Fluidigm Corporation (now Standard BioTools Inc.) — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. The filing is by Fluidigm Corporation; the company name in the request reflects its later name, Standard BioTools Inc. Dollar amounts below are in millions unless noted.
Business context and reporting period
Fluidigm develops and sells life-sciences research instruments, consumables and services, including mass cytometry and microfluidics products. It reported amid the COVID-19 pandemic, which management said reduced customer research activity and demand. The company completed its acquisition of InstruNor AS in January 2020 to expand into automated sample preparation for cytometry analysis.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 |
|---|---|---|---|---|
| Total revenue | $26.1 | $28.2 | $53.7 | $58.3 |
| Operating loss | $(13.7) | $(14.6) | $(28.7) | $(28.8) |
| Net loss | $(13.0) | $(13.8) | $(29.0) | $(39.2) |
| Basic and diluted loss per share | $(0.18) | $(0.20) | $(0.41) | $(0.61) |
| Product and service margin | 52.5% | 54.5% | 53.1% | 55.5% |
- Q2 product revenue declined 25% to $17.4 million; service revenue rose 4% to $5.1 million. H1 product revenue fell 24% to $36.4 million, while service revenue was approximately flat at $10.3 million.
- Q2 operating expenses were $39.8 million, down from $42.8 million. Research and development rose 7% to $8.4 million; selling, general and administrative expense fell 7% to $20.6 million.
- Net cash used in operating activities was $7.1 million in H1, compared with $25.1 million in H1 2019. Investing activities provided $27.6 million, principally from investment maturities and sales, partly offset by the InstruNor acquisition.
- At June 30, cash and cash equivalents were $43.0 million, short-term investments $2.4 million, and restricted cash $1.1 million. The company reported $7.3 million of borrowing-base availability under its revolver and no revolver borrowings. Management said available resources should fund working capital and capital expenditures for at least 18 months.
- Convertible notes had $56.1 million aggregate principal outstanding and a $54.0 million net carrying value. The $55.0 million 2019 Notes bear 5.25% interest and mature in December 2024; holders may require repurchase of the remaining $1.1 million 2014 Notes beginning in February 2021. Operating lease liabilities totaled $41.3 million, largely reflecting the new headquarters lease.
Material changes versus prior comparable periods
- Revenue fell 8% in both Q2 and H1 year over year. Management attributed the decline primarily to COVID-19-related facility closures and reduced customer research activity. It estimated 30%–40% of customers were closed or operating at reduced capacity at June-end, versus 60%–70% in April.
- Product revenue weakness reflected lower mass cytometry instrument and consumable sales and lower microfluidics consumables; higher microfluidics instrument sales partially offset the declines. Q2 Americas revenue increased 25%, while EMEA declined 42% and Asia-Pacific declined 5%.
- Product and service margin contracted by 2.0 percentage points in Q2 and 2.4 points in H1. Management cited fixed depreciation and amortization on lower revenue and lower mass cytometry factory utilization, partly offset by cost savings and manufacturing efficiencies.
- H1 net loss improved year over year partly because 2019 included a $9.0 million loss on extinguishment of debt. H1 operating loss was nearly unchanged.
- Cash and short-term investments together declined to $45.4 million from $58.6 million at year-end 2019, although cash and cash equivalents alone increased. Much of the H1 cash increase reflected converting short-term investments to cash, rather than operating cash generation.
Outlook, commentary, risks and unusual items
- No quantified revenue or earnings guidance was provided. Management warned that COVID-19’s duration and economic effects were uncertain, and said it was actively managing expenses and cash flow. Temporary salary reductions were implemented in Q2; salaries had been restored by the filing date, while merit increases remained on hold pending clearer revenue visibility.
- In July 2020, the company signed an NIH RADx program letter contract with a proposed project budget of up to $37.0 million. Up to $12.2 million of initial funding depended on specified validation and delivery milestones and execution of a definitive contract; neither the full funding nor a definitive contract was assured.
- The FDA EUA application for Fluidigm’s saliva-based Advanta Dx SARS-CoV-2 assay was pending. Authorization, timing, commercialization conditions and continued authorization were uncertain.
- A March 2020 intellectual-property settlement produced a $3.5 million payment: $3.1 million was recognized as license revenue and $0.4 million offset legal costs. The company also recognized $3.0 million of development revenue under a new agreement with up to $11.7 million of milestone payments.
- The company completed an interim goodwill and developed-technology impairment test after identifying a COVID-19-related triggering event; no impairment was recorded. InstruNor’s purchase price was approximately $7.2 million, including $5.2 million cash and 485,451 shares.
- Key risks include prolonged pandemic-related customer disruption, continuing losses, competition and pricing pressure, reliance on single- or limited-source components and concentrated manufacturing sites, regulatory uncertainty, potential dilution from convertible notes or the unused $50 million ATM program, and the ability to meet NIH milestones. Management reported no material expected adverse outcome from pending legal matters and said disclosure controls were effective.
Important facts for investors to verify
- Confirm the filing identity and period: this is Fluidigm Corporation’s 2020 Q2 filing, not a filing originally made under the later Standard BioTools name.
- Track whether customer activity and instrument and consumable sales recover, and whether COVID-19-related revenue offsets weakness in the core business.
- Verify NIH milestone completion, definitive contract status, funding actually received and any associated production-capacity spending.
- Check the FDA EUA decision and any limits or conditions on assay distribution, as well as actual commercial demand.
- Monitor operating cash burn, liquidity, the February 2021 put right on the 2014 Notes, lease commitments and any ATM share sales or convertible-note dilution.
- Assess whether the margin decline, inventory growth and continued losses improve, and whether future impairment testing results change.