Cepheid Reports 2015 Third Quarter Results

Commercial Clinical Growth of 22% for First Nine Months of 2015

20 Oct, 2015, 16:05 ET from Cepheid

SUNNYVALE, Calif., Oct. 20, 2015 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the third quarter of 2015 of $126.5 million, representing growth of 10% from $115.2 million for the third quarter of 2014.  Net loss was $(22.9) million, or $(0.32) per share, which compares to net loss of $(7.2) million, or $(0.10) per share, in the third quarter of 2014. 

Excluding stock-based compensation expense, amortization of debt discount and transaction costs, and amortization of purchased intangible assets, non-GAAP net loss for the third quarter of 2015 was $(9.1) million, or $(0.13) per share.  This compares to non-GAAP net income of $4.7 million, or $0.06 per share, in the third quarter of 2014.

"Our Commercial Clinical business has grown 22% year-to-date and we currently expect to deliver approximately 20% growth for the full year," said John Bishop, Cepheid's Chairman and Chief Executive Officer.  "Worldwide, we now have more than 9,200 GeneXpert Systems installed, and a menu of up to 23 tests spanning healthcare associated infections, critical infectious disease, sexual health and virology.  Our objective is to improve lab efficiency and reduce costs through system consolidation and workflow efficiencies while at the same time allowing an ever increasing number of patients to benefit from our accurate, fast, and easy-to-use tests."

Operational Overview

  • Total revenue was, in millions:

Three Months Ended September 30,

2015

2014

Change

Clinical Systems

$    17.9

$    17.0

5%

Clinical Reagents

102.3

90.1

14%

    Total Clinical 

120.2

107.1

12%

Non-Clinical & Other

6.3

8.1

-22%

Total Revenue

$  126.5

$  115.2

10%

  • By geography, total revenue was, in millions:

Three Months Ended September 30,

2015

2014

Change

North America

     Clinical

$    67.4

$    61.0

11%

     Non-Clinical & Other

6.2

6.9

-10%

Total North America

73.6

67.9

8%

International

     Clinical

52.8

46.1

14%

     Non-Clinical & Other

0.1

1.2

-93%

Total International

52.9

47.3

12%

Total Revenue

$  126.5

$  115.2

10%

  • Commercial Clinical sales were $97.8 million and sales to High Burden Developing Countries (HBDC) were $22.4 million.
  • During the quarter, Cepheid installed a total of 204 GeneXpert systems in its Commercial Clinical business. Additionally, the Company placed a total of 172 GeneXpert systems as part of its HBDC program. Including HBDC sales, a cumulative total of 9,279 GeneXpert systems have been placed worldwide as of September 30, 2015.
  • GAAP gross margin on sales was 46% and non-GAAP gross margin on sales was 48%, which compares to 51% and 52%, respectively, in the third quarter of 2014.
  • Cash, cash equivalents and investments were $386.4 million as of September 30, 2015.
  • DSO was 43 days.

Business Outlook

For the fiscal year ending December 31, 2015, the Company now expects:

  • Total revenue to be in the range of $537 to $541 million;
    • Net loss in the range of $(0.73) to $(0.71) per share; and
  • Non-GAAP earnings in the range of a loss of $(0.01) to income of $0.01 per share.

Expected non-GAAP net income excludes approximately $37 million related to stock-based compensation expense, approximately $10 million related to the amortization of debt discount and transaction costs, and approximately $5 million related to the amortization of purchased intangible assets.  The fully diluted share count for the year is expected to be approximately 72 million in the case of a net loss, and approximately 75 million shares in the case of net income.

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

Guidance Range for Year

Ending December 31, 2015

Low 

High

Net Loss Per Share

$ (0.73)

$ (0.71)

   Stock-Based Compensation Expense

0.51

0.51

   Amortization of Debt Discount and Transaction Costs

0.14

0.14

   Amortization of Purchased Intangible Assets

0.07

0.07

Non-GAAP Measure of Net Income Per Share

$ (0.01)

$   0.01

Accessing Cepheid's 2015 Third Quarter Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Tuesday, October 20, 2015, 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.

Summary of Management Presentation

In conjunction with today's press release, the Company is making a summary of the management presentation immediately available at http://ir.cepheid.com

About Cepheid

Based in Sunnyvale, California, 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 stock-based compensation expense, amortization of debt discount and transaction costs, and amortization of purchased intangible assets.  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:

Stock-based Compensation Expense. This consists primarily of expenses for stock options and restricted stock under ASC 718 (formerly SFAS 123(R)).  The Company excludes stock-based compensation expense from its non-GAAP measures primarily because it is a non-cash expense that the Company does not believe is 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 Debt Discount and Transaction Costs.  The Company incurs amortization of debt discount and transaction costs in connection with the Convertible Senior Notes issued in February 2014.  The Company excludes these amounts because these expenses are not reflective of ongoing operating results in the period incurred.  These amounts arise from the Company's issuance of debt and have no direct correlation to the operation of the Company's business.

