# Quanterix Corp (QTRX) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from Quanterix Corp's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1503274/000150327425000031/qtrx-20241231.htm Accession: 0001503274-25-000031 Filing date: 2025-03-17 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/QTRX/ All MD&A years: /company/QTRX/mda/ Previous year: /company/QTRX/mda/fy2023/ (FY 2023) Next year: /company/QTRX/mda/fy2025/ (FY 2025) ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Quanterix Corporation for the years ended December 31, 2024 and 2023. For a full understanding of our financial condition and results of operations, this discussion and analysis should be read in conjunction with our Consolidated Financial Statements and accompanying notes included in the section titled “Part II. Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain columns and rows may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded numbers. In addition to historical information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results, performance, or experience may differ materially from those discussed below due to various important factors, risks, and uncertainties, including, but not limited to, those set forth under the sections titled “Part I, Item 1A. Risk Factors” and “Note Regarding Forward-Looking Statements” included in this Annual Report on Form 10-K. Unless the context otherwise requires, the terms “Quanterix,” the “Company,” “we,” “it,” “us,“ and “our” in this Annual Report on Form 10-K refer to Quanterix Corporation and its consolidated subsidiaries. The discussion and analysis of our financial condition as of, and results of operations for the year ended December 31, 2023 as compared to December 31, 2022 is included in the section titled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2023, as filed with the U.S Securities and Exchange Commission (the "SEC") on December 23, 2024. Overview We are a life sciences company that develops and commercializes next-generation, ultra-sensitive digital immunoassay platforms that advance life sciences research and diagnostics. Our platforms are based on our proprietary digital “Simoa” detection technology and enable customers to reliably detect protein biomarkers at ultra-low concentrations in blood, serum and other fluids that, in many cases, are undetectable using conventional, analog immunoassay technologies. The ability of our Simoa platforms to detect proteins in the femtomolar range enables the development of novel therapies and diagnostics and has the potential to identify early-stage disease markers before symptoms appear to facilitate a paradigm shift in healthcare from an emphasis on later-stage treatment to a focus on earlier detection, monitoring, prognosis, and, ultimately, prevention. Our Simoa platforms have achieved significant commercial adoption with an installed base of over 1,000 instruments, and scientific validation with citations in more than 3,200 scientific publications in areas of high unmet medical need and research interest such as neurology, oncology and immunology, and inflammation. Our instruments are designed to be used either with assays fully developed by us, including all antibodies and supplies required to run the assays, or with “homebrew” assay 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 HD-X instrument in the second half of 2019. The HD-X is an upgraded version of the Simoa HD-1 (our first Simoa instrument, launched in January 2014), collectively “HD Instruments”, that is designed to deliver significant productivity and operational efficiency improvements, as well as greater user flexibility. The HD-X uses our bead-based technology and assays run on the HD-X are fully automated. At December 31, 2024, approximately 84% of the HD Instrument installed base were HD-X instruments. Further, we launched our SR-X instrument in 2017 as a compact desktop instrument with a lower price point, more flexible assay preparation, and a wider range of applications. The SR-X utilizes the same Simoa bead-based technology and assay kits as the HD-X. With our acquisition of Aushon BioSystems, Inc. in 2018, we acquired their CLIA certified laboratory and their proprietary sensitive planar array detection technology. The Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) are federal regulatory standards that apply to all clinical laboratory testing performed on humans in the United States (with the exception of research testing that does not report patient specific results). Leveraging our proprietary sophisticated Simoa image analysis and data analysis algorithms, we further refined the planar array technology to develop 48 Table of Contents 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 (“NfL”), antibodies, and enzyme-linked immunoassay (“ELISA”) kits, which are used by researchers and biopharmaceutical and diagnostics companies world-wide in the detection of NfL to advance the development of therapeutics and diagnostics for neurodegenerative conditions. We also provide contract research services for customers and Laboratory Developed Test (“LDT”) services 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, custom assay development, and blood-based biomarker testing. To date, we have completed over 2,400 projects for more than 500 customers from all over the world using our Simoa platforms. We have an extensive base of customers including pharmaceutical, biotechnology, contract research organizations, academic and governmental research institutions. We sell our instruments, consumables, and services through a direct field sales and support organizations in North America and Europe, and through our own sales force and distributors in additional countries, 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. Our total revenues were $137.4 million and $122.4 million for the years ended December 31, 2024 and 2023, respectively. Since our inception, we have incurred annual net losses, including net losses of $38.5 million and $28.4 million for the years ended December 31, 2024 and 2023, respectively. We expect to incur significant expenses and operating losses at least through the next 24 months, and we expect our expenses to increase substantially as we: •expand our sales and marketing efforts to further commercialize our products; •expand our research and development efforts to