Quanterix Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless noted. Quanterix develops Simoa ultra-sensitive immunoassay platforms, related instruments and consumables, and research services for life-sciences and diagnostic customers. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparator |
|---|---|---|
| Total revenue | $28.5 million | $29.6 million; down 4% |
| Product revenue | $19.3 million | $20.7 million; down 7% |
| Service and other revenue | $8.6 million | $8.8 million; down 3% |
| Gross profit / GAAP gross margin | $16.9 million / 59.5% | $14.6 million / 49.3% |
| Operating expenses | $26.3 million | $32.7 million; down 20% |
| Operating loss | $9.4 million | $18.2 million |
| Net loss / diluted loss per share | $6.1 million / $0.16 | $18.2 million / $0.49 |
| Net cash used in operating activities | $9.5 million | $21.7 million |
| Cash and cash equivalents at period end | $329.4 million | $338.7 million at December 31, 2022 |
Non-GAAP gross margin, which reclassifies product shipping costs from operating expenses to cost of goods sold, was 53.1% versus 43.2%. Q1 interest income was $3.4 million, compared with $0.1 million, primarily reflecting higher rates earned on cash. Cash, cash equivalents and restricted cash together totaled $332.3 million at quarter-end.
Current assets were $376.0 million and current liabilities $26.9 million. The balance sheet reports lease liabilities of $44.3 million in total ($3.9 million current and $40.4 million long-term); it does not show a borrowing balance. Stockholders’ equity was $357.3 million and accumulated deficit was $408.3 million.
Changes versus the prior comparable period
- Revenue fell by $1.1 million. Product revenue declined $1.4 million, including lower instrument sales, which management attributed to reduced demand in Asia Pacific, softer North American demand, and lower consumables production while quality infrastructure and assays are redeveloped.
- Gross profit improved by $2.4 million despite lower revenue. Management cited improved inventory management, use of previously reserved raw materials, and lower operations and supply-chain costs following restructuring.
- Research and development expense fell 33% to $4.7 million and selling, general and administrative expense fell 19% to $20.9 million, mainly due to restructuring-related headcount reductions.
- Net loss narrowed by $12.1 million, with lower operating expenses and higher interest income contributing. Operating cash use also declined by $12.2 million year over year.
- Service and other revenue included $1.5 million from the Lilly collaboration, versus $2.7 million in Q1 2022. Collaboration and license revenue rose to $0.4 million, primarily due to Uman; $0.2 million of grant revenue was also recognized.
Outlook, commentary, risks and unusual items
- Management expects continued operating losses and significant expenses for at least the next 24 months, while stating that existing cash and expected commercial cash generation should meet anticipated operating cash requirements for at least the next 12 months. No specific revenue or earnings guidance was provided.
- The August 2022 restructuring eliminated 119 positions and included assay redevelopment and other cost measures. Management expects approximately $25 million in annualized operating expense savings. The workforce reduction was substantially completed in Q3 2022.
- Quanterix is evaluating alternatives for unused Bedford, Massachusetts office and laboratory space, including lease termination or subleasing. It recorded $0.8 million of other lease costs in Q1 2023 related to the impaired space. The company recorded $17.4 million of long-lived-asset impairment charges in 2022; none were recorded in Q1 2023.
- Product quality and assay redevelopment, customer acceptance, execution of restructuring savings, competition, regulatory requirements for potential diagnostic uses, and access to future financing could affect results and cash needs. The company warns that it may need to raise capital; equity financing could dilute shareholders.
- One customer represented 11% of Q1 revenue. Open purchase orders with Stratec were $4.9 million at March 31, 2023; total other purchase commitments for the quarter were $2.7 million. Management reported no material pending legal proceedings and no material changes to the risk factors in its 2022 Form 10-K.
- Internal control over financial reporting had previously identified material weaknesses. Management concluded disclosure controls were not effective at a reasonable assurance level at March 31, 2023 because remediation had only recently begun and had not been tested for a sufficient period. Remediation work was underway and expected to continue through 2023.
Important facts for investors to verify
- Whether instrument demand stabilizes and assay redevelopment improves product quality, availability and consumables growth.
- Progress against the approximately $25 million annualized savings target, and the cost and outcome of the Bedford lease alternatives.
- Operating cash use and the assumptions behind management’s stated minimum 12-month liquidity outlook.
- Whether the improvement in gross margin is sustained and how much reflects lasting efficiencies versus inventory and restructuring effects.
- Progress in remediating and testing the disclosed material weaknesses in internal controls.
- Customer concentration, purchase commitments, and the timing and value of collaboration, grant, license, and milestone revenue.