interest rates and other factors. The slowdown in the U. S.

Speaker 3

Was offset partially by better performance in all of our markets outside the U. S. A number of our ex U. S. Markets grew in the high double digit with China growing in the triple digit as a percentage of revenue.

Speaker 3

We are pleased with the significant improvement in gross margin in our service business And revenue from our academic customers grew in line with our expectation during the quarter. On a constant currency basis for the quarter, revenue was $38,100,000 an increase of 9% over the Q1 of 2022. Gross profit was $21,000,000 for the Q1 of 2023, an increase of 4% compared to a gross profit of $20,200,000 in the Q1 of 2022. Gross profit margin was 57% in the Q1 of 2023 compared to 58% in the Q1 of 2022. Adjusted gross profit margin in the Q1 of 2023 was 59% compared to 60% in the first Quarter of 2022 after adjusting for stock based compensation expense and amortization of acquisition related intangibles.

Speaker 3

Operating expenses were $33,200,000 for the Q1 of 2023, a 47% increased from $22,500,000 in the Q1 of 2022. The increase was primarily due to Expenses to support continued growth of the business, including further investment in R and D, sales and marketing and G and A With increases in headcount and personnel related expenses, costs related to the acquisition and infrastructure services to support the growth of our overall operations. Research and development expenses were $10,000,000 for the 3 months ended March 31, 2023, as compared to $8,000,000 for the 3 months ended March 31, 2022. Sales and marketing expenses were $11,100,000 for the 3 months ended March 31, 2023, as compared to $7,000,000 for the 3 months ended March 31, 2022. General and administrative expenses were 12 for the 3 months ended March 31, 2022.

Speaker 3

Loss from operation was $12,200,000 this quarter compared to a loss from operations of $2,400,000 for the Q1 of 2022. Net loss in the Q1 of 2023 was $6,800,000 compared to a loss of $2,200,000 in the Q1 of 2022. Additionally, adjusted EBITDA in the Q1 of 2023 was negative $2,500,000 compared to positive 1,900,000 dollars in the Q1 of 2022 after adjusting for stock based compensation expense. Cash, cash equivalents and short term investments were $299,000,000 as of March 31, 2023. Now turning to our guidance for 2023.

Speaker 3

As Wenbin shared, our expectation for the full year 2023 revenues now fall into a range of 205 to $220,000,000 representing overall growth of 25% to 34% over full year 2022. This is comprised of revenue from our organic business in the range of $180,000,000 to $190,000,000 representing growth of approximately 10% to 16% over the full year 2022 revenue and a total of $25,000,000 to $30,000,000 of revenue contribution in 2023 from the business acquired from Luminex. This assumes no changes in the rate of foreign exchange as well as there are some continued delays in order due Longer sales cycle from biotech and pharma customers in the U. S. As Wendell mentioned.

Speaker 3

While our typical seasonal pattern is for revenue to be skewed towards the back half of the year, in 2023, We are expecting that pattern to be even more strongly apparent due to the effects of integrating Amnys and guava as well as macro factors affecting the U. S. Economy. With that, I will turn it back over to Wendin.

Speaker 4

Thanks, Patrick. As always, I want to start by thanking our team at Scitech for their dedication and drive as we execute on our mission to deliver our complete cell analysis solutions to a broad range of customers. It is their excellence, Hard work and the shared belief in our important mission that drives our progress. Scitech is in a fortunate position with many opportunities. We are in a strong position financially, Continue to see solid demand and are committed to remaining profitable on an annual EBITDA and a net income basis, as well as achieving our long term growth targets and objectives.

Speaker 4

In addition, Our solid balance sheet underpins the strength of our company and provides important strategic flexibility to take advantage of opportunities as they may arise. We have significant opportunities ahead to convert the large existing base of conventional flow cytometers to full spectrum to expand our products Into clinical use in the U. S. To accelerate the growth of our still new sales order, to create new products from our recent combination with Amnes and Barba, to drive sales through an expanded customer base, and to make our overall company more efficient and profitable as we scale in size and the product offerings. We believe Cytec is particularly well positioned to address these opportunities, Given the power of our advanced technologies, the strength of our capital base, the growing awareness of Citek among customers in the I want to thank everyone for joining today's call, and we will now open it up for questions.

Speaker 4

Operator?

