Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 6, 2023 (the “Annual Report on Form 10-K”). In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results, performance, or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks, and uncertainties, including, but not limited to, those set forth under the section titled “Part II, Item 1A. Risk Factors” and “Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q or under the section titled “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K, as may be updated by Part II, Item 1A. Risk Factors in our subsequently filed Quarterly Reports on Form 10-Q. Unless the context otherwise requires, the terms “Quanterix,” the “Company,” “we,” “it,” “us, “and “our” in this Quarterly Report on Form 10-Q refer to Quanterix Corporation and its consolidated subsidiaries.
Overview
We are a life sciences company that has developed next generation, ultra-sensitive digital immunoassay platforms that advance precision health for life sciences research and diagnostics. Our platforms are based on our proprietary digital “Simoa” detection technology. Our Simoa bead-based and planar array platforms enable customers to reliably detect protein biomarkers in extremely low concentrations in blood, serum, and other fluids that, in many cases, are undetectable using conventional, analog immunoassay technologies, and also allow researchers to define and validate the function of novel protein biomarkers that are only present in very low concentrations. These capabilities provide our customers with insight into the role of protein biomarkers in human health that has not been possible with other existing technologies and enable researchers to unlock unique insights into the continuum between health and disease. We believe this greater insight will enable the development of novel therapies and diagnostics and facilitate a paradigm shift in healthcare from an emphasis on treatment to a focus on earlier detection, monitoring, prognosis and, ultimately, prevention.
Our instruments are designed to be used either with assays fully developed by us, including all antibodies and supplies required to run the tests, or with “homebrew” kits where we supply some of the components required for testing, and the customer supplies the remaining required elements. Accordingly, our installed instruments generate a recurring revenue stream. As the installed base of the Simoa instruments increases, we expect total consumables revenue to increase.
We commercially launched our first immunoassay platform, the Simoa HD-1, in 2014. The HD-1 is based on our bead-based technology and assays run on the HD-1 are fully automated. We initiated commercial launch of the SR-X instrument in 2017. The SR-X utilizes the same Simoa bead-based technology and assay kits as the HD-1 in a compact benchtop form with a lower price point, more flexible assay preparation, and a wider range of applications. In 2019, we launched the Simoa HD-X, an upgraded version of the Simoa HD-1, which replaces the HD-1. The HD-X has been designed to deliver significant productivity and operational efficiency improvements, as well as greater user flexibility. By June 30, 2023, approximately 81% of the HD instrument installed base was HD-X instruments.
With our acquisition of Aushon BioSystems, Inc. in 2018, we acquired a CLIA-certified laboratory, as well as their proprietary sensitive planar array detection technology. Leveraging our proprietary sophisticated Simoa image analysis and data analysis algorithms, we further refined the planar array technology to develop the SP-X instrument to provide sensitivity similar to that found in our Simoa bead-based platform. We commercially launched the SP-X instrument in 2019.
Our wholly-owned subsidiary UmanDiagnostics AB (“Uman”), a company located in Umeå, Sweden, supplies neurofilament light (“Nf-L”), antibodies, and enzyme-linked immunoassay (“ELISA”) kits, which are used by
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researchers and biopharmaceutical and diagnostics companies world-wide in the detection of Nf-L to advance the development of therapeutics and diagnostics for neurodegenerative conditions.
We also provide contract research services for customers through our CLIA-certified Accelerator Laboratory. The Accelerator Laboratory provides customers with access to Simoa technology, and supports multiple projects and services, including sample testing, homebrew assay development, and custom assay development. To date, we have completed over 2,000 projects for more than 450 customers from all over the world using our Simoa platforms.
We sell our instruments, consumables and services to the life science, pharmaceutical, and diagnostics industries through a direct sales force and support organizations in North America and Europe, and through distributors or sales agents in other select markets, including Australia, Brazil, China, Czech Republic, India, Hong Kong, Israel, Japan, New Zealand, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, and the United Arab Emirates. In addition, Uman sells Nf-L antibodies and Nf-L ELISA kits directly, and in conjunction with us and another distributor, worldwide. We have an extensive base of customers in academic and governmental research institutions, as well as pharmaceutical, biotechnology, and contract research companies.