improve our existing, or to develop and launch, new assays and instruments, including Simoa ONE. These expenses could be particularly significant if any of its products become subject to additional or more burdensome regulation by the U.S Food and Drug Administration (the "FDA"); •invest in Lucent Diagnostics, additional LDTs, and other diagnostics initiatives including entry into translational pharma and clinical diagnostic markets; •seek Premarket Approval (“PMA”) or 510(k) clearance from the FDA for our existing products or new products, including new assays and instruments, 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 to support our growth and research and development; •strategically acquire and integrate companies or technologies that may be complementary to our business; •enter into collaboration arrangements, or in-license other products and technologies; and •add or enhance operational, financial, and management information systems. Recent Business Developments ISO 13485 Certification On January 31, 2025, we received ISO 13485 certification for our operations in Billerica, Massachusetts. ISO 13485 certification indicates that a company has implemented a quality management system that meets international requirements for medical device manufacturing. 49 Table of Contents Agreement to Acquire Akoya Biosciences, Inc. On January 9, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire Akoya Biosciences, Inc. (“Akoya”), a life sciences technology company based in Marlborough, Massachusetts delivering spatial biology solutions through the power of spatial phenotyping. Spatial phenotyping refers to a rapidly evolving technology that enables academic and biopharma scientists to detect and map the distribution of cell types and biomarkers across whole tissue samples at single-cell resolution, enabling advancements in their understanding of disease progression and patient response to therapy. Akoya commercializes proprietary instrument platforms, reagents, software, and services that offer end-to-end solutions to perform tissue analysis and spatial phenotyping from discovery through translational and clinical research and diagnostics. The transaction is part of our plans to establish the first fully integrated technology ecosystem to identify and measure biomarkers across tissue and blood, expand our technology offerings into oncology and immunology, and expand our portfolio of lab service offerings. Pursuant to the Merger Agreement, a newly formed, wholly owned subsidiary of Quanterix will merge with and into Akoya, with Akoya continuing as the surviving corporation and becoming a wholly owned subsidiary of Quanterix (the “Merger”). Upon completion of the Merger, each issued and outstanding share of common stock of Akoya will be converted into 0.318 of a share of our common stock. The closing of the Merger is subject to a number of conditions and obligations and we expect that, if approved, the Merger will close in the second quarter of 2025. We and Akoya have also agreed to use our respective reasonable best efforts to cooperate in good faith to enter into one or more agreements pursuant to which we would provide Akoya with bridge financing. Any such financing would be in the form of subordinated convertible note(s) in an aggregate principal amount not to exceed $30.0 million, subject to Akoya having obtained any required consents and satisfied any other conditions under Akoya’s existing credit facility. As of the date of filing of this annual report, we are negotiating the potential terms of such financing. Acquisition of Emission Inc. On January 8, 2025, we acquired all of the issued and outstanding shares of capital stock of Emission (the “Emission Transaction”), a life sciences manufacturing company based in Georgetown, Texas, that produces large-scale, highly-uniform dye-encapsulating magnetic beads designed for low and mid-plex assays and a mid-plex platform that reads its proprietary beads. The transaction is part of our plans to secure the use of Emission’s highly controlled beads in our next generation platforms and expansion into a new multi-plex segment targeting third-party original equipment manufacturer customers. Under the Emission Transaction, we made an upfront payment of $10.0 million, with an additional $10.0 million payable upon completion of certain technical milestones. Additionally, the shareholders of Emission (collectively, the “Emission Shareholders”) may receive up to an additional $50.0 million in earnout payments through December 31, 2029, contingent upon the achievement of certain performance milestones. In connection with the closing of the Emission Transaction, the parties entered into a call option agreement (the “Option Agreement”), in which the Emission Shareholders have the right to repurchase all of the outstanding capital stock of Emission for $10.0 million after five years if Emission’s revenues do not exceed $5.0 million in any one year during such five-year period. If the Emission Shareholders exercise the right to repurchase Emission under the Option Agreement and consummate the repurchase, we will retain a perpetual, fully-paid, irrevocable license to all Emission intellectual property required to continue to manufacture and commercialize our products. LucentAD Tests In October 2024, we launched LucentAD Complete, a confirmatory blood biomarker test capable of providing results equivalent to FDA-cleared CSF biomarkers. This test combines p-Tau 217, Amyloid beta 42, Amyloid beta 40, GFAP, and NfL biomarkers, which are recognized by the Alzheimer’s Association as core biomarkers of amyloid and tau, or biomarkers of non-specific processes involved in Alzheimer’s disease pathophysiology. The LucentAD Complete test is intended for patients being evaluated for Alzheimer’s disease. The results from the LucentAD Complete test can aid in the earlier diagnosis of Alzheimer’s disease, as well as the development of personalized treatment plans. Additionally, our LucentAD Complete and our LucentAD p-Tau 217 blood tests were granted Breakthrough Device designation by the FDA in January 2025 and March 2024, respectively. This designation is granted to products that have the potential to offer more effective diagnosis of life-threatening diseases with an unmet medical need. Proposed indications for these blood tests include use of the