Here's Why Fluidigm Is Getting Crushed Today

The company reported second-quarter revenue at the low end of its expectations and well below the average Wall Street estimate.

Maxx Chatsko
Maxx Chatsko
Aug 2, 2019 at 1:15PM
Health Care

What happened

Shares of Fluidigm (NASDAQ:FLDM) fell nearly 45% today after the company reported second-quarter 2019 operating results. The laboratory equipment manufacturer delivered revenue of $28.2 million, which was at the low end of its guidance range of $28 million to $31 million. It was also well below the average expectation on Wall Street for $32 million in quarterly revenue, according to numbers compiled by Yahoo! Finance

That result might not be an anomaly. Management expects Q3 2019 revenue in the range of $27 million to $30 million. Wall Street was looking for $35.2 million. While the collapsing stock price may seem a bit extreme, analysts and investors have legitimate cause for concern. 

As of 11:58 a.m. EDT, the stock had settled to a 36.1% loss.

A pink line and arrow crashing through the horizontal axis of a chart.

Image source: Getty Images.

So what

Today's stock move isn't entirely unwarranted. Investors, including myself, had been expecting Fluidigm to turn the corner this year and pounce on the growth opportunities made possible by its new focus on mass cytometry and imaging mass cytometry. The experimental methods are used by researchers to deepen their understanding of the tools used in immuno-oncology and genetic medicines. The company has developed one of the leading mass cytometry instrument platforms. 

But Q2 operating results and Q3 guidance suggest the business is running in place, as it's likely that Q1 2019 revenue will be the highest of the three periods.

Metric

Q2 2019

Q2 2018

Change

Revenue

$28.2 million

$26.4 million

7%

Gross profit

$15.3 million

$13.6 million

13%

Operating expenses

$30.0 million

$26.4 million

14%

Operating income

($14.6 million)

($12.8 million)

N/A

Net loss

($13.7 million)

($16.2 million)

N/A

Data source: Fluidigm press release.

While machines are flashy and result in big chunks of revenue, the entire business model rests on creating a recurring revenue stream by selling consumables -- the chemical reagents needed to run the instruments -- to each machine. Therefore, investors might be a little concerned that total consumables revenue has fallen over 5% in the first half of 2019 compared to the year-ago period. Management said that was mostly due to the continued weakness in the company's microfluidics instruments, which had to be offset by strength in its mass cytometry portfolio. 


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Now what

Businesses that sell desktop machines, whether they be 3D printers or mass cytometry instruments, can encounter long stretches of choppy performance if they don't have scaled-up consumable revenue streams. Fluidigm is still in the process of increasing its installed base to provide greater consumables pull-through potential, but that's occurring slower than almost everyone expected. Management struck an optimistic tone during the earnings conference call, describing the foundation that continues to be built for long-term success. That said, investors are right that the business was supposed to be growing at a much faster clip by now, and certainly by Q3 2019.