As of June 30, 2023, we had cash and cash equivalents of $329.5 million. Since our inception, we have incurred annual net losses. Our net losses were $6.1 million and $12.2 million for the three and six months ended June 30, 2023 and $24.9 million and $43.1 million for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $414.3 million and stockholders' equity of $355.4 million.
We expect to continue to incur significant expenses and operating losses at least through the next 24 months. We expect our expenses will increase as we:
● expand our sales and marketing efforts to further commercialize our products;
● expand our research and development efforts to improve our existing products and develop and launch new products, particularly if any of our products are deemed by the U.S. Food and Drug Administration (the “FDA”) to be medical devices or otherwise subject to additional regulation by the FDA;
● seek Premarket Approval (“PMA”) or 510(k) clearance from the FDA for our existing products or new products if or when we decide to market products for use in the prevention, diagnosis, or treatment of a disease or other condition;
● hire additional personnel and grow our employee headcount;
● strategically acquire and integrate companies or technologies that may be complementary to our business;
● intend to invest in our diagnostics business in support of the launch of LucentAD and other diagnostics initiatives;
● enter into collaboration arrangements, if any, or in-license other products and technologies; and
● add operational, financial, and management information systems.
Recent Business Developments
In July 2023, we launched LucentAD, a blood-based biomarker test to assist in the evaluation of patients experiencing cognitive symptoms consistent with the early signs of Alzheimer’s disease. The test has not been cleared or approved by the FDA.
On September 21, 2022, we entered into a contract with the National Institutes of Health (the “NIH”) with a total award value of $1.7 million (the “NIH Grant”). The NIH is an agency of the U.S. Department of Health and Human Services and under the NIH Grant granted us funding in support of the development of certain point-of-care diagnostic technologies through collaborative efforts. Grant funding is to be used solely for activities related to the point-of-care diagnostic device development project and the contract period runs through August 2025. Receipt of the award value occurs throughout the term of the contract period and after we submit for reimbursement of activities related to the grant. As of June 30, 2023, we had not received any of the award value.
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During the three and six months ended June 30, 2023, grant revenue recognized and research and development expense incurred were immaterial.
On March 24, 2022, we entered into a contract with the Alzheimer’s Drug Discovery Foundation (the “ADDF”) with a total funding value of $2.3 million (the “ADDF Grant”). The ADDF is a charitable venture philanthropy entity that granted us funding in support of certain activities for the development of an in vitro diagnostic test for early detection of Alzheimer's disease. The ADDF Grant restricts our use of the granted funds solely for activities related to our Alzheimer’s diagnostic test development project and the contract period runs through June 2024. Receipt of the contract funding was subject to achievement of predefined milestones and as of June 30, 2023, we had received the total funding value of $2.3 million.
During the three and six months ended June 30, 2023 and 2022, grant revenue recognized and research and development expense incurred were immaterial.
On February 25, 2022, we entered into a Master Collaboration Agreement with Eli Lilly and Company (“Lilly”) establishing a framework for future projects focused on the development of Simoa immunoassays (the “Lilly Collaboration Agreement”). We also entered into a statement of work under the Lilly Collaboration Agreement to perform assay research and development services within the field of Alzheimer’s disease. In connection with the Lilly Collaboration Agreement, we received a non-refundable up-front payment of $5.0 million during the first quarter of 2022, which was recognized over a one-year period. In addition, under the statement of work, we receive $1.5 million per calendar, which began in the first quarter of 2022. The statement of work automatically renews on a quarterly basis until Lilly provides a termination notice in accordance with the terms of the Lilly Collaboration Agreement. As of June 30, 2023, the Lilly Collaboration Agreement and the statement of work were still in effect.
Concurrent with the execution of the Lilly Collaboration Agreement, we entered into a Technology License Agreement (the “Lilly License”) under which Lilly granted us a non-exclusive license to Lilly’s proprietary pTau217 antibody technology for use in research use only products and services and future in vitro diagnostics applications within the field of Alzheimer’s disease. In consideration of the Lilly License, we paid an upfront fee, are required to make milestone payments based on the achievement of predetermined regulatory and commercial events, and will pay royalties on net sales of licensed products.
We recognized revenue from the Lilly Collaboration Agreement of $1.5 million and $3.0 million during the three and six months ended June 30, 2023, respectively, and $2.7 million and $5.4 million during the three and six months ended June 30, 2022, respectively.