test results in patients presenting with cognitive impairment who are being evaluated for Alzheimer’s disease risk to aid in diagnostic evaluation. These tests are not intended as a stand-alone 50 Table of Contents diagnostic test and test results will be interpreted in conjunction with other diagnostic tools to establish a final clinical diagnosis. These tests have not been otherwise cleared or approved by the FDA and Breakthrough Device designation does not guarantee that the FDA review and approval process will be shortened or that an application will be approved. We do not expect material revenue from these tests, or other Lucent Diagnostics tests, until 2025 or later, if at all. Assay Redevelopment Program During the fourth quarter of 2023, we substantially completed our six-quarter assay redevelopment program. The objective of this operational program was to improve our ability to manufacture and deliver high-quality assays at scale. Since then, and using the improved protocols resulting from the assay redevelopment program, we have launched our new Simoa Advantage PLUS assays and continue to transition existing assays to Advantage PLUS. The improved protocols leverage manufacturing efficiencies and reagent improvements to provide more consistent results and improved lot-to-lot consistency, which also enables production of larger lot sizes with extended shelf lives. Advantage PLUS assays began shipping to customers in the first quarter of 2024. We expect to continue to apply these improved protocols and manufacturing efficiencies to other existing assays, as well as assays that we may develop in the future. Components of Results of Operations Revenues Product Revenue Our product revenues are generated from sales of (1) instruments and (2) consumables and related revenues. Our products are sold directly to customers and are also sold through distributors in EMEA and Asia Pacific regions. Instrument revenues consist of sales of our instruments (HD-X, SR-X, and SP-X). We currently sell our products for RUO applications directly to customers or through distributors. Customers' purchase processes for certain of our instruments can be long and as a result, instrument revenue can vary from period-to-period and can be concentrated to a small number of customers in any given period. Instruments sold directly to customers include an initial year service-type warranty, which is recorded in services and other revenue on the Consolidated Statements of Operations. Instruments sold to distributors include a license to import and resell the instruments and an initial year assurance-type warranty. Costs related to assurance-type warranties are recorded in cost of product revenue on the Consolidated Statements of Operations. Instrument sales may also be bundled with assays and other consumables, training, installation, and/or an extended service warranty. We expect softness in instrument sales to continue in 2025 as a result of what we believe is a constrained capital funding environment. We believe instrument sales will recover with an improvement in the capital funding environment , and further believe the introduction of our Simoa ONE instrument, which is expected to launch by the end of 2025, will help grow instrument sales in future years. Consumable and other revenues consist of sales of assays fully developed by us, including all antibodies and supplies required to run the assays, or with “homebrew” assay kits where we supply some of the components required for testing, and the customer supplies the remaining required elements. Consumable and other revenues also consist of replacement parts, reagents, and antibodies. Service and Other Revenue Service revenues consist of fixed fee contract research services through our Accelerator Laboratory, initial service-type warranties, extended service warranty contracts, repair services, and other services such as training. Collaboration and License Revenue Collaboration and license revenues consist of licensing our technology, intellectual property, and know-how associated with our instruments to third parties and for related services. License arrangements consist of sales or usage-based fees and/or future royalties. 51 Table of Contents Grant Revenue Grant revenues consist of funding received to perform specific research and development services under grant arrangements. Cost of Goods Sold and Services Cost of Product Revenue Cost of product revenue consists of manufacturing and assembly costs for instruments, related reagents, other consumables, contract manufacturer costs, personnel costs, royalties, overhead, and other direct costs related to product sales. Raw material part costs include inbound shipping and handling costs associated with purchased goods. Cost of product revenue also includes royalty fees due to third parties from revenue generated by collaboration or license deals. Cost of Service and Other Revenue Cost of services and other revenue consists of direct costs associated with operating our Accelerator Laboratory on behalf of customers, including raw materials, personnel costs, royalties, allocated overhead and other related costs. Additional costs include costs related to warranty services and other costs of servicing equipment at customer sites. Research and Development Expense Research and development expense consists of personnel costs, research supplies, third-party development costs for new products, materials for prototypes, quality assurance, and allocated overhead costs that include facility and other related costs. We have made substantial investments in research and development since our inception and plan to continue to make substantial investments in the future. Our research and development efforts have focused primarily on supporting development and commercialization of new and existing products and improved product quality. We believe that our continued investment in research and development is essential to our long-term competitive position. We expect research and development expense to continue to increase due to continued investment in new instruments, including Simoa ONE, and assay development. Selling, General and Administrative Expense Selling, general and administrative expense consists of personnel costs for our sales and marketing, finance, legal, human resources, and general management teams, shipping