CYTEK BIOSCIENCES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

CTKB

Forward-Looking Statements

Overview

We expect our expenses will increase substantially in connection with our on-going activities, as we:

Key factors affecting our results of operations and future performance

We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risk and uncertainties, including those described under the heading "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.

Global customer adoption

Recurring revenues

Revenue mix and gross margin

Expansion into new markets

Key business metrics

Distributors typically sell to end customers identified in other customer categories.

Components of our results of operations

Total revenue, net

We currently generate our total revenue, net from product revenue and service revenue.

Service. Our service revenue primarily consists of post-warranty service contracts, installations and repairs which are recognized over time. Post-warranty service contracts are recognized ratably over the term of the contract and installations and repair services are recognized as they are delivered to the customer.

Total cost of sales, gross profit and gross margin

Our total cost of sales is comprised of product cost of sales and service cost of sales.

Product. Cost of sales associated with our products primarily consist of manufacturing-related costs incurred in the production process, inventory write-downs, warranty costs, third party royalty costs, personnel and related costs, costs of component materials, overhead, packaging and delivery and depreciation expense.

Service. Cost of sales associated with our services primarily consists of personnel and related costs, expenses related to product replacements, product updates and qualification validation of our products and depreciation expense.

We expect our total cost of sales to increase in absolute dollars in future periods, corresponding to our anticipated growth in revenue and employee headcount to support our manufacturing, operations, field service team and support organizations.

Operating expenses

Our operating expenses are primarily comprised of research and development, sales and marketing, and general and administrative expenses, depreciation and amortization, and related overhead.

Research and development. Our research and development expenses primarily consist of salaries, benefits, stock-based compensation costs for employees in our research and development department, independent contractor costs, laboratory supplies, equipment maintenance and materials expenses.

We expect these expenses to vary from period to period as a percentage of revenue.

Other income (expense), net

Other income (expense), net. Our other income (expense), net consists primarily of foreign exchange gains and losses.

Income taxes

Comparison of the three and six months ended June 30, 2021 and 2020

The results of operations presented below should be reviewed in conjunction with the unaudited interim consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

The following table sets forth our interim consolidated results of operations and comprehensive income data for the periods presented:

Total cost of sales, gross profit and gross margin

We expect our research and development expense to increase in absolute dollars as we continue to develop new products and enhance existing instruments and technologies.

We expect our sales and marketing expenses to increase in absolute dollars as we hire additional sales and marketing personnel, expand our sales support infrastructure and invest in our brand and product awareness to further penetrate the United States and the international markets.

Liquidity and capital resources

Overview

We currently anticipate making additional capital expenditures during the next 12 months, which is expected to primarily include equipment to be used for manufacturing and investment in research and development, as well as spend associated with the expansion of our facilities in Wuxi, China.

We have financed our operations primarily through sales of our securities. Through June 30, 2021, we raised a total of $201.0 million from the sale of redeemable convertible preferred stock and common stock. We have also benefited from operating cash flows from the sale of our products and services.

Cash flows

The following table summarizes our cash flows for the periods presented:

Net cash (used in) provided by:

283

Investing activities

Net cash used in investing activities during the six months ended June 30, 2020 was $870,000 primarily driven by an increase in purchases of property and equipment.

Financing activities

Net cash provided by financing activities during the six months ended June 30, 2020 was $4.1 million primarily driven by the cash received from the PPP loan.

Contractual Obligations and Commitments

Off-balance sheet arrangements

Critical accounting policies, significant judgments and use of estimates

Recently adopted accounting pronouncements

See Note 2 to our unaudited interim consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.

JOBS Act accounting election and smaller reporting company status

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