Quanterix Corp (QTRX)

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

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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.

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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

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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.

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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.

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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):

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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.

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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.

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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):

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.

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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

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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.

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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.

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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)

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.

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, 2023 and 2022. 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. 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.

For additional information on our financial condition as of December 31, 2022 and results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, refer to the section titled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Overview

We are a life sciences company that has developed 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 is enabling the development of novel therapies and diagnostics and has the potential to facilitate a paradigm shift in healthcare from an emphasis on treatment to a focus on earlier detection, monitoring, prognosis, and, ultimately, prevention. Our Simoa platforms have achieved significant scientific validation and commercial adoption, and our Simoa technology has been cited in more than 2,700 scientific publications in areas of high unmet medical need and research interest such as neurology, oncology, cardiology, infectious disease, 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. By the end of 2023, approximately 82% 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

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sophisticated Simoa image analysis and data analysis algorithms, we further refined the planar array technology to develop 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”). 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 2,200 projects for more than 480 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. In addition, Uman sells NfL antibodies and NfL ELISA kits directly, and in conjunction with us and another distributor, worldwide.

Our total revenues were $122.4 million and $105.5 million for the years ended December 31, 2023 and 2022, respectively. Since our inception, we have incurred annual net losses, including net losses of $32.3 million and $96.7 million for the years ended December 31, 2023 and 2022, 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:

Recent Business Developments

In October 2023, we entered into a license agreement with Janssen Sciences Ireland UC, a Johnson & Johnson Company, (“Janssen”). The agreement grants us worldwide, non-exclusive rights to Janssen’s p-Tau 217 antibodies and assay designs for use in clinical research and diagnostic products, including in the production of Simoa p-Tau 217 research use only assay (“RUO”) kits for global distribution. Under this license, we are required to pay royalties on net sales of the licensed products and service activities.

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In July 2023, we launched Lucent Diagnostics, our brand for clinical testing services for healthcare providers in the field of neurology. Testing services were initially focused on Alzheimer’s disease at the same time newly approved therapies were becoming available. The first product offering was LucentAD, a blood test to aid the evaluation of patients experiencing cognitive symptoms consistent with the early signs of Alzheimer’s disease. In October 2023, we launched an improved blood test for Alzheimer’s disease, LucentAD p-Tau 217. These tests have not been cleared or approved by the FDA. We do not expect material revenues from these tests until late 2024 or later. For further discussion of FDA requirements refer to the section titled “Item 1. Business - Government Regulations”.

​

In August 2022, we announced a restructuring and strategic realignment plan (the “Restructuring Plan”). The Restructuring Plan included the elimination of 119 positions across the company in 2022 and other cost-saving measures that were substantially completed in 2022. The Restructuring Plan also included an assay redevelopment program with the objective of improving our ability to manufacture and deliver high-quality assays at scale. This six-quarter operational program was substantially completed in the fourth quarter of 2023, and we have now launched five new Simoa Advantage PLUS assays. The Simoa Advantage PLUS assays have been developed using improved protocols, by leveraging manufacturing efficiencies and reagent improvements to provide more consistent results and improved lot-to-lot consistency, and through enabling production of larger lot sizes with extended shelf lives. These 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 and 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.

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. Direct sales of instruments to customers include an initial year of implied service-type warranties. Sales of instruments to distributors include a license to import and resell the instruments. Instrument sales may also be bundled with assays and other consumables, training, installation, and/or an extended service warranty.

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 implied 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.

Grant Revenue

Grant revenues consist of funding received to perform specific research and development services under grant arrangements.

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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 freight, and 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 and expect these expenses to increase in future periods.

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, 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 Plan.

Impairment and Restructuring

Impairment and restructuring expense primarily consists of charges recorded as a result of the Restructuring Plan.

As a result of the Restructuring Plan, we performed an impairment assessment of our goodwill, long-lived assets, including operating lease right-of-use assets, property and equipment, and intangibles. All of our goodwill, and a

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portion of our operating lease right-of-use assets (including related property and equipment) were determined to be impaired as their carrying values exceeded their fair values, and corresponding impairment charges were recorded in the year ended December 31, 2022. During the year ended December 31, 2023, we continued to reassess the remaining operating lease right-of-use assets and related property and equipment and recorded an additional impairment charge.

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, 2023 and 2022:

The following table sets forth select Consolidated Statements of Operations data, and such data as a percentage of total revenues (in thousands, except percentages):

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Revenues

Total revenues increased $16.8 million, or 16%, to $122.4 million for the year ended December 31, 2023, compared to $105.5 million for the year ended December 31, 2022.

Product revenue of $79.5 million for the year ended December 31, 2023 consisted of instrument sales of $15.7 million and sales of consumables and other products of $63.8 million. This represented an increase of $9.7 million, or 14%, compared to product revenue of $69.8 million for the year ended December 31, 2022. The increase in product revenue was primarily due to a $19.0 million increase in sales of consumables and increased average selling prices. This increase was partially offset by a $9.3 million decrease in instrument sales due to reduced demand in what we believe is a constrained capital funding environment. We expect softness in instrument sales to continue in 2024.

Service revenue was $40.3 million for the year ended December 31, 2023, compared to $34.5 million for the year ended December 31, 2022, an increase of $5.8 million, or 17%. This increase was primarily due to a $9.0 million increase in Accelerator Laboratory revenue driven by higher volumes of sample testing and assay development services, and was partially offset by a $4.9 million decrease in revenue recognized from a collaboration agreement with Eli Lilly and Company (the “Lilly Collaboration Agreement”) due to non-recurring upfront payments received in 2022. The Lilly Collaboration Agreement establishes a framework for future projects focused on the development of Simoa immunoassays.

Collaboration and license revenue was $1.4 million for the year ended December 31, 2023, compared to $0.6 million for the year ended December 31, 2022, an increase of $0.7 million, or 113%. The increase was primarily due to $0.5 million of one-time revenue in 2023 related to the expiration of a previously paid for option to expand the scope of a license agreement with Abbott Laboratories entered into in 2020, pursuant to which we granted Abbott a non-exclusive, worldwide, royalty-bearing license, without the right to sublicense, under the Company’s bead-based single molecule detection patents in the field of in vitro diagnostics.

Grant revenue was $1.2 million for the year ended December 31, 2023, compared to $0.6 million for the year ended December 31, 2022, an increase of $0.7 million, or 116%, driven by receipt of a portion of a grant from the National Institutes of Health. Refer to Note 3 – Revenue and Related Matters within the Notes to the Consolidated Financial Statements, for more information regarding this grant.

Cost of Goods Sold and Services

Total cost of goods sold and services decreased $7.0 million, or 12%, to $51.7 million for the year ended December 31, 2023 compared to $58.7 million for the year ended December 31, 2022.

Cost of product revenue decreased $8.2 million, or 20%, to $32.6 million for the year ended December 31, 2023, compared to $40.8 million for the year ended December 31, 2022. The decrease was primarily due to improvement in inventory management and manufacturing processes as well as lower instrument sales, partially offset by higher costs related to increased consumables sales.

Cost of service and other revenue increased $1.2 million, or 7%, to $19.1 million for the year ended December 31, 2023, compared to $17.9 million for the year ended December 31, 2022. This increase was primarily due to an increase in department costs including compensation and benefits costs related to increased headcount, and was partially offset by lower costs related to the Lilly Collaboration Agreement.

Research and Development

Research and development expense decreased $1.0 million, or 4%, to $24.9 million for the year ended December 31, 2023, compared to $25.9 million for the year ended December 31, 2022. This decrease was primarily due to a decrease in compensation and benefit costs related to the reduction in headcount from the Restructuring Plan, which was partially offset by an increase in costs related to the assay redevelopment program under the Restructuring Plan including consulting fees, lab supplies, equipment, and product development activities.

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Selling, General and Administrative

Selling, general and administrative expense decreased $1.8 million, or 2% to $90.2 million for the year ended December 31, 2023, compared to $92.0 million for the year ended December 31, 2022. The decrease was primarily due to a decrease in compensation and benefit costs related to the reduction in headcount from the Restructuring Plan and a full twelve months of facilities costs from the leased office and laboratory facilities we are not using being recorded in other lease costs instead of selling, general, and administrative expenses on the Consolidated Statements of Operations. These decreases were partially offset by (1) an 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 for the year ended December 31, 2022, (2) an increase in software and information technology expenses, and (3) an increase in shipping and handling costs for consumables and other products due to higher volume. 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, 2023 and 2022, respectively.

Other Lease Costs

Other lease costs increased $2.4 million, or 190%, to $3.7 million for the year ended December 31, 2023, compared to $1.3 million for the year ended December 31, 2022. As part of the Restructuring Plan, we are not using two leased office and laboratory facilities and are evaluating alternatives, including sub-leasing the facilities. Other lease costs include the amortization of the related operating lease right-of-use assets and other leased facility operating expenses from periods after the initiation of the Restructuring Plan and the determination that the facilities would not be used. Lease costs in 2022 represent four and a half months of cost in 2022 after the Restructuring Plan was implemented, as compared to twelve months of costs in 2023. Expenses incurred prior to the Restructuring Plan were recorded in selling, general, and administrative on the Consolidated Statements of Operations.

Impairment and Restructuring

Impairment and restructuring costs were $1.5 million for the year ended December 31, 2023, compared to $29.3 million for the year ended December 31, 2022. This decrease reflects the implementation of the Restructuring Plan in August 2022, which did not repeat in 2023.

