Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
FLDM > SEC Filings for FLDM > Form 10-Q on 7-Nov-2013All Recent SEC Filings

Show all filings for FLUIDIGM CORP

Form 10-Q for FLUIDIGM CORP


7-Nov-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read together with our condensed consolidated financial statements and the notes to those statements included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act, that are based on our management's beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section entitled "Risk Factors" and this Management's Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements include information concerning our possible or assumed future cash flow, revenue, sources of revenue and results of operations, operating and other expenses, unit sales, business strategies, financing plans, expansion of our business, competitive position, industry environment, potential growth opportunities, and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as "anticipates," "believes," "could," "seeks," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would," or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in Part II, Item 1A, "Risk Factors," elsewhere in this Form 10-Q, and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this Form 10-Q.
Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
"Fluidigm," the Fluidigm logo, "BioMark," "Access Array," "C1," "EP1," "SNPtype," and "DELTAgene" are trademarks or registered trademarks of Fluidigm Corporation. Other service marks, trademarks, and trade names referred to in this Form 10-Q are the property of their respective owners.
In this Form 10-Q, "we," "us" and "our" refer to Fluidigm Corporation and its subsidiaries.
Overview
We develop, manufacture, and market microfluidic systems to leading academic institutions, clinical laboratories, and pharmaceutical, biotechnology, and agricultural biotechnology, or Ag-Bio, companies in growth markets, such as single-cell genomics, applied genotyping, and sample preparation for targeted resequencing. Our proprietary microfluidic systems consist of instruments and consumables, including integrated fluidic circuits, or IFCs, assays, and reagents. We actively market four microfluidic systems, including 17 different commercial IFCs for nucleic acid analysis, and three families of assay chemistries. Our systems are designed to significantly simplify experimental workflow, increase throughput, and reduce costs, while providing excellent data quality. In addition, our proprietary technology enables genetic analysis that in many instances was previously impractical. We have sold over 870 systems to customers in over 30 countries worldwide.
We have launched several product lines, including our BioMark System for gene expression analysis, genotyping, and digital polymerase chain reaction, or digital PCR, in 2006; our EP1 System for single nucleotide polymorphism, or SNP, genotyping, and digital PCR in 2008; our Access Array System for target enrichment in 2009; our BioMark HD System for high-throughput gene expression analysis, targeted single-cell gene expression analysis, SNP genotyping, and digital PCR in 2011; and our C1 Single-Cell Auto Prep System for single-cell sample preparation in June 2012. In addition, in May 2011, we launched assay products, including our DELTAgene assays for gene expression; our SNPtype assays for SNP genotyping; and our Access Array Target-Specific primers for targeted next-generation DNA sequencing. Our systems utilize one or more IFCs designed for particular applications and include specialized instrumentation and software, as well as assays and other reagents for certain applications. We distribute our microfluidic systems through our direct sales force and support organizations located in North America, Europe, and Asia-Pacific, and through distributors or sales agents in several European, Latin American, Middle Eastern, and Asia-Pacific countries. Our manufacturing operations are primarily located in Singapore. Our facility in Singapore manufactures our instruments, several of which are assembled at facilities of our contract manufacturers in Singapore, with testing and calibration of the assembled products performed at our Singapore facility. All of our IFCs for commercial sale and some IFCs for our research and development purposes are fabricated at our Singapore facility. Our South San Francisco facility fabricates IFCs for our research and development purposes, and manufactures our assays and produces other reagents for commercial sale.


Table of Contents

Our total revenue grew from $33.6 million in 2010 to $52.3 million in 2012, and for the nine months ended September 30, 2013, our total revenue was $50.3 million. We have incurred significant net losses since our inception in 1999 and, as of September 30, 2013, our accumulated deficit was $252.7 million. Critical Accounting Policies, Significant Judgments and Estimates Our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates may occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. There have been no material changes in our critical accounting policies and estimates in the preparation of our condensed consolidated financial statements during the three and nine months ended September 30, 2013 compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on March 12, 2013. Results of Operations
Revenue
We generate revenue from sales of our products, license agreements, and government grants. Our product revenue consists of sales of instruments and related services, and consumables, including IFCs, assays, and other reagents. We have entered into license agreements and have received government grants to conduct research and development activities.
The following table presents our revenue by source for each period presented (in thousands):

                      Three Months Ended             Nine Months Ended
                          September 30,                 September 30,
                        2013           2012           2013          2012
Revenue:
Instruments       $    10,894        $  6,750     $    28,964     $ 19,548
Consumables             7,151           5,852          20,602       16,578
Product revenue        18,045          12,602  -       49,566  -    36,126
License revenue            78              15             242           53
Grant revenue             164             165             494          496
Total revenue     $    18,287        $ 12,782  -  $    50,302  -  $ 36,675

