Quanterix Corporation — Q3 2020 Form 10-Q
Business context and reporting period. This unaudited filing covers the quarter and nine months ended September 30, 2020. Quanterix develops and sells ultra-sensitive Simoa protein-detection platforms, instruments, consumables, and research services, primarily for life-sciences research. Comparisons below are with the corresponding 2019 periods; amounts are in U.S. dollars.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $31.4M | $14.9M | $60.2M | $40.8M |
| Gross profit / margin | $21.1M / 67% | $7.0M / 47% | $33.1M / 55% | $20.0M / 49% |
| Operating income (loss) | $2.3M | $(10.2)M | $(21.7)M | $(30.1)M |
| Net income (loss) | $2.2M | $(9.9)M | $(21.7)M | $(29.8)M |
| Operating cash flow | Not separately reported for the quarter | Not separately reported for the quarter | $(28.0)M | $(21.7)M |
- Q3 revenue included $11.2M of collaboration and license revenue and $1.9M of NIH grant revenue; product revenue was $11.7M and service and other revenue was $6.6M. The Abbott license and recognition of previously deferred revenue were major contributors to the quarter’s reported revenue and profit.
- For the nine months, product revenue declined 3% to $28.3M, while service and other revenue rose 58% to $18.6M. Collaboration and license revenue was $11.4M and grant revenue was $1.9M, both absent in the 2019 comparison.
- Cash and cash equivalents were $173.2M at September 30; cash, cash equivalents, and restricted cash totaled $174.2M. Current assets were $214.9M and current liabilities $28.1M. Management said existing cash, commercial sales, and interest income should cover anticipated operating cash needs for at least 12 months.
- Reported debt was approximately $7.7M, with scheduled principal payments due in 2021; no further borrowing was available under the facility. Operating lease liabilities totaled $23.3M. The 2020 underwritten stock offering generated $91.4M in net proceeds; shares outstanding rose from 28.1M at year-end 2019 to 31.6M at September 30, 2020.
Material changes and management commentary
- Q3 total revenue more than doubled year over year. Management attributed product growth to higher consumables sales as customer laboratories reopened and to a larger installed instrument base; service growth reflected greater Accelerator Laboratory activity.
- Nine-month revenue growth was partly offset by COVID-related interruptions in customer laboratories, which reduced consumables orders in Q2, and by limits on access to customer sites and instrument installations. Management expected these disruptions to continue until affected customers returned to normal operations.
- Management expects significant expenses and operating losses to continue at least through the next 24 months, despite Q3 profitability. It expects spending to rise as it expands sales, research and development, staffing, and manufacturing capacity.
Outlook, risks, and unusual items
- The NIH RADx WP2 contract has a stated award value of $18.2M to support development, scale-up, and deployment of a SARS-CoV-2 antigen test. Funding depends on milestones; no WP2 revenue had been recognized by September 30, 2020, and the company may not receive the full amount. The contract also gives the U.S. government termination and modification rights and imposes compliance obligations.
- The Abbott agreement grants a non-exclusive license for in-vitro diagnostics, with a $10.0M initial fee, potential development, regulatory, and commercial milestone payments, and low-single-digit royalties. Abbott may terminate without cause on 60 days’ notice.
- COVID-19 uncertainty could affect customer activity, suppliers, sales, and the timing of instrument installations. Regulatory clearance or authorization, market acceptance, competition, and the company’s ability to secure future financing are additional risks.
- The Q3 net profit should be assessed in light of license and grant revenue, rather than assumed to reflect sustained operating profitability. The company reported no pending or threatened litigation expected to materially affect its financial condition or results, and stated that disclosure controls were effective.
Most important facts for investors to verify
- How much of Q3 and nine-month revenue and gross profit came from the Abbott license, deferred-revenue recognition, and NIH WP1 funding, and how repeatable those sources are.
- Progress against NIH WP2 milestones, funding release conditions, commercialization plans, and any related manufacturing or compliance costs.
- Whether COVID-related customer interruptions and installation delays persist, and whether consumables and service growth continue.
- Cash burn, receivables growth, and the timing and classification of debt repayments. The balance sheet reports both current and long-term debt, while the debt note describes the remaining loan balance as long term; investors should check the detailed debt disclosures.
- The impact of the 2020 equity issuance and future funding needs on dilution, given management’s expectation of continued losses and rising expenses.