Costs incurred during the year ended December 31, 2023 primarily relate to long-lived asset impairment charges associated with two leased facilities we are not using. Costs incurred during the year ended December 31, 2022 include (1) $8.2 million of goodwill impairment charges, (2) $16.3 million of long-lived asset impairment charges associated with the leased facilities that we are not using, (3) $1.1 million of software costs related to projects that were rationalized as part of the Restructuring Plan, and (4) $3.8 million of restructuring expenses primarily for severance and one-time termination benefits in connection with the elimination of 119 positions across the Company.

Interest Income

Interest income increased by $10.7 million, or 209% to $15.8 million for the year ended December 31, 2023, compared to $5.1 million for the year ended December 31, 2022. This increase was primarily due to higher interest rates 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) was $2.2 million of income for the year ended December 31, 2023, compared to $0.1 million of expense for the year ended December 31, 2022. The increase 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 2021.

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Income Tax Expense

Income tax expense was $0.7 million for the year ended December 31, 2023, as compared to $0.1 million for the year ended December 31, 2022. The change was primarily due to the increase 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, 2023, we had cash and cash equivalents of $174.4 million and $146.9 million of available for sale marketable securities. Historically we have financed our operations through 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.

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 and introduction of new products and services, including Lucent Diagnostics, continuing market acceptance of our products and services, regulatory guidelines or approval of our products or services.

We regularly assess potential acquisitions and have a strategy 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 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, 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.

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Cash Flows

The following table summarizes our cash flows (in thousands):

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.

Net cash used in operating activities was $18.9 million and $48.3 million for the years ended December 31, 2023 and 2022, respectively. The $29.4 million reduction in net cash used in operating activities was primarily driven by an overall reduction in our net loss, adjusted for non-cash items, consisting of revenue growth, a full year of reduced expenses resulting from the Restructuring Plan, continued improvements in our inventory management and manufacturing processes leading to improved gross margin, and increased interest income from investing in marketable securities and rising interest rates. The reduction was offset by changes in working capital items, primarily an increase in accounts receivable from strong revenue growth through the fourth quarter of 2023 and an increase in inventory as a result of completing the assay development program and manufacturing new assays to begin shipping to customers in the first quarter of 2024.

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. Cash used towards capital expenditures can be partially offset by proceeds from grants with third parties to purchase assets (refer to the section titled “Grant Revenue” in Note 3 − Revenue and Related Matters in the Notes to Consolidated Financial Statements for more information).

Net cash used in investing activities was $148.4 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 used in investing activities was $11.2 million during the year ended December 31, 2022, which consisted of $11.7 million of purchases of property and equipment which were partially offset by $0.5 million in grant proceeds under the grant received from the National Institutes of Health under its Rapid Acceleration of Diagnostics program. Refer to Note 3 – Revenue and Related Matters, within the Notes to the Consolidated Financial Statements, for more information regarding this grant.

Net Cash Provided by Financing Activities

Financing activities provided $2.7 million and $2.3 million of cash during the years ended December 31, 2023 and 2022, respectively, from sales of our common stock under our employee stock purchase plan and from the exercise of options under our equity incentive plan.

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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, 2023.

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, 2023 are $7.1 million, $14.7 million, $15.5 million, and $15.7 million, respectively.

STRATEC Purchase Commitment

During the year ended December 31, 2022, the Company and STRATEC Consumables GmbH (“STRATEC”) entered into an amendment to the supply agreement with STRATEC (as amended, the “STRATEC Supply Agreement”), related to the supply of discs used in Simoa bead-based instruments. As part of the STRATEC Supply Agreement, the Company agreed to purchase a total of 515,000 discs to be shipped at various points starting in 2022 and continuing through 2024 at an agreed purchase price per disc.

The total purchase commitment under the STRATEC Supply Agreement is $3.7 million, of which $2.1 million has been paid, and $1.0 million is due within one year from December 31, 2023.

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 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)

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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 performance obligations to transfer products or services. We evaluate the existence of multiple performance obligations 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.

Direct instrument sales include installation and an initial year of implied service-type warranties. We have determined that the instrument and installation are a combined performance obligation as the customer cannot benefit from the instrument without the installation and no other vendors can provide installation of our specialized instruments. The implied 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. We have determined these distributor licenses are part of a combined performance obligation with the instrument as the distributor only benefits from the combination of the instrument and ability to resell it.

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.

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, and pricing of similar products, and we use a range of amounts to estimate SSP. 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.

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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 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), and market conditions. If we identify any of these adverse conditions exist, the carrying value of the inventory is reduced to its estimated net realizable value by providing estimated reserves for excess or obsolete inventory. We adjust the reserves for excess or obsolete inventory and record additional inventory write downs based on unfavorable changes in estimated customer demand or actual market conditions that may differ from management projections.

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.

Non-GAAP Financial Measures

To supplement our financial statements presented on a U.S. GAAP basis, we present non-GAAP gross profit, non-GAAP gross margin, non-GAAP total operating expenses, and non-GAAP loss from operations. These non-GAAP 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.

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Set forth below is a reconciliation of non-GAAP gross profit, non-GAAP gross margin, non-GAAP total operating expenses, and non-GAAP loss from operations to their most directly comparable GAAP financial measures (in thousands).

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.

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, 2022, and 2021. For a full understanding of our financial condition and results of operations, this discussion should be read in conjunction with our consolidated financial statements and accompanying notes included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

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For additional information on our financial condition as of December 31, 2021 and results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview

We are a life sciences company that has developed 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. Our 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. These capabilities provide our 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. We believe this greater insight will enable the development of novel therapies and diagnostics and facilitate a paradigm shift in healthcare from an emphasis on treatment to a focus on earlier detection, monitoring, prognosis and, ultimately, prevention.

Our instruments are designed to be used either with assays fully developed by us, including all antibodies and supplies required to run the tests, or with “homebrew” 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, total consumables revenue overall is expected to increase.

We commercially launched our first immunoassay platform, the Simoa HD-1, in January 2014. The HD-1 is based on our bead-based technology, and assays run on the HD-1 are fully automated. We initiated commercial launch of the SR-X instrument in December 2017. The SR-X utilizes the same Simoa bead-based technology and assay kits as the HD-1 in a compact benchtop form with a lower price point, more flexible assay preparation, and a wider range of applications. In July 2019, we 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. We began shipping and installing HD-X instruments at customer locations in 2019, and by the end of 2022, approximately 79% of the HD instrument installed base were HD-X instruments.

With our acquisition of Aushon in 2018, we acquired a CLIA certified laboratory, as well as their proprietary sensitive planar array detection technology. Leveraging our proprietary sophisticated Simoa image analysis and data analysis algorithms, we further refined the planar array technology to develop 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 April 2019.

Our wholly owned subsidiary UmanDiagnostics AB (Uman), a Swedish company located in Umeå, Sweden, 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.

We also provide contract research services for customers 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 and custom assay development. To date, we have completed over 1,900 projects for more than 400 customers from all over the world using our Simoa platforms.

We sell our instruments, consumables and services to the life science, pharmaceutical and diagnostics industries through a direct sales force and support organizations in North America and Europe, and through distributors or sales agents in select markets, including Australia, Brazil, China, Czech Republic, India, Hong Kong, Israel, Japan, New Zealand, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, and UAE. In addition, Uman sells Nf-L antibodies and Nf-L ELISA kits directly, and in conjunction with us and another distributor worldwide. We have an

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extensive base of customers in world class academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies.

Although the COVID-19 pandemic negatively affected revenues in 2020 and the first part of 2021, we have seen less of an impact related to COVID-19 as customers began returning to normal operations beginning in mid-2021. However, we expect COVID-19 related challenges may continue for the foreseeable future and potentially increase if variants result in new shutdowns.

During the COVID-19 pandemic, we determined that our cytokine assay technology could provide researchers with important and differentiated tools to study disease progression, cytokine release syndrome, and patient-treatment response in the fight against COVID-19 and developed a SARS antibody test and SARS antigen test, each of which was run on our HD-X instrument. In December 2020, the FDA issued an EUA for our Simoa Semi-Quantitative SARS-CoV-2 IgG Antibody Test, and in January 2021, the FDA issued an EUA for our Simoa SARS-CoV-2 N Protein Antigen Test. In September 2021, the FDA expanded the EUA for our Simoa SARS-CoV-2 N Protein Antigen Test to include testing with nasal swabs and saliva and for asymptomatic serial testing with nasal swab samples. In 2022, we voluntarily withdrew the EUA for these tests.

Restructuring and Strategic Re-Alignment

Following a strategic review and assessment of our operations and cost structure, on August 8, 2022, we announced a plan of restructuring and strategic re-alignment (the Restructuring Plan). As part of this plan, we began an assay redevelopment program with the ultimate objective of improving our ability to manufacture and deliver high-quality assays at scale. The plan aligns our investments to best serve the needs of customers, focuses innovation efforts on key platforms and provides the foundation for our entry into translational pharma and clinical markets, which we believe will be required to access new growth categories. The Restructuring Plan included the elimination of 119 positions and other cost-saving measures. The workforce reduction was substantially completed by the end of the third quarter of 2022. As part of the Restructuring Plan, we are also reviewing alternative uses of the additional facility space that we currently lease in Bedford, Massachusetts. These alternatives may include termination of the lease, or sub-leasing all, or a portion, of the Bedford facilities. During the year ended December 31, 2022, we recorded an impairment expense of $16.3 million on our long-lived assets related to the Bedford facilities, as well as a $1.1 million impairment expense related to software projects. Overall, as a result of the Restructuring Plan, we expect to realize estimated annualized operating expense savings of approximately $25 million.

