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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           .

Commission File Number: 001-38319

QUANTERIX CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

20-8957988

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

900 Middlesex Turnpike

Billerica, MA

01821

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 301-9400

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common Stock, $0.001 par value per share

QTRX

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   No

As of October 30, 2020, the registrant had 31,668,184 shares of common stock, $0.001 par value per share, outstanding.

TTABLE OF CONTENTS

Page

Special Note Regarding Forward-Looking Statements

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

4

Unaudited Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019

4

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019

5

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019

6

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019

7

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019

8

Notes to Condensed Consolidated Financial Statements

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

43

Item 4. Controls and Procedures

43

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

44

Item 1A. Risk Factors

44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3. Defaults Upon Senior Securities

45

Item 4. Mine Safety Disclosures

45

Item 5. Other Information

45

Item 6. Exhibits

46

Signatures

48

2

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about our financial performance, and are subject to a number of risks, uncertainties and assumptions, including those described in this Quarterly Report on Form 10-Q and in “Part I, Item 1A, Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, as may be updated by “Part II, Item 1A, Risk Factors” of our subsequently filed Quarterly Reports on Form 10-Q, or other filings that we make with the Securities and Exchange Commission, or SEC. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, events or circumstances reflected in the forward-looking statements will be achieved or occur. You should read this Quarterly Report on Form 10-Q, and the documents that we reference herein and have filed with the SEC, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to new information, actual results or to changes in our expectations, except as required by law.

Unless the context otherwise requires, the terms “Quanterix,” the “Company,” “we,” “us” and “our” in this Quarterly Report on Form 10-Q refer to Quanterix Corporation and its subsidiaries. “Quanterix,” “Simoa,” “Simoa HD-X,” “Simoa HD-1,” “SR-X,” “SP-X,” “HD-X Analyzer,” “HD-1 Analyzer” and our logo are our trademarks. All other service marks, trademarks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

3

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Quanterix Corporation

Condensed Consolidated Balance Sheets

(amounts in thousands, except share and per share data)

    

(Unaudited)

    

    

September 30, 2020

    

December 31, 2019

Assets

Current assets:

 

 

  

Cash and cash equivalents

$

173,162

$

109,155

Accounts receivable (less reserve for doubtful accounts of $449 and $162 as of September 30, 2020 and December 31, 2019, respectively; including $73 and $186 from related parties as of September 30, 2020 and December 31, 2019, respectively)

 

26,262

 

10,906

Inventory

 

13,274

 

10,463

Prepaid expenses and other current assets

 

2,230

 

2,137

Total current assets

214,928

 

132,661

Restricted cash

 

1,000

 

1,026

Property and equipment, net

 

12,827

 

12,047

Intangible assets, net

 

13,242

 

14,307

Goodwill

 

9,714

 

9,353

Right-of-use assets

12,019

Other non-current assets

 

375

 

557

Total assets

$

264,105

$

169,951

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable (including $60 and $36 to related parties as of September 30, 2020 and December 31, 2019, respectively)

$

5,962

$

5,777

Accrued compensation and benefits

 

7,038

 

6,570

Other accrued expenses (including $1,338 and $0 to related parties as of September 30, 2020 and December 31, 2019, respectively)

 

4,177

 

2,498

Deferred revenue (including $56 and $55 with related parties as of September 30, 2020 and December 31, 2019, respectively)

 

3,793

 

4,697

Current portion of long term debt

 

5,744

 

75

Short term lease liabilities

1,166

Other current liabilities

212

216

Total current liabilities

 

28,092

 

19,833

Deferred revenue, net of current portion

 

363

 

466

Long term debt, net of current portion

 

1,907

 

7,587

Long term lease liabilities

22,159

Other non-current liabilities

 

2,543

 

13,407

Total liabilities

 

55,064

 

41,293

Commitments and contingencies (Note 11)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock, $0.001 par value:

 

 

