Fluidigm Corporation (now Standard BioTools) — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. The filing registrant is Fluidigm Corporation. The company develops and sells life-sciences research instruments, consumables, and related services. Unless noted, financial amounts below are in millions of U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Total revenue | $23.9 | $28.2 | $49.4 | $57.2 |
| Operating loss | $(16.5) | $(18.1) | $(34.0) | $(37.0) |
| Net loss | $(16.9) | $(18.6) | $(34.1) | $(38.5) |
| Net loss per share | $(0.58) | $(0.64) | $(1.17) | $(1.33) |
| Product margin | 45% | 55% | 47% | 56% |
| Service margin | 73% | 63% | 73% | 65% |
Q2 product revenue fell 21% to $19.5 million; instruments declined 25% and consumables 17%. Service revenue increased 27% to $4.3 million, supported by a larger installed base, particularly mass-cytometry instruments. For the first half, product revenue fell 19% while service revenue grew 22%. Management attributed the product declines chiefly to lower genomics instrument and consumables sales, partly offset by mass-cytometry products.
Operating expenses declined: R&D was down 25% in Q2 and 22% for the first half; selling, general and administrative expense was down 12% in both periods. These reductions reflected cost-saving actions, including workforce and facility reductions. Lower revenue, lower production volumes, excess and obsolete inventory expense, and fixed technology amortization weighed on product margins; service margins improved with lower labor and material costs.
Cash and cash equivalents were $39.6 million and short-term investments were $2.4 million at June 30, versus $35.0 million and $24.4 million, respectively, at December 31, 2016. First-half operating cash use was $16.8 million, compared with $15.1 million a year earlier. Investing activities provided $21.1 million, mainly from investment maturities and sales; cash increased $4.6 million overall. Working capital excluding deferred revenue was $53.9 million.
Convertible notes had $201.3 million principal outstanding and a $195.1 million net carrying value. The notes bear 2.75% interest and mature in 2034; first-half interest expense was $2.9 million. Total liabilities were $254.8 million and stockholders’ equity was $23.9 million. The company reported an accumulated deficit of $473.8 million.
Changes, outlook, and notable matters
- Revenue decreased 15% in Q2 and 14% for the first half year over year. Net losses narrowed, while product margins weakened. Lower operating expenses partly offset the revenue decline.
- Management expected R&D and SG&A expense to decrease in 2017 as cost-saving initiatives continued. It gave no specific revenue or profitability guidance and stated it could not assure future revenue growth.
- Management believed existing cash, cash equivalents, and investments would fund working capital and capital expenditure needs for at least 18 months. It cautioned that weaker cash generation, higher costs, or unsuccessful savings could require additional financing or further reductions in spending.
- On August 3, 2017, the company entered into an at-the-market equity sales agreement for up to $30 million of common stock. It is not obligated to sell shares; sales could dilute existing holders. Cowen’s compensation may be up to 3% of gross proceeds.
- A July 2017 settlement with Thermo Fisher required a one-time $3.0 million payment for release and dismissal of claims. The company accrued an additional $1.0 million of legal expense in Q2 and reported $2.0 million accrued at June 30, net of a $1.0 million insurance receivable.
- The company cited competitive pressure, declining single-cell genomics demand, prior C1 IFC performance issues, customer spending variability, and manufacturing and sole-source supplier dependence as material business risks. Goodwill and net intangible assets totaled about $184.5 million, exposing results to potential impairment. Disclosure controls were assessed as effective.
- The Tax Benefit Preservation Plan expired August 1, 2017. The company expected adoption of the new revenue standard in Q1 2018 and did not expect a material financial-statement impact, subject to completion of its assessment.
Key facts for investors to verify
- Whether product demand—especially genomics instruments, IFCs, and other consumables—stabilizes, and whether mass-cytometry growth can offset declines.
- Whether cost reductions improve operating cash burn without materially impairing product development, commercialization, or customer support.
- Cash runway assumptions and any actual share sales under the $30 million ATM program, including resulting dilution.
- Settlement payment timing and resolution of Thermo Fisher claims, as well as any further material legal or intellectual-property exposure.
- Product-margin trends, inventory charges, and impairment indicators for goodwill and intangible assets.