As of December 31, 2022, we had cash and cash equivalents of $338.7 million. Since inception, we have incurred annual net losses. Our net loss was $96.7 million and $57.7 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $402.2 million and stockholders' equity of $358.9 million. We expect to continue to incur significant expenses and operating losses at least through the next 24 months. We expect our expenses will increase substantially as we:

Financial Operations Overview

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Revenue

Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606 - Revenue from Contracts with Customers (ASC 606), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (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. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

Once a contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations. Arrangements that include rights to additional goods 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, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying license relative to the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that would be subject to the option rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (SSP) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

We generate product revenue primarily from sales of our HD-X, SR-X, and SP-X instruments and related reagents and other consumables. We currently sell our products for RUO applications and our customers are primarily laboratories associated with academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies. Sales of our consumables have consistently increased due to an increasing number of instruments being installed in the field, all of which require certain of our consumables to run customers’ specific tests. Consumable revenue consists of sales of complete assays which are developed internally by us, plus sales of “homebrew” kits which contain all the elements necessary to run tests with the exception of the specific antibodies utilized which are separately provided by the customer.

Service and other revenue consists of testing services provided by us in our Accelerator Laboratory on behalf of certain research customers, in addition to warranty and other service-based revenue. Services provided in our Accelerator Laboratory include sample testing, homebrew assay development and custom assay development.

Collaboration and license revenue consists of revenue associated with licensing our technology to third parties and for related services.

Grants received by us that do not require the transfer of goods or services to a customer are accounted for by analogy to International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance (IAS 20). Under IAS 20, we recognize revenue as the matching expense or asset is incurred or capitalized.

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Cost of Products, Services and Collaboration Revenue

Cost of goods sold for products consists of HD-X, HD-1, and SR-X instrument costs from the manufacturer and related reagents and other consumables. Cost of goods sold for SP-X consists of costs based on the internal assembly of this item. Raw material part costs; inbound freight, shipping and handling costs associated with purchased goods; contract manufacturer costs; personnel costs; royalties; overhead and other direct costs related to those sales are classified as cost of goods sold for products.

Cost of goods sold for services consists of raw materials, personnel costs, royalties as well as overhead and other direct costs associated with operating the Accelerator Laboratory on behalf of customers, in addition to costs related to warranties and other costs of servicing equipment at customer sites.

Cost of collaboration revenue consists of royalty expense due to third parties from revenue generated by collaboration or license deals.

Research and Development Expenses

Research and development expenses consist of personnel costs, research supplies, third-party development costs for new products, materials for prototypes, and allocated overhead costs that include facility and other overhead 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 the tasks required to support 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 and expect these expenses to increase in future periods. Additionally, costs incurred related to grant revenue are recorded as research and development expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel costs for our sales and marketing, finance, legal, human resources and general management, costs associated with shipping and handling for product sales, other general and administrative costs, as well as professional services costs, such as marketing, advertising, legal and accounting services in addition to allocated overhead costs that include facility and other overhead costs.

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 the 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. Shipping and handling costs for product sales included within selling, general and administrative expenses were $7.2 million and $6.9 million for the years ended December 31, 2022 and 2021, respectively, and our gross margin was 44.4% and 55.8% for the years ended December 31, 2022 and 2021, respectively. If these shipping and handling costs had been included in cost of goods sold for products, our non-GAAP gross margin would have been 37.5% and 49.6% for the years ended December 31, 2022 and 2021, respectively. See “Non-GAAP Financial Measures” below.

We expect, but cannot guarantee, that annual selling, general and administrative expenses will not increase significantly over the next 12 to 14 months.

Non-GAAP Financial Measures

To supplement our financial statements presented on a GAAP basis, we present non-GAAP gross profit and non-GAAP gross margin, which are calculated by including shipping and handling costs for product sales within cost of goods sold instead of within selling, general and administrative expenses. Management uses 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. Management believes that presentation of non-GAAP gross margin provides useful information to investors in assessing our operating performance within our industry and in order to allow

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comparability to the presentation of other companies in our industry where shipping and handling costs are included in cost of goods sold for products. Management also uses non-GAAP gross margin as a factor in assessing the Company’s progress against the Restructuring Plan. 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 GAAP.

Set forth below is a reconciliation of non-GAAP gross profit, non-GAAP gross margin and non-GAAP operating expenses to their most directly comparable GAAP financial measures.

Reconciliation of Non-GAAP Financial Measures:

​

Goodwill, Intangibles and Long-Lived Assets Impairment Expenses

Goodwill, intangibles and long-lived assets impairment expense consists primarily of impairment charges recorded due to an impairment event. We perform an impairment assessment annually, or whenever events or circumstances indicate that the carrying amount of the asset (asset group) may not be recoverable, of goodwill, intangibles and long-lived assets under the guidance of US GAAP accounting standards ASC 350 - Intangibles – Goodwill and Other (ASC 350) and ASC 360 - Property, Plant and Equipment (ASC 360). If impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset. Fair value is generally determined using a discounted future cash flow analysis. During the year ended December 31, 2022, the Company recorded a goodwill impairment charge of $8.2 million and impairment expense of $17.4 million for other long-lived assets due to impairment indicators identified. As of December 31, 2022, there was no remaining goodwill. There were no impairment charges recorded for the year ended December 31, 2021.

​

Critical Accounting Policies, Significant Judgments 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, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates may occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. 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.

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We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other significant accounting policies. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations. Our significant accounting policies are more fully described in “Significant Accounting Policies” in Note 2 in the notes to our consolidated financial statements.

Revenue Recognition

We recognize revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects consideration that we expect 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.

Product Revenue

Our 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 we transfer 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 our Accelerator Laboratory and generally consist of fixed fee contracts. Revenues from contract research services are recognized at a point in time when we complete and deliver our 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.

During the first quarter of 2022, we entered into a Master Collaboration Agreement with Eli Lilly and Company (Lilly) establishing a framework for future projects focused on the development of Simoa immunoassays (the Lilly Collaboration Agreement). We also entered into a Statement of Work under the Lilly Collaboration Agreement to perform assay research and development services within the field of Alzheimer’s disease. In connection with the Lilly Collaboration Agreement, we received a non-refundable up-front payment of $5.0 million during the first quarter of 2022, and under the Statement of Work received $1.5 million per calendar quarter during 2022, beginning with the first quarter of 2022. The revenue was recognized over a one-year period. The Lilly Collaboration Agreement automatically renews on a quarterly basis unless Lilly provides 100 days’ termination notice.

Concurrent with the execution of the Lilly Collaboration Agreement, we entered into a Technology License Agreement (the Lilly License) under which Lilly granted to the Company a non-exclusive license to Lilly’s proprietary P-tau217 antibody technology for potential near-term use in research use only products and services and future in vitro diagnostics applications within the field of Alzheimer’s disease. In consideration of the license, we paid an upfront fee, are required to make milestone payments based on the achievement of predetermined regulatory and commercial events, and will pay a royalty on net sales of licensed products.

We concluded that the Lilly Collaboration Agreement (including the Statement of Work) and the Lilly License represented a single contract with a customer, and we are accounting for the agreements as service revenue recognized over time as the services are delivered. The transaction price for the Lilly Collaboration Agreement was $10.9 million. Contingent amounts due to Lilly, under the Lilly License, represent variable consideration payable to a customer and will be recognized as reductions to service revenue up to the amount of the transaction price recognized, when probable.

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During the year ended December 31, 2022, we recognized approximately $10.9 million of revenue from the Lilly Collaboration Agreement.

Collaboration and License Revenue

We may enter into agreements to license the intellectual property and know-how associated with our 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. We have recognized royalty revenue based on sales or usage related to our licensing technology and intellectual property.

Payment Terms

Our payment terms vary by the type and location of customer and the products or services offered. Payment from customers is generally required in a term ranging from 30 to 45 days from date of shipment or satisfaction of the performance obligation with no discounts for early payment. Occasionally we do provide extended payment terms or financing arrangements to customers.

Disaggregated Revenue

When disaggregating revenue, we consider all of the economic factors that may affect revenues. The following tables disaggregate our revenue from contracts with customers based on their location by revenue type:

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Our contracts with customers may include promises to transfer multiple products and services to a customer. In accordance with ASC 606, we combine any performance obligations that are immaterial with one or more other performance obligations that are material to the contract. For arrangements with multiple performance obligations, we allocate the contract transaction price, including discounts, to each performance obligation based on its relative standalone selling price. Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling prices based on prices charged to customers in observable transactions, and use a range of amounts to estimate standalone selling prices for each performance obligation. We may have more than one range of standalone selling price for certain products and services based on the pricing for different customer classes.

Variable consideration in our contracts primarily relates to (i) sales- and usage-based royalties related to the license of intellectual property in collaboration and license contracts and (ii) certain non-fixed fee research services contracts. ASC 606 provides for an exception to estimating the variable consideration for sales- and usage-based royalties related to the license of intellectual property, such that the sales- or usage-based royalty will be recognized in the period the underlying transaction occurs. We have recorded sales- or usage-based royalty revenue for the years ended December 31, 2022 and 2021 related to the intellectual property licensed by Uman. We recognize revenues from sales- or usage-based royalty revenue at the later of when the sales or usage occurs and the satisfaction or partial satisfaction of the performance obligation to which the royalty has been allocated.