Restructuring and Strategic Re-Alignment
Following a strategic review and assessment of our operations and cost structure, on August 8, 2022, we announced a restructuring and strategic re-alignment plan (the “Restructuring Plan”). As part of the Restructuring Plan, we began an assay redevelopment program with the ultimate objective of improving our ability to manufacture and deliver high-quality assays at scale. The Restructuring Plan aligns our investments to best serve the needs of our customers, focuses our innovation efforts on key platforms, and provides a foundation for our entry into translational pharma and clinical markets, which we believe will be required to access new growth categories. In accordance with the Restructuring Plan, we implemented a workforce reduction, which was substantially completed by the end of the third quarter of 2022. The Restructuring Plan included the elimination of 119 positions and other cost-saving measures.
As a result of the Restructuring Plan, we performed an impairment assessment of our goodwill, long-lived assets, including operating lease right-of-use assets, and intangibles. The assessments resulted in us recording an impairment charge of $25.6 million during the year ended December 31, 2022. The impairment charge included (1) $16.3 million associated with the right-of-use asset and property and equipment at leased facilities, (2) $8.2 million of goodwill (refer to Note 11 – Goodwill in the Notes to Consolidated Financial Statements), and (3) $1.1 million for software costs related to projects that were rationalized as part of the Restructuring Plan. There were no impairment charges recorded associated with the Restructuring Plan during the three and six months ended June 30, 2023. There were no material changes to the Restructuring Plan or the exit and disposal costs in 2023.
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Overall, as a result of the Restructuring Plan, we expect to realize estimated annualized operating expense savings of approximately $25 million.
Comparison of Results of Operations for the Three Months Ended June 30, 2023 and 2022 (in thousands, except percentages):
Three Months Ended June 30,
Increase (Decrease)
2023
% of revenue
2022
% of revenue
Amount
%
Revenues:
Product revenue
$
19,692
63
%
$
14,785
63
%
$
4,907
33
%
Service revenue
10,552
34
%
8,548
37
%
2,004
23
%
Collaboration and license revenue
629
2
%
92
—
%
537
584
%
Grant revenue
156
1
%
75
—
%
81
108
%
Total revenues
31,029
100
%
23,500
100
%
7,529
32
%
Cost of goods sold and services:
Cost of product revenue
7,236
23
%
9,921
42
%
(2,685)
(27)
%
Cost of service revenue
4,655
15
%
4,868
21
%
(213)
(4)
%
Total costs of goods sold and services
11,891
38
%
14,789
63
%
(2,898)
(20)
%
Gross profit
19,138
62
%
8,711
37
%
10,427
120
%
Operating expenses:
Research and development
5,946
19
%
6,625
28
%
(679)
(10)
%
Selling, general, and administrative
21,591
70
%
27,045
115
%
(5,454)
(20)
%
Other lease costs
1,162
4
%
—
—
%
1,162
—
Restructuring
—
—
%
—
—
%
—
—
Total operating expenses
28,699
92
%
33,670
143
%
(4,971)
(15)
%
Loss from operations
(9,561)
(31)
%
(24,959)
(106)
%
15,398
62
%
Interest income, net
3,886
13
%
552
2
%
3,334
(604)
%
Other expense, net
(154)
—
%
(358)
(2)
%
204
(57)
%
Loss before income taxes
(5,829)
(19)
%
(24,765)
(105)
%
18,936
76
%
Income tax expense, net
(235)
(1)
%
(137)
(1)
%
(98)
72
%
Net loss
$
(6,064)
(18)
%
$
(24,902)
(106)
%
$
18,838
76
%
Revenues
Total revenues increased $7.5 million, or 32%, to $31.0 million for the three months ended June 30, 2023, compared to $23.5 million for the three months ended June 30, 2022.
Product revenue of $19.7 million for the three months ended June 30, 2023 consisted of instrument sales of $3.5 million and sales of consumables and other products of $16.2 million. This represented an increase of $4.9 million, or 33%, as compared to product revenue of $14.8 million for the three months ending June 30, 2022, which consisted of $5.6 million in instrument sales and $9.2 million in sales of consumables and other products. The increase in product revenue resulted primarily from (1) increased sales of consumables, (2) increased average selling prices, and (3) a one-time increase from the receipt of ordinary shares from UltraDx with a fair value of $1.0 million that was accounted as variable consideration under the UltraDx Agreement (as a Level 3 financial asset with minimal market activity or other data available, the fair value was determined primarily using the third-party purchase price of similar instruments issued by UltraDx). These increases were partially offset by lower instrument sales due to reduced demand in certain markets. We expect this instrument trend to continue for the remainder of 2023.