Authorized—120,000,000 shares as of September 30, 2020 and December 31, 2019; issued and outstanding31,583,509 and 28,112,201 shares as of September 30, 2020 and December 31, 2019, respectively

 

32

 

28

Additional paid-in capital

 

446,228

 

345,027

Accumulated other comprehensive income (loss)

734

(153)

Accumulated deficit

 

(237,953)

 

(216,244)

Total stockholders’ equity

 

209,041

 

128,658

Total liabilities and stockholders’ equity

$

264,105

$

169,951

See accompanying notes

4

Quanterix Corporation

Condensed Consolidated Statements of Operations

(amounts in thousands, except share and per share data)

(Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

Product revenue (including related party activity of $126 and $321 for the three months ended September 30, 2020 and 2019, respectively, and $398 and $526 for the nine months ended September 30, 2020 and 2019, respectively

$

11,662

$

10,737

$

28,285

$

29,059

Service and other revenue (including related party activity of $26 and $31 for the three months ended September 30, 2020 and 2019, respectively, and $71 and $73 for the nine months ended September 30, 2020 and 2019, respectively)

 

6,552

 

4,207

 

18,631

 

11,757

Collaboration and license revenue

 

11,246

 

 

11,401

 

Grant revenue

1,929

1,929

Total revenue

 

31,389

 

14,944

 

60,246

 

40,816

Costs of goods sold:

 

 

  

Cost of product revenue (including related party activity of $39 and $80 for the three months ended September 30, 2020 and 2019, respectively, and $116 and $150 for the nine months ended September 30, 2020 and 2019, respectively)

 

6,387

 

5,513

 

17,989

 

14,217

Cost of services and other revenue

 

2,896

 

2,398

 

8,125

 

6,630

Cost of collaboration and license revenue

1,000

1,000

Total costs of goods sold, services, and licenses

 

10,283

 

7,911

 

27,114

 

20,847

Gross profit

21,106

7,033

33,132

19,969

Operating expenses:

 

 

  

Research and development

 

5,377

 

3,924

 

13,957

 

11,792

Selling, general, and administrative

 

13,451

 

13,352

 

40,826

 

38,293

Total operating expenses

 

18,828

 

17,276

 

54,783

 

50,085

Income (loss) from operations

 

2,278

 

(10,243)

 

(21,651)

 

(30,116)

Interest income (expense), net

 

(160)

 

282

 

(107)

 

346

Other expense, net

 

(26)

 

(34)

 

(204)

 

(149)

Income (loss) before income taxes

2,092

(9,995)

(21,962)

(29,919)

Income tax benefit

111

125

253

81

Net income (loss)

$

2,203

$

(9,870)

$

(21,709)

$

(29,838)

Net income (loss) per share, basic

$

0.07

$

(0.37)

$

(0.75)

$

(1.24)

Weighted-average common shares outstanding, basic

 

30,139,157

 

26,627,831

 

28,881,716

 

24,102,887

Net income (loss) per share, diluted

$

0.07

$

(0.37)

$

(0.75)

$

(1.24)

Weighted-average common shares outstanding, diluted

 

31,386,439

 

26,627,831

 

28,881,716

 

24,102,887

See accompanying notes

5

Quanterix Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(amounts in thousands)

(Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2020

    

2019

    

2020

    

2019

Net income (loss)

$

2,203

$

(9,870)

$

(21,709)

$

(29,838)

Other comprehensive income (loss):

Cumulative translation adjustment

760

(1,135)

887

(1,135)

Total other comprehensive income (loss)

760

(1,135)

887

(1,135)

Comprehensive income (loss)

$

2,963

$

(11,005)

$

(20,822)

$

(30,973)

See accompanying notes

6

Quanterix Corporation

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(Unaudited)

Nine Months Ended September 30, 

2020

    

2019

Operating activities

 

  

 

  

Net income (loss)

$

(21,709)

$

(29,838)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

  

Depreciation and amortization expense

 

3,187

 

