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Fluidigm Reports Q3 2014 Results

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Fluidigm Corporation (NASDAQ:FLDM) today announced its financial results for the third quarter ended September 30, 2014.

Total revenue for the third quarter of 2014 was $29.6 million, an increase of 62% from $18.3 million in the third quarter of 2013. Organic revenue (excluding revenue attributable to the DVS Sciences acquisition, comprised of the CyTOF(R) 2 system and proteomics analytical consumables) was $24.7 million, an increase of 35% over the same quarter in 2013. Net loss for the third quarter of 2014 was $13.8 million, compared to a net loss of $4.3 million in the third quarter of 2013. Non-GAAP net loss for the third quarter of 2014 was $3.1 million, compared with $1.5 million non-GAAP net loss for the third quarter of 2013 (see accompanying table for reconciliation of GAAP and non-GAAP measures).

“We delivered solid performance in the third quarter. Our organic growth was fueled by diversified strength across single-cell genomics and production genomics. We are also pleased with the commercial progress of our single-cell proteomics business, which tracked well relative to our expectations for the quarter,” said Gajus Worthington, Fluidigm President and Chief Executive Officer.

“Fluidigm is at the forefront of the emerging and dynamic single-cell biology market. We have a unique leadership position in the market with a product portfolio that spans across single-cell genomics and proteomics. We are excited to report our first combined sale of a CyTOF 2, C1TM, and BioMarkTM HD system in the quarter, which we believe reinforces our vision of single-cell biology and the ultimate convergence of single-cell proteomics and genomics research,” continued Worthington.

Financial Highlights and Analysis

  • Instrument revenue grew 64% year-on-year in the quarter, driven by increased sales of the C1 and BioMark HD systems, and contribution from the acquired CyTOF 2 system.
    • Organic instrument revenue growth (which excludes contribution from the CyTOF 2 system) was 29% year-on-year in the quarter.
    • Approximately 60% of the BioMark HD system sales during the quarter were motivated by single-cell research.
    • Approximately 25% of C1 system sales were combined with a BioMark HD system in the quarter.
  • Consumables revenue grew 64% year-on-year in the quarter, driven by production genomics and single-cell genomics applications, and contribution from acquired proteomics analytical consumables.
    • Organic consumables revenue growth (which excludes contribution from proteomics analytical consumables) was 48% year-on-year in the quarter.
    • Consumables pull-through in the quarter was within its historical range of $40,000 – $50,000 per instrument/year for genomics analytical systems and $15,000 – $25,000 per instrument/year for genomics preparatory systems.
    • Consumables pull-through for proteomics analytical systems in the quarter was within its historical range of $50,000 -$70,000 per instrument/year.
  • Geographic revenue as a percent of total product revenue in the third quarter of 2014 was as follows: United States – 57%; Europe – 27%; Japan – 3%; Asia-Pacific – 9%; and Other – 4%.
  • Fluidigm’s instrument installed base was 1,230 units at the end of the quarter.
    • Genomics analytical systems (BioMark, BioMark HD, and EP1TM systems) represented 617 units of the installed base, genomics preparatory systems (Access ArrayTM and C1 systems) represented 527 units of the installed base, and proteomics analytical systems (CyTOF and CyTOF 2 systems) represented the remainder.
  • GAAP product margin was 61% in the third quarter of 2014, versus 72% in the year ago period. Non-GAAP product margin, which excludes the effects of amortization of developed technology, depreciation and amortization, non-cash charge for the sale of inventory revalued at the date of acquisition, and stock-based compensation expense, was 74% in the third quarter of 2014, versus 74% in the year ago period (see accompanying table for reconciliation of GAAP and non-GAAP product margins).
  • Fluidigm ended September 30, 2014 with approximately $147.2 million in cash, cash equivalents, and investments.

Business Highlights Since Fluidigm’s Last Earnings Release

  • Initiated an early access program targeting key production genomics customers and prospects for our new JunoTM system, which allows for fully-automated SNP genotyping from dilute or challenging DNA samples.
  • Launched the Single-Cell Whole Exome Sequencing Application for the C1 system, designed to help researchers accelerate the discovery of novel functional variants that may alter protein function.
  • The total number of single-cell biology publications referencing Fluidigm increased to 222, which includes 63 publications citing mass cytometry technology.
  • Single-cell mass cytometry study utilizing the deep profiling capabilities of the CyTOF published in Science Translational Medicine, demonstrating the ability to correlate changes in certain blood cell types with surgical recovery times.
  • Shallow sequencing of single cells study utilizing the C1 system published in Nature Biotechnology, demonstrating that shallow single-cell mRNA sequencing (approximately 50,000 reads per cell) is sufficient for unbiased classification of cell identities.