Service revenue was $10.6 million for the three months ended June 30, 2023, compared to $8.5 million for the three months ended June 30, 2022, an increase of $2.1 million, or 23%, primarily due to increased Accelerator Laboratory revenue, partially offset by lower revenue recognized from the Lilly Collaboration Agreement.
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Collaboration and license revenue was $0.6 million for the three months ended June 30, 2023, compared to $0.1 million for the three months ended June 30, 2022, an increase of $0.5 million, or 584%. This was due to a one-time increase from the expiration of a previously paid for option to expand the scope of the Abbott License Agreement.
Grant revenue was $0.2 million for the three months ended June 30, 2023, compared to $0.1 million for the three months ended June 30, 2022.
Cost of Goods Sold and Services
Cost of goods sold and services decreased $2.9 million, or 20%, to $11.9 million for the three months ended June 30, 2023 compared to $14.8 million for the three months ended June 30, 2022, primarily due to decreased cost of product revenue.
Cost of product revenue decreased $2.7 million, or 27%, to $7.2 million for the three months ended June 30, 2023, compared to $9.9 million for the three months ended June 30, 2022, as a result of improved inventory management and lower instrument sales. Cost of service revenue decreased $0.2 million, or 4%, to $4.7 million for the three months ended June 30, 2023, compared to $4.9 million for the three months ended June 30, 2022 as a result of decreased lab services expenses.
Research and Development
Research and development expense decreased $0.7 million, or 10%, to $5.9 million for the three months ended June 30, 2023, as compared to $6.6 million for the three months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan.
Selling, General, and Administrative
Selling, general and administrative expense decreased $5.4 million, or 20%, to $21.6 million for the three months ended June 30, 2023, as compared to $27.0 million for the three months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan. Included within selling, general, and administrative expense are $1.6 million and $1.9 million of shipping and handling costs for product sales for the three months ended June 30, 2023 and 2022, respectively.
Other Lease Costs
During the three months ended June 30, 2023, we incurred other lease costs of $1.2 million. As part of the Restructuring Plan, we are not utilizing the leased office and laboratory facilities in Bedford, Massachusetts and are evaluating alternatives, including sub-leasing the facilities . Other lease costs include amortization of the related operating lease right-of-use assets and other leased facility operating expenses from periods after the impairment and the determination that the facilities would not be utilized. There were no similar charges for the three months ended June 30, 2022.
Interest Income, Net
Interest income, net was $3.9 million for the three months ended June 30, 2023, as compared to $0.6 million for the three months ended June 30, 2022, primarily due to higher interest rates earned on cash and cash equivalents.
Other Expense, Net
Other expense, net was ($0.2) million in the three months ended June 30, 2023, as compared to ($0.4) million in the three months ended June 30, 2022.
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Income Tax Expense, Net
Income tax expense, net was ($0.2) million for the three months ended June 30, 2023, as compared to ($0.1) million for the three months ended June 30, 2022, consisting primarily of a provision recorded on the operating results of our foreign subsidiaries.
