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2014

Cepheid Reports 2013 Third Quarter Results

First $100 Million Revenue Quarter Driven by Record Commercial Clinical and HBDC Sales

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SUNNYVALE, Calif., Oct. 17, 2013 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenues for the third quarter of 2013 of $100.1 million, representing growth of 24% from $80.5 million for the third quarter of 2012.  Net loss in the third quarter of 2013 was $1.4 million, or $(0.02) per share.  This compares to net loss of $21.3 million, or $(0.32) per share, in the third quarter of 2012, which included a charge of $15.1 million, or $0.23 per share, associated with a litigation settlement.    

Excluding employee stock-based compensation and amortization of purchased intangible assets, non-GAAP net income for the third quarter of 2013 was $6.6 million, or $0.09 per share.  This compares to non-GAAP net income of $0.9 million, or $0.01 per share, in the third quarter of 2012.

"Cepheid delivered a record 574 GeneXpert Systems in the third quarter of 2013, bringing our cumulative, global total to more than 5,000.  This includes 1,400 systems in the US where there are now more GeneXpert systems in use than any other clinical molecular diagnostic system," said John Bishop, Cepheid's Chairman and Chief Executive Officer.  "With our fast-growing menu of Xpert tests, including most recently Xpert CT/NG and Xpert MTB/RIF here in the US, Cepheid is fast emerging as a broad, global leader in the molecular market." 

Operational Overview

  • By business, total sales were, in millions:

Three Months Ended September 30,


2013


2012


Change







Clinical Systems

$    17.5


$  13.1


34%

Clinical Reagents

74.4


54.5


36%

    Total Clinical 

91.9


67.6


36%







Non-Clinical & Other

8.2


12.9


-36%

Total Sales

$  100.1


$  80.5


24%

 

  • By geography, total sales were, in millions:

Three Months Ended September 30,


2013


2012


Change

North America






     Clinical

$    51.7


$  42.7


21%

     Non-Clinical & Other

7.1


11.5


-38%

Total North America

58.8


54.2


8%







International






     Clinical

40.2


24.9


62%

     Non-Clinical & Other

1.1


1.4


-18%

Total International

41.3


26.3


57%







Total Sales

$  100.1


$  80.5


24%

 

  • Commercial sales, including Clinical and Non-Clinical & Other, were $79.8 million in the third quarter of 2013.  Sales to High Burden Developing Countries (HBDC) in the third quarter of 2013 were $20.3 million.
  • During the quarter, Cepheid installed a total of 133 GeneXpert systems in its commercial Clinical business.  Additionally, the Company placed a total of 441 GeneXpert systems as part of its HBDC program.  Including the HBDC systems, a cumulative total of 5,126 GeneXpert systems have been placed worldwide as of September 30, 2013.
  • GAAP gross margin on sales was 48% and non-GAAP gross margin on sales was 49%, which compares to 51% and 52%, respectively, in the third quarter of 2012.  Lower gross margins were primarily attributed to a larger contribution from our lower margin HBDC business.
  • Cash, cash equivalents and investments were $84.5 million as of September 30, 2013.
  • DSO was 38 days.

Business Outlook

For the fiscal year ending December 31, 2013, the Company has increased its full year revenue guidance to reflect much stronger than expected HBDC sales offset in part by a 1% decrease in guidance for Commercial Clinical sales.  The change in expected Commercial Clinical sales is driven by a modestly slower than expected recovery in North America sales productivity.  The Company now expects:

  • Total revenue in the range of $389 to $391 million;
  • Net loss in a range from $(0.26) to $(0.24) per share; and
  • Non-GAAP net income in the range of $0.22 to $0.24 per share. 

Expected non-GAAP net income excludes approximately $29 million related to stock compensation expense and approximately $4 million related to the amortization of acquired intangibles.  The fully diluted share count for the year is expected to be approximately 67 million, except in the event we have non-GAAP net income, in which case the share count would be approximately 72 million shares.

The following table reconciles net loss per share to the non-GAAP net income per share range:



Guidance Range for Year



Ending December 31, 2013



Low 


High

Net Loss Per Share


$ (0.26)


$ (0.24)

   Stock Compensation Expense


0.42


0.42

   Amortization of Purchased Intangible Assets


0.06


0.06

Non-GAAP Measure of Net Income Per Share


$   0.22


$   0.24

 

Accessing Cepheid's 2013 Third Quarter Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, October 17, 2013, to discuss the results.  To access the live webcast, please visit Cepheid's website at http://ir.cepheid.com at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software.  A replay of the webcast will be available shortly following the call and will remain available for at least 90 days.