The following table presents our product revenue by geography and as a percentage of total product revenue by geography based on the billing address of our customers for each period presented (in thousands):

                           Three Months Ended September 30,                      Nine Months Ended September 30,
                             2013                     2012                        2013                        2012
United States      $    10,145         56 %   $  7,757         62 %   $    27,213              55 %   $ 20,024         55 %
Europe                   3,962         22 %      2,678         21 %        11,899              24 %      8,088         23 %
Japan                    2,620         15 %        774          6 %         4,504               9 %      2,763          8 %
Asia-Pacific               897          5 %      1,267         10 %         4,375               9 %      4,484         12 %
Other                      421          2 %        126          1 %         1,575               3 %        767          2 %
Total              $    18,045        100 %   $ 12,602        100 %   $    49,566             100 %   $ 36,126        100 %

Our customers include academic research institutions, clinical laboratories, and pharmaceutical, biotechnology, and Ag-Bio companies worldwide. Total revenue from our five largest customers in each of the periods presented comprised 21% and 18% of our total revenue in the three and nine months ended September 30, 2013, respectively, and 21% and 20% of our total revenue in the three and nine months ended September 30, 2012, respectively.


Table of Contents

Comparison of the Three Months Ended September 30, 2013 and September 30, 2012 Total Revenue
Total revenue increased by $5.5 million, or 43%, to $18.3 million for the three months ended September 30, 2013, compared to $12.8 million for the three months ended September 30, 2012.
Product Revenue
Product revenue increased by $5.4 million, or 43%, to $18.0 million for the three months ended September 30, 2013, compared to $12.6 million for the three months ended September 30, 2012.
Instrument revenue increased by $4.1 million, or 61%, primarily driven by increased unit sales of our analytical systems and increased unit sales of our preparatory systems, including our C1 Single-Cell Auto Prep System, which was first sold as a new product in the third quarter of 2012. Also contributing to the increase to a lesser extent were higher revenues from service offerings and higher average unit selling prices of our instrument systems.
Consumables revenue increased by $1.3 million, or 22%, primarily due to growth in IFC unit volume, which was driven by increased sales to production genomics customers, and, to a lesser extent, higher average selling prices, increased sales to research customers, and increased sales of assays and reagents. The revenue increase was offset in part by a shift in sales mix to IFCs with lower average selling prices. Annualized IFC pull-through for our analytical systems was within our historical range of $40,000 to $50,000 per system and above the historical range of $10,000 to $15,000 per system for preparatory systems. We expect total unit sales of both instruments and consumables to increase over time as we continue our efforts to grow our customer base, expand our geographic market coverage, and launch new products. However, we expect the average selling prices of our products to fluctuate over time based on market conditions, product mix, and currency fluctuations.
Grant Revenue
Grant revenue consists of a grant from California Institute for Regenerative Medicine, or CIRM. Our CIRM grant was awarded in 2011 in the amount of $1.9 million to be earned over a three-year period. The CIRM grant revenue is recognized as the related research and development services are performed, and costs associated with the grants are recognized as research and development expense during the period incurred.
Grant revenue was $0.2 million for each of the three months ended September 30, 2013 and 2012.
Cost of Product Revenue
The following table presents our cost of product revenue and product margin for each period presented (in thousands, other than percentages):

                             Three Months Ended
                                September 30,
                              2013          2012
Cost of product revenue   $    5,138      $ 3,518
Product margin                    72 %         72 %

Cost of product revenue includes manufacturing costs incurred in the production process, including component materials, labor and overhead, installation, packaging, and delivery costs. In addition, cost of product revenue includes royalty costs for licensed technologies included in our products, warranty, service, provisions for slow-moving and obsolete inventory, and stock-based compensation expense. Costs related to license and grant revenue are included in research and development expense.
Cost of product revenue increased by $1.6 million, or 46%, to $5.1 million for the three months ended September 30, 2013 primarily due to increased product revenue. Overall cost of product revenue as a percentage of related revenue was relatively flat at approximately 28% for the three months ended September 30, 2013 and 2012. The favorable effects of higher average selling prices for consumables and instruments, increased IFC capacity utilization and production yields, and improved instrument distribution and logistics efficiency were offset by a higher product mix of lower margin instrument systems relative to consumables, higher production costs for assays and reagents, and higher analytical systems materials costs.