2,188

Inventory step-up amortization

670

Reduction in the carrying amounts of right-of-use assets

204

Stock-based compensation expense

 

6,970

 

4,713

Non-cash interest expense

 

65

 

68

Loss on disposal of fixed assets

 

120

 

24

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(15,360)

 

(4,474)

Prepaid expenses and other assets

 

(5)

 

(104)

Inventory

 

(3,505)

 

(3,943)

Other non-current assets

 

182

 

(21)

Accounts payable

 

(187)

 

(835)

Accrued compensation and benefits, other accrued expenses and other current liabilities

 

2,117

 

573

Contract acquisition costs

(99)

533

Operating lease liabilities

515

Other non-current liabilities

(177)

10,068

Deferred revenue

 

(1,007)

 

(604)

Net cash used in operating activities

(28,019)

(21,652)

Investing activities

 

  

 

  

Purchases of property and equipment

 

(2,149)

 

(10,303)

Acquisition of UmanDiagnostics AB, net of cash acquired

 

 

(14,529)

Net cash used in investing activities

(2,149)

(24,832)

Financing activities

 

  

 

  

Proceeds from stock options exercised

 

1,943

 

2,176

Sale of common stock in at-the-market offering, net

48,019

Sale of common stock in underwritten public offering, net

91,404

64,529

Proceeds from ESPP purchase

 

888

 

799

Payments on notes payable

 

(75)

 

(50)

Net cash provided by financing activities

94,160

115,473

Net increase in cash and cash equivalents

 

63,992

 

68,989

Effect of foreign currency exchange rate on cash

(11)

(65)

Cash, restricted cash, and cash equivalents at beginning of period

 

110,181

 

45,429

Cash, restricted cash, and cash equivalents at end of period

$

174,162

$

114,353

Supplemental cash flow information

 

  

 

  

Cash paid for interest

$

468

$

478

Purchases of property and equipment included in accounts payable

$

358

$

45

Purchases of property and equipment included in other non-current liabilities

$

$

7,750

191,152 shares of common stock issued in connection with the acquisition of UmanDiagnostics AB

$

$

5,467

Reconciliation of cash, cash equivalents, and restricted cash:

Cash and cash equivalents

$

173,162

$

113,327

Restricted cash

$

1,000

$

1,026

Total cash, cash equivalents, and restricted cash

$

174,162

$

114,353

See accompanying notes

7

Quanterix Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(amounts in thousands, except share data)

(Unaudited)

Accumulated

Additional

other

Total

Common

Common

paid-in

comprehensive

Accumulated

stockholders’

    

stock shares

    

stock value

    

capital

    

income (loss)

deficit

    

equity

Balance at June 30, 2020

28,381,280

 

$

28

 

$

351,188

 

$

(26)

$

(240,156)

 

$

111,034

Exercise of common stock options and vesting of restricted stock

130,302

1

831

832

Sale of common stock in underwritten public offering, net

 

3,048,774

3

91,401

 

91,404

ESPP stock purchase

 

23,153

448

 

448

Stock-based compensation expense

 

2,360

 

2,360

Cumulative translation adjustment

760

760

Net income (loss)

2,203

2,203

Balance at September 30, 2020

 

31,583,509

 

$

32

 

$

446,228

 

$

734

$

(237,953)

 

$

209,041

Accumulated

Additional

other

Total

Common

Common

paid-in

comprehensive

Accumulated

stockholders’

    

stock shares

    

stock value

    

capital

    

income (loss)

deficit

    

equity

Balance at June 30, 2019

 

24,894,019

$

25

$

270,136

$

$

(195,416)

 

$

74,745

Exercise of common stock warrants

45,690

Exercise of common stock options and vesting of restricted stock

 

87,476

265

 

265

Sale of common stock in underwritten public offering, net

2,732,673

3

64,526

 

64,529

Issuance of shares for acquisition of Umandiagnostics AB

191,152

5,467

5,467

ESPP stock purchase

16,703

406

406

Stock-based compensation expense

1,828

1,828

Cumulative translation adjustment

(1,135)

