Standard BioTools Inc. (formerly Fluidigm Corporation) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 9, 2022. The company develops and sells life-science research tools using mass cytometry and microfluidics technologies. It changed its name to Standard BioTools and its ticker to LAB after the quarter, following completion of a preferred-equity financing.
Financial performance
Amounts below are in millions of dollars except per-share data and percentages.
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $26.5 | $32.8 | Down 19% |
| Product revenue | $20.0 | $24.7 | Down 19% |
| Service revenue | $6.1 | $6.3 | Down 2% |
| Operating loss | $(27.5) | $(19.3) | Loss widened |
| Net loss | $(76.3) | $(18.8) | Loss widened materially |
| Net loss per share, diluted | $(0.99) | $(0.25) | |
| Cash used in operating activities | $(15.6) | $(12.9) | Use increased |
- Revenue mix and drivers: Consumables revenue fell 27% to $12.5 million; instrument revenue declined 2% to $7.5 million. Development revenue declined to $0.1 million from $1.5 million, and grant revenue was nil versus $0.3 million. The company attributed the overall decline primarily to lower demand for COVID-19 testing products and the completion of development milestones.
- Geography: Americas revenue fell 30% to $12.9 million; EMEA declined 6% to $8.6 million; Asia-Pacific declined 3% to $5.0 million. The filing says a weaker U.S. dollar negatively affected total revenue by 1.1 percentage points.
- Product and service gross profit and margin: Combined gross profit was $11.9 million versus $17.3 million; margin fell to 45.4% from 55.7%. The company cited lower COVID-19 consumables sales and product mix, lower manufacturing utilization, higher inventory reserves and warranty costs, and fixed depreciation and amortization against lower revenue.
- Expenses: Research and development declined 18% to $8.9 million, largely reflecting prior-year development work on products launched in 2021. Selling, general and administrative expense rose 12% to $30.9 million, including $3.4 million of private-placement costs and $1.2 million of former-CEO severance costs. Management also expected approximately $5.0 million of cash retention bonuses and $2.9 million of stock-based compensation to affect SG&A through Q1 2023.
- Unusual non-operating items: Net loss included a $37.8 million loss on the forward sale of Series B preferred stock and a $10.7 million unrealized loss on bridge loans. These fair-value charges were substantially noncash; the bridge-loan valuation was influenced largely by the common-stock price increase from $2.84 at inception to $3.59 at quarter-end.
Balance sheet, liquidity and financing
- At March 31, cash and cash equivalents were $30.0 million, with $1.0 million restricted cash and $8.4 million available under the revolving credit facility. Total assets were $271.9 million; total liabilities were $249.8 million; stockholders’ equity was $22.1 million.
- Cash, cash equivalents and restricted cash totaled $31.0 million, up $1.5 million from year-end. Investing cash use was $0.9 million, primarily capital expenditures; financing cash inflow was $18.1 million, including $25.0 million of bridge-loan proceeds and repayment of $6.8 million of revolver advances.
- Debt carrying value totaled approximately $100.0 million at quarter-end, including $35.7 million of bridge loans, $54.3 million of convertible notes and $10.1 million of term-loan debt. No revolver borrowings were outstanding; the term loan was fully drawn. The 2019 convertible notes have $55.0 million principal and mature in December 2024.
- The company reported working capital of $41.9 million using its stated measure, which excludes deferred revenue, current and deferred grant income, and restricted cash. It said it was in compliance with credit-facility terms at March 31.
- Subsequent financing: Stockholders approved the transaction April 1, and it closed April 4, 2022. The company received $225 million before expenses for Series B preferred stock; the $25.5 million bridge-loan conversion amount converted into 30,559 preferred shares. Management said the financing eliminated the previously disclosed substantial doubt about the company’s ability to continue as a going concern and expected available resources, including the financing and revolver availability, to fund needs for at least 12 months.
Outlook, commentary and material risks
- No specific revenue, earnings or cash-flow guidance is provided. Management described priorities of pursuing organic and acquisition-led growth, improving cost structure toward sustainable positive cash flow, expanding relationships across life-science customers, advancing mass cytometry, and focusing microfluidics on targeted higher-profit applications and partnerships.
- The company noted continuing uncertainty from COVID-19, reduced COVID-testing demand, China lockdowns, supply-chain constraints, inflation, foreign-exchange movements, customer research budgets and geopolitical developments, including the war in Ukraine. It also cited reliance on certain sole-source suppliers and manufacturing facilities in Singapore and Canada.
- The Series B preferred stock is senior to common stock for dividends, redemption and liquidation rights, includes change-of-control protections, and is initially convertible into approximately 75.2 million common shares, about 49.4% of common shares outstanding as of April 30, 2022 on an as-converted basis, before conversion limitations. The investors also received voting, board-designation and consent rights. These terms create potential dilution and may affect governance, liquidity and future transactions.
- COVID-19 assay Emergency Use Authorizations are limited to the public-health emergency; continued commercialization afterward may require traditional regulatory clearance or approval. The filing also identifies risks from competition, product acceptance, execution of cost and growth plans, acquisitions, debt obligations and potential future capital needs.
- A securities class action was dismissed with prejudice in February 2022; the plaintiff appealed in March. The company said it believes the claims lack merit and intends to defend the action. It reported no other pending matter expected to have a material adverse effect, while noting litigation outcomes are uncertain.
Important facts for investors to verify
- Whether the post-quarter $225 million financing, including its preferred-stock conversion, provides adequate runway as the company pursues its stated cost and growth plans.
- Whether revenue stabilizes after the sharp decline in COVID-19-related microfluidics consumables and development revenue, and whether newer instruments can offset that decline.
- Whether product and service margins recover from 45.4%, given utilization, inventory, warranty and product-mix pressures.
- The potential common-stock dilution and governance effects of Series B conversion rights, investor voting rights, board representation and consent provisions.
- Cash burn, debt maturities and covenants, including the 2019 notes due 2024 and the credit facility’s minimum Adjusted Quick Ratio requirement.
- Developments in the securities-litigation appeal, COVID-19 EUA status, and supply-chain, China and foreign-exchange risks.