Table of Contents

Operating Expenses
The following table presents our operating expenses for each period presented
(in thousands):

                                          Three Months Ended
                                              September 30,
                                            2013           2012
Research and development              $     5,004        $  4,071
Selling, general and administrative        12,097           9,102
Total operating expenses              $    17,101        $ 13,173

Research and Development
Research and development expense consists primarily of personnel and independent contractor costs, prototype and material expenses, and other allocated facilities and information technology expenses. We have made substantial investments in research and development since our inception. Our research and development efforts have focused primarily on enhancing our technologies and supporting development and commercialization of new and existing products and services.
Research and development expense increased $0.9 million, or 23%, to $5.0 million for the three months ended September 30, 2013, compared to $4.1 million for the three months ended September 30, 2012. The increase in research and development expense was primarily due to an increase in headcount and other compensation-related costs of $0.7 million, and an increase in facility expenses of $0.2 million. We incurred these costs to support our development and commercialization of new and existing products and services. We believe that our continued investment in research and development is essential to our long-term competitive position and these expenses may increase in future periods.
Selling, General and Administrative
Selling, general and administrative expense consists primarily of personnel costs for our sales and marketing, business development, finance, legal, human resources, and general management, as well as professional services, such as legal and accounting services.
Selling, general and administrative expense increased $3.0 million, or 33%, to $12.1 million for the three months ended September 30, 2013, compared to $9.1 million for the three months ended September 30, 2012. The increase was primarily due to an increase in headcount and other compensation-related costs of $1.7 million, and to a lesser extent, an increase in legal fees of $0.5 million, an increase in sales and marketing activities of $0.3 million, and an increase in accounting and outside services of $0.2 million. The increase was primarily driven by expansion of our worldwide commercial capabilities, and to a lesser extent, general and administrative expense to support our growth and legal fees related to litigation against NanoString Technologies, Inc. We expect selling, general and administrative expense to increase in future periods as we continue to grow our sales, technical support, marketing, and administrative headcount, support increased product sales, broaden our customer base, and incur additional costs to support our expanding global footprint and the overall growth in our business.
Litigation Settlement
Pursuant to the terms of a patent cross license agreement with Applied Biosystems, LLC (now part of Life Technologies Corporation, or Life), we are obligated to make a $1.0 million payment to Life upon satisfaction of certain conditions. We do not believe that the conditions triggering the payment obligation have been met; however, on October 16, 2013, Life provided notice that the $1.0 million payment is due and payable under the license agreement. We intend to dispute Life's claim to the contingent payment, but it is probable that we will make the payment while reserving our rights to dispute the obligation. Among other reasons, we would make the payment to avoid what would be, in our view, an improper termination of our license to certain Life patent filings under the agreement, which could subject our relevant product lines to risks associated with patent infringement litigation. As we believe that making the disputed payment is probable, we accrued a loss contingency of $1.0 million in the three months ended September 30, 2013.


Table of Contents

Interest Expense and Other Income and Expense, Net We have incurred interest expense and amortization of debt discount related to our long-term debt. The following table presents interest expense and other income and expense items for each period presented (in thousands):

                                 Three Months Ended
                                     September 30,
                                 2013           2012
Interest expense              $    (1 )     $     (107 )
Other income (expense), net       709              (75 )

In September 2012, we paid the remaining balance due under our long-term debt. Accordingly, we did not incur any interest expense on long-term debt during the three months ended September 30, 2013. As a result, interest expense decreased by $0.1 million, or 99%, for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. We expect interest expense to be less in 2013 compared to 2012 because we have fully repaid our long-term debt. Other income, net increased by $0.8 million for the three months ended September 30, 2013 compared to other expense, net of $75,000 for the three months ended September 30, 2012 primarily because of the $0.6 million gain resulting from settlement of litigation filed by us against NanoString Technologies, Inc.
Comparison of the Nine Months Ended September 30, 2013 and September 30, 2012 Total Revenue
Total revenue increased by $13.6 million, or 37%, to $50.3 million for the nine months ended September 30, 2013, compared to $36.7 million for the nine months ended September 30, 2012.
Product Revenue
Product revenue increased by $13.4 million, or 37%, to $49.6 million for the nine months ended September 30, 2013, compared to $36.1 million for the nine months ended September 30, 2012.
Instrument revenue increased by $9.4 million, or 48%, primarily driven by increases in unit sales of our preparatory systems, which include our C1 Single-Cell Auto Prep System, first sold as a new product in the third quarter of 2012, and to a lesser extent, increases in unit sales of our analytical systems. Increased sales of our service offerings and higher average selling prices of our instrument systems also contributed to the increase in instrument revenue. The revenue increase was offset in part by lower unit sales of our EP1 system, an analytical systems instrument.
Consumables revenue increased by $4.0 million, or 24%, primarily due to growth in IFC unit volume, driven by increased sales to production genomics customers. Annualized IFC pull-through for our analytical systems was within our historical range of $40,000 to $50,000 per system and above the historical range of $10,000 to $15,000 per system for preparatory systems. Increases in assays and reagents sales also contributed to the increase in consumables revenue.
We expect total unit sales of both instruments and consumables to increase over time as we continue our efforts to grow our customer base, expand our geographic market coverage, and launch new products. However, we expect the average selling prices of our products to fluctuate over time based on market conditions, product mix, and currency fluctuations.
Grant Revenue
Grant revenue consists of a grant from California Institute for Regenerative Medicine, or CIRM. Our CIRM grant was awarded in 2011 in the amount of $1.9 million to be earned over a three-year period. The CIRM grant revenue is recognized as the related research and development services are performed, and costs associated with the grants are recognized as research and development expense during the period incurred.
Grant revenue was $0.5 million for each of the nine months ended September 30, 2013 and 2012.