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of December 31, 2022 is $10.1 million. Of the performance obligations not yet satisfied or that are partially satisfied, $8.6 million is expected to be recognized as revenue in the next 12 months, with the remainder to be recognized within the 24 months thereafter. The $10.1 million principally consists of $9.6 million billed for undelivered services related to initial and extended service-type warranties and research services, as well as $0.5 million related to undelivered licenses of intellectual property for a diagnostics company.

We have classified the balance of capitalized costs to obtain a contract as a component of prepaid expenses and other current assets as of December 31, 2022 and will amortize the expense as a component of cost of goods sold and selling, general and administrative expense over the estimated life of the contract. We consider potential impairment in these amounts each period.

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ASC 606 provides entities with certain practical expedients and accounting policy elections to minimize the cost and burden of adoption. We exclude from the transaction price any amounts collected from customers related to sales and other similar taxes. We have elected to account for the shipping and handling as an activity to fulfill the

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promise to transfer the product, and therefore will not evaluate whether shipping and handling activities are promised services to its customers.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. None of our contracts contained a significant financing component for the years ended December 31, 2022 and 2021.

Grant Revenue

We recognize grant revenue as we perform services under the arrangement when the funding is committed. Revenues and related research and development expenses are presented gross in the consolidated statements of operations as we have determined we are the primary obligor under the arrangement relative to the research and development services.

Accounting for grants does not fall under ASC 606, as the grantor will not benefit directly from our expansion or product development. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for-profit business entities, we have accounted for grants by analogy to IAS 20.

Our grants contain both monetary amounts granted related to assets and monetary amounts granted related to income, which are grants other than those related to assets. The grants related to assets are for the expansion and increase of manufacturing capacity. The grants related to income are for additional research and development, as well as other non-asset related scale up costs. We determined it was appropriate to account for each monetary grant amount under the appropriate accounting treatment outlined in IAS 20.

Under IAS 20, grants related to assets shall be presented in the consolidated balance sheets either by recognizing the grant as deferred income (which is recognized in the consolidated statements of operations on a systematic basis over the useful life of the asset), or by deducting the grant in calculating the carrying amount of the asset (which is recognized in the consolidated statements of operations over the life of the depreciable asset as a reduced depreciation expense). Both methods are acceptable under IAS 20. We have elected to record grants related to assets as a deduction in calculating the carrying value of the asset.

Under IAS 20, grants related to income are presented as part of the consolidated statements of operations, either separately or under a general heading. Both methods are acceptable under IAS 20. We have elected to record grants related to income separately on the consolidated statements of operations as grant revenue. The related expenses are recorded within operating expenses and not deducted.

On September 29, 2020, we entered into WP2 with the NIH under its RADx program. The contract, with a total award value of $18.2 million, accelerated the continued development, scale-up, and deployment of the novel SARS-CoV-2 antigen detection test using our Simoa technology. The contract provided funding to expand assay kit manufacturing capacity and commercial deployment readiness. Release of the $18.2 million of funding under WP2 was based on the achievement of certain milestones. Contract funding was subject to achievement of these pre-defined milestones and the contract period ran through September 2021, with one milestone extended to March 31, 2022. As of December 31, 2022, we received the full $18.2 million under WP2. During the year ended December 31, 2022, we recognized no grant revenue and incurred no research and development expense related to WP2. During the year ended December 31, 2021, we recognized $5.2 million in grant revenue and incurred $3.4 million in research and development expense related to WP2.

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The following table summarizes the cumulative RADx activity as of December 31, 2022 and 2021 (in thousands):

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ADDF

On March 24, 2022, we entered into a contract with the Alzheimer’s Drug Discovery Foundation (ADDF) (the ADDF Grant). ADDF is a charitable venture philanthropy entity that has granted us funding in support of certain activities for the development of an in vitro diagnostic (IVD) test for early detection of Alzheimer's disease. The ADDF Grant, which has a total funding value of $2.3 million, restricts our use of the granted funds to be used solely for activities related to the Alzheimer’s diagnostic test development project. Contract funding is subject to achievement of these pre-defined milestones and the contract period runs through June 2024. We are recognizing revenue over time as the related services are performed. As of December 31, 2022, we had received $1.3 million of the total funding value of $2.3 million under the ADDF Grant. During the year ended December 31, 2022, we recognized $0.6 million in grant revenue and incurred $0.6 million in research and development expense related to the ADDF Grant.

Stock-Based Compensation

We account for stock-based compensation awards in accordance with ASC 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all stock-based payments to employees and non-employees, including grants of stock options, to be recognized in the statement of operations based on their fair values. Stock-based compensation awards have historically consisted of stock options and restricted stock units.

We recognize forfeitures as they occur. We estimate the grant date fair value, and the resulting stock-based compensation expense, using a Black-Scholes option-pricing model. The grant date fair value of the stock-based awards for employees is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. The grant date fair value of stock-based awards for non-employees is recognized on a straight-line basis over the vesting period.

The fair value of stock options granted to employees and non-employees is estimated on the grant date using a Black-Scholes option-pricing model, based on the assumptions noted in the following table:

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Expected volatility was calculated based on proportional weighting of reported volatility data for a representative group of guideline publicly traded companies for which historical information was available, as well as our stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant, commensurate with the expected life assumption. We estimate the expected life of options granted to employees utilizing the simplified method which calculates the expected life of an option as the average of the time to vesting and contractual life of the options. The expected life is applied to the stock option grant group as a whole, as we do not expect substantially different exercise or post-vesting termination behavior among our employee population. We use the simplified method due to the lack of historical exercise data and the plain nature of the stock options. We use the remaining contractual term for the expected life of non-employee awards. The expected dividend yield is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on common stock.

We determined the fair value of each share of common stock underlying share-based awards based on the closing price of our common stock as reported by Nasdaq on the date of grant.

The table below summarizes the stock-based compensation expense recognized in our statements of operations by classification (in thousands):

As of December 31, 2022, we had $33.9 million of total unrecognized stock-based compensation costs which we expect to recognize over a weighted-average period of 2.9 years.

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Results of Operations

Comparison of the Years Ended December 31, 2022, and December 31, 2021 (dollars in thousands):

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Revenue

Revenue decreased by $5.0 million, or 5%, to $105.5 million for the year ended December 31, 2022 as compared to $110.6 million for the year ended December 31, 2021.

Product revenue decreased by $11.3 million, or 14%, to $69.8 million for the year ended December 31, 2022, as compared to $81.1 million for the year ended December 31, 2021. Product revenue consisted of sales of instruments totaling $25.0 million and sales of consumables and other products totaling $44.8 million for the year ended December 31, 2022. Product revenue consisted of sales of instruments totaling $26.0 million and sales of consumables and other products of $55.1 million for the year ended December 31, 2021. The decrease in product revenue was primarily due to reducing our production levels of consumables to ensure quality as we address the issues affecting our consumables.

Service and other revenue increased by $10.9 million, or 46%, to $34.5 million for the year ended December 31, 2022, as compared to $23.6 million for the year ended December 31, 2021. The increase in service and other revenue was primarily due to the revenue related to Lilly Collaboration Agreement recognized during the year-ended December 31, 2022.

We had $0.6 million and $0.6 million in collaboration revenue during the year ended December 31, 2022 and 2021, respectively, related to licensing technology and intellectual property.

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We had grant revenue of $0.6 million related to the ADDF grant that was recognized during the year ended December 31, 2022, and grant revenue of $5.2 million related to our contract with WP2 was recognized during the year ended December 31, 2021.

Cost of Goods Sold, Services, and Licenses

Cost of product revenue increased by $6.7 million, or 20%, to $40.8 million for the year ended December 31, 2022, as compared to $34.1 million for the year ended December 31, 2021. The increase was primarily due to increased reserves for excess and discontinued products partially offset by lower volume.

Cost of service and other revenue increased by $3.2 million, or 22%, to $17.9 million for the year ended December 31, 2022, as compared to $14.7 million for the year ended December 31, 2021, primarily due to increased personnel costs from the build out of our field service organization as well as the increased efforts related to the Lilly Collaboration Agreement.

Total cost of goods sold, services, and licenses as a percentage of revenue increased to 56% of total revenue for the year ended December 31, 2022, from 44% for the year ended December 31, 2021, primarily due to increased reserves for excess and discontinued products, and changes in product mix, partially offset by decreased product revenues.

Research and Development Expense

Research and development expense decreased by $2.1 million, or 7%, to $25.9 million for the year ended December 31, 2022, as compared to $28.0 million for the year ended December 31, 2021. The decrease was mainly due to the reduction in headcount in connection with the implementation of the Restructuring Plan.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased by $0.3 million, to $92.0 million for the year ended December 31, 2022 as compared to $92.3 million for the year ended December 31, 2021. This was primarily driven by the reduction in headcount in connection with the implementation of the Restructuring Plan, offset by the rent expense increase year over year due to the newly leased facilities in Bedford, Massachusetts. Included within selling, general and administrative expense are shipping and handling costs for product sales of $7.2 million and $6.9 million for the years ended December 31, 2022 and 2021, respectively.

Other Lease Costs

During the year ended December 31, 2022, we incurred other lease costs of $1.3 million. As part of the Restructuring Plan, we are not utilizing the office and laboratory space leased in Bedford, Massachusetts and are evaluating alternatives, including termination of the lease or sub-leasing the facilities. Other lease costs represent the depreciation expense of the right-of-use asset and the accretion of the lease facility for periods after the impairment and the determination that the facilities would not be utilized. There were no similar charges in the same period in 2021.