(1,135)

Net income (loss)

(9,870)

(9,870)

Balance at September 30, 2019

 

27,967,713

 

$

28

 

$

342,628

 

$

(1,135)

$

(205,286)

 

$

136,235

Accumulated

Additional

other

Total

Common

Common

paid-in

comprehensive

Accumulated

stockholders’

    

stock shares

    

stock value

    

capital

    

income (loss)

deficit

    

equity

Balance at December 31, 2019

 

28,112,201

$

28

$

345,027

$

(153)

$

(216,244)

 

$

128,658

Exercise of common stock options and vesting of restricted stock

 

376,688

1

1,942

 

1,943

Sale of common stock in underwritten public offering, net

3,048,774

3

91,401

91,404

ESPP stock purchase

45,846

888

 

888

Stock-based compensation expense

6,970

6,970

Cumulative translation adjustment

887

887

Net income (loss)

(21,709)

(21,709)

Balance at September 30, 2020

 

31,583,509

 

$

32

 

$

446,228

 

$

734

$

(237,953)

 

$

209,041

Accumulated

Additional

other

Total

Common

Common

paid-in

comprehensive

Accumulated

stockholders’

    

stock shares

    

stock value

    

capital

    

income (loss)

deficit

    

equity

Balance at December 31, 2018

 

22,369,036

$

22

$

216,931

$

$

(175,888)

 

$

41,065

Cumulative-effect adjustment for the adoption of ASC 606

440

440

Exercise of common stock warrants

45,690

Exercise of common stock options and vesting of restricted stock

 

406,246

1

2,175

 

2,176

Sale of common stock in at-the-market offering, net

2,186,163

2

48,017

48,019

Sale of common stock in underwritten public offering, net

2,732,673

3

64,526

64,529

Issuance of shares for acquisition of Umandiagnostics AB

191,152

5,467

5,467

ESPP stock purchase

36,753

799

 

799

Stock-based compensation expense

4,713

4,713

Cumulative translation adjustment

(1,135)

(1,135)

Net income (loss)

(29,838)

(29,838)

Balance at September 30, 2019

 

27,967,713

 

$

28

 

$

342,628

 

$

(1,135)

$

(205,286)

 

$

136,235

See accompanying notes

8

Quanterix Corporation

Notes to condensed consolidated financial statements

(Unaudited)

1. Organization and operations

Quanterix Corporation (Nasdaq: QTRX) (the Company) is a life sciences company that has developed next generation, ultra-sensitive digital immunoassay platforms that advance precision health for life sciences research and diagnostics. The Company's platforms are based on its proprietary digital "Simoa" detection technology. The Company's Simoa bead-based and planar array platforms enable customers to reliably detect protein biomarkers in extremely low concentrations in blood, serum and other fluids that, in many cases, are undetectable using conventional, analog immunoassay technologies, and also allow researchers to define and validate the function of novel protein biomarkers that are only present in very low concentrations and have been discovered using technologies such as mass spectrometry. These capabilities provide the Company's customers with insight into the role of protein biomarkers in human health that has not been possible with other existing technologies and enable researchers to unlock unique insights into the continuum between health and disease. The Company is currently focusing on protein detection, which it believes is an area of significant unmet need and where it has significant competitive advantages. However, in addition to enabling new applications and insights in protein analysis, the Company’s Simoa platforms have also demonstrated applicability across other testing applications, including detection of nucleic acids and small molecules.