Operator

Thank you, Doctor. Zhang. Yes, at this time, we'll conduct a question and answer session. Please standby while we compile the Q and A roster. And our first question comes from David Westenberg with Piper Sandler.

Operator

David, your line is open. Please go ahead.

Speaker 5

Hi. Thank you very much for taking the questions. And I'm going to squeeze in a few here I think a lot of people are on a lot of difficult calls tonight. So anyway, can I just maybe ask about the placement numbers here? Your placement numbers missed me by more than the implied revenue beat.

Speaker 5

Are you at least getting maybe traction And with the Aurora placements and can we make any kind of inference in terms of like what the potential for selling more Reagent to that customer in 2023 2024 and beyond and I have a few more here.

Speaker 3

So maybe I can take the first question, Dave. Thanks for asking. So looking at the instruments Placement, so we sold 96 last quarter, last year was about 116. So we are down on almost All the categories, but at the same time we've seen to your point an uptick in an increase in reagent revenue. So The increase in revenue coming from reagent is actually very positive.

Speaker 5

Okay. Let me ask a few more here. Can you talk about maybe the penetration rate of full spectral Flow cytometers here. I mean, I think there as you've noted, there is a slowdown in placements. I mean, I still think that you have The best in class technology here, but maybe are we getting in your opinion maybe a little bit more mature market?

Speaker 5

Are we hitting an air Pocket in terms or is this more of an air pocket in terms of market conditions? And I'll ask a couple more.

Speaker 4

I think we can take a look at the split of our customer base that include academia and Pharma Biotech, also international. I think as indicated, our international sales have been Very well and especially China and actually the market is leaning more towards our high end of the Aurora and the sales orders. The U. S, our academia is as expected doing okay and I think it Meet our expectation for this way. It's the pharma biotech that's below our expectation, But it doesn't mean that business is lost.

Speaker 4

It just takes longer time for them to come back to place orders. They become more conservative. And Cytec, because of our business, right, they are heavily leaned toward More actually kind of 3rd month kind of behavior for each quarter. This quarter particularly is because of the Situation we all know about and so really the 3rd month has failed to meet our expectation with those Commercial customers on the pharma and biotech as they become more conservative. So that's basically what's happening right now.

Speaker 5

Got it. Maybe I don't know if you'd like to dwell into that because I don't think that the entire concept that biotech, small biotech, Danaher Said it on their call that they're rationalizing spending. We all know that they can't get kind of the funding that they want here on from closed capital structure Capital Markets environment, sorry, it takes a while to get me to figure that out. But I think U. S.

Speaker 5

Pharma based customers is what is that, maybe a quarter of the customers. Is there any chance that maybe some of the other customers as we go into further into Can kind of make up for some of that slack here. I mean academic is not necessarily as dependent on these cycles. As we see the back half of the year, is there upside for maybe they don't need to cut out that spending considering biotech, Still needs to spend on their R and D projects for later stage programs. Any color there would be helpful.

Speaker 5

No,

Speaker 4

exactly as what you have indicated. And it just takes longer for them to come back with order, not necessarily means They will never come back and indeed we have seen this already and as we get into the Q2. So That's basically what we'll put it over there like this.

Speaker 5

Okay. Actually, I'll hop off right now and then I'll hop back in and ask a few more. Thank you.

Operator

Stand by for our next caller. And our next question comes from Taeos Sibbaeint from Morgan Stanley. Tijos, your line is open. Please go ahead.

Speaker 6

Hey guys, this is Edmund on for Tijos. Thank you for taking my questions. I just wanted to dig a little deeper in what you were seeing in terms of the pharma biotech headwinds in the U. S. In the quarter.

Speaker 6

Is there any sort of bifurcation Some of the SMID cap biopharmas here versus some of your larger biopharma and pharma companies. And Are your expectations for I know you're saying that the orders are going to take a little longer, but are they going to be will this trend be normalized by the year And or is this something that may lead a little longer into 2024?

Speaker 4

Indeed, actually there are some difference In the large pharma and the small pharma biotech, based on the data we have analyzed, In fact, a small biotech has a kind of steady coming down over the last few quarters, but the big pharma actually has a sudden rapid effect, which is impacting what we are seeing right now. But on the other hand, and we don't think the business is a loss. They will still come back once the situation stabilizes, as I said mentioned earlier. And we are already seeing this Trend right now, but it's going to take a longer time to close this year than what we normally see.