Restructuring, Goodwill Impairment, and Impairment Expense

During the year ended December 31, 2022, we incurred restructuring expense of $3.8 million, non-cash impairment expenses for long-lived assets of $17.4 million and non-cash impairment expenses for goodwill of $8.2 million. Included in restructuring expense were costs for severance and one-time termination benefits in connection with the elimination of 119 positions across the Company, associated legal fees and contract cancellation costs due to the implementation of the Restructuring Plan. Impairment expense of $17.4 million includes $16.3 million associated with the Bedford, Massachusetts facilities and $1.1 million associated with the impairment of software costs for projects that have been rationalized as part of the Restructuring Plan. As part of the Restructuring Plan, we are not utilizing the Bedford, Massachusetts facilities and are evaluating alternatives, including terminating the lease or sub-leasing the

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facilities. The entire goodwill balance was written off during the year ended December 31, 2022, following the assessment of our interim goodwill impairment test. There were no similar charges in the same period in 2021.

Interest Income (Expense), Net

Interest income (expense), net increased by $5.5 million to $5.1 million of income for the year ended December 31, 2022, as compared to ($0.4) million of expense for the year ended December 31, 2021. This increase was due to the favorable impact of higher interest rates earned on cash and cash equivalents as well as the settlement of our notes payable in the year ended December 31, 2021.

Other (Expense) Income, Net

Other (expense) income, net decreased by $1.4 million to ($0.1) million of expense for the year ended December 31, 2022, as compared to $1.3 million of income for the year ended December 31, 2021. The decrease was primarily due to the recognition of a one-time employee retention tax credit of $2.2 million established under the Coronavirus Aid, Relief, and Economic Security Act in 2021.

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Income Tax (Expense) Benefit, Net

Income tax (expense) benefit, net was less than ($0.1) million of expense for the year ended December 31, 2022, as compared to benefit of less than $0.1 million for the same period in 2021. The change was primarily due to the decrease in the tax benefit recorded on the operating results of our foreign subsidiaries.

Liquidity and Capital Resources

Since our inception, we have incurred annual net losses and negative cash flows from operations. We used $48.3 million and $47.9 million of cash for our operating activities for the years ended December 31, 2022 and 2021, respectively.

The impact to our operating cash flows of an increase in net loss of $39.0 million for the year ended December 31, 2022, was primarily offset due to one-time non-cash expenses (i.e., goodwill and long-lived assets impairment), improved collection of receivables, and lower levels of inventory. This resulted in no significant change in net cash used in operating activities during the years ended December 31, 2022, and 2021. As of December 31, 2022, we had an accumulated deficit of $402.2 million. As of December 2022, we had cash and cash equivalents of $338.7 million.

Sources of Liquidity

To date, we have financed our operations principally through equity offerings, borrowings from credit facilities and revenue from our commercial operations.

Equity Offerings

In February 2021, we raised approximately $270 million of net proceeds through an underwritten public offering of approximately 4.1 million shares of our common stock at a public offering price of $70.00 per share. There were no equity offerings during the year ended December 31, 2022.

Loan Facility with Hercules

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On April 14, 2014, we executed a loan agreement with Hercules Capital, Inc. (Hercules), as subsequently amended most recently in April 2019. The interest rate on this term loan was variable based on a calculation of 8.0% plus the prime rate less 5.25%, with a minimum interest rate of 8.0%. Interest was to be paid monthly beginning the month following the borrowing date. Under the amended agreement, we were required to pay the loan principal in four equal installments starting July 1, 2021, with the final principal payment and end of term charge to be made on October 1, 2021. On October 1, 2021, we made the final principal payment, including end of term fees, of $2.0 million related to

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the loan agreement. There were no outstanding balances under the loan facility at any time during the year ended December 31, 2022.

Cash Flows

The following table presents our cash flows for each period presented (in thousands):

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 support the growth of our business. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built out our infrastructure and this may continue in the future.

Net cash used in operating activities was $48.3 million during the year ended December 31, 2022. Net cash used in operating activities primarily consisted of net loss of $96.7 million offset by non-cash charges of $15.4 million of stock-based compensation expense, $5.3 million of depreciation and amortization expense, $8.2 million of goodwill impairment and $17.4 million of impairment of long-lived assets. Net changes in operating assets and liabilities resulted in net cash inflows of $2.1 million, primarily due to a decrease in accounts receivable of $5.2 million, decrease in inventory of $5.4 million as well as an increase in deferred revenue of $2.6 million, offset by a decrease in payables of $5.4 million, decrease in compensation and payroll accruals of $4.1 million and an increase in prepaid expenses and other assets of $0.6 million.

Net cash used in operating activities was $47.9 million during the year ended December 31, 2021. Net cash used in operating activities primarily consisted of net loss of $57.7 million offset by non-cash charges of $16.0 million of stock based compensation expense and $4.9 million of depreciation and amortization expense. Cash used as a result of changes in operating assets and liabilities of $12.2 million was primarily due to an increase in inventory of $8.1 million and an increase in accounts receivable of $6.9 million, offset by an increase in accounts payable, accrued compensation and benefits and other accrued expenses of $3.5 million, all driven by growth and our investments in process improvements.

Net Cash Used in Investing Activities

Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure and work force. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.

On a net basis, we used $11.2 million of cash during the year ended December 31, 2022, consisting of $11.7 million for the purchase of property and equipment, offset by $0.5 million in grant proceeds related to assets acquired under RADx grant.

On a net basis, we used $6.3 million of cash during the year ended December 31, 2021, consisting of $13.6 million for the purchase of property and equipment, offset by $7.3 million in grant proceeds related to assets acquired under WP2.

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Net Cash Provided by Financing Activities

Historically, we have financed our operations principally through equity offerings, borrowings from credit facilities and revenue from our commercial operations.

Financing activities provided $2.3 million of cash during the year ended December 31, 2022, consisting of $1.4 million in net proceeds from the exercise of stock options and $0.9 million in net proceeds from purchases under our Employee Stock Purchase Plan.

Financing activities provided $270.8 million of cash during the year ended December 31, 2021, primarily from $269.7 million in net proceeds from our underwritten public offering during the first quarter of 2021.

Capital Resources

We have not achieved profitability on an annual basis since our inception, and we expect to continue to incur net losses in the future. We also expect that our operating expenses will increase as we continue to increase our marketing efforts to drive adoption of our commercial products as well as our investment in improving the quality of our products and services. Our liquidity requirements have historically consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, debt service and general corporate expenses.

We believe cash generated from commercial sales along with our current cash and cash equivalents will be sufficient to meet our anticipated operating cash requirements for at least the next 12 months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales and marketing activities and grow our customer base. Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in Item 1A, “Risk Factors” of this Annual Report on Form 10-K. We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including:

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, 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

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able to obtain sufficient funds, we may have to delay development or commercialization of our products. 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 or debt offerings or other financings.

Contractual Obligations, Commitments and Contingencies

Lease Obligations

We currently lease approximately 91,600 square feet of office, laboratory, and manufacturing space at our headquarters in Billerica, Massachusetts. The premises covered by this lease serve as our principal office and laboratory space. The initial term of the Billerica lease is eleven years and five months beginning on April 1, 2019, and we have the option to extend the lease for two additional five-year periods.

On January 28, 2022, we executed a lease for 85,800 square feet of office and laboratory space in Bedford, Massachusetts. The lease commencement date was February 1, 2022, when we gained access to the underlying facilities. The initial term of the lease’s payment schedule is eight years and nine months beginning on May 1, 2022. We have the option to extend the lease for two additional five-year periods. As part of the Restructuring Plan, we decided not to utilize these facilities as part of our own operations. We are reviewing our alternatives with respect to this space. These alternatives may include the termination of the lease or the sub-lease of all or a portion of the leased facilities. Refer to Note 12 to the consolidated financial statements for further details related to the Bedford space.

In addition, our subsidiary, Uman, leases a total of approximately 6,500 square feet of office, laboratory, manufacturing and storage space in Umeå, Sweden through multiple leases that expire at various dates through June 30, 2025.

The following table summarizes our operating lease obligations (in thousands):

Backlog

We generally expect to ship all instrument and consumable orders in the same fiscal quarter in which they are received, with the exception of orders received near the end of a fiscal quarter. As a result, our backlog at the end of any fiscal quarter is typically insignificant.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See “Special Note Regarding Forward-Looking Statements.” Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors.” Results of operations for the fiscal year ended December 31, 2019 can be referenced on our 2020 Annual Report on Form 10-K filed with the SEC on March 5, 2021.

Overview

We are a life sciences company that has developed next generation, ultra-sensitive digital immunoassay platforms that advance precision health for life sciences research and diagnostics. Our platforms are based on our proprietary digital “Simoa” detection technology. Our 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. These capabilities provide our 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. We believe this greater insight will enable the development of novel therapies and diagnostics and facilitate a paradigm shift in healthcare from an emphasis on treatment to a focus on earlier detection, monitoring, prognosis and, ultimately, prevention.

Our instruments are designed to be used either with assays fully developed by us, including all antibodies and supplies required to run the tests, or with “homebrew” 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, total consumables revenue overall is expected to increase. We believe that consumables revenue should be subject to less period-to-period fluctuation than our instrument sales revenue, and will become an increasingly important contributor to our overall revenue.