Amortization of Purchased Intangible Assets.  The Company incurs amortization of purchased intangible assets in connection with acquisitions.  The Company excludes these amounts 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.

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 projected future growth, future revenues, future net loss/income and profitability and future number of fully-diluted shares, including on a non-GAAP basis, strategic investments, platform features, the breadth and speed of test menu expansion, geographic expansion and market segment 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 success in increasing commercial and HBDC sales and the effectiveness of our sales personnel; the relative mix of commercial and HBDC sales, and relative mix of instrument and test sales; manufacturing costs associated with the ramp-up of new products; 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, complete clinical trials successfully and obtain regulatory clearances in a timely manner for new products; uncertainties related to the FDA regulatory and international 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; long sales cycles and variability in systems placements and reagent pull-through in the Company's HBDC program;  the rate of environmental biothreat testing conducted by the USPS, which will affect the amount of consumable products sold to the USPS; unforeseen supply, development and manufacturing problems; our ability to manage our inventory levels; our ability to successfully complete and bring on additional manufacturing lines; the potential need for additional intellectual property licenses for tests and other products and the terms of such licenses; 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 impact of foreign currency exchange; 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.

FINANCIAL TABLES FOLLOW

CEPHEID

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended   September 30,

Nine Months Ended   September 30,

2015

2014

2015

2014

Revenue

$      126,465

$      115,209

$      391,577

$      338,619

Costs and operating expenses:

Cost of sales

67,681

56,791

198,259

169,442

Collaboration profit sharing

1,286

1,291

3,879

3,231

Research and development

32,909

23,541

84,987

69,279

Sales and marketing

28,664

23,913

82,678

70,873

General and administrative

15,401

13,069

47,395

41,076

Total costs and operating expenses

145,941

118,605

417,198

353,901

Loss from operations

(19,476)

(3,396)

(25,621)

(15,282)

Other income (expense):

Interest income

494

325

1,283

784

Interest expense

(3,687)

(3,640)

(10,937)

(9,003)

Foreign currency exchange loss and other, net

(408)

(258)

(2,848)

(1,015)

Other expense, net

(3,601)

(3,573)

(12,502)

(9,234)

Loss before income taxes

(23,077)

(6,969)

(38,123)

(24,516)

Benefit from (provision for) income taxes

176

(266)

(602)

(1,865)

Net loss

$      (22,901)

$        (7,235)

$      (38,725)

$      (26,381)

Basic net loss per share

$          (0.32)

$          (0.10)

$          (0.54)

$          (0.38)

Diluted net loss per share

$          (0.32)

$          (0.10)

$          (0.54)

$          (0.38)

Shares used in computing basic net loss per share

72,199

70,326

71,777

69,859

Shares used in computing diluted net loss per share

72,199

70,326

71,777

69,859

 

CEPHEID

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

December 31,

2015

2014

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$        136,487

$         96,663

Short-term investments

189,697

196,729

Accounts receivable, net

60,383

68,809

Inventory, net

144,808

132,635

Prepaid expenses and other current assets

30,990

24,274

Total current assets

562,365

519,110

Property and equipment, net

124,366

115,765

Investments

60,168

79,731

Other non-current assets

8,215

7,847

Intangible assets, net

26,700

31,440

Goodwill

39,681

39,681

Total assets

$        821,495

$       793,574

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$          65,789

$         50,435

Accrued compensation

33,248

33,760

Accrued royalties

4,862

5,443

Accrued and other liabilities

28,769

34,761

Current portion of deferred revenue

12,102

13,447

Total current liabilities

144,770

137,846

Long-term portion of deferred revenue

5,081

4,532

Convertible senior notes, net

285,406

278,213

Other liabilities

19,421

18,768

Total liabilities

454,678

439,359

Shareholders' equity:

Common stock

448,525

422,151

Additional paid-in capital

251,772

225,529

Accumulated other comprehensive income (loss), net of taxes

(1,043)

247

Accumulated deficit

(332,437)

(293,712)

Total shareholders' equity

366,817

354,215

Total liabilities and shareholders' equity

$        821,495

$       793,574

 

CEPHEID

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Nine Months Ended  September 30,

2015

2014

Cash flows from operating activities:

Net loss

$ (38,725)

$ (26,381)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization of property and equipment

