Quanterix Corporation — Q2 2018 Form 10-Q
Business context and period: Unaudited results for the quarter and six months ended June 30, 2018. Quanterix sells ultra-sensitive Simoa protein-detection instruments, consumables and services, and acquired Aushon Biosystems in January 2018. The company operates as one segment and primarily serves research-use customers.
Financial performance
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $8.64 million | $5.21 million | $16.16 million | $10.55 million |
| Gross profit and margin | $3.97 million; 46.0% | $2.18 million; 41.8% | $7.15 million; 44.2% | $4.54 million; 43.1% |
| Operating loss | $(7.31) million | $(6.47) million | $(14.48) million | $(12.53) million |
| Net loss | $(7.34) million | $(6.63) million | $(14.55) million | $(13.02) million |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(13.97) million | $(10.22) million |
Q2 product revenue was $5.20 million, service and other revenue $3.17 million, and collaboration and license revenue $0.27 million. For the first half, the respective amounts were $9.95 million, $5.68 million and $0.54 million. Q2 basic and diluted loss per share was $0.34; first-half loss per share was $0.67. The 2017 per-share comparison is affected by the IPO-era preferred-stock conversion and substantially lower weighted-average common shares.
At June 30, cash and cash equivalents were $60.47 million, down from $79.68 million at year-end 2017. Current assets were $70.70 million and current liabilities $23.36 million. Debt was $7.61 million, classified as current; no additional borrowing was available under the facility. Stockholders’ equity was $53.18 million and accumulated deficit was $158.90 million.
First-half investing cash use was $3.69 million, including $3.00 million for the Aushon acquisition, net of cash acquired. Financing cash use was $1.55 million, primarily debt repayment. Cash declined by $19.21 million over the six months.
Changes versus prior comparable periods
- Revenue rose 65.8% in Q2 and 53.2% for the first half. Management attributed growth primarily to more instrument sales, increased consumables sales as the installed base expanded, and greater use of Accelerator Laboratory services.
- Service revenue nearly doubled in Q2, increasing 97.4%; first-half service revenue increased 74.7%. Product revenue increased 55.8% in Q2 and 47.1% in the first half.
- Gross margin improved in both comparisons, while operating and net losses widened. SG&A increased 59.7% in Q2 and 60.1% for the first half, reflecting hiring, public-company costs, Aushon-related transaction costs and amortization, and stock compensation.
- R&D expense declined 5.1% in Q2 and 9.9% in the first half, mainly because SR-X development costs fell after its 2017 launch; management said higher staffing and new-product development partially offset the decline.
- First-half operating cash use increased from $10.22 million to $13.97 million. The prior-year period included $8.42 million of net proceeds from preferred-stock financing; the current period had no comparable financing proceeds.
Outlook, risks and notable items
- No specific revenue or earnings guidance was provided. Management expects significant expenses and operating losses to continue for at least the next 24 months, but believes cash, commercial receipts and interest income will fund anticipated requirements for at least that period. This is subject to risks and assumptions, and actual cash needs may be greater.
- Management expects spending to increase with sales and marketing expansion, R&D, hiring, infrastructure, acquisitions and public-company costs. It expects consumables to become a more important and relatively steadier revenue contributor as the instrument base grows; SR-X is expected to generate less consumables revenue per instrument than HD-1.
- Aushon purchase consideration totaled $4.0 million: $3.2 million paid at closing and $0.8 million paid in July 2018. Purchase accounting remained preliminary; acquired intangibles were $2.95 million and goodwill $1.31 million.
- The STRATEC supply agreement carries a potential shortfall fee estimated at $11.7 million at June 30 if no additional qualifying units were purchased. The company believes it will meet the minimum purchase commitment and had not accrued this potential amount. Separately, $1.5 million is payable for additional development services as completed, expected during 2018.
- Debt principal payments were scheduled to resume in September 2018; the loan matures in March 2019. The facility includes negative covenants and a subjective material-adverse-change default provision, but no financial covenants. Scheduled debt payments, including end-of-term fees, totaled $7.69 million.
- Cash-flow use, continued losses, market acceptance of products, competition, future funding availability and execution of growth plans are key risks. The filing highlights cybersecurity and data privacy exposure, including GDPR compliance and potential penalties. No material legal proceedings or material subsequent events were reported; disclosure controls were deemed effective.
Important facts for investors to verify
- Whether revenue growth, particularly consumables and laboratory services, continues and translates into improved gross margins and operating leverage.
- Cash runway against the reported operating cash burn and management’s estimate of at least 24 months of funding adequacy.
- Debt repayment progress and compliance with the loan agreement, including the expected September 2018 resumption of principal payments.
- Whether Quanterix meets STRATEC minimum-purchase requirements and avoids the potential shortfall fee.
- Final Aushon purchase-price allocation, integration results, and the contribution of acquired operations to revenue and costs.