We commercially launched our first immunoassay platform, the Simoa HD-1, in January 2014. The HD-1 is based on our bead-based technology, and assays run on the HD-1 are fully automated. We initiated commercial launch of the SR-X instrument in December 2017. The SR-X utilizes the same Simoa bead-based technology and assay kits as the HD-1 in a compact benchtop form with a lower price point, more flexible assay preparation, and a wider range of applications. In July 2019, we 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. We began shipping and installing HD-X instruments at customer locations in 2019, and by the end of 2021, approximately 68% of the HD instrument installed base was HD-X instruments.

On January 30, 2018, we acquired Aushon for $3.2 million in cash, with an additional payment of $0.8 million made in July 2018, six months after the acquisition date. With the acquisition of Aushon, we acquired a CLIA certified laboratory, as well as Aushon’s proprietary sensitive planar array detection technology. Leveraging our proprietary sophisticated Simoa image analysis and data analysis algorithms, we further refined this planar array technology to develop the SP-X instrument to provide the same Simoa sensitivity found in our Simoa bead-based platform. We initiated an early-access program for the SP-X instrument in January 2019, with the full commercial launch commenced in April 2019.

On August 1, 2019, we completed our acquisition of Uman for an aggregate purchase price of $21.2 million, comprised of (i) $15.7 million in cash plus (ii) 191,152 shares of our common stock (representing $5.5 million based on the closing prices of our common stock on the Nasdaq Global Market on July 1, 2019 and August 1, 2019, the dates of issuance). Uman supplies neurofilament light (Nf-L) antibodies and ELISA kits, which are widely recognized by

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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.

We also provide contract research services for customers 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 and custom assay development. To date, we have completed over 1,700 projects for approximately 400 customers from all over the world using our Simoa platforms.

We sell our instruments, consumables and services to the life science, pharmaceutical and diagnostics industries through a direct sales force and support organizations in North America and Europe, and through distributors or sales agents in other select markets, including Australia, Brazil, China, Czech Republic, India, Hong Kong, Israel, Japan, New Zealand, Qatar, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, and UAE. In addition, Uman sells Nf-L antibodies and Nf-L ELISA kits directly, and in conjunction with us and another distributor worldwide. We have an extensive base of customers in world class academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies.

On September 29, 2020, we entered the Abbott License Agreement with Abbott. Pursuant to the terms of the Abbott License Agreement, we granted Abbott a non-exclusive, worldwide, royalty-bearing license, without the right to sublicense, under our bead-based single molecule detection patents in the field of IVD. Abbott paid an initial license fee of $10.0 million in connection with the execution of the Abbott License Agreement, which was recognized as license revenue for the year ended December 31, 2020. Abbott has also agreed to pay us milestone fees subject to the achievement by Abbott of certain development, regulatory and commercialization milestones and low single digit royalties on net sales of licensed products.

We are subject to ongoing uncertainty concerning the COVID-19 pandemic, including its length and severity and its effect on our business. During the first and second quarters of 2020, we implemented a resiliency plan focused on the health and safety of our employees and maintaining continuity of our operations. We saw an impact on instrument revenue due to limitations on our ability to access certain customer sites and complete instrument installations, as well as an impact on consumables revenue from interruptions in certain customer laboratories through the first quarter of 2021. As customers began returning to normal operations in the second quarter of 2021, we have seen less of an impact related to COVID-19 related shutdowns. However, we expect COVID-19 related challenges to continue for the foreseeable future and potentially increase if variants result in new shutdowns.

In view of the COVID-19 pandemic, in 2020, we adjusted our operations to expand capacity in our Accelerator Laboratory to support customers whose operations have been disrupted and to sustain clinical trials. We also determined that our cytokine assay technology could provide researchers with important and differentiated tools to study disease progression, cytokine release syndrome, and patient-treatment response in the fight against COVID-19, and began developing a SARS-CoV-2 semi-quantitative IgG assay and a SARS-CoV-2 antigen detection assay, and prototyping a high-definition multiplex SARS-CoV-2 serology assay. In December 2020, the FDA issued an EUA for our Simoa Semi-Quantitative SARS-CoV-2 IgG Antibody Test, and in January 2021, the FDA issued an EUA for our Simoa SARS-CoV-2 N Protein Antigen Test, each of which is run on our HD-X instrument. In September 2021, the FDA expanded the EUA for our Simoa SARS-CoV-2 N Protein Antigen Test to include testing with nasal swabs and saliva and for asymptomatic serial testing with nasal swab samples. We are exploring extending the test to home-based sample collection and pooling to enable larger scale testing.

In September 2020, we entered into WP2 with the NIH under the RADx program. This contract, which has a total award value of up to $18.2 million, is intended to accelerate the continued development, scale-up and deployment of our novel SARS-CoV-2 antigen test. Initial early feasibility of this test was funded in part through the RADx WP1 award we were granted in June 2020. WP2 supports clinical validation of the test in support of the EUA submissions with the FDA, and provides funding to expand assay kit manufacturing capacity and commercial deployment readiness. Contract funding was subject to the achievement of pre-defined milestones and the contract period ran through September 2021, with one milestone extended to March 31, 2022. As of December 31, 2021, we had received $17.7 million out of the full $18.2 million under WP2.

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The COVID-19 situation remains dynamic, and there remains significant uncertainty as to the length and severity of the pandemic, the actions that may be taken by government authorities, the impact to the business of our customers and suppliers, the long-term economic implications and other factors identified in “Part I, Item 1A, Risk Factors” of this Annual Report on Form 10-K. We will continue to evaluate the nature and extent of the impact to our business, financial condition, and operating results.

As of December 31, 2021, we had cash and cash equivalents of $396.5 million. Since inception, we have incurred annual net losses. Our net loss was $57.7 million, $31.5 million, and $40.8 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $305.5 million and stockholders' equity of $441.0 million. We expect to continue to incur significant expenses and operating losses at least through the next 24 months. We expect our expenses will increase substantially as we:

Financial Operations Overview

Revenue

Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606 - Revenue from Contracts with Customers (ASC 606), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (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. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

Once a contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations. Arrangements that include rights to additional goods 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, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying license relative to the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that would be subject to the option rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.

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The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (SSP) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

We generate product revenue primarily from sales of our HD-X, HD-1, SR-X, and SP-X instruments and related reagents and other consumables. We currently sell our products for RUO applications and our customers are primarily laboratories associated with academic and governmental research institutions, as well as pharmaceutical, biotechnology and contract research companies. Sales of our consumables have consistently increased due to an increasing number of instruments being installed in the field, all of which require certain of our consumables to run customers’ specific tests. Consumable revenue consists of sales of complete assays which are developed internally by us, plus sales of “homebrew” kits which contain all the elements necessary to run tests with the exception of the specific antibodies utilized which are separately provided by the customer.

Service and other revenue consists of testing services provided by us in our Accelerator Laboratory on behalf of certain research customers, in addition to warranty and other service-based revenue. Services provided in our Accelerator Laboratory include sample testing, homebrew assay development and custom assay development.

Collaboration and license revenue consists of revenue associated with licensing our technology to third parties and for related services.

Grants received by us that do not require the transfer of goods or services to a customer are accounted for by analogy to International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance (IAS 20). Under IAS 20, we recognize revenue as the matching expense or asset is incurred or capitalized.

Cost of Products, Services and Collaboration Revenue

Cost of goods sold for products consists of HD-X, HD-1, and SR-X instrument costs from the manufacturer. Cost of goods sold for SP-X consists of costs based on the internal assembly of this item. Raw material part costs, associated freight, shipping and handling costs, contract manufacturer costs, salaries, personnel costs, royalties, stock-based compensation, overhead and other direct costs related to those sales are classified as cost of goods sold for products.

Cost of goods sold for services consists of salaries and other personnel costs, royalties, stock-based compensation and facility costs associated with operating the Accelerator Laboratory on behalf of customers, in addition to costs related to warranties and other costs of servicing equipment at customer sites.

Cost of collaboration revenue consists of royalty expense due to third parties from revenue generated by collaboration or license deals.

Research and Development Expenses

Research and development expenses consist of salaries and other personnel costs, stock-based compensation, research supplies, third-party development costs for new products, materials for prototypes, and allocated overhead costs that include facility and other overhead 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 the tasks required to support development and commercialization of new and existing products. We believe that our continued investment in research and development is essential to our long-term

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competitive position and expect these expenses to increase in future periods. Additionally, costs incurred related to grant revenue are recorded as research and development expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and other personnel costs, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal and accounting services. We expect selling, general and administrative expenses to increase in future periods as the number of sales, technical support and marketing and administrative personnel grows and we continue to introduce new products, broaden our customer base and grow our business. We also expect to incur additional public company expenses, including expenses related to compliance with the rules and regulations of the SEC and the Nasdaq Stock Market, additional insurance expenses, and expenses related to investor relations activities and other administrative and professional services.

Critical Accounting Policies, Significant Judgments 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, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in accounting estimates may occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. 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.

We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other significant accounting policies. Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations. Our significant accounting policies are more fully described in “Significant Accounting Policies” (Note 2) in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Revenue Recognition

We recognize revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects consideration that we expect 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.

Product Revenue

Our 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 we transfer 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 our Accelerator Laboratory and generally consist of fixed fee contracts. Revenues from contract research services are

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recognized at a point in time when we complete and deliver our 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

We may enter into agreements to license the intellectual property and know-how associated with our 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. We have recognized revenues from a sales- or usage based royalties related to our licensing technology and intellectual property.