and handling for product sales, acquisition related costs, other general and administrative costs, as well as professional services costs, such as marketing, advertising, legal and accounting services, and allocated overhead costs that include facility and other related costs. We expect to increase the size of our selling, general and administrative functions to support the growth in our business and newly launched Lucent Diagnostics. However, selling, general and administrative expenses in total are not expected to increase at the same rate in future periods as total revenue or research and development expenses. The classification of shipping and handling costs for product sales varies from company to company, with some companies recording these as selling, general and administrative expenses and others recording such expenses within costs of goods sold for products. To the extent our classification of these shipping and handling costs differs from the classification used by other companies, our gross margins may not be comparable with those reported by such other companies. Other Lease Costs Other lease costs consist of amortization of operating lease right-of-use assets and other facility operating expenses from leased facilities we are not using as a result of the restructuring and strategic realignment plan (the "Restructuring Plan") in August 2022. Impairment and Restructuring Impairment and restructuring expense primarily consists of charges recorded as a result of the Restructuring Plan and the corresponding impairment of our goodwill, long-lived assets (including operating lease right-of-use assets, property and equipment) and intangibles, which were determined to have carrying values exceeding their fair values. 52 Table of Contents Additional impairment expenses consist of assessments of our intangible and long-lived assets annually, or whenever events or circumstances indicate that the carrying amount of the asset(s) may not be recoverable. Interest Income Interest income consists of interest earned on cash, cash equivalents, and marketable securities, and the accretion of discounts from the purchase of marketable securities. Other Income (Expense), Net Other income (expense), net primarily consists of unrealized and realized gains and losses on foreign currency, and other non-recurring items that are not a part of our core business operations. Income Tax Expense Income tax expense consists primarily of income taxes related to federal, state, and foreign jurisdictions in which we conduct business. Comparison of Results of Operations for Years Ended December 31, 2024 and 2023: The following table sets forth select Consolidated Statements of Operations data, and such data as a percentage of total revenues (in thousands, except percentages): [[GREPCENT_TABLE]] [["","Year Ended December 31,","","Increase (Decrease)"],["","2024","","% of revenue","","2023","","% of revenue","","Amount","","%"],["Revenues:"],["Product revenue","$","79,740","","","58","%","","$","79,670","","","65","%","","$","70","","","\u2014","%"],["Service and other revenue","51,244","","","37","%","","40,089","","","33","%","","11,155","","","28","%"],["Collaboration and license revenue","4,452","","","3","%","","1,380","","","1","%","","3,072","","","223","%"],["Grant revenue","1,985","","","1","%","","1,229","","","1","%","","756","","","62","%"],["Total revenues","137,421","","","100","%","","122,368","","","100","%","","15,053","","","12","%"],["Costs of goods sold and services:"],["Cost of product revenue","33,304","","","24","%","","29,103","","","24","%","","4,201","","","14","%"],["Cost of service and other revenue","21,013","","","15","%","","19,041","","","16","%","","1,972","","","10","%"],["Total costs of goods sold and services","54,317","","","39","%","","48,144","","","39","%","","6,173","","","13","%"],["Gross profit","83,104","","","60","%","","74,224","","","61","%","","8,880","","","12","%"],["Operating expenses:"],["Research and development","31,082","","","23","%","","26,064","","","21","%","","5,018","","","19","%"],["Selling, general and administrative","101,618","","","74","%","","89,111","","","73","%","","12,507","","","14","%"],["Other lease costs","3,020","","","2","%","","3,712","","","3","%","","(692)","","","(19)","%"],["Impairment and restructuring","\u2014","","","\u2014","%","","1,328","","","1","%","","(1,328)","","","(100)","%"],["Total operating expenses","135,720","","","99","%","","120,215","","","98","%","","15,505","","","13","%"],["Loss from operations","(52,616)","","","(39)","%","","(45,991)","","","(37)","%","","(6,625)","","","14","%"],["Interest income","14,655","","","11","%","","15,839","","","13","%","","(1,184)","","","(7)","%"],["Other income (expense)","(136)","","","\u2014","%","","2,517","","","2","%","","(2,653)","","","(105)","%"],["Loss before income taxes","(38,097)","","","(28)","%","","(27,635)","","","(22)","%","","(10,462)","","","38","%"],["Income tax expense","(434)","","","\u2014","%","","(719)","","","(1)","%","","285","","","(40)","%"],["Net loss","$","(38,531)","","","(28)","%","","$","(28,354)","","","(23)","%","","$","(10,177)","","","36","%"]] [[/GREPCENT_TABLE]] 53 Table of Contents Revenues Total revenues increased $15.1 million, or 12%, to $137.4 million for the year ended December 31, 2024, compared to $122.4 million for the year ended December 31, 2023. Product revenue of $79.7 million for the year ended December 31, 2024 consisted of instrument sales of $10.5 million and sales of consumables and other products of $69.3 million. This represented an increase of $0.1 million, or less than 1%, compared to product revenue of $79.7 million for the year ended December 31, 2023. The increase in product revenue was primarily due to a $5.3 million increase in sales of consumables and higher selling prices and was mostly offset by a $5.3 million decrease in instrument sales due to reduced demand. Service revenue was $51.2 million for the year ended December 31, 2024, compared to $40.1 million for the year ended December 31, 2023, an increase of $11.2 million, or 28%. This increase was primarily due to a $10.2 million increase in Accelerator Laboratory revenue driven by higher volumes of sample testing and assay development services, as well as higher selling prices. Collaboration and license revenue was $4.5 million for the year