The Company launched its first immunoassay platform, the Simoa HD-1, in 2014. The HD-1 is a fully automated immunoassay bead-based platform with multiplexing and custom assay capability, and related assay test kits and consumable materials. The Company launched a second bead-based immunoassay platform (SR-X) in the fourth quarter of 2017 with a more compact footprint than the Simoa HD-1 and less automation designed for lower volume requirements while still allowing multiplexing and custom assay capability. The Company initiated an early-access program for its third instrument (SP-X) on the new Simoa planar array platform in January 2019, with the full commercial launch commencing in April 2019. In July 2019, the Company launched the Simoa HD-X, an upgraded version of the Simoa HD-1 which replaces the HD-1. The HD-X has been designed to deliver significant productivity and operational efficiency improvements, as well as greater user flexibility. The Company began shipping and installing HD-X instruments at customer locations in the third quarter of 2019. The Company also performs research services on behalf of customers to apply the Simoa technology to specific customer needs. The Company's customers are primarily in the research use only market, which includes academic and governmental research institutions, the research and development laboratories of pharmaceutical manufacturers, contract research organizations, and specialty research laboratories.

The Company acquired Aushon Biosystems, Inc. (Aushon) in January 2018. With the acquisition of Aushon, the Company acquired a CLIA certified laboratory, as well as Aushon's proprietary sensitive planar array detection technology. Leveraging its proprietary sophisticated Simoa image analysis and data analysis algorithms, the Company further refined this planar array technology to develop the SP-X instrument to provide the same Simoa sensitivity found in its bead-based platform.

The Company completed the acquisition of UmanDiagnostics AB (Uman), a Swedish company located in Umea, Sweden, in August 2019. The acquisition closed with respect to 95% of the outstanding shares of capital stock of Uman on July 1, 2019 and with respect to the remaining 5% of the outstanding shares of capital stock of Uman on August 1, 2019. Uman supplies neurofilament light (Nf-L) antibodies and ELISA kits, which are widely recognized by researchers and biopharmaceutical and diagnostics companies world-wide as the premier solution for the detection of Nf-L to advance the development of therapeutics and diagnostics for neurodegenerative conditions. With the acquisition of Uman, the Company has secured a long-term source of supply for a critical technology.

“At-the-market offering”

On March 19, 2019, the Company entered into a Sales Agreement (the Sales Agreement) with Cowen and Company, LLC (Cowen) with respect to an “at-the-market” offering program under which the Company may offer and

9

sell, from time to time at its sole discretion, shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $50.0 million through Cowen as its sales agent.

On June 5, 2019, the Company issued approximately 2.2 million shares of common stock at an average stock price of $22.73 per share pursuant to the terms of the Sales Agreement. The “at-the-market” offering resulted in gross proceeds of $49.7 million. The Company incurred $1.7 million in issuance costs associated with the “at-the-market” offering, resulting in net proceeds to the Company of $48.0 million.

On August 6, 2020, the Company delivered written notice to Cowen to terminate the Sales Agreement, which termination the parties agreed to make immediately effective.

Underwritten public offerings

On August 8, 2019, the Company entered into an underwriting agreement with J.P. Morgan Securities LLC and SVB Leerink LLC, as representatives of the several underwriters, relating to an underwritten public offering of approximately 2.7 million shares of the Company’s common stock, par value $0.001 per share. The underwritten public offering resulted in gross proceeds of $69.0 million. The Company incurred $4.5 million in issuance costs associated with the underwritten public offering, resulting in net proceeds to the Company of $64.5 million.

On August 6, 2020, the Company entered into an underwriting agreement with SVB Leerink LLC and Cowen, as representatives of the several underwriters, relating to an underwritten public offering of approximately 3.0 million shares of the Company’s common stock, par value $0.001 per share. The underwritten public offering resulted in gross proceeds of $97.6 million. The Company incurred $6.2 million in issuance costs associated with the underwritten public offering, resulting in net proceeds to the Company of $91.4 million.

Basis of presentation

The interim condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements reflect, in the opinion of the Company’s management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 13, 2020 (the 2019 Annual Report on Form 10-K). The consolidated financial information as of December 31, 2019 has been derived from the audited 2019 consolidated financial statements included in the 2019 Annual Report on Form 10-K.

