Seer, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Seer is a life sciences technology company commercializing its Proteograph Product Suite for proteomics research. The unaudited financial statements are consolidated and prepared under U.S. GAAP.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $3.6 million | $1.3 million | $6.9 million | $1.4 million |
| Gross profit | $1.6 million | $0.7 million | $2.9 million | $0.8 million |
| Gross margin | 44.4% | 56.1% | 41.2% | 58.0% |
| Operating expenses | $25.0 million | $17.4 million | $50.1 million | $34.0 million |
| Operating loss | $23.4 million | $16.7 million | $47.2 million | $33.2 million |
| Net loss | $22.8 million | $16.6 million | $46.5 million | $33.0 million |
| Basic and diluted loss per share | $0.37 | $0.27 | $0.75 | $0.55 |
Revenue growth primarily reflected sales of Proteograph instruments, consumables, and platform evaluations. Q2 product revenue was $2.4 million; related-party revenue was $1.1 million. For the first half, related-party revenue was $2.2 million, or 31% of total revenue. The company reported no meaningful debt financing; liabilities were $44.3 million at June 30, including $30.0 million of operating lease liabilities.
At June 30, cash and cash equivalents were $79.0 million, short-term investments $372.2 million, and long-term investments $4.9 million, totaling approximately $456.1 million. Current assets were $466.8 million and current liabilities $15.0 million. Stockholders’ equity was $472.0 million. The accumulated deficit was $173.0 million.
For the first half, operating cash use was $33.2 million, investing cash use was $122.3 million, and financing provided $1.6 million. Investing outflows mainly reflected purchases of marketable securities, net of maturities, rather than operating investment alone. Cash, cash equivalents, and restricted cash declined $153.8 million to $79.5 million; much of the liquidity remained invested in securities.
Material changes versus prior comparable periods
- Revenue rose 171% in Q2 and 397% in the first half, from a low base, as commercialization expanded. Cost of revenue grew faster than revenue, and gross margin declined year over year.
- First-half operating expenses increased 47%; R&D rose 64% and selling, general and administrative costs rose 37%, reflecting product development, staffing, facility expansion, and public-company costs.
- First-half net loss widened by $13.4 million, while operating cash use increased by $7.9 million year over year.
- Interest income increased with higher rates on cash and investments. Available-for-sale securities generated $2.6 million of first-half unrealized losses recorded in other comprehensive loss.
Outlook, commentary, and risks
- Management expects significant and increasing expenses, operating losses, and negative operating cash flows for the foreseeable future. It believes existing cash and investments will fund operations for at least 12 months from the report date. No numerical revenue or earnings guidance is provided.
- Commercial execution depends on market acceptance, customer adoption, installation and training, and growth in instrument utilization and consumables sales. The company is continuing to expand sales, support, distribution, R&D, and manufacturing capabilities.
- COVID-19-related restrictions have delayed customer access, installation, and training; the company also reported longer SP100 instrument lead times and other supplier delays. Hamilton is the sole contract manufacturer for the SP100.
- Customer concentration is material: one customer accounted for 31% of first-half revenue, and two customers contributed 31% and 12% of Q2 revenue. PrognomIQ is a related party and accounted for 31% of first-half revenue.
- Other notable risks include uncertain market size and adoption, competition, scaling and product-quality challenges, dependence on research budgets, intellectual-property and regulatory risks, and potential future financing needs. Purchase commitments to manufacturing suppliers were $3.2 million; future minimum lease payments were $41.6 million undiscounted.
- The company recorded $0.4 million of incremental compensation expense from an employee stock-option repricing in Q2; $2.3 million of related incremental compensation remained to be recognized over three years. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. No material legal proceedings were reported.
Important facts for investors to verify
- Whether revenue growth broadens beyond a small customer base and reduces reliance on PrognomIQ.
- Whether gross margins improve as instrument and consumables volumes scale.
- Commercial adoption indicators, including installations, utilization, repeat consumables purchases, and customer retention.
- Cash burn and investment balances over time, including the effect of continued operating losses and lease commitments on the stated 12-month liquidity outlook.
- Progress addressing instrument supply lead times, manufacturing capacity, and COVID-related customer-access delays.
- The effect of stock-based compensation and the option repricing on future operating expenses and shareholder dilution.