Payment Terms

Our payment terms vary by the type and location of customer and the products or services offered. Payment from customers is generally required in a term ranging from 30 to 45 days from date of shipment or satisfaction of the performance obligation with no discounts for early payment. Occasionally we do provide extended payment terms or financing arrangements to customers.

Disaggregated Revenue

When disaggregating revenue, we considered all of the economic factors that may affect revenues. The following tables disaggregate our revenue from contracts with customers based on their location by revenue type:

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Our contracts with customers may include promises to transfer multiple products and services to a customer. In accordance with ASC 606, we combine any performance obligations that are immaterial with one or more other performance obligations that are material to the contract. For arrangements with multiple performance obligations, we allocate the contract transaction price, including discounts, to each performance obligation based on its relative standalone selling price. Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling prices based on prices charged to customers in observable transactions, and use a range of amounts to estimate standalone selling prices for each performance obligation. We may have more than one range of standalone selling price for certain products and services based on the pricing for different customer classes.

Variable consideration in our contracts primarily relates to (i) sales- and usage-based royalties related to the license of intellectual property in collaboration and license contracts and (ii) certain non-fixed fee research services contracts. ASC 606 provides for an exception to estimating the variable consideration for sales- and usage-based royalties related to the license of intellectual property, such that the sales- or usage-based royalty will be recognized in the period the underlying transaction occurs. We have recorded sales- or usage-based royalty revenue for the years ended December 31, 2021, 2020 and 2019 related to the intellectual property licensed by Uman. We recognize revenues from sales- or usage based royalty revenue at the later of when the sales or usage occurs; and the satisfaction or partial satisfaction of the performance obligation to which the royalty has been allocated.

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of December 31, 2021 is $7.5 million. Of the performance obligations not yet satisfied or that are partially satisfied, $6.4 million is expected to be recognized as revenue in the next 12 months, with the remainder to be recognized within the 24 months thereafter. The $7.5 million principally consists of amounts billed for undelivered services related to initial and extended service-type warranties and research services, as well as $0.5 million related to undelivered licenses of intellectual property for a diagnostics company.

We have classified the balance of capitalized costs to obtain a contract as a component of prepaid expenses and other current assets as of December 31, 2021 and classified the expense as a component of cost of goods sold and selling, general and administrative expense over the estimated life of the contract. We consider potential impairment in these amounts each period.

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ASC 606 provides entities with certain practical expedients and accounting policy elections to minimize the cost and burden of adoption. We exclude from the transaction price any amounts collected from customers related to sales and other similar taxes. We have elected to account for the shipping and handling as an activity to fulfill the

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promise to transfer the product, and therefore will not evaluate whether shipping and handling activities are promised services to its customers.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. None of our contracts contained a significant financing component for the years ended December 31, 2021, 2020, and 2019.

Grant Revenue

We recognize grant revenue as we perform services under the arrangement when the funding is committed. Revenues and related research and development expenses are presented gross in the consolidated statements of operations as we have determined we are the primary obligor under the arrangement relative to the research and development services.

Accounting for grants does not fall under ASC 606, as the grantor will not benefit directly from our expansion or product development. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for-profit business entities, we have accounted for grants by analogy to IAS 20.

Our grants contain both monetary amounts granted related to assets and monetary amounts granted related to income, which are grants other than those related to assets. The grants related to assets are for the expansion and increase of manufacturing capacity. The grants related to income are for additional research and development, as well as other non-asset related scale up costs. We determined it was appropriate to account for each monetary grant amount under the appropriate accounting treatment outlined in IAS 20.

Under IAS 20, grants related to assets shall be presented in the consolidated balance sheets either by recognizing the grant as deferred income (which is recognized in the consolidated statements of operations on a systematic basis over the useful life of the asset), or by deducting the grant in calculating the carrying amount of the asset (which is recognized in the consolidated statements of operations over the life of the depreciable asset as a reduced depreciation expense). Both methods are acceptable under IAS 20. We have elected to record grants related to assets as a deduction in calculating the carrying value of the asset.

Under IAS 20, grants related to income are presented as part of the consolidated statements of operations, either separately or under a general heading. Both methods are acceptable under IAS 20. We have elected to record grants related to income separately on the consolidated statements of operations as grant revenue. The related expenses are recorded within operating expenses and not deducted.

On June 22, 2020, we entered into WP1 under the NIH’s RADx program to assess the feasibility of a novel SARS-CoV-2 antigen detection test using our Simoa technology. During the year ended December 31, 2020 we recognized $2.0 million of grant revenue and incurred $1.0 million in research and development expense related to WP1. WP1 was completed as of December 31, 2020.

On September 29, 2020, we entered into WP2 with the NIH under its RADx program. The contract, which has a total award value of $18.2 million, accelerates the continued development, scale-up, and deployment of the novel SARS-CoV-2 antigen detection test using our Simoa technology. The contract provides funding to expand assay kit manufacturing capacity and commercial deployment readiness. Release of the $18.2 million of funding under WP2 is based on the achievement of certain milestones. Contract funding was subject to achievement of these pre-defined milestones and the contract period ran through September 2021, with one milestone extended to March 31, 2022. As of December 31, 2021, we had received $17.7 million out of the full $18.2 million under WP2. During the year ended December 31, 2021, we recognized $5.2 million in grant revenue and incurred $3.4 million in research and development expense related to WP2. During the year ended December 31, 2020, we recognized $4.4 million in grant revenue and incurred $2.6 million in research and development expense related to WP2.

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The following table summarizes the cumulative activity under WP2 as of December 31, 2021 and 2020 (in thousands):

Stock-Based Compensation

We account for stock-based compensation awards in accordance with ASC 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Stock-based compensation awards have historically consisted of stock options and restricted stock units. Prior to the adoption of Accounting Standards Update (ASU) No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07), the measurement date for non-employee awards was generally the date the services were completed, resulting in financial reporting period adjustments to stock-based compensation during the vesting period for changes in the fair value of the awards. We adopted ASU 2018-07 on January 1, 2020. After the adoption of ASU 2018-07, the measurement date for non-employee awards is the date of grant without changes in the fair value of the award. Stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis. There were no material non-employee awards outstanding during the years ended December 31, 2021, 2020, and 2019.

We recognize forfeitures as they occur. We estimate the grant date fair value, and the resulting stock-based compensation expense, using a Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.

The fair value of stock options granted to employees and non-employees is estimated on the grant date using a Black-Scholes option-pricing model, based on the assumptions noted in the following table:

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Expected volatility was calculated based on proportional weighting of reported volatility data for a representative group of guideline publicly traded companies for which historical information was available, as well as our stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant, commensurate with the expected life assumption. We estimate the expected life of options granted to employees utilizing the simplified method which calculates the expected life of an option as the average of the time to vesting and

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contractual life of the options. The expected life is applied to the stock option grant group as a whole, as we do not expect substantially different exercise or post-vesting termination behavior among our employee population. We use the simplified method due to the lack of historical exercise data and the plain nature of the stock options. We use the remaining contractual term for the expected life of non-employee awards. The expected dividend yield is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on common stock.

We determined the fair value of each share of common stock underlying share-based awards based on the closing price of our common stock as reported by Nasdaq on the date of grant.

The table below summarizes the stock-based compensation expense recognized in our statements of operations by classification (in thousands):

As of December 31, 2021, we had $35.8 million of total unrecognized stock-based compensation costs which we expect to recognize over a weighted-average period of 2.9 years.

Results of Operations

Comparison of the Years Ended December 31, 2021 and December 31, 2020 (dollars in thousands):

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Revenue

Revenue increased by $24.2 million, or 28%, to $110.6 million for the year ended December 31, 2021 as compared to $86.4 million for the year ended December 31, 2020. Product revenue increased 84% to $81.1 million for the year ended December 31, 2021, as compared to $44.0 million in the same period in 2020. Product revenue consisted of sales of instruments totaling $26.0 million and sales of consumables and other products totaling $55.1 million for the year ended December 31, 2021. Product revenue consisted of sales of instruments totaling $16.6 million and sales of consumables and other products of $27.4 million for the year ended December 31, 2020. The increase in product revenue was primarily due to the increased ability to install instruments as customer sites reopened from COVID-19 related shutdowns that impacted results in the same period in 2020. In addition, as the installed base of instruments increased year over year, consumable sales increased. The decrease in service and other revenue of $0.5 million was primarily due to our open headcount within our services personnel. We had $0.6 million and $11.8 million in collaboration and license revenue during the year ended December 31, 2021 and 2020, respectively, related to licensing technology and intellectual property. We had $11.2 million in collaboration and license revenue during the year ended December 31, 2020, primarily related to entering into the Abbott License Agreement. Grant revenue of $5.2 million and $6.4 million consisted of revenue related to WP2 recognized during the year ended December 31, 2021, and revenue related to WP2 and WP1 recognized during the year ended December 31, 2020, respectively.

Cost of Goods Sold, Services, and Licenses

Cost of product revenue increased by $8.2 million, or 32%, to $34.1 million for the year ended December 31, 2021 as compared to $26.0 million for the year ended December 31, 2020. The increase was primarily due to our increase in volume of our product revenue. Cost of service revenue increased by $3.4 million, or 31%, to $14.7 million for the year ended December 31, 2021, as compared to $11.2 million for the year ended December 31, 2020, primarily due to increased personnel costs from the build out of our field service organization. Cost of collaboration and license revenue of $1.0 million for the year ended December 31, 2020 resulted from the licensing of certain technology and intellectual property to Abbott. Overall cost of goods sold and services as a percentage of revenue was consistent at 44% of total revenue for the years ended December 31, 2021 and 2020, respectively.