ended December 31, 2024, compared to $1.4 million for the year ended December 31, 2023, an increase of $3.1 million, or 223%. The increase was primarily due to LDT and other diagnostic related license revenues. Grant revenue was $2.0 million for the year ended December 31, 2024, compared to $1.2 million for the year ended December 31, 2023, a increase of $0.8 million, or 62%. The increase was primarily due to completion of milestones under certain grants. Cost of Goods Sold and Services Total cost of goods sold and services increased $6.2 million, or 13%, to $54.3 million for the year ended December 31, 2024 compared to $48.1 million for the year ended December 31, 2023. Cost of product revenue increased $4.2 million, or 14%, to $33.3 million for the year ended December 31, 2024, compared to $29.1 million for the year ended December 31, 2023. The increase was primarily due to lower production volume and output, which led to decreased labor and overhead capitalization, increased costs due to the introduction of new assays, and increased compensation and benefits costs related to increased headcount. These increases were partially offset by improvement in inventory management and manufacturing processes and lower instrument sales. Cost of service and other revenue increased $2.0 million, or 10%, to $21.0 million for the year ended December 31, 2024, compared to $19.0 million for the year ended December 31, 2023. This increase was primarily due to an increase in department costs, including compensation and benefits costs related to increased headcount and lab supplies, as a result of increased demand for Accelerator Laboratory services. Although service and other revenue increased by 28% during the same period, these costs did not increase at the same rate compared to the prior year due to larger project sizes and improved efficiency delivering Accelerator Laboratory services. Research and Development Research and development expense increased $5.0 million, or 19%, to $31.1 million for the year ended December 31, 2024, compared to $26.1 million for the year ended December 31, 2023. This increase was primarily due to a $3.2 million increase related to headcount, consisting of $2.9 million in compensation and benefit costs and $0.4 million in stock-based compensation expense, and a $1.7 million increase in costs of outside services and research lab supplies and equipment to enable product development. These increases were partially offset by a $0.4 million decrease from the disposal of certain assets in 2023, which did not repeat in 2024. 54 Table of Contents Selling, General and Administrative Selling, general and administrative expense increased $12.5 million, or 14% to $101.6 million for the year ended December 31, 2024, compared to $89.1 million for the year ended December 31, 2023. The increase was primarily due to (1) a $7.1 million increase related to headcount, consisting of $4.7 million in compensation and benefit costs and $2.4 million in stock-based compensation expense, (2) a $3.7 million increase in professional services and consulting fees related to our efforts to remediate the material weaknesses in our internal control over financial reporting described in our Annual Report on Form 10-K (as amended by Amendment No.1 to such report on Form 10-K/A) for the year ended December 31, 2023, the restatement of our financial statements completed on December 23, 2024, and due diligence and other acquisition costs related to the Emission and Akoya transactions, (3) a $0.7 million increase in marketing expense for promotion and branding, (4) a $0.6 million increase in software and information technology expenses, and (5) a $0.4 million increase in travel and related expenses. Included within selling, general and administrative expense are $8.1 million and $7.2 million of shipping and handling costs for product sales for the years ended December 31, 2024 and 2023, respectively. Other Lease Costs Other lease costs decreased $0.7 million, or 19%, to $3.0 million for the year ended December 31, 2024, compared to $3.7 million for the year ended December 31, 2023. In the fourth quarter of 2024, we began using one of the leased facilities that we did not occupy as a result of the Restructuring Plan. Accordingly, as of the fourth quarter of 2024, the amortization of the operating lease right-of-use asset and related leased facility operating expenses at this facility are no longer recorded in other lease costs. Impairment and Restructuring We did not incur any impairment and restructuring costs for the year ended December 31, 2024, compared to $1.3 million for the year ended December 31, 2023. During 2023, we incurred long-lived asset impairment charges associated with leased facilities we were not using. Interest Income Interest income decreased by $1.2 million, or 7% to $14.7 million for the year ended December 31, 2024, compared to $15.8 million for the year ended December 31, 2023. This decrease was primarily due to lower interest rates and a lower balance of cash, cash equivalents, and marketable securities. Other Income (Expense), Net Other income (expense) was less than $0.1 million of expense for the year ended December 31, 2024, compared to $2.5 million of income for the year ended December 31, 2023. The decrease was primarily due to recognizing a $2.4 million receivable under the Employee Retention Credit established by the Coronavirus Aid, Relief, and Economic Security Act in the third quarter of 2023. Income Tax Expense Income tax expense was $0.4 million for the year ended December 31, 2024, as compared to $0.7 million for the year ended December 31, 2023. The change was primarily due to the decrease in the tax expense recorded on the operating results of our foreign subsidiaries. Liquidity and Capital Resources Our principal sources of liquidity are cash, cash equivalents, marketable securities, and funds generated from sales of our products and services. As of December 31, 2024, we had cash and cash equivalents of $56.7 million and $232.4 million of available for sale marketable securities. Historically we have financed our operations through funds generated from sales of our products and services, equity offerings, and borrowings from credit facilities. We believe our cash, cash equivalents, and marketable securities, along with funds generated from sales of our products