Quanterix Corporation — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Quanterix develops and sells ultra-sensitive Simoa immunoassay instruments, consumables and research services; it acquired Aushon Biosystems in January 2018.
Financial performance and liquidity
- Q3 revenue: $10.6 million, up 85% from $5.7 million. Product revenue was $6.0 million, service and other revenue $3.0 million, and collaboration and license revenue $1.6 million.
- Nine-month revenue: $26.8 million, up 64% from $16.3 million. Product revenue was $15.9 million; service and other revenue was $8.7 million; collaboration and license revenue was $2.1 million.
- Gross profit and margin: Q3 gross profit was $5.6 million, or 53% of revenue, versus $2.6 million and 45% a year earlier. Nine-month gross profit was $12.7 million, or 48%, versus $7.1 million and 44%.
- Operating costs and losses: Q3 operating expenses were $13.3 million and net loss was $7.7 million, compared with $9.0 million and $6.6 million in Q3 2017. For nine months, operating expenses were $34.9 million and net loss was $22.2 million, versus $26.0 million and $19.6 million. Nine-month loss per share was $1.01, compared with $9.51 in 2017, when preferred-stock accretion affected the common-stockholder result.
- Cash flow: Nine-month operating cash use was $20.6 million, investing cash use $5.3 million, and financing cash use $1.3 million. Cash and cash equivalents were $51.4 million at September 30, down from $79.7 million at year-end; an additional $1.0 million was restricted cash.
- Debt: Long-term debt had a $7.6 million carrying amount; scheduled principal and end-of-term obligations totaled $7.7 million, due in 2020. The August 2018 amendment deferred principal payments to maturity and extended the loan to March 2020. No further borrowing was available under the facility.
- Balance sheet: Total assets were $71.2 million, total liabilities $23.5 million, and stockholders’ equity $47.7 million. Accumulated deficit was $166.6 million.
Material changes versus the prior comparable period
- Revenue growth reflected more instrument and consumable sales and greater use of the Simoa Accelerator Laboratory. Management attributed consumables growth partly to the larger installed instrument base.
- Q3 collaboration revenue included $1.6 million recognized after bioMérieux terminated its agreement on September 6, 2018. Termination returned future Simoa IVD licensing and intellectual-property rights to Quanterix; the one-time recognition increased reported revenue and contributed to Q3 gross margin.
- Selling, general and administrative expense rose 87% in Q3 and 69% for the nine-month period, primarily from staffing, public-company costs, Aushon-related transaction costs and intangible amortization, and stock-based compensation.
- Aushon added $2.5 million of net intangible assets and $1.3 million of goodwill at September 30. Purchase-price allocation remained preliminary.
- Cash used in investing increased mainly because of the Aushon acquisition and capital expenditures. Debt payments were lower after the amendment deferred principal.
Outlook, risks and contingencies
- Management expects significant expenses and operating losses to continue at least through the next 24 months, with spending expected to rise for sales and marketing, R&D, hiring, systems and public-company costs.
- Management believes existing cash, commercial sales and interest income will fund anticipated operating needs for at least 24 months. This is a forward-looking estimate and is subject to risks; the company cautions that actual cash needs could be higher and additional financing may not be available on acceptable terms.
- Management expects the SR-X to produce less consumables revenue per instrument than the HD-1 because of lower throughput, while anticipating that consumables will become a more important and potentially less variable revenue source as the installed base grows.
- The STRATEC supply agreement could require up to $11.6 million in fees if minimum unit-purchase commitments were not met, assuming no further purchases. The company had not accrued this amount because it expected to meet the commitment. It also reported $1.5 million payable for additional development services as performed.
- A new 137-month headquarters lease was signed October 2, 2018, with approximately $272,000 monthly base rent after initial rent concessions, annual increases and additional operating costs. The company also had $40.7 million of minimum future rent payments disclosed at September 30. Aushon’s former lease termination requires a $75,933 payment by July 2019.
- The company reported no material pending legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Assess underlying revenue growth excluding the $1.6 million deferred-revenue recognition triggered by bioMérieux’s termination, and track whether new collaborations replace that revenue.
- Reconcile the cash-flow figures: the cash-flow statement reports nine-month operating cash use of $20.6 million, while the MD&A also states $21.8 million in one passage.
- Monitor cash burn against management’s 24-month runway estimate, the 2020 debt maturity, and the costs of the new headquarters lease.
- Review progress toward STRATEC minimum purchase commitments and the final Aushon purchase-price allocation.
- Track whether product and service growth translates into sustainable margins as SG&A and other growth investments increase.