Table of Contents

Cost of Product Revenue
The following table presents our cost of product revenue and product margin for
each period presented (in thousands, other than percentages):

                             Nine Months Ended
                                September 30,
                             2013          2012
Cost of product revenue   $  14,273     $ 10,990
Product margin                   71 %         70 %

Cost of product revenue includes manufacturing costs incurred in the production process, including component materials, labor and overhead, installation, packaging, and delivery costs. In addition, cost of product revenue includes royalty costs for licensed technologies included in our products, warranty, service, provisions for slow-moving and obsolete inventory, and stock-based compensation expense. Costs related to license and grant revenue are included in research and development expense.
Cost of product revenue increased by $3.3 million, or 30%, to $14.3 million for the nine months ended September 30, 2013 from $11.0 million for the nine months ended September 30, 2012 primarily due to increased product revenue. Cost of product revenue as a percentage of related revenue was 29% and 30% for the nine months ended September 30, 2013 and 2012, respectively. This improvement was driven by higher IFC capacity utilization and improved production yields; higher average unit selling prices for instruments and IFCs; and a favorable change in the instruments sales mix primarily due to increased sales of our C1 Single-Cell Auto Prep System, first sold as a new product in the third quarter of 2012, which has a higher margin than other instruments. This was offset in part by a higher product mix of lower margin instrument systems relative to consumables; higher production costs for assays and reagents; and higher service costs. Operating Expenses
The following table presents our operating expenses for each period presented (in thousands):

                                         Nine Months Ended
                                            September 30,
                                          2013         2012
Research and development              $    14,198    $ 12,337
Selling, general and administrative        34,840      27,926
Total operating expenses              $    49,038    $ 40,263

Research and Development
Research and development expense consists primarily of personnel and independent contractor costs, prototype and material expenses, and other allocated facilities and information technology expenses. We have made substantial investments in research and development since our inception. Our research and development efforts have focused primarily on enhancing our technologies and supporting development and commercialization of new and existing products and services.
Research and development expense was $14.2 million for the nine months ended September 30, 2013, an increase of $1.9 million, or 15%, compared to $12.3 million for the nine months ended September 30, 2012. The increase in research and development expense was primarily due to an increase in headcount and other compensation-related costs of $1.3 million, and an increase in facility expenses of $0.5 million. These increased costs were in support of our development and commercialization of new and existing products and services. We believe that our continued investment in research and development is essential to our long-term competitive position and these expenses may increase in future periods.
Selling, General and Administrative
Selling, general and administrative expense consists primarily of personnel costs for our sales and marketing, business development, finance, legal, human resources, and general management, as well as professional services, such as legal and accounting services.
Selling, general and administrative expense increased $6.9 million, or 25%, to $34.8 million for the nine months ended September 30, 2013, compared to $27.9 million for the nine months ended September 30, 2012. The increase was primarily due to


Table of Contents

an increase in headcount and other compensation-related costs of $5.0 million, and to a lesser extent, an increase in sales and marketing activities of $1.0 million, and an increase in legal fees of $0.8 million. The increase was primarily driven by expansion of worldwide commercial capabilities to support our growth, and to a lesser extent, general and administrative expense to support our growth and legal fees related to litigation against NanoString Technologies, Inc.
We expect selling, general and administrative expense to increase in future periods as we continue to grow our sales, technical support, marketing, and . . .

  Add FLDM to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for FLDM - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.