Bionano Genomics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Bionano develops and markets the Saphyr genome-analysis platform for detecting structural variation. The unaudited financial statements are prepared under U.S. GAAP.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $1.85 million | $1.77 million; up 4.8% |
| Gross profit and gross margin | $0.71 million; 38.1% | $0.93 million; 52.4% |
| Operating expenses | $6.89 million | $5.26 million; up 30.9% |
| Operating loss | $6.19 million | $4.34 million |
| Net loss | $7.85 million | $3.85 million |
| Operating cash flow | $(6.55) million | $(6.79) million |
| Cash and cash equivalents | $20.83 million at March 31 | $16.52 million at December 31, 2018 |
| Long-term debt, carrying value | $18.38 million | $9.03 million at December 31, 2018 |
Product revenue was $1.69 million, up 1.5%; other revenue was $0.17 million, up 55.4%. Gross margin is calculated from reported revenue and cost of revenue. Net loss per share was $0.77, versus $1.16 in Q1 2018; weighted-average shares increased to 10.21 million from 3.32 million.
Current assets were $28.01 million and current liabilities were $4.71 million at quarter-end. Equity was $5.87 million, compared with $10.14 million at year-end 2018. Cash rose by $4.31 million during the quarter, principally because financing inflows exceeded operating cash use: financing provided $10.86 million, including Innovatus debt proceeds and common-stock sales. There were no investing cash outflows in Q1 2019.
Material changes and unusual items
- Revenue growth was modest overall, with a pronounced geographic mix shift: EMEIA revenue rose to $0.92 million from $0.10 million, while North America declined to $0.84 million from $1.04 million and Asia Pacific declined to $0.10 million from $0.63 million. Management attributed the overall increase primarily to EMEIA, partly offset by lower Asia Pacific sales.
- Cost of revenue rose 36.3%, faster than revenue; management said instrument sales represented a larger share of product sales. SG&A increased 65.5% to $4.79 million, attributed to added employee compensation and public-company and operating professional fees. R&D fell 11.3% to $2.10 million, mainly due to lower materials and supplies costs.
- In March, the company refinanced MidCap debt with an Innovatus facility and repaid MidCap. The payoff generated a $0.92 million debt-extinguishment loss, including write-off of unamortized debt discounts; a $0.4 million prepayment fee was also incurred. Q1 other expense included $0.47 million.
- At March 31, Bionano had borrowed $20 million under Innovatus, with up to $5 million in additional term borrowing and a $5 million revolving line subject to conditions. The agreement is secured by substantially all assets, including intellectual property. The company elected to pay 7.25% cash interest and capitalize an additional 3.0% as PIK interest; the reported effective interest rate was 13.4%. The filing says the company was covenant-compliant at quarter-end.
- The company also sold shares to Aspire Capital and Innovatus-affiliated investors. Aspire may purchase up to a further $9 million of shares at the company’s request over 30 months, subject to conditions and market-based pricing. Common shares outstanding rose to 10,845,020 from 10,055,072 at year-end.
Outlook, risks, and contingencies
No quantified revenue, earnings, or margin guidance is provided. Management expects significant expenses and operating losses to continue, while anticipating higher revenue and gross margins over the next 12 months. Management stated that cash, commercial receipts, and financing proceeds were expected to fund anticipated operating requirements for at least 12 months. That assessment depends on assumptions about revenue growth, recurring consumables sales, margins, and expense growth; the filing cautions that actual cash needs may differ and additional financing may be required.
Key risks include continued operating losses and cash burn, product-market acceptance, execution of commercialization and distribution plans, competition and technological developments, potential dilution from further equity issuance, and debt service and restrictive covenants. The company reported no pending legal actions for which it was a defendant and no accrued litigation loss. It disclosed lease, royalty, and supplier purchase commitments. Management reported disclosure controls were effective at the reasonable-assurance level; it reported no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether installed-base and consumables growth can sustain revenue growth, particularly given the substantial regional revenue declines and changing geographic mix.
- Whether gross margins recover from 38.1% as product mix and manufacturing costs evolve.
- Cash runway and operating burn against management’s 12-month sufficiency assertion, including actual use and availability of Aspire proceeds.
- Innovatus facility funding conditions, PIK accrual, final payment and prepayment terms, collateral scope, and covenant compliance.
- Potential dilution from Aspire share purchases, warrants, options, and other reserved equity; confirm subsequent share count and financing activity.
- Whether the Q1 debt-extinguishment charges are nonrecurring and how ongoing financing costs affect future losses and cash flows.