Financial Outlook

Fluidigm is projecting 2014 total revenue to be between $114 million and $117 million versus prior guidance of $112 million to $118 million. Organic revenue is projected to be between $95 million and $96 million, an increase of 33% to 35% over 2013, compared to prior guidance of 32% to 35%. The Company now projects 2014 operating expenses on a GAAP basis to be between $129 million and $131 million versus prior guidance of $134 million to $136 million. Non-GAAP operating expenses, excluding approximately: $11 million of acquisition-related expenses, $19 million of stock-based compensation expense, and $4 million of depreciation and amortization expense, is expected to be between $95 million and $97 million, compared to prior guidance of $100 million to $102 million (also, see accompanying table for reconciliation of GAAP and non-GAAP operating expenses for the third quarter of 2014 and 2013). Stock-based compensation expense is expected to be between $21 million and $22 million, including $9 million related to assumed share-based awards from the DVS acquisition. Interest expense is projected to be $5.3 million and capital spending is expected to be between $9 million and $11 million versus prior guidance of $11 million to $13 million.

Conference Call Information

Fluidigm will host a conference call today, October 30, 2014 at 5:00 p.m. Eastern Time. The call can be accessed by calling (877) 556-5248 (domestic toll-free) or (720) 545-0029 (international toll). Fluidigm will also provide a live stream of its third quarter 2014 financial results conference call for investors at: http://investors.fluidigm.com/events.cfm. The link will not be active until 4:45 p.m. Eastern Time on October 30, 2014. A telephone replay of the teleconference will be available 90 minutes after the end of the call at (855) 859-2056 (domestic toll-free), or (404) 537-3406 (international toll), access code 13962396. The conference call will also be archived on the Fluidigm investor’s page at: http://investors.fluidigm.com.

Statement Regarding Use of Non-GAAP Financial Information

Fluidigm has presented certain financial information in accordance with GAAP and also on a non-GAAP basis for the three and nine months ended September 30, 2014 and 2013. Management believes that non-GAAP financial measures, taken in conjunction with GAAP financial measures, provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of the company’s core operating results. Management uses non-GAAP measures to compare the company’s performance relative to forecasts and strategic plans and to benchmark the company’s performance externally against competitors. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company’s operating results as reported under U.S. GAAP. Fluidigm encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the accompanying table of this release.

Use of Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements regarding the anticipated growth and trends of the single-cell biology and production genomics markets; expectations regarding future sales, revenue, opportunities, and financial performance; opportunities, objectives, expectations and/or strategies relating to new products; and current estimates of 2014 total revenue growth, organic revenue growth, GAAP and non-GAAP operating expenses, stock-based compensation expense, interest expense, and capital spending. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from currently anticipated results, including but not limited to, risks relating to the integration of the recently acquired proteomics product line with Fluidigm’s business and operations and the future financial performance of its proteomics and genomics product lines; the possible loss of key employees, customers, or suppliers as a result of uncertainty caused by the acquisition; intellectual property risks arising from the acquisition, including risks relating to maintaining material in-licensed intellectual property rights; challenges inherent in developing, manufacturing, launching, marketing, and selling new products; competition; its sales, marketing and distribution capabilities; its planned sales, marketing, and research and development activities; reduction in research and development spending or changes in budget priorities by customers; interruptions or delays in the supply of components or materials for, or manufacturing of, its products; seasonal variations in customer operations; unanticipated increases in costs or expenses; and risks associated with international operations. Information on these and additional risks, uncertainties, and other information affecting Fluidigm’s business and operating results are contained in its Annual Report on Form 10-K for the year ended December 31, 2013, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, and other filings with the Securities and Exchange Commission. Additional information will also be set forth in Fluidigm’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 to be filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Fluidigm Corporation disclaims any obligation to update these forward-looking statements except as may be required by law.

About Fluidigm

Fluidigm (NASDAQ:FLDM) develops, manufactures, and markets life science analytical and preparatory systems for growth markets such as single-cell biology and production genomics. We sell to leading academic institutions, clinical laboratories, and pharmaceutical, biotechnology, and agricultural biotechnology companies worldwide. Our systems are based on proprietary microfluidics and multi-parameter mass cytometry technology, and are designed to significantly simplify experimental workflow, increase throughput, and reduce costs, while providing excellent data quality. Fluidigm products are provided for Research Use Only. Not for use in diagnostic procedures.

For more information, please visit www.fluidigm.com.

Fluidigm, the Fluidigm logo, CyTOF, C1, BioMark, EP1, Access Array, and Juno are trademarks or registered trademarks of Fluidigm Corporation.

FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Revenue:
Instruments $ 17,850 $ 10,894 $ 48,327 $ 28,964
Consumables 11,714 7,151 34,165 20,602
Product revenue 29,564 18,045 82,492 49,566
License and grant revenue 71 242 474 736
Total revenue 29,635 18,287 82,966 50,302
Costs and expenses:
Cost of product revenue 11,421 5,138 30,080 14,273
Research and development 12,687 5,004 31,707 14,198
Selling, general and administrative 18,574 12,097 52,486 34,840
Litigation settlement 1,000 1,000
Acquisition-related expenses 10,696
Total costs and expenses 42,682 23,239 124,969 64,311
Loss from operations (13,047 ) (4,952 ) (42,003 ) (14,009 )
Interest expense (1,453 ) (1 ) (3,894 ) (13 )
Gain from sale of investment in Verinata 332 332 1,777
Other (expense) income, net (338 ) 709 (308 ) 457
Loss before income taxes (14,506 ) (4,244 ) (45,873 ) (11,788 )
Benefit from (provision for) income taxes 716 (42 ) 3,987 (95 )
Net loss $ (13,790 ) $ (4,286 ) $ (41,886 ) $ (11,883 )
Net loss per share, basic and diluted $ (0.49 ) $ (0.17 ) $ (1.52 ) $ (0.47 )
Shares used in computing net loss per share, basic and diluted 28,085 25,534 27,613 25,407
FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, 2014

