Rapid Micro Biosystems, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. The company develops and sells the Growth Direct automated microbial quality-control platform, consumables, software, and related services.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $4.16 million | $5.00 million; down 16.7% |
| Product revenue | $2.56 million | $3.72 million; down 31.1% |
| Service revenue | $1.60 million | $1.07 million; up 49.7% |
| Recurring product and service revenue | $2.66 million; 63.9% of total revenue | $1.61 million; 32.2% of total revenue |
| Gross loss and gross margin | $1.92 million; approximately -46.3% | $2.07 million; approximately -41.4% |
| Operating loss | $15.00 million | $9.69 million |
| Net loss | $14.93 million; $0.35 per share | $22.10 million; $37.89 per share |
| Cash used in operating activities | $16.80 million | $11.26 million |
| Cash, cash equivalents, and investments | $184.2 million at March 31 | Cash and cash equivalents were $178.4 million at December 31, 2021; investments were $25.1 million |
| Debt and lease obligations | No long-term debt; approximately $8.0 million of operating and financing lease liabilities | 2020 term loan had been repaid in September 2021 |
Cash and cash equivalents were $62.5 million at quarter-end, alongside $121.7 million of short- and long-term investments. The current ratio was approximately 12.6, based on current assets of $186.9 million and current liabilities of $14.9 million. Management said available cash and investments were expected to fund operating and capital needs for at least 12 months after issuance of the statements.
Material changes and operating developments
- Revenue declined primarily because fewer Growth Direct systems were placed: two in Q1 2022 versus eight in Q1 2021. Management attributed weaker-than-expected placements partly to COVID-19 site-access and readiness constraints, including the Omicron variant.
- Recurring revenue increased 65.5%, supported by higher consumables shipments and service-contract revenue. Systems placed cumulatively reached 118; validated systems cumulatively reached 93.
- Operating expenses rose 30.5% to $19.2 million. R&D increased 64.2%, sales and marketing 51.9%, and general and administrative 90.3%, reflecting hiring, business expansion, and public-company costs.
- Operating loss widened despite the lower net loss. The year-ago net loss included an $11.4 million noncash loss from the change in fair value of preferred-stock warrants, as well as preferred-stock accretion and dividends; those items did not recur in Q1 2022.
- Cash and cash equivalents fell from $178.4 million at year-end, in part because the company invested $97.2 million in securities. Investing cash outflow was $99.5 million, including $2.4 million of property and equipment purchases.
- In March 2022, the company amended its Lowell facility lease, expanding the space and extending the lease through July 2029. Disclosed future minimum payments under the amended lease were $4.6 million, including approximately $1.0 million for leases expected to commence later in 2022.
Outlook, risks, and contingencies
- No quantified revenue, earnings, or placement guidance was provided. The company expects continuing operating losses and investment in sales, manufacturing, R&D, and personnel. It does not anticipate BARDA revenue in 2022 because funding was fully earned by Q4 2021.
- Management cautioned that its 12-month liquidity estimate relies on assumptions and that capital could be depleted sooner than expected; future financing may be needed if revenue and available capital are insufficient.
- COVID-19-related travel and site-access restrictions may continue to delay sales, shipments, installations, validation, and customer training. The resulting financial impact and duration were not estimable.
- Inflation and rising interest rates may increase labor, materials, and freight costs and could reduce customer demand. The financial impact was not estimable.
- Revenue is subject to quarter-to-quarter variability from system order timing, customer budgets, seasonal periods, and the transition toward recurring revenue. Three customers each generated at least 10% of Q1 2022 revenue; together they represented 38.6%.
- Commitments included $0.8 million of minimum supplier payments through 2022 and $0.9 million for cloud and software services through January 2026. The filing reported no current litigation and no material changes to previously disclosed risk factors.
- Disclosure controls and procedures were assessed as effective at the reasonable-assurance level; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether system placements recover from the Q1 decline and whether placed systems progress through installation and validation on schedule.
- Whether growth in consumables and service contracts can sustain recurring-revenue expansion and improve gross margins.
- Operating cash burn, investment balances, and the assumptions underlying management’s stated liquidity runway.
- The effects of COVID-19, inflation, interest rates, and customer concentration on demand, supply, and costs.
- The full costs and timing of the expanded facility lease and other contractual commitments.