Business context and reporting period
This is Fluidigm Corporation’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2018. The filing describes a life-sciences tools business selling instruments, consumables and services for genomics, single-cell analysis and mass cytometry. The request metadata names STANDARD BIOTOOLS INC.; the filing itself is for Fluidigm Corporation.
Financial performance and liquidity
Amounts are in U.S. dollars; figures below are in millions except per-share data.
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $29.0 | $24.7 | $80.6 | $74.2 |
| Operating loss | $(11.6) | $(15.6) | $(37.0) | $(49.6) |
| Net loss | $(14.8) | $(15.9) | $(44.2) | $(50.1) |
| Basic and diluted loss per share | $(0.38) | $(0.46) | $(1.13) | $(1.61) |
- Revenue grew 17% in Q3 and 9% for the nine-month period. Q3 product revenue rose 18%, led by mass-cytometry instrument sales; service revenue increased 14%.
- Product gross margin was 52% in Q3 and 50% year to date, versus 45% and 46%, respectively. Service margin was 68% in Q3 and 66% year to date, versus 72% and 73%. Higher mass-cytometry service costs weighed on service margin.
- Operating expenses for the nine months fell 9% to $79.9 million, principally reflecting cost-saving initiatives and lower legal and depreciation costs. Interest expense rose to $9.8 million from $4.4 million, largely due to discount and issuance-cost amortization and accretion on the 2018 notes.
- Operating cash use was $24.6 million, similar to $24.8 million in the prior-year period. Investing activities provided $4.7 million; financing activities used $2.3 million. Cash and cash equivalents declined $22.2 million to $35.8 million from year-end 2017.
- At September 30, current assets were $71.9 million and current liabilities $38.9 million; working capital excluding deferred revenue was $44.5 million. The company reported $12.8 million available under its revolving facility and no facility borrowings.
- Convertible notes had $201.3 million aggregate principal outstanding ($150.0 million 2018 notes and approximately $51.3 million 2014 notes); their combined carrying value was $169.3 million. Total liabilities were $229.9 million and stockholders’ equity $22.4 million.
Material changes, outlook and risks
- Q3 revenue growth was driven primarily by increased mass-cytometry sales; U.S. genomics revenue was weaker. For the nine months, consumables revenue rose 15%, while instrument revenue rose 2%.
- In March 2018, Fluidigm exchanged $150 million principal of 2014 notes for 2018 notes. This extended the first holder put date on the exchanged notes from February 2021 to February 2023, but the 2018 notes’ accreted repurchase amount may reach 120% of original principal. Their initial conversion price was approximately $7.88 per share, creating potential dilution.
- A new asset-secured revolving credit facility with Silicon Valley Bank was entered into in August 2018, with a maximum amount of $15 million and maturity in August 2020. The company reported compliance with its terms.
- Management said existing cash, cash equivalents and investments were expected to meet working-capital and capital-expenditure needs for at least 18 months. This is an estimate, not a guarantee; management warned that weaker sales or higher costs could require additional capital. No specific revenue or earnings guidance was provided.
- Other notable items: the company expected approximately $3.4 million of retention-plan cash bonuses payable in January 2019 to eligible continuing employees; some participants exchanged about $2.4 million of bonuses for roughly 380,000 fully vested RSUs. Adoption of the new revenue standard reduced nine-month net loss by $0.1 million versus the prior standard and increased September 30 assets and equity by $0.4 million.
- Principal risks include continued losses and operating cash burn, substantial convertible debt and future put obligations, possible equity dilution or need for financing, competitive and product-acceptance pressures, manufacturing and sole-source supplier risks, and potential goodwill or intangible-asset impairment. Goodwill was $104.1 million and net intangible assets $64.9 million. Management highlighted recent share-price weakness as increasing impairment risk.
- The filing said pending legal matters were not currently expected to have a material adverse effect, while noting litigation outcomes are uncertain. Disclosure controls were assessed as effective at the reasonable-assurance level; no material quarterly change in internal control was reported.
Important facts for investors to verify
- Confirm the issuer and security: this 2018 filing is for Fluidigm Corporation, despite the metadata naming Standard BioTools Inc.
- Review the convertible-note indentures, including holder put dates, accretion to as much as 120%, conversion terms, and potential dilution.
- Assess cash runway against continued operating cash outflows, debt service, expected retention-plan payments, and the company’s stated 18-month liquidity estimate.
- Track whether mass-cytometry growth persists, genomics sales stabilize, and service margins recover.
- Monitor goodwill and intangible-asset impairment indicators, manufacturing and supplier dependencies, and any material changes to legal, regulatory or financing risks.