and services, will be sufficient to meet our anticipated operating cash requirements for at least 12 months from the date of this Annual Report on Form 10-K. 55 Table of Contents 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. Our future capital requirements will depend on many factors, including, but not limited to, our pace of growth, expansion, or introduction of new instruments, assays, and services, including Lucent Diagnostics and Simoa ONE, and advancing access to our diagnostic tests, market acceptance of our products and services, regulatory requirements, regulatory approval of our products or services, and the effects of competition, technological developments, and broader market and economic trends. Our future capital needs will also depend on the level of our merger and acquisition activity, including purchase price payments, earnout obligations, and acquisition and integration costs. Further, we may need additional liquidity as a result of changes in our operations and strategic plan as a result of future acquisitions, investments, or similar transactions. On January 8, 2025, we completed the acquisition of Emission for an upfront payment of $10.0 million, with an additional $10.0 million payable upon completion of certain technical milestones, and an additional $50.0 million in earnout payments through December 31, 2029, contingent upon the achievement of certain performance milestones. On January 9, 2025, we announced our plan to merge with Akoya in an all stock transaction. Under the terms of the Merger Agreement with Akoya, we and Akoya have also agreed to use our respective reasonable best efforts to cooperate in good faith to enter into one or more agreements pursuant to which we would provide Akoya with up to $30.0 million of bridge financing prior to closing of the Merger. As of the date of filing this annual report, we are negotiating the potential terms of such financing. We regularly assess other potential acquisitions and may need capital to pursue acquisitions of complementary businesses, services, and technologies. To the extent our existing cash, cash equivalents, and marketable securities are insufficient to fund future activities or requirements to continue operating our business, we may need to raise additional capital. If the conditions for raising capital are favorable, we may seek to finance future cash needs through public or private equity, debt offerings, or other financings. If needed, 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 or issue equity in connection with a merger or acquisition, 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 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, if needed, 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, debt offerings, or other financings. Cash Flows The following table summarizes our cash flows (in thousands): [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2024","","2023"],["Net cash used in operating activities","$","(35,164)","","","$","(18,849)"],["Net cash used in investing activities","(82,265)","","","(148,454)"],["Net cash provided by financing activities","456","","2,691"],["Net decrease in cash, cash equivalents, and restricted cash","$","(116,973)","","","$","(164,612)"]] [[/GREPCENT_TABLE]] 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 will continue in the future. 56 Table of Contents Net cash used in operating activities was $35.2 million and $18.8 million for the years ended December 31, 2024 and 2023, respectively. The $16.3 million increase in net cash used in operating activities was primarily driven by an overall increase in our net loss, adjusted for non-cash items, consisting of product development, increases in headcount primarily across product delivery, research and development, and sales functions, and lower production volume and output which led to decreased labor and overhead capitalization. The increase was partially offset by changes in working capital items, primarily an increase in accounts receivable from revenue growth through the fourth quarter of 2024 and an increase in inventory as a result of manufacturing new assays and purchasing materials for additional new assays in 2025. Net Cash Used in Investing Activities Our primary investing activities consist of purchases of marketable securities to increase the interest income we would otherwise earn in cash accounts. Additionally, we use funds towards 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. Net cash used in investing activities was $82.3 million during the year ended December 31, 2024, which consisted of the purchase of $295.6 million of marketable securities, proceeds from the maturities of marketable securities of $216.7 million, and $3.4 million of purchases of property and equipment. Net cash used in investing activities was $148.5 million during the year ended December 31, 2023, which consisted of the purchase of $175.6 million of marketable securities, proceeds from the maturities of marketable securities of $31.0 million, and $3.8 million of purchases of property and equipment. Net Cash Provided by Financing Activities Financing activities provided $0.5 million and $2.7 million of cash during each of the years ended December 31, 2024 and 2023, respectively, from sales of our common stock under our employee stock purchase plan and from the exercise of options under our equity incentive plan. Future Cash Obligations In addition to the future cash obligations described below, we have other payables and liabilities that may be legally enforceable but are not considered contractual commitments. Refer to Note 15 - Commitments and Contingencies in the Notes to Consolidated Financial Statements for a summary of our purchase commitments and other obligations as of December 31, 2024. Acquisitions See the sections titled “Recent Business Developments” and “Liquidity and Capital Resources” within Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on the acquisition of Emission and the proposed Merger with Akoya. Operating Leases We lease office, laboratory, and manufacturing space for our employees and operations, as well as office equipment, under non-cancellable operating lease agreements (refer to Note 14 - Leases in the Notes to Consolidated Financial Statements). The remaining duration of non-cancellable operating leases ranges from four months to