Fluidigm Corporation (now Standard BioTools Inc.) — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; filed May 9, 2016. The filing identifies the registrant as Fluidigm Corporation. The company develops, manufactures, and sells life-science tools for single-cell analysis and genomics.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / prior date |
|---|---|---|
| Total revenue | $29.0 million | $26.7 million; up 9% |
| Product revenue | $25.4 million | $24.0 million; up 6% |
| Service revenue | $3.5 million | $2.7 million; up 34% |
| Operating loss | $18.9 million | $14.0 million |
| Net loss | $19.9 million; $0.69 per share | $15.9 million; $0.56 per share |
| Net cash used in operating activities | $7.8 million | $9.8 million |
| Cash, cash equivalents and short-term investments | $95.2 million at March 31, 2016 | $95.0 million at December 31, 2015 |
- Product gross margin was 58%, versus 59%; service gross margin was 66%, versus 72%. Operating loss was 65% of revenue, versus 52%; net loss was 69% of revenue, versus 60%.
- Q1 operating cash outflow improved year over year. Cash and cash equivalents rose to $42.9 million from $29.1 million at year-end, partly reflecting investment maturities and $2.3 million received from the Verinata investment. Investing activities provided $21.2 million; capital expenditures were $1.1 million.
- At March 31, current assets were $137.8 million and current liabilities $30.5 million. The company reported working capital excluding deferred revenue of $116.4 million.
- Convertible notes had $201.3 million principal outstanding and a $194.7 million carrying value. The notes bear 2.75% interest and mature in 2034; estimated fair value was $112.7 million.
Changes versus the prior-year quarter
- Revenue growth came from higher instrument and consumables sales, as well as service contracts. Applied-customer product revenue rose about 10%; Research-customer product revenue rose about 3%.
- Instrument revenue increased 5%, mainly from Helios systems and products launched in 2015, partly offset by lower sales of core genomics systems. Consumables revenue rose 7%; genomics preparatory-system consumables pull-through was below the company’s historical range.
- Selling, general and administrative expense increased 27% to $25.5 million, chiefly from commercial infrastructure, staffing and compensation, and higher legal costs. R&D expense rose 4% to $10.4 million.
- Operating loss widened by $4.9 million and net loss by $4.0 million despite higher revenue. Lower foreign-exchange losses reduced other expense compared with Q1 2015.
Outlook, risks and notable items
- No numeric revenue or earnings guidance is provided. Management expects existing cash, cash equivalents and investments to meet working-capital and capital-expenditure needs for at least 18 months, while cautioning that lower operating cash generation or higher spending could require additional financing.
- Management expects continued investment in R&D and commercial infrastructure, and anticipates SG&A may increase. It also expects instrument and consumables unit sales to increase over time, while average selling prices may fluctuate.
- The company reported a performance issue involving certain C1 integrated fluidic circuits (IFCs), where chambers could contain more than one cell. One redesigned IFC had been released; additional redesigns were expected later in 2016 and early 2017, subject to development and timing risks.
- Other key risks include ongoing losses and negative operating cash flow; competitive pressure and variable quarterly sales; dependence on specialized and sole-source suppliers; manufacturing concentration in Singapore, Canada and California; foreign-exchange exposure; and potential impairment of goodwill and acquired technology. Goodwill was $104.1 million and net intangible assets approximately $95.8 million.
- The company was relocating Canadian manufacturing for Helios/CyTOF 2 products, which could disrupt production. New or expanded leases included Durham, North Carolina, and additional headquarters space.
- Legal proceedings were described as arising in the ordinary course; management did not believe pending matters would have a material adverse effect. Disclosure controls were assessed as effective at the reasonable-assurance level, with no material change in internal control reported.
Important facts for investors to verify
- Whether subsequent results show revenue growth can offset rising operating expenses and narrow operating losses.
- Progress, timing and customer impact of the C1 IFC redesigns, and whether preparatory-system consumables pull-through recovers.
- Cash burn, capital spending and the assumptions supporting management’s stated 18-month liquidity outlook.
- Canadian manufacturing transition execution, supplier availability, and product quality or yield developments.
- Goodwill and intangible-asset recoverability, alongside the terms and future cash obligations of the convertible notes and leases.