Quanterix Corporation — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Unaudited results; amounts below are in U.S. dollars.
Business context
Quanterix develops ultra-sensitive Simoa protein-detection platforms and sells analyzers, assays, consumables, and research services, primarily to life-sciences research customers. The company launched the SP-X commercially in April 2019 and began shipping its upgraded HD-X in Q3, ahead of its original schedule. In August, it completed its acquisition of UmanDiagnostics, a supplier of neurofilament light antibodies and ELISA kits.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Total revenue | $14.9m | $10.6m | $40.8m | $26.8m |
| Gross profit | $7.0m | $5.6m | $20.0m | $12.7m |
| Gross margin | 47.1% | 52.8% | 48.9% | 47.6% |
| Operating loss | $(10.2)m | $(7.7)m | $(30.1)m | $(22.1)m |
| Net loss | $(9.9)m | $(7.7)m | $(29.8)m | $(22.2)m |
| Net loss per share | $(0.37) | $(0.35) | $(1.24) | $(1.01) |
- Product revenue was $10.7m in Q3 and $29.1m for the nine months; service and other revenue was $4.2m and $11.8m, respectively. No collaboration and license revenue was recorded in 2019.
- For the nine months, operating cash used was $21.7m, investing cash used was $24.8m, and financing cash provided was $115.5m. Financing included $48.0m net proceeds from an at-the-market offering and $64.5m from an underwritten offering.
- At September 30, cash and cash equivalents were $113.3m, with $1.0m of restricted cash. Total current assets were $138.7m and current liabilities $18.2m.
- Debt carrying value was approximately $7.6m. Principal payments are scheduled in 2021; the loan’s maturity was extended to October 2021, with interest-only payments through July 2021.
- Stockholders’ equity was $136.2m and accumulated deficit was $205.3m at September 30.
Material changes versus prior periods
- Revenue rose 41.1% in Q3 and 52.6% for the nine months, primarily from higher instrument and consumables sales as the installed base grew, plus increased research services.
- Q3 gross margin fell to 47.1% from 52.8%, reflecting the prior-year bioMérieux collaboration revenue and Uman-related inventory valuation and acquired-intangible costs. Nine-month gross margin improved to 48.9% from 47.6%.
- Q3 SG&A increased 50.9% to $13.4m, mainly due to staffing, the new headquarters lease, stock compensation, and about $1.0m of Uman acquisition costs. Nine-month SG&A rose 65.6% to $38.3m.
- Q3 R&D declined 11.0% to $3.9m as HD-X development neared completion; nine-month R&D was essentially unchanged at $11.8m.
- The company raised $112.5m net through the two 2019 equity offerings. Shares outstanding increased from 22.4m at year-end 2018 to 28.0m at September 30, 2019.
Outlook, commentary, and risks
- Management expects continued significant expenses and operating losses at least through the next 24 months, while stating existing cash, commercial receipts, and interest income should cover anticipated operating cash needs for at least 12 months.
- Management expects spending to rise with expansion of sales and marketing, R&D, staffing, and operations. No specific revenue or earnings guidance was provided.
- Uman’s $21.2m purchase price included $15.7m cash and $5.5m in stock. Purchase-price allocations, including $13.5m of acquired intangible assets, were preliminary. Uman contributed $0.4m revenue and less than $0.1m net income in the quarter after acquisition.
- Operating cash use remained substantial; working capital included increased receivables and inventory. The company also incurred $10.3m in capital expenditures and paid $14.5m net for acquisitions during the nine-month period.
- Future minimum lease payments were $38.9m. Under its STRATEC supply agreement, a shortfall against minimum purchases could trigger a fee estimated at $10.3m at September 30, assuming no further qualifying purchases; the company said it expected to meet the commitment and recorded no accrual.
- The Hercules loan is secured by substantially all assets and includes restrictive covenants and a subjective material-adverse-change default provision. The company said acceleration under that provision was not probable. It reported no material litigation and no material changes to previously disclosed risk factors beyond those in its prior-quarter filing.
Important facts for investors to verify
- Whether instrument placements, including HD-X and SP-X, translate into sustained consumables growth and improving gross margins.
- Cash-burn trends and the basis for management’s estimate that liquidity will cover at least 12 months of anticipated operating needs.
- Final Uman purchase accounting, integration costs, and contribution to revenue and profitability.
- Progress toward STRATEC minimum purchase commitments and the potential fee if they are not met.
- Effects of dilution from 2019 equity offerings and ongoing stock-based compensation.
- Lease and debt obligations, including the 2021 loan repayment schedule and loan covenants.