2. Significant accounting policies

Principles of consolidation

The condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of Quanterix Corporation and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. In making those estimates and assumptions, the Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. The Company’s significant estimates included in

10

the preparation of the consolidated financial statements are related to revenue recognition, fair value of equity instruments and notes receivable, fair value of assets acquired and liabilities assumed in acquisitions, valuation allowances recorded against deferred tax assets, right-of-use assets and lease liabilities, and stock-based compensation. Actual results could differ from those estimates.

Foreign currency

The Company translates assets and liabilities of its foreign subsidiaries at rates in effect at the end of the reporting period. Revenues and expenses are translated at average rates in effect during the reporting period. Translation adjustments are included in accumulated other comprehensive loss.

Income taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the consolidated financial statement carrying amounts and the tax bases of the assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company accounts for uncertain tax positions in accordance with the provisions of Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740). When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of September 30, 2020 the Company did not have any significant uncertain tax positions.

Business combinations

Under the acquisition method of accounting, the Company generally recognizes the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on estimates and assumptions determined by management. The excess consideration over the aggregate value of tangible and intangible assets, net of liabilities assumed, is recorded as goodwill. These valuations require significant estimates and assumptions, especially with respect to intangible assets.

The Company typically uses the discounted cash flow method to value acquired intangible assets. This method requires significant management judgment to forecast future operating results and establish residual growth rates and discount factors. The estimates used to value and amortize intangible assets are consistent with the plans and estimates that are used to manage the business and are based on available historical information and industry estimates and averages. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, the Company could experience impairment charges. In addition, the Company has estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed.

11

Restricted cash

Restricted cash primarily represents collateral for a letter of credit issued as security for the lease for the Company’s headquarters in Billerica, Massachusetts. The restricted cash is long term in nature as the Company will not have access to the funds until more than one year from September 30, 2020.

Recent accounting pronouncements

The Company is considered to be an “emerging growth company” (EGC) as defined in the Jumpstart Our Business Startups Act of 2012, as amended (JOBS Act). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company may remain an EGC until the last day of the fiscal year in which the fifth anniversary of the closing of the initial public offering occurs, although if the market value the Company’s common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time or if the Company has annual gross revenues of $1.07 billion or more in any fiscal year, the Company would cease to be an EGC as of December 31 of the applicable year. The Company also would cease to be an EGC if it issues more than $1 billion of non-convertible debt over a three-year period. The Company has elected to avail itself of this extended transition period and, as a result, the Company will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies so long as the Company remains an EGC.

Recently Adopted

In February 2016, the Financial Accounting Standards Board (FASB) established Topic 842, Leases (ASC 842), by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. ASC 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements (ASU 2018-11). The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. An optional transition approach is permitted under ASU 2018-11, applying the new standard to all leases existing at the date of initial application.

On January 1, 2020, the Company adopted ASC 842 using the optional transition method allowing entities to recognize a cumulative effect adjustment to the opening balance sheet without restating comparative prior periods presented. ASC 842 requires a lessee to recognize assets and liabilities on the balance sheet for most leases and changes many key definitions, including the definition of a lease. Lessees will continue to differentiate between finance leases and operating, and classification will impact expense recognition.

The Company elected the following practical expedients for all lease asset classes, which must be elected as a package and applied consistently to all of its leases at the transition date: i) the Company did not reassess whether any expired or existing contracts are or contain leases; ii) the Company did not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with ASC 840, Leases (ASC 840), are classified as operating leases); and iii) the Company did not reassess initial direct costs for any existing leases.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. The Company has elected the practical expedient not to recognize leases on the balance sheet with a term of twelve months or less. The Company’s leases consist of office and lab space and office equipment. All of the Company’s leases are classified as operating, and options to renew a lease are only included in the lease term to the extent those options are reasonably

12

certain to be exercised. Additionally, the Company elected to apply the practical expedient not to separate lease and nonlease components for all leases.

