Standard BioTools Inc. — Q1 2023 Form 10-Q
Business context and reporting period. The unaudited quarter ended March 31, 2023. Standard BioTools develops and sells life-science instruments, consumables and services using proteomics (mass cytometry) and genomics (microfluidics) technologies.
Financial performance
Amounts are in millions of dollars unless otherwise stated. Comparisons are with Q1 2022.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $25.1 | $26.5 |
| Product revenue | $17.4 | $20.0 |
| Service revenue | $6.9 | $6.1 |
| Operating loss | $(16.6) | $(27.5) |
| Net loss | $(16.8) | $(76.3) |
| Net loss per share, basic and diluted | $(0.21) | $(0.99) |
| Operating cash flow | $(8.5) | $(15.6) |
- Total revenue declined 5%. Instrument revenue fell 21% and consumables revenue fell 8%; service revenue increased 12%. Foreign exchange reduced revenue by approximately $0.5 million, or 1.9%.
- Proteomics revenue increased 10% to $15.2 million; genomics revenue declined 22% to $9.9 million. Genomics product and service revenue fell 28%, including lower instrument sales and reduced COVID-19 test-product sales.
- Product and service gross profit was $11.3 million, down 5%; the combined product and service margin improved to 46.6% from 45.4%. The filing attributes the margin improvement to mix and pricing, partly offset by lower manufacturing utilization and higher warranty and service costs.
- Research and development expense decreased 28% to $6.4 million and selling, general and administrative expense decreased 28% to $22.3 million. Operating loss narrowed 40%. Prior-year results included $37.8 million of preferred-stock forward-sale losses and $10.7 million of bridge-loan fair-value losses, which did not recur in Q1 2023.
- Investing activities provided $43.2 million, primarily from net sales and maturities of short-term investments; this was not operating cash generation. Financing activities used $2.6 million, including $2.5 million of share repurchases.
Financial position and liquidity
- At March 31, cash and cash equivalents were $113.7 million and short-term investments were $40.9 million, totaling $154.5 million, versus $165.8 million at December 31, 2022. Current assets were $194.9 million and current liabilities were $43.8 million.
- Total debt carrying value was $65.1 million: $54.7 million of convertible notes and $10.3 million under the term loan. The $55 million principal amount of 2019 convertible notes matures December 1, 2024. The term loan has a stated July 2025 maturity, with a possible earlier June 2024 maturity depending on specified convertible-debt conditions; scheduled principal installments begin August 2023.
- No revolver borrowings were outstanding; $7.1 million was available. The facility was scheduled to mature August 2, 2023. Its minimum adjusted quick ratio and liquidity covenants apply. Following SVB’s closure, First Citizens Bank assumed the deposits and loans; SVB operates as its division.
- Series B redeemable preferred stock was recorded as $311.3 million of mezzanine equity, with an aggregate liquidation preference of $255.6 million. It ranks senior to common stock and may convert into common shares or, under specified circumstances, require cash redemption or repurchase.
- Management stated existing liquidity and capital sources were expected to support operations for the 12 months following the filing date.
Changes, outlook and notable items
- Management’s priorities are revenue growth, improved operating discipline and strategic capital allocation. The restructuring plan includes workforce reductions, footprint and manufacturing changes, and cost controls. The company expected to complete actions by year-end 2023 and estimated up to $2.0 million of additional restructuring charges for the remainder of 2023.
- The company subleased an additional 25% of its South San Francisco headquarters in February 2023; 50% of the space was subleased as of quarter-end. It expects $9.1 million of sublease income over the 77-month term, beginning December 2023. A prior sublease is expected to generate $4.7 million over its term.
- No specific revenue or earnings guidance is provided. Management notes results are subject to market acceptance, execution of improvement initiatives, product quality and development costs, and broader economic and geopolitical conditions.
- The securities class action dismissal was affirmed by the Ninth Circuit in February 2023. The company reported no accrued liabilities for the other legal matters discussed and stated outcomes of legal proceedings are uncertain.
- Management concluded disclosure controls were effective at a reasonable assurance level as of March 31, 2023; it reported no material change in internal control over financial reporting during the quarter.
Investor verification points
- Track revenue trends by segment, especially genomics instrument and consumables sales, COVID-19 product exposure, and proteomics growth.
- Assess whether cost reductions and restructuring improve operating performance without impairing product development, customer support or revenue growth.
- Review cash burn and liquidity separately from investment maturities and sales; confirm revolver renewal or replacement and compliance with credit covenants.
- Monitor the 2019 notes’ December 2024 maturity, the term loan’s possible accelerated maturity, and the potential dilution or cash obligations associated with Series B preferred stock.
- Consider the scale of the preferred-stock liquidation preference, continuing share-based compensation and share-repurchase activity when evaluating common-stock dilution and capital allocation.