Standard BioTools Inc. — Q2 2023 Form 10-Q
Business context and reporting period. The unaudited filing covers the quarter and six months ended June 30, 2023, with comparisons to the same 2022 periods. Standard BioTools supplies proteomics and genomics instruments, consumables, and services using mass cytometry and microfluidics technologies. Its reportable segments are proteomics and genomics.
Financial performance
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $27.7m | $18.8m | $52.8m | $45.3m |
| Gross profit | $13.6m | $4.4m | $25.9m | $16.7m |
| Gross margin | 49.2% | 23.6% | 49.1% | 36.8% |
| Operating loss | $(17.4)m | $(38.6)m | $(34.0)m | $(66.1)m |
| Net loss | $(17.0)m | $(63.5)m | $(33.9)m | $(139.8)m |
| Operating cash flow | Not separately presented by quarter | $(17.8)m | $(45.6)m |
- Q2 revenue grew 47% year over year; first-half revenue grew 17%. Product revenue increased 77% in Q2 and 21% in the first half, led by instruments. Instrument revenue was $11.6m in Q2 and $17.5m in the first half. Service revenue was nearly flat in Q2 and increased 6% in the first half; consumables revenue was up 5% in Q2 but down 2% year to date.
- Proteomics revenue rose 74% in Q2 and 38% in the first half. Genomics revenue rose 15% in Q2 but declined 8% in the first half. Management attributed proteomics growth to adoption of its flow-symmetry solution, CYTOF XT, and early traction for Hyperion XTi, released in April 2023.
- Gross margin improved substantially versus 2022. Management cited lower manufacturing costs following relocation of operations to lower-cost regions and one-time 2022 items, including a $1.6m revenue reserve and a $3.1m excess-inventory provision. The improvement is therefore not solely evidence of recurring operating progress.
- Operating expenses fell 28% in Q2 and 27% in the first half, mainly from lower R&D and SG&A costs associated with workforce reductions, lower spending, and the absence of certain 2022 costs. Restructuring charges increased to $2.3m in Q2 and $3.4m in the first half.
- The net loss narrowed substantially, but comparisons include $25.4m of Q2 2022 losses and $73.8m of first-half 2022 losses related to the Series B preferred-stock forward sale and bridge loans. These were not repeated in 2023. 2023 other income included interest earned on cash and investments.
Liquidity, debt, and capital
- At June 30, 2023, cash and cash equivalents were $142.3m; the company had no short-term investments, compared with $84.5m at year-end 2022. Cash, cash equivalents, and short-term investments totaled $142.3m versus $165.8m at year-end. Cash, cash equivalents, and restricted cash were $143.1m.
- First-half operating cash use was $17.8m. Investing activities provided $83.3m, primarily from net sales and maturities of short-term investments; financing activities used $4.6m, including $4.8m for share repurchases. Cash increased by $60.8m over the six-month period.
- Total debt carrying value was $65.2m: $54.9m in convertible notes and $10.4m in term-loan carrying value. The $54.3m 2019 Notes mature December 1, 2024, bear 5.25% interest, and have an initial conversion price of approximately $2.90 per share. The term loan requires principal installments beginning August 1, 2023, with stated maturity in July 2025; under specified conditions tied to the convertible debt, maturity could move to June 2024.
- The revolving credit facility expired August 2, 2023. At June 30, the company had no borrowings and $7.1m available; the filing does not report a replacement facility.
- Series B redeemable preferred stock is presented as mezzanine equity, with a $311.3m carrying amount and $255.6m aggregate liquidation preference. Its senior rights and potential conversion or cash-redemption features are important capital-structure considerations.
- The company had repurchased 2.9m shares for $5.4m cumulatively under its $20m authorization, leaving approximately $14.6m available at June 30. The authorization runs through December 31, 2023 and may be suspended or ended.
Outlook, commentary, and risks
- Management stated that existing liquidity and capital sources should be sufficient to support operations for at least 12 months from the filing date. No specific revenue, earnings, or cash-flow guidance was provided in the supplied filing text.
- Management’s priorities are revenue growth, operating discipline, and strategic capital allocation. The restructuring includes workforce reductions, lower-cost and more focused R&D, manufacturing-footprint optimization, and real-estate reductions. The company expects to relieve most employee-severance liabilities by year-end 2023; facility-related charges may continue through the lease terms.
- Two headquarters floors representing 50% of the space had been subleased as of March 31, 2023. The company expects $4.7m of income from the first sublease and $9.1m from the second, with the latter lease term beginning December 1, 2023. It was also evaluating whether to sublease another floor.
- The company reported an accumulated deficit of $960.0m and a history of operating losses and negative operating cash flow. Liquidity depends on revenue, cash generation, execution of improvement initiatives, and access to capital. Management cautioned that actual results may differ from forward-looking statements.
- The filing reported no recorded litigation liabilities and no indicators of impairment during the first half of 2023. It noted general business, economic, geopolitical, international-operations, and other risks; it did not provide a new, specific risk-factor update in the supplied text.
Important facts for investors to verify
- Whether elevated instrument placements translate into sustained consumables and service growth, particularly in proteomics.
- Whether cost reductions and gross-margin improvement persist after the effects of unusual 2022 comparison items.
- Liquidity and financing plans following expiration of the revolving credit facility, including the 2024 convertible-note maturity and term-loan maturity provisions.
- The potential cash and dilution implications of Series B preferred-stock rights and the substantial excluded potentially dilutive securities.
- Actual restructuring costs, savings, and sublease proceeds, as well as the rationale and remaining capacity for share repurchases while the company continues to incur operating losses.