Comparison of Results of Operations for the Six Months Ended June 30, 2023 and 2022 (in thousands, except percentages):
The following table sets forth select Consolidated Statements of Operations data, and such data as a percentage of total revenues (in thousands, except percentages):
Six Months Ended June 30,
Increase (Decrease)
2023
% of revenue
2022
% of revenue
Amount
%
Revenues:
Product revenue
$
38,979
65
%
$
35,441
67
%
$
3,538
10
%
Service revenue
19,131
32
%
17,358
33
%
1,773
10
%
Collaboration and license revenue
997
2
%
178
—
%
819
460
%
Grant revenue
378
1
%
75
—
%
303
404
%
Total revenue
59,485
100
%
53,052
100
%
6,433
12
%
Cost of goods sold and services:
Cost of product revenue
14,269
24
%
20,667
39
%
(6,398)
(31)
%
Cost of service revenue
9,152
15
%
9,115
17
%
37
0
%
Total costs of goods sold and services
23,421
39
%
29,782
56
%
(6,361)
(21)
%
Gross profit
36,064
61
%
23,270
44
%
12,794
55
%
Operating expenses:
Research and development
10,666
18
%
13,659
26
%
(2,993)
(22)
%
Selling, general, and administrative
42,474
71
%
52,757
99
%
(10,283)
(19)
%
Other lease costs
1,938
3
%
—
—
%
1,938
—
Restructuring
(33)
—
%
—
—
%
(33)
—
Total operating expenses
55,045
92
%
66,416
125
%
(11,371)
(17)
%
Loss from operations
(18,981)
(31)
%
(43,146)
(81)
%
24,165
56
%
Interest income, net
7,335
12
%
604
1
%
6,731
(1,114)
%
Other expense, net
(146)
—
%
(575)
(1)
%
429
(75)
%
Loss before income taxes
(11,792)
(19)
%
(43,117)
(81)
%
31,325
73
%
Income tax (expense) benefit, net
(375)
(1)
%
62
—
%
(437)
(705)
%
Net loss
$
(12,167)
(18)
%
$
(43,055)
(81)
%
$
30,888
72
%
Revenues
Total revenues increased $6.4 million, or 12%, to $59.5 million for the six months ended June 30, 2023, compared to $53.1 million for the six months ended June 30, 2022.
Product revenue of $39.0 million for the six months ended June 30, 2023 consisted of instrument sales of $8.8 million and sales of consumables and other products of $30.2 million. This represented an increase of $3.5 million, or 10%, as compared to product revenue of $35.4 million for the six months ending June 30, 2022, which consisted of $11.8 million in instrument sales and $23.6 million in sales of consumables and other products. The increase in product revenue resulted primarily from (1) increased sales of consumables, (2) increased average selling prices, and (3) a one-time increase from the receipt of ordinary shares of UltraDx with a fair value of $1.0 million that was accounted for as variable consideration under the UltraDx Agreement (as a Level 3 financial asset with minimal market activity or other data available, the fair value was determined primarily using the third-party purchase price of similar instruments issued by UltraDx). These increases were partially offset by lower instrument sales due to reduced demand in certain markets. We expect this instrument trend to continue for the remainder of 2023.
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Service revenue was $19.1 million for the six months ended June 30, 2023, compared to $17.4 million for the six months ended June 30, 2022, an increase of $1.7 million, or 10%, primarily due to increased Accelerator Laboratory revenue, partially offset by lower revenue recognized from the Lilly Collaboration Agreement.
Collaboration and license revenue was $1.0 million for the six months ended June 30, 2023, compared to $0.2 million for the six months ended June 30, 2022, an increase of $0.8 million, or 460%. This was primarily due to a one-time increase from the expiration of a previously paid for option to expand the scope of the Abbott License Agreement.
Grant revenue was $0.4 million for the six months ended June 30, 2023, compared to $0.1 million for the six months ended June 30, 2022.
Cost of Goods Sold and Services
Cost of goods sold and services decreased $6.4 million, or 21%, to $23.4 million for the six months ended June 30, 2023 compared to $29.8 million for the six months ended June 30, 2022, primarily due to improved inventory management and lower instrument sales.
Cost of product revenue decreased $6.4 million, or 31%, to $14.3 million for the six months ended June 30, 2023, compared to $20.7 million for the six months ended June 30, 2022, as a result of improved inventory management and lower instrument sales. The increase in cost of service revenue was immaterial for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Research and Development
Research and development expense decreased $3.0 million, or 22%, to $10.7 million for the six months ended June 30, 2023, as compared to $13.7 million for the six months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan.
Selling, General, and Administrative
Selling, general and administrative expense decreased $10.3 million, or 19%, to $42.5 million for the six months ended June 30, 2023, as compared to $52.8 million for the six months ended June 30, 2022, primarily due to the reduction in headcount in connection with the Restructuring Plan. Included within selling, general and administrative expense are $3.5 million and $3.6 million of shipping and handling costs for product sales for the six months ended June 30, 2023 and 2022, respectively.
Other Lease Costs
During the six months ended June 30, 2023, we incurred other lease costs of $1.9 million. As part of the Restructuring Plan, we are not utilizing the leased office and laboratory facilities in Bedford, Massachusetts and are evaluating alternatives, including sub-leasing the facilities . Other lease costs include the amortization of the related operating lease right-of-use assets and other leased facility operating expenses from periods after the impairment and the determination that the facilities would not be utilized. There were no similar charges for the six months ended June 30, 2022.
