Standard BioTools Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 14, 2023. This is an annual report, not a standalone fourth-quarter report. The company, formerly Fluidigm Corporation, changed its name and Nasdaq ticker to Standard BioTools Inc. and LAB in April 2022.
Business context
Standard BioTools develops and sells life-science research tools based on mass cytometry and microfluidics technologies. Its two reportable segments are Proteomics and Genomics. Products include analytical and preparatory instruments, consumables, software, and services for protein and gene analysis. Products are generally sold for research use only.
Financial highlights
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $97.9 million | $130.6 million |
| Product revenue | $72.5 million | $100.4 million |
| Service revenue | $23.7 million | $25.9 million |
| Product and service gross margin | 36.7% | 51.5% |
| Operating loss | $116.2 million | $67.5 million |
| Net loss | $190.1 million | $59.2 million |
| Net cash used in operating activities | $89.4 million | $44.1 million |
- Revenue fell 25%. Instrument revenue declined 40%, consumables 19%, and service revenue 9%. Proteomics and Genomics product and service revenue each declined 24%.
- Product and service gross profit was $35.3 million, down 46%. Margin pressure reflected higher excess and obsolete inventory provisions ($7.9 million versus $2.3 million), lower revenue against fixed costs, unfavorable product mix, and higher service costs.
- Operating expenses were $153.3 million, up 12%. The company recorded $29.8 million of costs and items associated with financing and business improvement actions that increased operating loss, including product rationalization, restructuring, retention, and advisory costs.
- Net loss included $60.1 million of non-operating loss on the Series B preferred-stock forward sale and $13.7 million of bridge-loan fair-value loss. These were principally fair-value accounting effects tied to the share price and financing terms.
- Cash and cash equivalents were $81.3 million and short-term investments were $84.5 million at year-end, totaling $165.8 million. Working capital, excluding deferred revenue, deferred grant income, and restricted cash, was $179.8 million.
- Cash flow from investing activities was negative $88.1 million, mainly reflecting purchases of short-term securities, partly offset by maturities. Financing activities provided $230.8 million, including $225 million from preferred-stock issuance and $25 million of bridge loans; the bridge loans converted into preferred stock at closing.
- Year-end debt carrying value was approximately $64.9 million: $55.6 million of convertible notes and $10.3 million of term-loan carrying value. The $55 million 2019 Notes mature December 2024; term-loan principal repayments begin August 2023. The company had no revolving-facility borrowings at year-end.
Material changes and management actions
- Revenue declined across geographies; Americas revenue fell 31%, EMEA 22%, and Asia-Pacific 13%. A stronger U.S. dollar reduced total revenue by approximately $3.6 million.
- The company received $250 million in gross proceeds from the April 2022 private placement and bridge loans, appointed Michael Egholm CEO, and adopted priorities of revenue growth, operating discipline, and strategic capital allocation.
- A restructuring plan reduced headcount by 15%, narrowed the Microfluidics business, and discontinued Laser Capture Microdissection, Flow Conductor, and COVID-19 products. Management reported approximately $5.5 million of operating-expense reductions realized in 2022. It expects restructuring actions to finish by the end of 2023 and estimated up to $4.0 million of additional 2023 charges.
- The company launched the Hyperion+ Imaging System and X9 Real-Time PCR System. One Genomics customer accounted for 11% of FY2022 revenue; customers outside the United States accounted for approximately 58%.
Outlook, risks, and unusual items
- No specific revenue or earnings guidance is provided in the filing. Management stated that available liquidity was expected to support operations and debt maturities for at least 12 months from the filing date, while also warning that continuing losses and negative operating cash flow could require additional financing.
- On March 10, 2023, Silicon Valley Bank was closed and placed into receivership; the company said it no longer expected to be able to draw on its revolving credit facility. The facility had $9.2 million of availability at December 31, 2022.
- Key risks include sustained losses and cash burn, customer research-budget variability, competition and product adoption, dependence on limited or sole-source suppliers, international exposure and currency effects, and execution of restructuring and the planned ERP implementation.
- Series B preferred stock was recorded as mezzanine equity at $311.3 million. It has senior dividend and liquidation rights, conversion and change-of-control provisions, and governance rights. It was initially convertible into approximately 75.2 million common shares, about 48.6% of year-end common shares on an as-converted basis, before applicable conversion limitations.
- Purchase commitments totaled $13.5 million; future operating lease obligations totaled $37.8 million. A securities class action was dismissed by the appellate court in February 2023. Management said other pending matters were not expected to have a material adverse effect.
- PwC issued an unqualified opinion on the financial statements and concluded that internal control over financial reporting was effective as of year-end. The audit identified valuation and classification of Series B preferred stock as a critical audit matter.
Important facts for investors to verify
- Whether revenue stabilizes and new products and OEM activity offset lower instrument sales and discontinued product revenue.
- Whether gross margins recover as inventory provisions, product mix, and manufacturing utilization change.
- Actual operating cash burn and liquidity runway, including the loss of expected access to the SVB revolver and upcoming debt payments.
- The economic and dilution effects of Series B conversion, liquidation, change-of-control, voting, and board-designation rights.
- Restructuring savings versus remaining charges, and progress on the ERP implementation and planned business-development activity.
- Exposure to the 11% revenue customer, international markets, and critical sole- or limited-source suppliers.