Speaker 6

Got it. And then Patrick, I think you mentioned a steeper second half SKU. I was wondering if you could put that into That's relative to your prior expectations, I believe is about $4,000,000 $5,000,000 for the year?

Speaker 3

Yes. So With that statement, I think we're going to be closer to a forty-sixty, 61, forty-sixty. So, obviously, more skewed towards the second half As to your point as the trend normalize, assuming also the economy doesn't Fall apart, I think that's the expectation at this point, yes.

Speaker 6

Got it, great. And then Just touching real quick on your bill and hold arrangements and the trends that you can see, are the levels still elevated in this quarter or Hasn't normalized to more normalized levels. Can you comment on the level of bill and hold?

Speaker 3

Yes. We still have, as I mentioned last year, We'll continue to have some bill and hold. I think this is a part of the business process. The expectation is that maybe going forward, it'll Come down a little bit, but it still is present in Q1 of this year.

Speaker 6

Roughly what percent of the revenue?

Speaker 3

We have about a little less than $6,000,000 in bill and hold over the revenue number.

Speaker 6

Got it. And then turning to your FCI acquisition and the Amnis platform, I was just wondering what are some of the strategies you have in place to drive this conversion and what has the initial feedback And then looking more specifically, I'm trying to understand how the 2 platforms will work together in a research workflow. Is the idea here researchers can Leverage the FFP platform to quickly narrow it down to a smaller subset of cell populations of And then perform downstream analyses on the ANS with imaging capabilities?

Speaker 4

Yes. And in fact, I think the overlap Lab here is more related to the pharma core lab when they early during the early discovery stage And the imaging provides some additional information with regarding to the sales and also the inside the sale to sale interaction Inside the sales, those are the actual information, which typically phenotyping won't be able to provide. This is where we see opportunities since especially with regarding to our 5 laser Aurora customers and mostly heavily clustered towards that type of applications and we feel the Omnix will add on top of What we have provided to help our customers, our researchers to understand and more of the Discoveries are engaging with.

Speaker 6

Got it. Thank you.

Operator

Standby for our next question. And our next question comes from Matt Sykes at Goldman Sachs. Matt, your line is open. Please go ahead.

Speaker 7

Hi. This is Evie Kozlowski on for Matt. Thanks for taking my questions. Just wanted to ask what's baked into your guide in the base business for the rest of the year in terms of biotech funding and instrument demand? And like more specifically, how much of the back half recovery is from synergies with the acquisition versus a macro recovery?

Speaker 3

Yes. So the back half, obviously, the most of the recovery is going to be I mean, actually it's going to be 2 fold. It's going to be along with the added guava and amnies products. It's going to be Also much stronger activity on the academic side and obviously also the expectation that the biotech pharma Comes back or the trend improves in the next coming months. And we've already seen some early signals for that.

Speaker 3

So we're hopeful that The second half of this year will actually provide us with the increased revenue that we expect.

Speaker 4

Yes. Just to add on top of that, right now our sales funnel is still very, very strong, very powerful. We feel It might take longer time to close, but eventually it will come.

Speaker 7

Okay, great. Yes, that's really helpful. And then You kind of touched on it, but what does your instrument backlog look like, with other names in our coverage citing less visibility in recent quarters? What kind of visibility do you have on new orders for the rest of the year?

Speaker 3

So we don't really break out backlog information, although As Wenbin just mentioned, we have a funnel, which is the open order level activity and we track that funnel on a Daily, weekly basis and our funnel is up compared to last year. So we have a fairly good understanding of what's coming ahead of us. Yet we have less we don't understand if what we don't know is how fast Customer will turn an order into a PO.

Speaker 7

Okay, great. Thank you. That's it for me.

Operator

Thank you very much and stand by. Our next question comes from Stephen Ma with TD Cowen. Steven, your line is open. Please go ahead.

Speaker 8

Great. Thanks for taking the questions. A lot of ground already covered, so I'll just have a few Different questions. So on the Luminex revenue, it looks like you raised the guide from used to be $20,000,000 I think for 2023 to $25,000,000 to $30,000,000 So were you seeing similar macro headwinds on the Amnis Flow cytometer platform, I'm just trying to square away the difference between lowering your organic guide and then raising the Luminex guide.

