Quanterix Corporation — Q1 2019 Form 10-Q
Business context and reporting period
Quanterix develops and sells ultra-sensitive Simoa protein-detection platforms, instruments, assays, consumables and research services. This unaudited report covers the three months ended March 31, 2019; comparisons are with Q1 2018 unless otherwise noted. The SP-X instrument entered early access in January 2019 and its full commercial launch began in April 2019.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $12.3 million | $7.5 million; up 64% |
| Product revenue | $9.5 million | $4.7 million; up 101% |
| Service and other revenue | $2.8 million | $2.5 million; up 11% |
| Gross profit / margin | $6.0 million / 49% | $3.2 million / 42% |
| Operating expenses | $15.4 million | $10.3 million; up 49% |
| Net loss | $9.4 million; $0.42 per share | $7.2 million; $0.33 per share |
| Operating cash flow | $(5.4) million | $(10.1) million |
| Capital expenditures | $5.9 million | $0.4 million |
- Product growth reflected increased instrument sales and consumables revenue as the installed base grew. Service revenue increased mainly with greater Accelerator Laboratory activity; collaboration and license revenue was zero, versus $0.3 million in Q1 2018.
- Cash and cash equivalents were $34.0 million at March 31, 2019, down from $44.4 million at December 31, 2018. Including $1.0 million restricted cash, cash totaled $35.0 million. Current assets were $51.5 million and current liabilities $16.6 million.
- Debt was approximately $7.6 million, with no additional borrowing available under the facility. The April 2019 amendment extended interest-only payments through July 1, 2021 and maturity to October 1, 2021, with principal payable in five equal installments beginning July 1, 2021.
- Stockholders’ equity was $34.2 million and accumulated deficit was $184.9 million. Total assets were $65.2 million.
Material changes and management commentary
- Gross margin rose to 49% from 42%, as cost of goods sold and services fell to 51% of revenue from 58%.
- SG&A increased 72% to $11.5 million, driven by hiring, public-company costs, the new headquarters lease, Aushon-related costs and higher stock compensation. R&D rose 6% to $3.9 million.
- Operating cash use improved year over year, but Q1 2019 included a $6.1 million increase in other non-current liabilities, primarily related to the new lease. Investing cash use increased with headquarters improvements.
- Quanterix adopted ASC 606 on January 1, 2019 using the modified retrospective method. It recorded a $0.4 million cumulative-effect adjustment to accumulated deficit; management said adoption did not materially change revenue recognition for current contracts.
Outlook, risks and contingencies
- Management expects continued significant expenses and operating losses for at least the next 24 months. It stated cash resources should support operations through at least Q2 2020; a financial-statement note separately says existing unrestricted cash should fund the current operating plan for at least 12 months from the filing. These are estimates and subject to risks.
- Funding needs depend on product acceptance, including SP-X, sales and distribution expansion, R&D costs, collaborations and potential regulatory requirements. Additional financing may be needed; equity financing could dilute shareholders, and acceptable funding may not be available.
- A new Billerica headquarters lease has minimum future rent payments of $38.7 million. Restricted cash of $1.0 million supports a letter of credit for the lease.
- Under the STRATEC supply agreement, the potential fee for a shortfall in minimum instrument purchases would be $10.9 million if no further units were purchased. The company expects to meet the commitment and has not accrued the potential amount.
- The company reported no material pending or threatened litigation and no material changes to the risk factors in its 2018 Form 10-K. Its shelf registration statement was not yet effective at the filing date.
Important facts for investors to verify
- Whether instrument placements and the larger installed base translate into sustained recurring consumables growth and improved margins.
- The assumptions behind the cash runway estimate, given recurring losses, Q1 capital spending and planned growth investments.
- The timing and cost of the SP-X commercial launch and customer adoption, as well as any regulatory implications for future uses.
- Whether the company meets STRATEC’s minimum purchase commitment and how the new lease affects future cash requirements.
- The amended debt repayment schedule and the status and potential dilution from the proposed shelf and at-the-market financing capacity.