Fluidigm Corporation (now identified in the request as Standard BioTools Inc.) — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. The filing registrant is Fluidigm Corporation; it describes life-science tools and technologies focused on single-cell analysis and genomics. Financial amounts below are in U.S. dollars.
Financial performance and position
- Revenue: $26.7 million, up 4% year over year. Product revenue was $26.6 million (+5%); instruments contributed $15.8 million and consumables $10.8 million. License revenue was $83,000; there was no grant revenue.
- Profitability: Product margin was 60%, down from 66%. Operating loss was $14.0 million versus $16.6 million; net loss was $15.9 million versus $15.4 million. Basic and diluted loss per share was $0.56 versus $0.57.
- Expenses: R&D rose 31% to $10.0 million and SG&A rose 32% to $20.1 million, reflecting higher headcount, compensation and business-support costs. Q1 2014 included $10.7 million of acquisition-related expenses, with no such expense in Q1 2015.
- Cash flow: Operating cash used was $9.8 million, compared with $10.5 million. Investing activities provided $10.1 million, primarily from investment maturities and sales; financing provided $3.7 million, mainly from option exercises. Cash and cash equivalents increased $3.3 million to $37.0 million.
- Liquidity: Cash, cash equivalents and investments totaled approximately $134.9 million at quarter-end, including $79.4 million of short-term and $18.5 million of long-term investments. Working capital excluding deferred revenue was $137.7 million. Management said existing cash and investments should cover working-capital and capital-expenditure needs for at least 18 months, while noting funding needs could change.
- Debt: Convertible notes had a net carrying value of $195.5 million; principal was $201.3 million. The notes bear 2.75% interest and mature in 2034, subject to conversion, redemption and repurchase provisions. Interest expense was $1.45 million for the quarter.
- Balance sheet: Total assets were $395.0 million and stockholders’ equity $142.5 million. Accumulated deficit was $326.1 million. Goodwill was $104.1 million and net developed technology was $99.4 million.
Changes versus the prior comparable period
- Revenue growth was modest: total revenue increased $1.0 million. Higher C1 and Juno preparatory-system sales, service revenue, and some CyTOF 2 sales were partly offset by lower Biomark HD sales and foreign-exchange effects.
- Geographically, U.S. product revenue increased to $13.7 million; Japan declined to $1.9 million from $4.4 million. Management reported that foreign currency reduced instrument and consumables revenue by $0.8 million and $0.7 million, respectively.
- Cost of product revenue increased 22%, and margin fell six percentage points. The filing attributes this in part to higher acquired-technology amortization, foreign exchange, manufacturing costs and stock compensation.
- Operating loss narrowed despite higher R&D and SG&A, largely because Q1 2014 included acquisition-related charges. Net loss increased slightly, reflecting higher interest and other expense, including foreign-currency remeasurement losses.
Outlook, risks and unusual items
- Management expected instrument and consumables unit sales to increase over time as the company expanded its customer base, geographic coverage and product offerings. It also expected R&D and SG&A expenses to rise. No specific revenue, earnings or margin guidance was provided.
- Management warned of quarterly revenue variability, customer purchasing timing, product-mix changes and foreign-exchange exposure. The filing notes that revenue growth in Q1 2015 was substantially lower than growth rates in some earlier periods and describes a historical tendency for fourth-quarter sales to exceed the following first quarter.
- The company reported a $1.3 million foreign-currency loss for the quarter and said it had not entered into currency hedging contracts.
- DVS acquisition escrow dispute: Fluidigm submitted claims against shares held in escrow; the stockholder representative objected. As of the filing, no shares had been released and the outcome, potential litigation and recoveries were uncertain.
- Licensing exposure: The filing describes ongoing negotiations with PerkinElmer regarding the mass-cytometry license following the DVS acquisition, and negotiations with Nodality to reinstate or replace an expired license. Adverse outcomes could affect the proteomics product line.
- Other risks: The company highlighted dependence on single- or sole-source suppliers and concentrated manufacturing facilities, market acceptance and competitive risks, regulatory uncertainty for diagnostic uses, and risks related to its substantial convertible debt and continuing operating losses. It reported no material legal proceedings and no off-balance-sheet arrangements.
- Management reported disclosure controls were effective at the reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth and instrument demand improved, particularly for Biomark HD, C1, Juno and CyTOF products, and whether consumables pull-through strengthened.
- Whether product margin stabilized as acquired-technology amortization, foreign exchange and manufacturing costs affected results.
- Operating cash use, investment balances and capital spending relative to management’s stated 18-month liquidity assessment.
- The resolution and financial impact, if any, of the DVS escrow claims and the PerkinElmer and Nodality licensing matters.
- The terms, potential dilution and future repurchase obligations associated with the $201.3 million convertible notes.