Quanterix Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results; amounts below are in U.S. dollars. Quanterix develops ultra-sensitive Simoa biomarker platforms and sells instruments, consumables, research services, and laboratory-developed tests.
Financial performance and liquidity
- Q3 revenue: $31.3 million, up 18% year over year. Product revenue was $19.7 million (+11%), service revenue $10.9 million (+31%), collaboration and license revenue $0.2 million, and grant revenue $0.5 million.
- Q3 profitability: Gross profit was $17.8 million, a 56.8% GAAP gross margin (41.1% in Q3 2022). Operating loss was $13.8 million and net loss was $7.8 million, or $0.21 per diluted share, compared with a $35.1 million net loss, or $0.95 per share, in the prior-year quarter. The comparison benefited substantially from the absence of 2022 impairment and restructuring charges.
- Nine-month results: Revenue was $90.8 million (+14%); gross profit was $53.8 million, with a 59.3% GAAP gross margin versus 42.9%; operating loss was $32.8 million; net loss was $19.9 million, or $0.53 per share, versus a $78.1 million net loss, or $2.12 per share.
- Cash flow: Operating cash use was $12.9 million for the first nine months, versus $44.2 million a year earlier. Investing cash use was $126.8 million, primarily $125.2 million invested in marketable securities; financing provided $2.5 million. Cash, cash equivalents, and restricted cash ended at $203.9 million.
- Liquidity and obligations: Cash and cash equivalents were $201.3 million and marketable securities were $126.4 million, or $327.7 million combined. Current assets were $381.0 million and current liabilities $35.2 million. The filing reports no conventional borrowings; operating lease liabilities totaled $42.4 million. Stockholders’ equity was $353.4 million.
- Other metrics: Q3 non-GAAP gross margin, which reclassifies shipping and handling costs from operating expenses to cost of revenue, was 48.6% versus 34.9%. Stock-based compensation was $12.4 million for the first nine months. Accumulated deficit was $422.1 million.
Material changes versus the prior comparable period
- Growth came principally from consumables and services. Q3 consumables and other product revenue increased $6.1 million, while instrument revenue fell $4.1 million; management said reduced instrument demand was expected to continue through the rest of 2023. For the nine months, consumables revenue rose $12.7 million while instrument revenue declined $7.2 million.
- Higher Accelerator Laboratory sample-testing and assay-development volumes contributed to service revenue growth. Q3 service revenue also partly offset lower revenue recognized under the Lilly collaboration.
- Product costs declined as management cited improved inventory management and manufacturing processes. The nine-month gross-margin improvement also reflects the prior-year restructuring and impairment charges not recurring.
- Interest income rose to $4.2 million in Q3 and $11.5 million for the first nine months, mainly due to higher interest rates and investment in marketable securities. Other income included a $2.4 million Employee Retention Credit receivable recognized in Q3.
- SG&A increased 18% in Q3, including higher professional-services costs associated with remediating control weaknesses, stock-based compensation, and shipping costs. For the nine-month period, SG&A declined 9%, partly reflecting restructuring-related headcount reductions.
Outlook, commentary, and risks
- Management expects continued operating losses and significant expenses for at least the next 24 months, but believes current cash, cash equivalents, marketable securities, and product and service cash generation can fund anticipated operating needs for at least 12 months from the filing date. This assessment is subject to risks and assumptions.
- The 2022 restructuring eliminated 119 positions. Management estimated approximately $25 million of annualized operating-expense savings in 2023. No material new restructuring activity or impairment charges were reported for the first nine months of 2023.
- Lucent Diagnostics launched in July 2023, and initial Alzheimer’s-related blood-based tests, LucentAD and LucentAD p-Tau 217, launched in the second half of 2023. These tests have not been cleared or approved by the FDA; the company does not expect material revenue from them until 2024 or later. In October 2023, Quanterix entered a license agreement with Janssen for p-Tau 217 antibodies and assay designs, with royalties payable on licensed sales and services.
- One customer accounted for more than 10% of revenue in both the Q3 and nine-month 2023 periods, and one customer represented more than 10% of gross accounts receivable at quarter-end.
- Internal control over financial reporting had previously disclosed material weaknesses. Management concluded disclosure controls and procedures remained ineffective as of September 30, 2023, citing insufficient time to test remediation. Remediation efforts included hiring accounting leaders, using consultants, and enhancing controls and systems.
- Management reported no legal proceedings expected to have a material adverse effect and no material changes to the risk factors in its 2022 Form 10-K. Risks include continued losses, product adoption and quality, regulatory requirements, competition, and possible need for additional financing.
Important facts for investors to verify
- Whether consumables and service growth can continue to offset weaker instrument demand, and how customer concentration may affect results.
- Whether operating cash use, expense levels, and management’s stated liquidity runway remain consistent with the forecast, particularly as investment and commercialization needs evolve.
- Progress and commercial timing for LucentAD and other diagnostics, including any FDA or other regulatory developments and the path to material revenue.
- Whether the estimated restructuring savings are realized and whether gross-margin gains persist as product mix and manufacturing volumes change.
- Whether remediation controls operate effectively for a sufficient period to resolve the disclosed material weaknesses.
- The repeatability of reported earnings improvements: 2022 impairment and restructuring charges did not recur, while 2023 results included elevated interest income and a $2.4 million Employee Retention Credit receivable.