Standard BioTools Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions. The company develops and sells proteomics and genomics research instruments, consumables, and services.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $25.4M | $25.6M | $78.2M | $70.9M |
| Gross profit / margin | $11.2M / 44% | $9.2M / 36% | $37.1M / 47% | $25.9M / 36% |
| Operating loss | $21.2M | $29.0M | $55.2M | $95.1M |
| Net loss | $21.0M | $29.4M | $54.9M | $169.3M |
| Net loss per share, diluted | $0.27 | $0.37 | $0.69 | $2.17 |
- Q3 product revenue was $18.7M, down 3%; service and other revenue was $6.7M, up 5%. For the first nine months, product revenue increased 12% and service and other revenue increased 5%.
- Q3 proteomics revenue was $14.0M, down 4%; genomics revenue was $11.4M, up 3%. Nine-month proteomics revenue rose 22% to $47.3M, while genomics fell 4% to $30.9M.
- Operating expenses were $32.3M in Q3, down 15%, and $92.3M for nine months, down 24%. Lower R&D and SG&A reflected cost reductions, workforce actions, and reduced spending.
- Cash used in operating activities was $29.2M for nine months, versus $70.2M a year earlier. Capital expenditures were $2.8M.
- At September 30, cash and cash equivalents were $79.7M and short-term investments were $49.2M, totaling $128.9M, down from $165.8M at year-end 2022. The company reported $80.5M of cash, cash equivalents and restricted cash.
- Total debt carrying value was $64.6M, comprising $55.0M of convertible notes and $9.6M of term-loan carrying value. The term loan had $9.2M principal outstanding. Current liabilities were $51.8M; total liabilities were $159.8M.
- Total assets were $339.3M; accumulated deficit was $981.0M. Redeemable Series B preferred stock was classified as mezzanine equity at $311.3M, with an aggregate liquidation preference of $255.6M.
Changes, outlook and notable items
- Revenue was nearly flat year over year in Q3, but up 10% for the first nine months. Management attributed the nine-month increase mainly to instrument placements, particularly in proteomics; Q3 softness reflected order timing and lower genomics consumables.
- Gross margin improved year over year. Management cited lower product costs and manufacturing efficiencies; the prior-year comparison also included one-time revenue and inventory charges.
- The much smaller nine-month net loss versus 2022 partly reflects the absence of prior-year non-cash losses of $60.1M on the Series B preferred-stock forward sale and $13.7M on bridge loans. The comparison is not solely a measure of operating improvement.
- Management expects existing liquidity and capital sources to support operations for at least 12 months from the filing date. The filing provides no numerical revenue or earnings guidance. Continued operating cash use and access to future financing remain relevant considerations.
- Restructuring continues, including workforce reductions, facility consolidation and manufacturing-footprint optimization. The company expects most remaining employee-severance liabilities to be relieved in 2024; facility costs may continue through lease terms. It expects $9.1M of sublease income over the term of a new headquarters sublease.
- On October 4, 2023, after quarter-end, the company agreed to merge with SomaLogic. SomaLogic shareholders are expected to own approximately 57% and existing Standard BioTools shareholders approximately 43% of the combined company on a fully diluted basis. The exchange ratio is 1.11 Standard BioTools shares per SomaLogic share; closing was expected in Q1 2024, subject to approvals and other conditions. Transaction expenses are expected to continue through that quarter. Specified termination circumstances could trigger fees of approximately $19.1M payable by Standard BioTools, or approximately $17.2M payable by SomaLogic, and expense reimbursements capped at $2.0M.
- The company’s $20M share-repurchase authorization was terminated October 4, 2023. Repurchases totaled $5.2M during the first nine months of 2023.
- The 2019 convertible notes mature December 1, 2024. Holders of the 2014 notes may require repurchase on February 6, 2024. Term-loan maturity could accelerate to June 1, 2024 if specified convertible-debt conditions are not met. These dates and refinancing or repayment needs merit attention.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level. No material change in internal control over financial reporting was reported. The company said it had no accrued liabilities for legal matters; litigation outcomes remain uncertain.
Key facts for investors to verify
- Whether the SomaLogic merger receives shareholder, regulatory and other required approvals, closes on schedule, and delivers anticipated benefits; assess dilution and integration risks.
- Cash burn, liquidity runway and funding needs, including the ability to address convertible-note and term-loan maturities and any acceleration provisions.
- Whether instrument placements translate into recurring consumables and service revenue, particularly in proteomics, and whether genomics trends stabilize.
- Whether gross-margin improvement and cost reductions are sustainable, while tracking ongoing restructuring, merger costs and sublease income.
- The potential effects of the Series B preferred stock’s senior rights and the substantial potential dilution from preferred stock, convertible notes and equity awards.