seven years. Remaining lease payments within one year, within two to three years, within four to five years, and greater than five years from December 31, 2024 are $7.3 million, $15.1 million, $16.1 million, and $7.6 million, respectively. Critical Accounting Policies and Estimates Our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience, worldwide economic conditions, both general and specific to the life sciences industry, and on various other assumptions we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an 57 Table of Contents ongoing basis, and changes in accounting estimates may occur from period to period. Accordingly, actual results could differ significantly from the estimates. To the extent that 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. Our significant accounting policies are described in Note 2 - Significant Accounting Policies in the Notes to Consolidated Financial Statements. We believe that the assumptions and estimates in the following critical accounting policies involve a greater degree of judgment and complexity and accordingly are the most critical to understanding and evaluating the potential impact to our Consolidated Financial Statements. Revenue from Contracts with Customers We generate revenue from the sale of products, services, and licenses, as further described in the section titled “Components of Results of Operations” above. For contracts with customers, we recognize revenue when a customer obtains control of promised products or services, for an amount that reflects the consideration expected to be received in exchange for those products or services. We follow the five-step framework prescribed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 - Revenue from Contracts with Customers (“ASC 606”) to determine revenue recognition: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Revenues are presented net of any sales, value added, or similar taxes collected from customers and remitted to the government. We determine the transaction price based on the amount of consideration we expect to be entitled to, which is generally equal to our contract amounts. In some cases, our contracts contain variable consideration which primarily relates to (1) sales and usage-based royalties related to the license of intellectual property in collaboration and license contracts and (2) contracts with minimum purchase commitments. For sales and usage-based royalties, ASC 606 provides an exception to estimating variable consideration. Under this exception, we recognize revenues from sales or usage-based royalty revenue at the later of when the sales or usage occurs or the satisfaction (or partial satisfaction) of the performance obligation to which the royalty has been allocated. All other variable amounts are constrained to the minimum guaranteed contract amount so that a reversal of cumulative revenue does not occur in future periods. Once there is no longer uncertainty over a variable amount, any incremental fees we are entitled to are allocated to the related performance obligations. Our contracts may include either a single promise (referred to as a performance obligation) to transfer a product or service, or a combination of multiple promises to transfer products or services. We evaluate the existence of multiple promises within our contracts by using judgment to determine if (1) the customer can benefit from each contractual promise on its own or together with readily available resources and (2) the transfer of each contractual promise is separately identifiable from other promises in a contract. When both criteria are met, each promise is accounted for as a separate performance obligation. Sales of instruments directly to customers include installation and an initial year service-type warranty (which guarantees that our instruments are free from material defects in workmanship and materials, excluding normal wear and tear, and maintenance services). We have determined that the instrument and installation are a combined performance obligation. The service-type warranty is considered a separate performance obligation since a customer could benefit from it independently with readily available resources and is capable of being sold on its own. Sales of instruments to distributors include a license to import and resell the instruments and an initial year of assurance-type warranty (which guarantees that the products conform to our published specifications). We have determined that the instrument and distributor license are a combined performance obligation since the distributor only benefits from the combination of the instrument and ability to resell it. The assurance-type warranty does not create a separate performance obligation under ASC 606. Under ASC Topic 460 – Guarantees, we establish an accrual for estimated assurance-type warranty expense, which is recorded in cost of product revenue on the Consolidated Statements of Operations. Instrument sales may also be bundled with assays and other consumables, training, and/or an extended service warranty, each of which is considered a separate performance obligation. 58 Table of Contents Contracts that include rights to additional products or services that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide a material right to the customer and if so, the material right is considered a performance obligation. The identification of material rights requires judgment to determine if the value of the option to purchase additional products and services in relation to options that may be provided to, and prices paid by, customers in the normal course of business. Material rights are recognized when they are exercised by a customer or upon expiration of the right. For contracts that contain multiple performance obligations, the transaction price is allocated among the performance obligations on a relative basis according to their standalone selling prices (“SSP”). Determining the SSP for performance obligations requires judgment. We determine SSP based on factors including prices charged to customers in observable transactions, internal pricing objectives and list prices, pricing of similar products, expected costs to manufacture our products, and estimated margins. We have more than one range of standalone selling price for certain products and services based on the geographic location of the