About Cepheid

Based in Sunnyvale, Calif., Cepheid (Nasdaq: CPHD) is a leading molecular diagnostics company that is dedicated to improving healthcare by developing, manufacturing, and marketing accurate yet easy-to-use molecular systems and tests.  By automating highly complex and time-consuming manual procedures, the Company's solutions deliver a better way for institutions of any size to perform sophisticated genetic testing for organisms and genetic-based diseases.  Through its strong molecular biology capabilities, the Company is focusing on those applications where accurate, rapid, and actionable test results are needed most, such as managing infectious diseases and cancer. For more information, visit http://www.cepheid.com.

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP financial information with non-GAAP measures that do not include employee stock-based compensation expense, amortization of purchased intangible assets, a tax benefit related to an intercompany intellectual property transaction in the quarter ended March 31, 2012, and litigation settlement expenses in the quarter ended September 30, 2012.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP.   The Company's management uses the non-GAAP information internally to evaluate its ongoing business, continuing operational performance and cash requirements, and believes these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's cash requirements and additional insight into the underlying operating results and the Company's ongoing performance in the ordinary course of its operations.

These non-GAAP measures may be different from non-GAAP measures used by other companies.  In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.  The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

As described above, the Company excludes the following items from one or more of its non-GAAP measures when applicable:

Employee Stock-based Compensation Expense. These expenses consist primarily of expenses for employee stock options and employee restricted stock under ASC 718 (formerly SFAS 123(R)).  The Company excludes employee stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results in the period incurred.  Further, as the Company applies ASC 718, it believes that it is useful to investors to understand the impact of the application of ASC 718 on its results of operations.

Amortization of Purchased Intangible Assets.  The Company incurs amortization of purchased intangible assets in connection with acquisitions.  The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred.  These amounts arise from the Company's prior acquisitions and have no direct correlation to the operation of the Company's business.

Tax Benefit Related to Intercompany Intellectual Property (IP) Transaction.  The Company excluded a tax benefit related to an intercompany IP transaction from its results for non-GAAP net loss for the first quarter ended March 31, 2012.  The Company excluded this item as it believes it was non-recurring in nature, and does not have a direct impact on the operation of the Company's core business. 

Litigation Settlement Expenses. These expenses consisted primarily of expenses related to the settlement of the Company's litigation with Abaxis.  This allocation was determined in accordance with ASC 450, Accounting for Contingencies (formerly SFAS No. 5), and ASC 605-25 (formerly EITF 00-21) using the concepts of fair value based on the past and estimated future revenue streams related to the products covered by the patents previously under dispute.  Specifically, the amount recorded in the consolidated income statement as Litigation settlement in the three months ended September 30, 2012 represented the fair value of the royalty paid on past revenue streams and the residual amount after allocating value to the future revenue streams.  The Company excluded this item as it believes it was non-recurring in nature, and does not have a direct impact on the operation of the Company's core business. 

Forward-Looking Statements

This press release contains forward-looking statements that are not purely historical regarding Cepheid's or its management's intentions, beliefs, expectations and strategies for the future, including those relating to potential growth, future revenues and future net loss/income and profitability, including on a non-GAAP basis, and the breadth and speed of test menu expansion.  Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the Company's current expectations.  Factors that could cause actual results to differ materially include risks and uncertainties such as those relating to: our ability to successfully complete and bring on line additional manufacturing lines; our ability to manage our inventory levels; long sales cycles and variability in systems placements and reagent pull-through in the Company's HBDC program; our success in increasing commercial and HBDC sales and the effectiveness of our sales personnel; the relative mix of commercial and HBDC sales; the performance and market acceptance of new products; sufficient customer demand, customer confidence in product availability and available customer budgets for our customers; our ability to develop new products and complete clinical trials successfully in a timely manner for new products; uncertainties related to the FDA regulatory and European regulatory processes; the level of testing at clinical customer sites, including for Healthcare Associated Infections (HAIs); the Company's ability to successfully introduce and sell products in clinical markets other than HAIs; the rate of environmental biothreat testing conducted by the USPS, which will affect the amount of consumable products sold to the USPS; other unforeseen supply, development and manufacturing problems; the potential need for additional intellectual property licenses for tests and other products and the terms of such licenses; lengthy sales cycles in certain markets; the Company's reliance on distributors in some regions to market, sell and support its products; the occurrence of unforeseen expenditures, acquisitions or other transactions; costs associated with litigation; the impact of competitive products and pricing; the Company's ability to manage geographically-dispersed operations; and underlying market conditions worldwide.  Readers should also refer to the section entitled "Risk Factors" in Cepheid's Annual Report on Form 10-K, its most recent Quarterly Report on Form 10-Q, and its other reports filed with the Securities and Exchange Commission.