Interest Income, Net
Interest income, net was $7.3 million for the six months ended June 30, 2023, as compared to $0.6 million for the six months ended June 30, 2022, due to higher interest rates earned on cash and cash equivalents.
Other Expense, Net
Other expense, net was ($0.1) million for the six months ended June 30, 2023, as compared to ($0.6) million for the six months ended June 30, 2022, primarily due to changes in foreign exchange rates.
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Income Tax (Expense) Benefit, Net
Income tax (expense) benefit, net was ($0.4) million for the six months ended June 30, 2023, as compared to $0.1 million for the six months ended June 30, 2022, primarily due to recording a provision for the operating results of our foreign subsidiaries.
Liquidity and Capital Resources
Our principal sources of liquidity are cash, cash equivalents, and funds generated from sales of our products and services. As of June 30, 2023, we had cash and cash equivalents of $329.5 million. Historically we have also financed our operations through equity offerings and borrowings from credit facilities.
Cash Flows
The following table summarizes our cash flows (in thousands):
Six Months Ended June 30,
Increase (Decrease)
2023
2022
Amount
%
Net cash used in operating activities
$
(8,869)
$
(29,635)
$
20,766
70
%
Net cash used in investing activities
(784)
(5,934)
5,150
87
%
Net cash provided by financing activities
690
1,190
(500)
42
%
Net decrease in cash, cash equivalents, and restricted cash
$
(8,963)
$
(34,379)
$
25,416
74
%
Net Cash Used in Operating Activities
We derive cash flows from operations primarily from the sale of our products and services. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses to develop new products and services, invest in process and product improvements, and increase our sales and marketing efforts. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business, and built our infrastructure. We expect negative cash flows from operating activities may continue in the future.
Net cash used in operating activities was $8.9 million during the six months ended June 30, 2023 which primarily consisted of the net loss of $12.2 million, offset by non-cash charges of $8.1 million of stock-based compensation expense, $2.8 million of depreciation and amortization expense, and non-cash lease expense of $1.0 million. Cash used as a result of changes in operating assets and liabilities of $9.5 million was primarily due to an increase in accounts receivable of $5.8 million, a decrease in operating lease liabilities of $1.6 million, a decrease in accrued compensation and benefits, other accrued expenses and other current liabilities of $1.3 million and an increase in inventory of $1.2 million. These decreases were primarily offset by an increase in deferred revenue of $1.7 million and $0.9 million received on the tenant improvement allowance associated with our leased facilities in Bedford, Massachusetts.
Net cash used in operating activities was $29.6 million during the six months ended June 30, 2022. The net cash used in operating activities primarily consisted of the net loss of $43.1 million, offset by non-cash charges of $9.0 million of stock-based compensation expense, $2.8 million of depreciation and amortization expense, and $1.4 million received on the tenant improvement allowance associated with our leased facility in Bedford, Massachusetts.
Net Cash Used in Investing Activities
Our primary investing activities consist of capital expenditures for the purchase of equipment to support our expanding infrastructure and work force. We expect to continue to incur additional capital expenditures related to these efforts in future periods. Cash used towards capital expenditures can be partially offset by proceeds from grants with
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third parties to purchase assets (refer to the section titled “Grant Revenue” in Note 3 – Revenue and Related Matters in the Notes to Consolidated Financial Statements for more information).
We used $0.8 million and $5.9 million in cash in investing activities during the six months ended June 30, 2023 and June 30, 2022, respectively, for purchases of property and equipment. The purchases during the six months ended June 30, 2022 were partially offset by $0.5 million in grant proceeds under the RADx Grant.
Net Cash Provided by Financing Activities
Our primary financing activities are proceeds from sales of our common stock.
Financing activities provided $0.7 million and $1.2 million of cash during the six months ended June 30, 2023 and June 30, 2022, respectively, from the proceeds of common stock issued.
Capital Resources
We have not achieved profitability on an annual basis since our inception, and we expect to continue to incur net losses in the future. We also expect that our operating expenses will increase as we continue to increase our marketing efforts to drive adoption of our commercial products, as well as our investment in improving the quality of our products and services. Our liquidity requirements have consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, and general corporate expenses.
