Rapid Micro Biosystems, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited, consolidated results. The company develops and sells the Growth Direct automated microbial quality-control platform, including systems, consumables, software and services.
Financial highlights
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $5.04 million | $4.16 million | +21.0% |
| Product revenue | $3.32 million | $2.56 million | +29.7% |
| Service revenue | $1.71 million | $1.60 million | +7.1% |
| Gross loss | $1.79 million | $1.92 million | Improved $0.13 million |
| Gross margin | -35.5% | -46.3% | Improved about 10.8 percentage points |
| Operating loss | $14.87 million | $15.00 million | Improved $0.13 million |
| Net loss | $13.89 million | $14.93 million | Improved $1.04 million |
| Net loss per share | $0.32 | $0.35 | Loss per share narrowed |
| Operating cash used | $16.69 million | $16.80 million | Nearly unchanged |
Product and service costs together exceeded revenue, resulting in a gross loss. Revenue growth reflected one additional system placement and higher consumable shipments; system placements were 3 versus 2. Systems validated during the quarter fell to 2 from 9, while cumulative placements and validations reached 128 and 105, respectively. Recurring revenue rose 22.4% to $3.25 million and was 64.6% of total revenue, compared with 63.9% a year earlier.
Research and development expense declined 10.6% to $3.15 million, primarily on lower consulting costs. Sales and marketing expense was essentially flat at $3.46 million; general and administrative expense increased 6.1% to $6.47 million. Net interest income increased to $1.00 million from $0.11 million, mainly due to higher yields on investments.
Liquidity, cash flow and obligations
- At March 31, cash and cash equivalents were $24.41 million, short-term investments $75.28 million and long-term investments $22.46 million—$122.15 million combined. Including restricted cash, the total was $122.43 million.
- Cash, cash equivalents and restricted cash decreased $2.65 million during the quarter. Operating cash use of $16.69 million was largely offset by $13.91 million of net cash provided by investing activities, principally investment maturities.
- Total liabilities were $20.84 million, including $7.71 million of lease liabilities. The filing reports no conventional borrowings; lease obligations are the principal disclosed financing liabilities.
- Management expects existing cash and investments to fund operating and capital expenditure requirements for at least 12 months after issuance of the statements. The company has recurring losses and operating cash outflows and expects significant losses to continue.
Changes, outlook and risks
- Revenue increased 21%, but operating expenses rose 3.9%; the net loss improvement was supported in part by higher investment income. Higher product and service volumes also increased associated costs.
- No specific revenue, margin or earnings guidance is provided. Management expects continued investment in commercial capabilities, manufacturing, research and development, and product development; it also expects research and development and selling costs to rise over time.
- Revenue and placements may fluctuate with order timing, customer budgets, site access, installation and validation schedules, and seasonality. Customer validation typically takes three to nine months, and adoption may take longer.
- Key risks include the ability to grow adoption and recurring consumable use, continued cash burn and future financing needs, inflation and interest-rate effects, and instability in the banking system that could affect access to funds. Three customers each contributed at least 10% of quarterly revenue; the largest accounted for 27%.
- The 2022 restructuring plan included an approximately 20% workforce reduction. The company paid $0.3 million of related costs in Q1 and had $0.2 million accrued at quarter-end. A one-time repricing of certain non-executive employee stock options was described as immaterial.
- The company reported no material litigation and no material change in internal control over financial reporting. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether system placements and validations convert into greater customer utilization and recurring consumable revenue.
- Whether gross margins improve as sales scale, given the continuing gross loss.
- Cash use, investment balances and management’s stated 12-month liquidity horizon, including assumptions behind that estimate.
- Customer concentration and the timing of large system orders, installations and validations.
- Any subsequent updates on strategic alternatives, financing needs, or the effects of banking-market and inflation risks.