Fluidigm Corp (FLDM) reported a loss of 26 cents per share in the fourth quarter of 2014, which was narrower than the Zacks Consensus Estimate by 17 cents. However, loss per share was significantly wider than the loss of 14 cents reported in the comparable quarter of 2013.
Following the earnings announcement on Feb 5, shares of Fluidigm rallied nearly 2.8% to open at $39.85 on Friday. The shares pulled back to close at $38.54 on the same day, recording a healthy return of roughly 32% over the last three months.
Quarter Details
Fourth-quarter revenues surged 60.4% year over year to $33.5 million, almost in line with the Zacks Consensus Estimate of $33 million. Organic revenues (excluding revenues from the DVS sciences acquisition made in Jan 2014) grew 21% year over year to $25.2 million.
The revenue upside was driven by a significant 62% rise in product revenues to $33.4 million, supported by strong growth across instruments and consumables.
Instrument revenues soared 71.6% year over year to $20.8 million driven by increased sales of C1 systems and contribution from sales of the acquired CyTOF 2 system. On an organic basis (which excludes contribution from the CyTOF 2 system), instrument revenues grew 17% year over year.
We note that single-cell genomics continues to be a strong growth driver for the company and for instrument revenues in particular. Approximately 70% of the Biomark HD system sales during the quarter were supported by single-cell research.
Consumables revenues improved 48.3% year over year to $12.7 million on the back of strength across all applications. Organic consumables revenue growth (which excludes contribution from proteomics analytical consumables) stood at 28% in the quarter.
Product gross margin remained flat at 73.8% on a year-over-year basis.
Research & Development (R&D) expenses, as a percentage of revenues, expanded 740 basis points (bps) to 35%, primarily due to the expansion of the single-cell proteomics product line. The increase was also driven by headcount additions and R&D project materials.
Selling, General & Administrative (SG&A) expenses rose nearly 39% year over year to $18.8 million driven by the same factors impacting the R&D expenses. Tradeshows, promotions and professional fees drove the remainder of the increase.
Adjusted operating loss increased to $5.2 million from $3.3 million incurred in the fourth quarter of 2013, owing to rising operating expenses.
As of Dec 31, 2014, Fluidigm had cash, cash equivalents and investments of $115.3 million, higher than $84.3 million at the end of 2013.
Product Update
During the fourth quarter, Fluidigm announced a new single-cell application for its C1 system, which improves whole genome sequencing of individual cells.
The company also introduced the Callisto system which is an integrated high throughput microfluidics platform that enables automated cell culture and combinatorial dosing on a single device. A full commercial version of the same is expected to be available in mid-2015.
Fluidigm also announced a new workflow that will facilitate high throughput single-cell mRNA sequencing at a lower cost. The high throughput workflow is enabled on the C1 Single-Cell Auto Prep System, which aids researchers in isolating, processing and profiling individual cells. The full commercial version of the workflow is expected to be available in the first half of 2015.
Apart from introducing new products, Fluidigm entered into collaboration with the Wellcome Trust Sanger Institute and the European Bioinformatics Institute (EMBL-EBI), to accelerate the development of new methods for analysis of single-cell genomics data.
Guidance
For full-year 2015, Fluidigm projects total revenue between $142 million and $149 million. The revenue guidance incorporates an estimated negative currency impact of around 3%–4% at the midpoint.
The company projects 2015 non-GAAP operating expenses between $105 million and $110 million. This excludes roughly $19 million of estimated stock-based compensation expense, and $5 million of estimated depreciation and amortization expense. Interest expense is projected to be approximately $6 million while capital spending is estimated between $6 million and $9 million.
Our Take
We believe that Fluidigm’s improving fundamentals, new product launches and partnerships should propel strong growth at the company. We are encouraged with the successful integration of DVS Sciences during the quarter, which strengthens the company’s position in the single-cell biology market.
However, the company’s top line continues to be hurt by unfavorable foreign exchange movements. Moreover, growth in Japan continues to be sluggish, largely due to delays in funding disbursements.
Zacks Rank
Currently, Fluidigm carries a Zacks Rank #2 (Buy).
Other well-performing stocks in the medical instruments industry include Abiomed (ABMD), Inogen (INGN) and Luminex (LMNX). All these stocks sport a Zacks Rank #1 (Strong Buy).
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