Speaker 4

Yes. And put this way, and during the last two months as we continue on with this integration, We start to understand more of the LUNDIMMIS products. When we first provided our early guidance, we We're kind of optimistic with regarding to converting Guava customers into our Northern Light platform. But now we realize, BABA has some special features, which It's going to take longer time for Northern Lights to implement. That means that part of the business is not going to convert that quickly.

Speaker 4

It will happen, but it's going to take a longer time. Because of this, we have lowered the organic part of the business forecast. But in the meantime, We have kept a certain business with Luminex which we originally intended to terminate and now we are going to continue. That was part of the reason why the Luminex business forecast has gone up.

Speaker 8

Okay. That makes sense. And when do you think the integration and tech transfer will be completed for the guava microfluidics to Northern Lights?

Speaker 4

I think basically we are right now going to spend the next 6 months To really understand more of the guava, understand the features, which understand their customer needs For those, WAVA then make a decision how we are going to adapt or adopt certain other features and Integrate those type of features into Northern Lights, so we can support the Wabaa customers with the Northern Lights platform.

Speaker 8

Okay, great. Thanks for the color. And then moving on to your Bio Rad partnership using their STARBrite dyes, Do you have any timing on when that product is going to launch? And if you're able to disclose, how does the revenue share work With bahrad or are you just using the bahrad reagents as sort of like an OEM type of arrangement?

Speaker 4

The process here is we qualify and then integrate that bioli dyes into Citec's Portfolio, in fact, they are going to be sold as Citec seafloor reagents. So in that process, There are certain work that need to be done internally from our operation side, But it's happening, but we should start to see the outcome results during the second half of the year.

Speaker 8

Okay, got it. And I'll sneak in the last one for Patrick. I know Patrick you had a lot of questions on the U. S. And pharma and biotech softness and You mentioned the heavy back end cadence, but you did mention that there was a couple of points or Trends that you're already seeing, I'm just wondering if you could provide us with any colors on some of these things, which are giving you confidence on a strong back half of 2023.

Speaker 8

Thank you.

Speaker 3

Yes. So the couple of trends that we're seeing is, first, the funnel activity remains Fairly strong, so we're very pleased with that across all the regions, most notably in the U. S. So that's very positive. So that's a key element and that's going to support the second half.

Speaker 5

Okay. Thank you.

Operator

And standby for our last question. And that comes from David Westenberg again from Piper Sandler. David, your line is open.

Speaker 5

Hi. Thank you for taking the follow-up. I just want to confirm in terms of competitors in There's really not still any formidable competitors. I just want to confirm that. And then are you seeing anything in terms of patents or announced products that you would consider a little bit more of a threat?

Speaker 5

That's the question.

Speaker 4

And first is, I think as we all know, a full spectral profiling technology has already become the gold standard of the industry. And we all believe I think Nobody is questioning that the future is not going to be special based for cytometry. Cytec is the leader In this technology and I'm sure today many other companies are working towards this and Very likely they are going to have products coming along. But in the meantime, Cytec as a leader we are continuing to invest to make sure we stay ahead, keep our leadership positions. So we are very comfortable.

Speaker 4

We are very Confident and that we will continue to be the leader and for the years to come.

Speaker 5

Got you. Okay. And then kind of a follow-up to my previous question here. And just I know you don't give long term growth guidance This goes back to whether or not this is an air pocket or if you see maybe you hit some certain sort of penetration rate in the flow cytometer market. But As we look at 2024, 2025, 2026, I'm guessing this is Definitely a double digit grower, but I mean any thoughts in terms of growth rates In out years compared to what we've seen guidance this year organically and what we've seen historically.

Speaker 5

Are we still that 30% grower?

Speaker 4

Put it this way, okay, as The company continues as our base starts to become larger and it's going percentage wide It may be smaller, but the absolute number is going to be still very impressive, right? So the 30% of Last year is not going to be the 30% this year. It will be very different from the next few years. So but on the other hand, we feel And as a growth company, we will be very comfortable to stay ahead, continue to keep 15%, 20% is the kind of growth range. We don't feel any problem.

Speaker 4

But on the other hand, of course, 30% is always something we are trying to achieve. But as your base becomes so large, right, you have to be realistic.

Speaker 5

Really appreciate all the thoughts. Thank you.

Operator

And that does conclude our Q and A. Thank you for your participation in today's conference. It concludes the program and you may now disconnect.

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Earnings Conference Call
BV Financial Q1 2023
00:00 / 00:00