We believe cash generated from product and services sales along with our current cash and cash equivalents will be sufficient to meet our anticipated operating cash requirements for at least 12 months from the date of this Quarterly Report on Form 10-Q. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales and marketing activities, and grow our customer base. Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties. Actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section titled “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K.
We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including but not limited to:
● continued market acceptance of our products and services and the ability of our products to meet our customers’ expectations;
● the cost and timing of establishing additional sales, marketing, and distribution capabilities;
● the extent to which we achieve intended cost savings, revenue improvement, and related benefits from our Restructuring Plan;
● the extent to which we are able to successfully complete our assay improvement program to enhance product quality;
● the cost of our research and development activities;
● our ability to enter into collaborations in the future, and the success of any such collaborations;
● potential opportunities to strategically acquire and integrate companies or technologies that may be complementary to our business;
● the cost and timing of potential regulatory clearances or approvals that may be required in the future for our products; and
● the effect of competing technological and market developments.
We cannot guarantee that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt
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or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products or grant licenses on terms that are not favorable to us. If we do not have or are not able to obtain sufficient funds, we may have to delay development or commercialization of our products and services. We also may have to reduce marketing, customer support or other resources devoted to our products, or cease operations.
If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity or debt offerings or other financings.
Contractual Obligations and Commitments
As of June 30, 2023, there have been no material changes to our contractual obligations and commitments from those described in the section titled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.
In addition to these cash commitments disclosed in our Annual Report on Form 10-K, we may have other payables and liabilities that may be legally enforceable but are not considered contractual commitments.
Critical Accounting Policies and Estimates
Our critical accounting policies and significant estimates that involve a higher degree of judgment and complexity are described in the section titled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies, Significant Judgments and Estimates” included in our Annual Report on Form 10-K.
There have been no material changes to our critical accounting policies and estimates as previously disclosed in that report.
Related Party Transactions
Refer to Note 13 – Related Party Transactions in the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a full description of related party transactions.
Non-GAAP Financial Measures
To supplement our financial statements presented on a U.S. GAAP basis, we present non-GAAP gross profit, non-GAAP gross margin, non-GAAP total operating expenses, and non-GAAP loss from operations, which are calculated by including shipping and handling costs for product sales within cost of goods sold instead of within selling, general, and administrative expenses. Management uses these non-GAAP measures to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors. Management believes that presentation of these non-GAAP measures provides useful information to investors in assessing our operating performance within our industry and in order to allow comparability to the presentation of other companies in our industry where shipping and handling costs are included in cost of goods sold for products. Management also uses these non-GAAP measures as a factor in assessing our progress against the Restructuring Plan. The non-GAAP financial information presented here should be considered in conjunction with, and not as a substitute for, the financial information presented in accordance with U.S. GAAP.
Set forth below is a reconciliation of non-GAAP gross profit, non-GAAP gross margin, non-GAAP total operating expenses, and non-GAAP loss from operations to their most directly comparable GAAP financial measures.
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Reconciliation of U.S. GAAP Financial Measures to Non-GAAP Financial Measures:
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
GAAP gross profit
$
19,138
$
8,711
$
36,064
$
23,270
Shipping and handling costs
(1,623)
(1,868)
(3,451)
(3,649)
Non-GAAP gross profit
$
17,515
$
6,843
$
32,613
$
19,621
GAAP revenue
$
31,029
$
23,500
$
59,485
$
53,052
GAAP gross margin (gross profit as % of revenue)
61.7%
37.1%
60.6%
43.9%
Non-GAAP gross margin (non-GAAP gross profit as % of revenue)
56.4%
29.1%
54.8%
37.0%
GAAP total operating expenses
$
28,699
$
33,670
$
55,045
$
66,416
Shipping and handling costs
(1,623)
(1,868)
(3,451)
(3,649)
Non-GAAP total operating expenses
$
27,076
$
31,802
$
51,594
$
62,767
GAAP loss from operations
$
(9,561)
$
(24,959)
$
(18,981)
$
(43,146)
Non-GAAP loss from operations
$
(9,561)
$
(24,959)
$
(18,981)
$
(43,146)
Recent Accounting Pronouncements
Refer to Note 2 – Significant Accounting Policies in the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption and effects on our Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
At June 30, 2023, there have been no material changes to the market risk information from those described in the section titled “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in our Annual Report on Form 10-K.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.