Fluidigm Corporation (identified in the request as Standard BioTools Inc.) — Q2 2011 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2011. The filing’s registrant is Fluidigm Corporation; the filing does not identify itself as Standard BioTools Inc. Fluidigm developed, manufactured and sold microfluidic instruments and consumables for life-science and agricultural-biotechnology markets.
Financial performance
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Total revenue | $10.6 million | $8.0 million | $19.3 million | $14.7 million |
| Product revenue | $9.7 million | $7.5 million | $18.1 million | $13.7 million |
| Operating loss | $6.7 million | $4.2 million | $11.5 million | $9.5 million |
| Net loss | $7.2 million | $4.8 million | $14.5 million | $10.4 million |
| Product gross margin | 69% | 61% | 68% | 60% |
- Q2 total revenue increased 32%; six-month revenue increased 31%. Product revenue rose 30% and 32%, respectively. Management attributed product growth to higher instrument sales and a larger installed base driving consumables sales.
- Q2 selling, general and administrative expense rose 33% to $7.8 million, reflecting headcount, public-company costs and legal and professional fees. Q2 included a $3.0 million litigation-settlement expense. Research and development expense was essentially flat.
- Six-month interest expense was $2.3 million, including a $1.2 million non-cash write-off of debt discount when the January 2011 notes were repaid. The six-month common-stockholder loss was $24.4 million, including a $9.9 million deemed dividend tied to a preferred-stock conversion-price change; this was not part of net loss.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $10.1 million and available-for-sale securities were $54.2 million; combined, $64.3 million. Working capital was $63.2 million.
- Six-month operating cash use was $12.9 million, versus $6.0 million in 2010. Investing cash use was $55.0 million, largely purchases of short-term securities; financing provided $72.2 million, principally from the February IPO.
- The February IPO generated approximately $77.0 million net proceeds. The company repaid its $3.1 million line-of-credit balance and $5.0 million in notes. Long-term debt principal was $13.0 million at June 30, bearing fixed interest at 13.5%, with a February 2013 maturity. A $7.0 million receivables-backed credit line was undrawn; the company reported covenant compliance.
- Management believed cash and cash equivalents would meet working-capital and capital-expenditure needs for at least 18 months, while also warning that additional capital might be needed. The filing does not give a formal revenue or earnings forecast.
Material developments, outlook and risks
- On June 30, Fluidigm settled patent litigation with Life Technologies and Applied Biosystems, paid $3.0 million and entered patent-license agreements. In July, Fluidigm exercised an option and paid a further $2.0 million for specified limits on certain patent litigation; that subsequent payment was to be recorded as an asset and amortized over four years. Both parties also have certain future royalty obligations; management did not expect them to be material based on current business.
- Grant revenue fell as Singapore Economic Development Board programs ended. Management expected grant revenue to decline significantly versus 2010, partly offset by a new $1.9 million CIRM grant to be recognized over three years. Management said it believed it had met relevant EDB obligations through June 30; the agreements included potential repayment rights if obligations were not met.
- Management expected instrument and consumables unit sales to continue growing, but noted instrument average selling prices may fluctuate with product mix and currencies. It anticipated higher SG&A and capital expenditures, including manufacturing-capacity expansion.
- Key risks include ongoing losses and negative operating cash flow; uncertain customer adoption, long and variable sales cycles, and quarterly volatility; competition and product-development execution; dependence on a single Singapore manufacturing site and certain limited-source suppliers; international, foreign-exchange and Japan-related exposure; regulatory uncertainty for diagnostic applications; and intellectual-property claims and licensing obligations. The filing also highlighted possible dilution from future financing and shares becoming eligible for sale after IPO lock-ups expire.
- Management reported disclosure controls and procedures were effective at a reasonable-assurance level and no material change in internal control over financial reporting occurred during the quarter.
Most important facts for investors to verify
- Confirm the registrant identity: this 2011 filing is for Fluidigm Corporation, notwithstanding the request’s Standard BioTools Inc. label.
- Track whether product-revenue growth and margin gains persist as grants decline and operating expenses rise.
- Assess cash burn against management’s stated 18-month liquidity expectation, planned capital spending and the $13.0 million high-interest debt balance.
- Review the scope and continuing obligations of the Life patent settlement, July $2.0 million payment, and any EDB grant repayment exposure.
- Monitor manufacturing expansion and supply continuity, customer adoption, and the effects of the August 25, 2011 IPO lock-up expiration on share supply.