Research and Development Expense

Research and development expense increased by $7.8 million, or 39%, to $28.0 million for the year ended December 31, 2021, as compared to $20.2 million for the year ended December 31, 2020. The increase was primarily due to increased headcount as we build our organization to support growth and invest in process improvements.

Selling, General and Administrative Expense

Selling, general and administrative expense increased by $32.7 million, or 55%, to $92.3 million for the year ended December 31, 2021 as compared to $59.6 million for the year ended December 31, 2020. The increase was primarily due to higher personnel costs from increased headcount and other spending increases in various departments as we build out our organization to support growth and invest in process improvements.

Interest Expense

Interest expense, net decreased by $0.1 million for the year ended December 31, 2021 as compared to the same period in 2020, primarily due to the unfavorable impact of interest rates on our cash equivalents for the year ended December 31, 2021, as compared to the year ended December 31, 2020.

Other Income (Expense), Net

Other income (expense), net increased by $1.3 million for the year ended December 31, 2021 as compared to the same period in 2020, primarily due to other income of $2.1 million related to an employee retention tax credit established under the Coronavirus Aid, Relief and Economic Securities Act, offset by other expense due to unfavorable foreign currency exchange rates during the year ended December 31, 2021.

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Income Tax Benefit

Income tax benefit was less than $0.1 million for the year ended December 31, 2021, as compared to $0.4 million tax for the same period in 2020. The change is primarily due to the decrease in the tax benefit recorded on the operating results of our foreign subsidiaries.

Liquidity and Capital Resources

Since our inception, we have incurred annual net losses and negative cash flows from operations. We used $47.9 million, $23.4 million and $26.2 million of cash for our operating activities for the years ended December 31, 2021, 2020, and 2019, respectively. The significant increase in our cash used for operating activities for the year ended December 31, 2021, as compared to December 31, 2020, was principally driven by our increased net loss for the 2021 period. As of December 31, 2021, we had an accumulated deficit of $305.5 million. As of December 2021, we had cash and cash equivalents of $396.5 million.

Sources of Liquidity

To date, we have financed our operations principally through equity offerings, borrowings from credit facilities and revenue from our commercial operations.

Equity Offerings

On March 19, 2019, we entered into a Sales Agreement for an “at-the-market offering” arrangement with Cowen and Company, LLC (Cowen), which allowed us to issue and sell shares of common stock pursuant to a shelf registration statement for total gross sales proceeds of up to $50.0 million from time to time through Cowen, acting as our agent. During the year ended December 31, 2019, we sold an aggregate of 2,186,163 shares of common stock pursuant to this agreement resulting in $49.7 million in gross proceeds and $48.0 million in net proceeds. On August 6, 2020, we delivered written notice to Cowen to terminate the Sales Agreement, which termination the parties agreed to make immediately effective.

On August 8, 2019, we entered into an underwriting agreement with J.P. Morgan Securities LLC and SVB Leerink LLC, or Leerink, as representatives of the several underwriters, relating to an underwritten public offering of 2,732,673 shares of common stock at a public offering price of $25.25 per share. We received $69.0 million in gross proceeds and $64.5 million in net proceeds.

On August 6, 2020, we entered into an underwriting agreement with Leerink and Cowen, as representatives of the several underwriters, relating to an underwritten public offering of 3,048,774 shares of common stock at a public offering price of $32.00 per share. We received $97.6 million in gross proceeds and $91.4 million in net proceeds.

On February 3, 2021, we entered into an underwriting agreement with Goldman Sachs & Co. LLC, Leerink and Cowen, as representatives of the several underwriters, relating to an underwritten public offering of 4,107,142 shares of common stock at a public offering price of $70.00 per share. We received $287.5 million in gross proceeds and approximately $269.7 million in net proceeds.

Loan Facility with Hercules

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On April 14, 2014, we executed a loan agreement with Hercules Capital, Inc. (Hercules), as subsequently amended most recently in April 2019. The interest rate on this term loan was variable based on a calculation of 8% plus the prime rate less 5.25%, with a minimum interest rate of 8%. Interest was to be paid monthly beginning the month following the borrowing date. Under the amended agreement, we were required to pay the loan principal in four equal installments starting July 1, 2021, with the final principal payment and end of term charge to be made on October 1, 2021. On October 1, 2021, we made the final principal payment, including end of term fees, of $2.0 million related to the loan agreement. As of December 31, 2021, there were no additional amounts available to borrow under the loan facility.

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Uman Acquisition

In August 2019, we completed the acquisition of Uman, in which we paid $15.7 million in cash to the shareholders of Uman. We funded this payment through our existing cash balances. In addition, we issued $5.5 million in stock in connection with the purchase of Uman. 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.

Cash Flows

The following table presents our cash flows for each period presented (in thousands):

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 support the growth of our business. We have historically experienced negative cash flows from operating activities as we have developed our technology, expanded our business and built our infrastructure and this may continue in the future.

Net cash used in operating activities was $47.9 million during the year ended December 31, 2021. Net cash used in operating activities primarily consisted of net loss of $57.7 million offset by non-cash charges of $16.0 million of stock-based compensation expense and $4.9 million of depreciation and amortization expense. Cash used as a result of changes in operating assets and liabilities of $12.2 million was primarily due to an increase in inventory of $8.1 million and an increase in accounts receivable of $6.9 million, offset by an increase in accounts payable, accrued compensation and benefits and other accrued expenses of $3.5 million, all driven by growth and our investments in process improvements.

Net cash used in operating activities was $23.4 million during the year ended December 31, 2020. Net cash used in operating activities primarily consisted of net loss of $31.5 million offset by non-cash charges of $10.1 million of stock-based compensation expense and $4.3 million of depreciation and amortization expense. Cash used as a result of changes in operating assets and liabilities of $8.0 million was primarily due to an increase in an increase in accounts receivable of $6.7 million, an increase in inventory of $5.1 million, and an increase in prepaid expenses and other assets of $3.9 million, offset by a decrease in accrued compensation and benefits and other accrued expenses of $6.2 million.

Net Cash Used in Investing Activities

Historically, our primary investing activities have consisted of capital expenditures for the purchase of capital equipment to support our expanding infrastructure and work force. We expect to continue to incur additional costs for capital expenditures related to these efforts in future periods.

We used $6.3 million of cash during the year ended December 31, 2021, consisting of $13.6 million for the purchase of property and equipment, offset by $7.3 million in grant proceeds related to assets acquired under WP2.

We used $0.6 million of cash in investing activities during the year ended December 31, 2020, consisting of $3.9 million in additions to property and equipment, offset by $3.3 million in grant proceeds related to assets acquired under WP2.

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Net Cash Provided by Financing Activities

Historically, we have financed our operations principally through private placements of our convertible preferred stock and borrowings from credit facilities, the sale of shares of our common stock in our IPO or other offerings and revenues from our commercial operations.

Financing activities provided $270.8 million of cash during the year ended December 31, 2021, primarily from $269.7 million in net proceeds from our underwritten public offering during the first quarter of 2021.

Financing activities provided $96.2 million of cash during the year ended December 31, 2020, primarily from net proceeds of our underwritten public offering during the third quarter of 2020.

Capital Resources

We have not achieved profitability on an annual basis since our inception, and we expect to continue to incur net losses in the future. We also expect that our operating expenses will increase as we continue to increase our marketing efforts to drive adoption of our commercial products. Our liquidity requirements have historically consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, debt service and general corporate expenses.

We believe cash generated from commercial sales along with our current cash and cash equivalents will be sufficient to meet our anticipated operating cash requirements for at least the next 12 months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales and marketing activities and grow our customer base. Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in Item 1A, “Risk Factors” of this Annual Report on Form 10-K. We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including:

We cannot assure you 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, 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, we may have to delay development or commercialization of our products. 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 or debt offerings or other financings. On November 6, 2020, we filed an automatically effective shelf registration statement with the SEC. Each issuance of securities under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of securities to be issued.  The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market

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conditions and other factors. This registration statement will expire on November 6, 2023, three years after its date of effectiveness.

Contractual Obligations, Commitments and Contingencies

Lease Obligations

We currently lease approximately 91,600 square feet of office, laboratory, and manufacturing space at our headquarters in Billerica, Massachusetts. In addition, in the first quarter of 2022, we executed a lease for 85,800 square feet of office and laboratory space in Bedford, Massachusetts. The premises covered by these leases serves as our principal office and laboratory space effective the second quarter of 2019. The initial term of the Billerica lease is eleven years and five months beginning on April 1, 2019, and we have the option to extend the lease for two additional five-year periods. The initial term of the Bedford lease is eight years and nine months beginning on the earlier of our occupancy, or May 1, 2022.

In addition, our subsidiary, Uman, leases a total of approximately 6,500 square feet of office, laboratory, manufacturing and storage space in Umeå, Sweden. These leases expire at various dates through February 28, 2023.

The following table summarizes our operating lease obligations (in thousands):

Backlog

We generally expect to ship all instrument and consumable orders received in a given period with the exception of orders received near the end of a fiscal quarter; and as a result, our backlog at the end of any period is typically insignificant.

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