20,170

15,877

Amortization of intangible assets

4,814

2,775

Unrealized foreign exchange differences

2,242

1,107

Amortization of debt discount and transaction costs

7,627

6,147

Impairment of acquired intangible assets, licenses, property and equipment

224

Stock-based compensation expense

25,752

24,655

Excess tax benefits from stock-based compensation expense

(53)

Loss on the disposal of property, equipment and intangible assets

56

Other non-cash items

198

Changes in operating assets and liabilities:

Accounts receivable

8,426

(3,568)

Inventory, net

(11,733)

(25,223)

Prepaid expenses and other current assets

(9,691)

(5,544)

Other non-current assets

(801)

(22)

Accounts payable and other current and non-current liabilities

12,297

6,070

Accrued compensation

(511)

5,940

Deferred revenue

(795)

3,010

Net cash provided by operating activities

19,497

4,843

Cash flows from investing activities:

Capital expenditures

(29,087)

(37,323)

Cost of acquisitions, net

(3,000)

Proceeds from sale of equipment and an intangible asset

834

Proceeds from sales of marketable securities and investments

49,173

77,038

Proceeds from maturities of marketable securities and investments

175,272

66,148

Purchases of marketable securities and investments

(198,701)

(381,632)

Transfer from restricted cash

1,792

Net cash used in investing activities

(3,717)

(275,769)

Cash flows from financing activities:

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

26,444

30,137

Excess tax benefits from stock-based compensation expense

53

Proceeds from borrowings of convertible senior notes, net of issuance costs

335,789

Purchase of convertible note capped call hedge

(25,082)

Principal payment of notes payable

(121)

(139)

Net cash provided by financing activities

26,376

340,705

Effect of foreign exchange rate change on cash and cash equivalents

(2,332)

(1,175)

Net increase in cash and cash equivalents

39,824

68,604

Cash and cash equivalents at beginning of period

96,663

66,072

Cash and cash equivalents at end of period

$ 136,487

$ 134,676

 

CEPHEID

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands, except per share data)

(unaudited)

Three Months Ended   September 30,

Nine Months Ended   September 30,

2015

2014

2015

2014

Cost of sales

$

67,681

$

56,791

$

198,259

$

169,442

Stock-based compensation expense

(1,129)

(1,437)

(3,177)

(3,291)

Amortization of purchased intangible assets

(829)

(223)

(2,877)

(669)

Non-GAAP measure of cost of sales

$

65,723

$

55,131

$

192,205

$

165,482

Gross margin on revenue per GAAP

46%

51%

49%

50%

Gross margin on revenue per Non-GAAP

48%

52%

51%

51%

Operating expenses

$

76,974

$

60,523

$

215,060

$

181,228

Stock-based compensation expense

(8,846)

(7,288)

(22,625)

(21,364)

Amortization of purchased intangible assets

(383)

(435)

(1,149)

(1,296)

Non-GAAP measure of operating expenses

$

67,745

$

52,800

$

191,286

$

158,568

Loss from operations

$

(19,476)

$

(3,396)

$

(25,621)

$

(15,282)

Stock-based compensation expense

9,975

8,725

25,802

24,655

Amortization of purchased intangible assets

1,212

658

4,026

1,965

Non-GAAP measure of loss from operations

$

(8,289)

$

5,987

$

4,207

$

11,338

Net loss

$

(22,901)

$

(7,235)

$

(38,725)

$

(26,381)

Stock-based compensation expense

9,975

8,725

25,802

24,655

Amortization of debt discount and transaction cost

2,583

2,505

7,627

6,147

Amortization of purchased intangible assets

1,212

658

4,026

1,965

Non-GAAP measure of net loss

$

(9,131)

$

4,653

$

(1,270)

$

6,386

Basic net loss per share

$

(0.32)

$

(0.10)

$

(0.54)

$

(0.38)

Stock-based compensation expense

0.14

0.12

0.36

0.35

Amortization of debt discount and transaction cost

0.03

0.04

0.10

0.09

Amortization of purchased intangible assets

0.02

0.01

0.06

0.03

Non-GAAP measure of net income (loss) per share

$

(0.13)

$

0.07

$

(0.02)

$

0.09

Diluted net loss per share

$

(0.32)

$

(0.10)

$

(0.54)

$

(0.38)

Stock-based compensation expense

0.14

0.12

0.36

0.35

Amortization of debt discount and transaction cost

0.03

0.03

0.10

0.09

Amortization of purchased intangible assets

0.02

0.01

0.06

0.03

Non-GAAP measure of net income (loss) per share

$

(0.13)

$

0.06

$

(0.02)

$

0.09

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

72,199

70,326

71,777

69,859

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

72,199

72,672

71,777

72,689

For Media & Investor Inquiries:

Jacquie Ross, CFA Tel: (408) 400 8329 corporate.communications@cepheid.com

 

SOURCE Cepheid



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