customer and sales channel. The majority of our products and services are recognized at the point in time we transfer control to the customer. For product revenues, direct instrument sales to customers are recognized upon completion of the instrument’s installation. For instrument sales to distributors, revenue is recognized based on the agreed upon shipping terms (either upon shipment or delivery) as that is when title passes to the customer. Services revenues generated from contract research services in our Accelerator Laboratory are recognized upon completion and delivery of the research results. In cases where we maintain a contractual right to payment for service performed (including a reasonable profit margin), revenue is recognized over time as the services are provided, using an output method that is based on the number of completed results. Service revenues generated from warranties and service contracts are recognized ratably over the service period as the customer simultaneously receives and benefits from the services. Collaboration and license revenues are recognized at the point in time the license performance obligation is delivered as the customer has the right to use the intellectual property when it is received. Royalty revenues that are sales or usage-based are recognized at the later of when the sales or usage occurs or the satisfaction (or partial satisfaction) of the performance obligation to which the royalty has been allocated. Inventory Reserves Inventory is stated at the lower of cost or net realizable value on a first-in, first-out (“FIFO”) basis and includes the cost of materials, labor, and manufacturing overhead. We analyze our inventory levels on each reporting date for slow-moving, excess, and obsolete inventory, and inventory expected to expire prior to being used. Our analysis requires judgment and is based on factors including, but not limited to, our recent historical activity, anticipated or forecasted demand for our products (developed through our planning and sales and marketing inputs), scientific data supporting the estimated life of materials that expire, and market conditions. If we identify adverse conditions exist, such as unfavorable changes in estimated customer demand, the lives of materials that expire, or actual market conditions that may differ from management projections, the carrying value of the inventory is reduced to its estimated net realizable value by providing estimated reserves for excess or obsolete inventory. Impairment of Other Long-Lived Assets Our long-lived assets consist of operating lease right-of-use assets, property and equipment, and intangible assets. We review the carrying amount of our long-lived assets for impairment whenever events or circumstances indicate that the estimated useful lives may warrant revision, or that the carrying amount of the assets may not be fully recoverable. To assess whether a long-lived asset or asset group has been impaired, the estimated undiscounted and discounted future cash flows for the estimated remaining useful life or estimated lease term of the asset is compared to its carrying value. Significant judgment is required to estimate future cash flows, including, but not limited to, the expected use of the asset, historical client retention rates, technology roadmaps, consumer awareness, trademark and trade name history, contractual provisions that could limit or extend an asset's useful life, market data, discount rates, and potential sublease opportunities, including rent and rent escalation rates, time to sublease, and free rent periods. To the extent that the future cash flows are less than the carrying value, a long-lived asset or asset group is impaired and written down to its estimated fair value. 59 Table of Contents Non-GAAP Financial Measures To supplement our financial statements presented on a U.S. GAAP basis, we present the following non-GAAP financial measures: adjusted gross profit, adjusted gross margin, adjusted total operating expenses, and adjusted loss from operations. These non-GAAP financial measures are calculated by including shipping and handling costs for product sales within cost of product revenue instead of within selling, general and administrative expenses. We use 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. We believe that presentation of these non-GAAP measures provides useful information to investors in assessing our operating performance within our industry and 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. 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 adjusted gross profit, adjusted gross margin, adjusted total operating expenses, and adjusted loss from operations from their most directly comparable GAAP financial measures: Reconciliation of Gross Profit, Gross Margin, Total Operating Expenses and Loss from Operations to Non-GAAP Financial Measures (Unaudited, amounts in thousands except percentages) [[GREPCENT_TABLE]] [["","Three Months Ended December 31,","","Twelve Months Ended December 31,"],["","2024","","2023","","2024","","2023"],["Gross profit","$","22,169","","$","19,406","","$","83,104","","$","74,224"],["Shipping and handling costs","(1,885)","","","(2,142)","","","(8,113)","","","(8,146)"],["Adjusted gross profit (non-GAAP)","$","20,284","","$","17,264","","$","74,991","","$","66,078"],["Total revenues","$","35,161","","$","31,549","","$","137,421","","$","122,368"],["Gross margin (gross profit as % of total revenues)","63.0%","","61.5%","","60.5%","","60.7%"],["Adjusted gross margin (non-GAAP) (adjusted gross profit as % of total revenues)","57.7%","","54.7%","","54.6%","","54.0%"],["Total operating expenses","$","36,938","","$","33,023","","$","135,720","","$","120,215"],["Shipping and handling costs","(1,885)","","","(2,142)","","","(8,113)","","","(8,146)"],["Adjusted total operating expenses (non-GAAP)","$","35,053","","$","30,881","","$","127,607","","$","112,069"],["Loss from operations","$","(14,769)","","","$","(13,617)","","","$","(52,616)","","","$","(45,991)"],["Adjusted loss from operations (non-GAAP)","$","(14,769)","","","$","(13,617)","","","$","(52,616)","","","$","(45,991)"]] [[/GREPCENT_TABLE]] Recent Accounting Pronouncements Refer to Note 2 - Significant Accounting Policies in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and effects on our Consolidated Financial Statements.