Standard BioTools(LAB) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section covers financial statements, management's analysis, market risk, and internal controls Item 1. Financial Statements Q1 2020 financials show revenue decreased to $27.6 million, net loss narrowed to $16.0 million, and assets increased Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity as of March 31, 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $34,992 | $21,661 | | Total current assets | $82,433 | $96,096 | | Goodwill | $106,328 | $104,108 | | Total assets | $290,219 | $264,812 | | Liabilities & Equity | | | | Total current liabilities | $35,364 | $32,821 | | Convertible notes, net | $53,920 | $53,821 | | Total liabilities | $148,723 | $111,200 | | Total stockholders' equity | $141,496 | $153,612 | - Total assets increased to $290.2 million as of March 31, 2020, from $264.8 million at December 31, 2019, primarily driven by an increase in operating lease right-of-use assets and goodwill[10] - Total liabilities increased to $148.7 million from $111.2 million, largely due to a significant increase in non-current operating lease liabilities[10] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net loss for the three months ended March 31, 2020 Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total revenue | $27,617 | $30,111 | | Loss from operations | $(14,942) | $(14,206) | | Loss from extinguishment of debt | $0 | $(9,000) | | Net loss | $(15,980) | $(25,465) | | Net loss per share, basic and diluted | $(0.23) | $(0.44) | - Total revenue decreased by 8.3% year-over-year, from $30.1 million in Q1 2019 to $27.6 million in Q1 2020[13] - Net loss significantly narrowed to $16.0 million in Q1 2020 from $25.5 million in Q1 2019, primarily because the prior-year period included a $9.0 million loss on extinguishment of debt[13] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,295) | $(20,130) | | Net cash provided by (used in) investing activities | $17,460 | $(9,757) | | Net cash provided by (used in) financing activities | $(503) | $147 | | Net increase (decrease) in cash | $12,331 | $(29,767) | | Cash at end of period | $36,067 | $65,634 | - Net cash used in operating activities improved significantly to $4.3 million in Q1 2020 from $20.1 million in Q1 2019, despite a similar operating loss, mainly due to changes in working capital and the absence of a large non-cash loss on debt extinguishment[20] - Investing activities provided $17.5 million in cash, driven by $23.6 million in proceeds from maturities of investments, partially offset by a $5.2 million acquisition[20] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements - On January 17, 2020, the company acquired InstruNor AS for $7.2 million, consisting of $5.2 million in cash and $2.0 million in stock, resulting in $2.2 million of goodwill[63][65][66] - In March 2020, the company recognized $3.1 million in license revenue from a settlement agreement for intellectual property infringement claims[34] - Due to the impact of COVID-19, a quantitative impairment test was performed on goodwill and developed technology intangibles during Q1 2020, with no impairment recognized[74] - In Q1 2019, the company retired $150.0 million of its 2018 Convertible Notes by converting them into 19.5 million shares of common stock, recognizing a $9.0 million loss on the extinguishment[87] - Subsequent to the quarter end, on April 21, 2020, the company amended its Revolving Credit Facility with Silicon Valley Bank, extending the maturity date by two years to August 2, 2022[148][149] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 8% year-over-year revenue decline to $27.6 million for Q1 2020, attributing it to the COVID-19 pandemic's impact on customer facility closures, which reduced demand for mass cytometry instruments and consumables. This was partially offset by license revenue and higher microfluidics instrument sales. The gross margin decreased due to fixed costs on lower revenue. Operating expenses remained relatively flat. The net loss narrowed significantly due to the absence of a $9.0 million loss on debt extinguishment recorded in the prior year. The company is actively managing expenses, including salary reductions, in response to the pandemic and believes its liquidity is sufficient for at least the next 18 months Recent Developments Highlights the company's response to COVID-19, including operational adjustments and research contributions - The company is actively responding to the COVID-19 pandemic as a designated essential business, but has experienced a significant slowdown in customer activities due to widespread lab closures[161][162] - Fluidigm's microfluidics and mass cytometry technologies are being used by researchers responding to the pandemic for virus detection and immune profiling[163] - In response to market uncertainty, the company has implemented operating expense reductions, including salary cuts and constrained hiring[164] Results of Operations Analyzes revenue, gross margin, and operating expenses, explaining Q1 2020 financial performance changes Revenue by Source (in thousands) | Source | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Instruments | $9,471 | $12,840 | (26)% | | Consumables | $9,510 | $11,987 | (21)% | | Product revenue | $18,981 | $24,827 | (24)% | | Service revenue | $5,186 | $5,284 | (2)% | | Grant revenue | $350 | $0 | NA | | License revenue | $3,100 | $0 | NA | | Total revenue | $27,617 | $30,111 | (8)% | Revenue by Geography (in thousands) | Geography | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Americas | $14,844 | $12,971 | 14% | | EMEA | $8,096 | $8,156 | (1)% | | Asia-Pacific | $4,677 | $8,984 | (48)% | | Total revenue | $27,617 | $30,111 | (8)% | - The 8% decrease in total revenue was driven by COVID-19 related shutdowns of customer facilities, impacting mass cytometry instruments and consumables. The decline was partially offset by $3.1 million in license revenue[178] - Product and service margin decreased by 2.6 percentage points to 53.8% from 56.4% year-over-year, due to the impact of fixed costs on a lower revenue base and unfavorable product mix[186] - Interest expense decreased by 67% to $0.9 million, and the prior year included a $9.0 million loss on extinguishment of debt, which were the primary drivers for the reduced net loss in Q1 2020[192] Liquidity and Capital Resources Discusses cash position, debt, and ability to meet short-term and long-term financial obligations - As of March 31, 2020, principal