December 31, 2013 (1)

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 30,939 $ 35,261
Short-term investments 64,324 49,083
Accounts receivable, net 16,919 10,552
Inventories 16,960 8,148
Prepaid expenses and other current assets 3,678 1,540
Total current assets 132,820 104,584
Long-term investments 51,962 1,942
Property and equipment, net 12,668 6,818
Other non-current assets 3,698 3,571
Developed technology, net 105,000
Goodwill 104,245
Total assets $ 410,393 $ 116,915
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 7,276 $ 4,353
Accrued compensation and related benefits 6,034 5,485
Other accrued liabilities 7,366 5,392
Deferred revenue, current portion 6,630 2,721
Total current liabilities 27,306 17,951
Convertible notes 195,399
Deferred tax liability 27,109
Other non-current liabilities 6,024 2,550
Total liabilities 255,838 20,501
Total stockholders’ equity 154,555 96,414
Total liabilities and stockholders’ equity $ 410,393 $ 116,915
(1) Derived from audited consolidated financial statements.
FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2014 2013
Operating Activities
Net loss $ (41,886 ) $ (11,883 )
Depreciation and amortization 2,922 1,850
Stock-based compensation expense 15,280 4,681
Non-cash charges related to acquisition 10,446
Gain from sale of investment in Verinata (332 ) (1,777 )
Other non-cash item 83 29
Changes in assets and liabilities, net (5,611 ) 2,271
Net cash used in operating activities (19,098 ) (4,829 )
Investing Activities
Acquisition, net of cash acquired (113,190 )
Purchases of investments (106,672 ) (56,831 )
Proceeds from sales and maturities of investments 41,412 19,140
Proceeds from sale of investment in Verinata 332 3,117
Purchase of intangible assets (1,043 )
Purchases of property and equipment (5,919 ) (1,565 )
Net cash used in investing activities (184,037 ) (37,182 )
Financing Activities
Proceeds from issuance of convertible notes, net 195,212
Proceeds from exercise of stock options 4,084 3,501
Net cash provided by financing activities 199,296 3,501
Effect of foreign exchange rate fluctuations on cash and cash equivalents (483 ) (40 )
Net decrease in cash and cash equivalents (4,322 ) (38,550 )
Cash and cash equivalents at beginning of period 35,261 58,649
Cash and cash equivalents at end of period $ 30,939 $ 20,099
FLUIDIGM CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET LOSS
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Net loss (GAAP) $ (13,790 ) $ (4,286 ) $ (41,886 ) $ (11,883 )
Acquisition-related expenses 10,696 (1)
Stock-based compensation expense 6,024 1,749 15,280 4,681
Amortization of developed technology 2,800 7,000
Interest expense 1,453 1 3,894 13
Depreciation and amortization 1,080 657 2,922 1,850
Non-cash charge for sale of inventory revalued at the date of acquisition 116 798
Benefit from acquisition related income taxes (449 ) (3,188 )
Gain from sale of investment in Verinata (332 ) (332 ) (1,777 )
Other income from litigation settlement (600 ) (600 )
Litigation settlement expense 1,000 1,000
Loss on disposal of property and equipment 16 83 29
Net loss (Non-GAAP) $ (3,082 ) $ (1,479 ) $ (4,733 ) $ (6,687 )
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP PRODUCT MARGIN
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Product margin (GAAP) $ 18,143 $ 12,907 $ 52,412 $ 35,293
Amortization of developed technology 2,800 7,000
Depreciation and amortization 214 191 652 563
Non-cash charge for sale of inventory revalued at the date of acquisition 116 798
Stock-based compensation expense 443 165 1,149 449
Product margin (Non-GAAP) $ 21,716 $ 13,263 $ 62,011 $ 36,305
Product margin percentage (GAAP) 61.4 % 71.5 % 63.5 % 71.2 %
Product margin percentage (Non-GAAP) 73.5 % 73.5 % 75.2 % 73.2 %
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP OPERATING EXPENSES
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Operating expenses (GAAP) $ 31,261 $ 17,101 $ 94,889 $ 49,038
Acquisition-related expenses (10,696 ) (1)
Stock-based compensation expense (5,581 ) (1,584 ) (14,131 ) (4,232 )
Depreciation and amortization (866 ) (466 ) (2,270 ) (1,287 )
Litigation settlement expense (1,000 ) (1,000 )
Operating expenses (Non-GAAP) $ 24,814 $ 14,051 $ 67,792 $ 42,519

(1) Acquisition-related expenses include charges for accelerated vesting of certain DVS restricted stock and options; consulting, legal, and investment banking fees; and other expenses.

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