Operating lease liabilities and their corresponding ROU assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The rate implicit in lease contracts is typically not readily determinable and, as a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments, for a similar term, in a similar economic environment. To estimate its incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating.

The adoption of ASC 842 resulted in the recognition of operating lease ROU assets and operating lease liabilities of $12.2 million and $22.8 million, respectively, on the Company’s condensed consolidated balance sheet, with the difference between the ROU asset and lease liability primarily attributable to unamortized lease incentives and deferred rent related to its lease for its corporate headquarters at 900 Middlesex Turnpike in Billerica, Massachusetts (the “900 Middlesex Turnpike Lease”).

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted this ASU on January 1, 2020 with no material effect to its financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). This ASU removed the following disclosure requirements: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. Additionally, this update added the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 was effective for fiscal years beginning after December 15, 2019 with early adoption permitted. The Company adopted this ASU on January 1, 2020 with no material effect to its financial statements.

Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The standard is effective for the Company beginning in the first quarter of 2022, with early adoption permitted. The Company is currently evaluating the expected impact of ASU 2016-13 on its financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). This ASU addresses the accounting for implementation, setup and other upfront costs paid by a customer in a cloud computing or hosting arrangement. The guidance aligns the accounting treatment of these costs incurred in a hosting arrangement treated as a service contract with the requirements for capitalization and

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amortization costs to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 15, 2020 and early adoption is permitted. The guidance can be adopted either retrospectively or prospectively. The Company is currently evaluating the expected impact of ASU 2018-15 on its financial statements.

There have been no other material changes to the significant accounting policies and recent accounting pronouncements previously disclosed in the 2019 Annual Report on Form 10-K.

3. Revenue recognition

The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects consideration that the Company expects to be entitled to receive in exchange for these goods and services, incentives and taxes collected from customers, that are subsequently remitted to governmental authorities.

The Company adopted Topic 606, Revenue from Contracts with Customers (ASC 606) on January 1, 2019, using the modified retrospective method for all contracts not completed as of the date of adoption.

Customers

The Company’s customers primarily consist of entities engaged in the life sciences research market that pursue the discovery and development of new drugs for a variety of neurologic, cardiovascular, oncologic and other protein biomarkers associated with diseases. The Company’s customer base includes several of the largest biopharmaceutical companies, academic research organizations and distributors who serve certain geographic markets.

Product revenue

The Company’s products are composed of analyzer instruments, assay kits and other consumables such as reagents. Products are sold directly to biopharmaceutical and academic research organizations or are sold through distributors in EMEA and Asia Pacific regions. The sales of instruments are generally accompanied by an initial year of implied service-type warranties and may be bundled with assays and other consumables and may also include other items such as training and installation of the instrument and/or an extended service warranty. Revenues from the sale of products are recognized at a point in time when the Company transfers control of the product to the customer, which is upon installation for instruments sold to direct customers, and based upon shipping terms for assay kits and other consumables. Revenue for instruments sold to distributors is generally recognized based upon shipping terms (either upon shipment or delivery).

Service and other revenue

Service revenues are composed of contract research services, initial implied one-year service-type warranties, extended services contracts and other services such as training. Contract research services are provided through the Company’s Accelerator Laboratory and generally consist of fixed fee contracts. Revenues from contract research services are recognized at a point in time when the Company completes and delivers its research report on each individually completed study, or over time if the contractual provisions allow for the collection of transaction consideration for costs incurred plus a reasonable margin through the period of performance of the services. Revenues from service-type warranties are recognized ratably over the contract service period. Revenues from other services are immaterial.

Collaboration and license revenue

The Company may enter into agreements to license the intellectual property and know-how associated with its instruments in exchange for license fees and future royalties (as described below). The license agreements provide the licensee with a right to use the intellectual property with the license fee revenues recognized at a point in time as the underlying license is considered functional intellectual property. The Company recognized revenues from a sales- or usage- based royalties related to the licensing of the Company’s technology and intellectual property.

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