All forward-looking statements and reasons why results might differ included in this release are made as of the date of this press release, based on information currently available to Cepheid, and Cepheid assumes no obligation to update any such forward-looking statement or reasons why results might differ.

CONTACTS:


For Media Inquiries:

For Investor Inquiries:

Jared Tipton

Cepheid Corporate Communications

Tel: (408) 400 8377

communications@cepheid.com

Jacquie Ross, CFA

Cepheid Investor Relations

Tel: (408) 400 8329

investor.relations@cepheid.com

 

FINANCIAL TABLES FOLLOW

 

CEPHEID


CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share data)






Three Months Ended
September 30,


Nine months Ended
September 30, 


2013


2012


2013


2012









Sales:








System and other sales

$       19,694


$    15,905


$  54,500


$    48,235

Reagent and disposable sales

80,387


64,567


233,531


190,544

Total sales

100,081


80,472


288,031


238,779

Costs and operating expenses:








Cost of product sales 

51,669


39,789


147,450


110,469

Collaboration profit sharing 

1,410


2,438


4,945


5,767

Research and development

18,558


16,154


54,857


54,374

Sales and marketing

19,788


15,993


58,019


45,613

General and administrative

9,490


11,766


28,865


33,828

Litigation settlement

-


15,110


-


15,110

Total costs and operating expenses 

100,915


101,250


294,136


265,161

Loss from operations 

(834)


(20,778)


(6,105)


(26,382)

Other income (expense), net

(200)


89


(543)


(245)

Loss before income taxes

(1,034)


(20,689)


(6,648)


(26,627)

Benefit from (provision for) income taxes

(347)


(607)


(1,000)


940

Net loss

$       (1,381)


$  (21,296)


$   (7,648)


$  (25,687)









Basic net loss per share 

$         (0.02)


$      (0.32)


$     (0.11)


$      (0.39)









Diluted net loss per share 

$         (0.02)


$      (0.32)


$     (0.11)


$      (0.39)









Shares used in computing basic net loss per share 

67,573


66,145


67,234


65,624









Shares used in computing diluted net loss per share 

67,573


66,145


67,234


65,624

 

 

CEPHEID


CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands)






September
30, 2013


December 31, 2012





ASSETS




Current assets:




Cash and cash equivalents

$      68,753


$       95,779

Short-term investments

5,785


-

Accounts receivable, net

42,027


43,999

Inventory

101,582


70,114

Prepaid expenses and other current assets 

15,976


9,448

Total current assets

234,123


219,340

Property and equipment, net

73,744


54,830

Investments

9,980


-

Other non-current assets

846


913

Intangible assets, net

17,662


18,767

Goodwill

39,681


37,694

Total assets

$    376,036


$     331,544





LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:




Accounts payable 

$      46,451


$       33,701

Accrued compensation 

18,863


16,540

Accrued royalties 

4,567


7,992

Accrued and other liabilities 

5,197


4,235

Current portion of deferred revenue

10,866


9,599

Current portion of notes payable

195


183

Total current liabilities 

86,139


72,250

Long-term portion of deferred revenue

3,115


1,156

Notes payable, less current portion

1,566


1,685

Other liabilities

10,006


8,911

Total liabilities

100,826


84,002

Shareholders' equity:




Common stock

369,614


355,867

Additional paid-in capital 

138,593


117,217

Accumulated other comprehensive income

249


56

Accumulated deficit 

(233,246)


(225,598)

Total shareholders' equity 

275,210


247,542

Total liabilities and shareholders' equity 

$    376,036


$     331,544

 

 

CEPHEID


CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)




Nine Months Ended
September 30,


2013


2012

Cash flows from operating activities:




Net loss

$   (7,648)


$   (25,687)

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




Depreciation and amortization of property and equipment

12,904


9,867

Amortization of intangible assets 

4,278


3,745

Stock-based compensation related to employees and consulting services rendered

20,017


17,932

Unrealized exchange differences

307


-

Changes in operating assets and liabilities:




Accounts receivable 

3,216


6,447

Inventory 

(30,044)


(4,014)

Prepaid expenses and other current assets 

(6,799)


(5,259)

Other non-current assets

263


(46)

Accounts payable and other current liabilities 

9,767


(2,278)

Accrued compensation 

2,276


(2,044)

Deferred revenue 

3,211


1,105

    Net cash provided by (used in) operating activities 

11,748


(232)





Cash flows from investing activities:




Capital expenditures 

(31,005)


(17,079)

Payments for technology licenses 

(1,125)


(2,140)

Cost of acquisitions, net

(3,571)


(17,462)

Purchase of marketable securities and investments

(15,770)


-

    Net cash used in investing activities 

(51,471)


(36,681)





Cash flows from financing activities:




Net proceeds from the issuance of common shares and exercise of stock options

13,746


26,404

Proceeds from notes payable

-


156

Principal payment of notes payable

(828)


(39)

    Net cash provided by financing activities 

12,918


26,521





Effect of exchange rate change on cash

(221)


(1,096)

Net decrease in cash and cash equivalents 

(27,026)


(11,488)

Cash and cash equivalents at beginning of period 

95,779


115,008

Cash and cash equivalents at end of period

$   68,753


$   103,520

 

 

CEPHEID






RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

(in thousands, except per share data)




Three Months Ended
September 30,


Nine Months Ended
September 30,









2013


2012


2013


2012

Cost of sales


$       51,669


$      39,789


$     147,450


$     110,469

  Stock compensation expense


(461)


(894)


(1,843)


(2,229)

  Amortization of purchased intangible assets


(345)


(332)


(2,004)


(998)

Non-GAAP measure of cost of sales


$       50,863


$      38,563


$     143,603


$     107,242










Gross margin on sales per GAAP


48%


51%


49%


54%

Gross margin on sales per Non-GAAP


49%


52%


50%


55%










Operating expenses


$       47,836


$      43,913


$     141,741


$     133,815

  Stock compensation expense


(6,750)


(5,450)


(18,174)


(15,659)

  Amortization of purchased intangible assets


(442)


(379)


(1,257)


(1,076)

Non-GAAP measure of operating expenses


$       40,644


$      38,084


$     122,310


$     117,080










Loss from operations


$          (834)


$    (20,778)


$       (6,105)


$     (26,382)

  Stock compensation expense


7,211


6,344


20,017


17,888

  Litigation Settlement


-


15,110


-


15,110

  Amortization of purchased intangible assets


787


711


3,261


2,074

Non-GAAP measure of income from operations


$         7,164


$        1,387


$       17,173


$         8,690










Net loss


$       (1,381)


$    (21,296)


$       (7,648)


$     (25,687)

  Stock compensation expense


7,211


6,344


20,017


17,888

  Litigation Settlement


-


15,110


-


15,110

  Amortization of purchased intangible assets


787


711


3,261


2,074

  Tax benefit related to intercompany IP transaction


-


-


-


(1,815)

Non-GAAP measure of net income


$         6,617


$           869


$       15,630


$         7,570










Basic net loss per share


$         (0.02)


$        (0.32)


$         (0.11)


$         (0.39)

  Stock compensation expense


0.11


0.09


0.29


0.28

  Litigation Settlement


-


0.23


-


0.23

  Amortization of purchased intangible assets


0.01


0.01


0.05


0.03

  Tax benefit related to intercompany IP transaction


-


-


-


(0.03)

Non-GAAP measure of net income per share


$           0.10


$          0.01


$           0.23


$           0.12










Diluted net loss per share


$         (0.02)


$        (0.32)


$         (0.11)


$         (0.39)

  Stock compensation expense


0.10


0.09


0.29


0.27

  Litigation Settlement


-


0.23


-


0.03

  Amortization of purchased intangible assets


0.01


0.01


0.04


0.23

  Tax benefit related to intercompany IP transaction


-


-


-


(0.03)

Non-GAAP measure of net income per share


$           0.09


$          0.01


$           0.22


$           0.11










Shares used in computing basic net income (loss) per share


67,573


66,145


67,234


65,624










Shares used in computing diluted net income (loss) per share


69,822


69,963


69,668


69,921

 

SOURCE Cepheid



RELATED LINKS
http://www.cepheid.com

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