sources of liquidity consisted of $35.0 million in cash and cash equivalents, $13.5 million in short-term investments, and $8.6 million available under the Revolving Credit Facility[196] - Net cash used in operating activities was $4.3 million, a significant improvement from $20.1 million in the prior-year period, primarily due to working capital changes and the absence of non-cash charges related to debt extinguishment[199][200] - The company believes its existing cash, cash equivalents, and investments will be sufficient to meet working capital and capital expenditure needs for at least the next 18 months[215] - In November 2019, the company issued $55.0 million of 5.25% convertible senior notes due 2024 and used most of the proceeds to retire a portion of its 2014 notes, effectively refinancing its debt to a later maturity[209] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposures are from fluctuations in foreign currency exchange rates and interest rates. Revenue is generally denominated in local currencies, while expenses are primarily in U.S. dollars, Singapore dollars, and Canadian dollars. In Q1 2020, the company recorded a foreign currency loss of $1.0 million. The company does not currently use hedging contracts. Interest rate risk on its cash and investment portfolio is considered not material - The company is exposed to foreign currency exchange risk as international operations expand. For Q1 2020, a foreign currency loss of $1.0 million was recorded, compared to a gain of $45 thousand in Q1 2019[222] - Interest rate sensitivity is considered low, as cash, cash equivalents, and investments of $48.5 million are held for working capital purposes in short-term instruments. A 10% change in interest rates would not have a material impact[223] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of March 31, 2020, and concluded they were effective at a reasonable assurance level. There were no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[225] - No changes occurred in the company's internal control over financial reporting during the first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, these controls[226] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, other disclosures, and a list of filed exhibits Item 1. Legal Proceedings The company is involved in legal proceedings from time to time in the normal course of business. Management currently believes that the final outcome of any pending matters will not have a material adverse effect on the company's business, financial condition, or cash flows - The company is involved in various legal proceedings in the ordinary course of business but does not currently believe any pending matters will have a material adverse effect on its financial condition or results of operations[230] Item 1A. Risk Factors The company faces numerous risks, with the most immediate being the material adverse effect of the COVID-19 pandemic on operations and financial performance, the extent of which remains unpredictable. Other significant risks include a history of losses, highly competitive markets, reliance on single-source suppliers, potential manufacturing disruptions at its facilities in Singapore and Canada, dependence on customer R&D spending, and the need to protect its intellectual property. Financial risks include stock price volatility, potential dilution from convertible notes, and the need for future capital Risks Related to Fluidigm's Business and Strategy Outlines key business risks: COVID-19 impact, historical losses, competition, and supply chain vulnerabilities - The COVID-19 pandemic is having a material adverse effect on operations and financial performance due to reduced customer demand, particularly from academic research labs, and its full impact remains uncertain[233][235] - The company has a history of significant net losses, with an accumulated deficit of $639.7 million as of March 31, 2020, and may continue to incur losses for the foreseeable future[242] - The company faces intense competition from established life science companies with greater resources, and its success depends on achieving market acceptance for its relatively new technologies[244][249] - Manufacturing is concentrated in single facilities (Singapore for genomics/IFCs, Canada for mass cytometry), making the company vulnerable to disruptions from natural disasters, public health crises, or operational issues[264] - The business relies on single and sole source suppliers for critical components, such as specialized polymers for IFCs and detectors for Helios systems, posing a risk of supply chain interruption[273][274] Risks Related to Intellectual Property Details risks in protecting proprietary technology, potential litigation, and reliance on third-party licenses - The company's commercial success depends on its ability to protect its proprietary technology through patents and other means, which is uncertain and may not provide a competitive advantage[323] - The company may be involved in costly and time-intensive lawsuits to enforce its patents or defend against infringement claims from third parties[326] - Fluidigm depends on technologies licensed from third parties, and the loss of these licenses could prevent the sale of its products. Some licensed technologies are subject to domestic manufacturing requirements due to U.S. government funding, which could pose a risk as manufacturing is currently done in Singapore[331][334] Risks Related to Our Common Stock Addresses risks of stock price volatility, anti-takeover provisions, and dilution from convertible notes - The company's stock price may fluctuate significantly due to low trading volume and a high concentration of ownership, with the top six stockholders controlling approximately 46.3% of outstanding shares as of year-end 2019[338][339] - Anti-takeover provisions in the company's charter documents and Delaware law could make a potential acquisition more difficult and may prevent stockholders from replacing management[341] - Conversion of the outstanding 2014 and 2019 Convertible Notes will dilute the ownership interest of existing stockholders and could depress the market price of the common stock[344] Item 5. Other Information No other material information is reported for this period Item 6. Exhibits Lists all documents filed as exhibits, including certifications and XBRL data - The exhibit list includes certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, as well as XBRL interactive data files[347][349]