Cepheid Reports Fourth Quarter And Full Year 2012 Results Clinical Reagents Grow 32% in 2012

SUNNYVALE, Calif., Jan. 24, 2013 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the fourth quarter of 2012 of $92.4 million.  Net income was $5.6 million, or $0.08 per share, which compares to revenue of $80.1 million and net loss of $1.6 million, or $(0.03) per share, in the fourth quarter of 2011.  2011 fourth quarter results reflected a one-time, non-cash charge to cost of sales of $5.4 million, or $0.08 per share, associated with the termination of a patent license.

Excluding stock compensation expenses, impairment of intangible assets and licenses and amortization of acquired intangibles, non-GAAP net income for the fourth quarter of 2012 was $14.2 million, or $0.20 per share.  This compares to a non-GAAP net income of $9.4 million, or $0.14 per share, in the fourth quarter of 2011.

Fiscal 2012 Overview

For the year ended December 31, 2012, Cepheid reported revenue of $331.2 million which compares to revenue of $277.6 million in 2011.  Net loss for the year was $20.0 million, or $(0.30) per share, which compares to net income of $2.6 million, or $0.04 per share, in 2011.  2012 full year net loss reflected a charge of $15.1 million, or $0.23 per share, associated with a litigation settlement.

Excluding stock compensation expenses, a litigation settlement charge, impairment of intangible assets and licenses, amortization of acquired intangibles and a tax benefit related to an intercompany intellectual property transaction, non-GAAP net income for the year was $21.8 million, or $0.31 per share.  This compares to a non-GAAP net income of $29.6 million, or $0.44 per share, for the full year 2011.

"2012 was a challenging year for Cepheid as we worked through growing pains associated with the scale-up of our manufacturing operations and adapted to the incremental variability associated with our HBDC program," said John Bishop, Cepheid's Chief Executive Officer.  "Despite these distractions, we were able to grow our clinical test revenue by 32%, including 25% growth in our commercial business."

Continued Bishop, "We are proud of our commitment to innovation, and our investment in R&D continues to be among the most aggressive in the industry.  As we move into 2013 and beyond, Cepheid is entering a pivotal period of Xpert test menu expansion with a number of high volume, high value tests that substantially extend our opportunities in new and existing markets.  We fully expect this product cycle to drive both market expansion and menu consolidation within accounts thereby benefiting continued, industry-leading revenue growth and improving profitability."

Operational Overview

  • Fourth quarter of 2012 Clinical sales of $82.2 million grew 19% from $68.9 million in the fourth quarter of 2011, and total fourth quarter of 2012 product sales of $89.7 million grew 17% from the same quarter a year ago.  For the year ended December 31, 2012, total Clinical sales of $286.3 million grew 21% from $236.0 million reported for 2011. 
  • By industry, product sales were, in millions:

Three Months Ended December 31,


Full Year Ended December 31,


2012


2011


Change


2012


2011


Change













Clinical Systems

$  13.4


$  19.9


-33%


$    52.8


$    58.6


-10%

Clinical Reagents

68.8


49.0


40%


233.5


177.4


32%

    Total Clinical 

82.2


68.9


19%


286.3


236.0


21%

Non-Clinical

7.5


8.0


-6%


35.2


29.5


19%

Total Product Sales

$  89.7


$  76.9


17%


$  321.5


$  265.5


21%

  • By geography, product sales were, in millions:

Three Months Ended December 31,


Full Year Ended December 31,


2012


2011


Change


2012


2011


Change

North America












     Clinical

$  54.4


$  46.4


17%


$  190.0


$  167.9


13%

     Other

6.0


7.2


-17%


29.0


25.0


16%

Total North America

60.4


53.6


13%


219.0


192.9


14%













International












     Clinical

27.8


22.5


24%


96.3


68.1


41%

     Other

1.5


0.8


90%


6.2


4.5


38%

Total International

29.3


23.3


26%


102.5


72.6


41%













Total Product Sales

$  89.7


$  76.9


17%


$  321.5


$  265.5


21%

  • During the fourth quarter of 2012, Cepheid placed a total of 153 GeneXpert systems in its commercial Clinical business.  Additionally, the Company placed a total of 68 GeneXpert systems as part of its High Burden Developing Country (HBDC) program.  For the year ended December 31, 2012, Cepheid placed a total of 523 GeneXpert systems in its commercial Clinical business and an additional 506 GeneXpert systems as part of its HBDC program.  As of December 31, 2012, a cumulative total of 3,835 GeneXpert systems have been placed worldwide.
  • Cash and cash equivalents were $95.8 million as of December 31, 2012.
  • DSO was 43 days.

Business Outlook

For the fiscal year ending December 31, 2013, the Company expects:

  • Total revenue to be in the range of $375 to $385 million;
  • Net income to range from a net loss of $(0.05) to net income of $0.01 per share; 
  • Non-GAAP net income in the range of $0.41 to $0.46 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 72 million, except in the event of a GAAP loss where the share count would be approximately 67 million shares.

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, 2013



Low 


High

Net Income (Loss) Per Share


$ (0.05)


$  0.01

   Stock Compensation Expense


0.40


0.39

   Amortization of Purchased Intangible Assets


0.06


0.06

Non-GAAP Measure of Net Income Per Share


$   0.41


$  0.46

Accessing Cepheid's Fourth Quarter and Full Year 2012 Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, January 24, 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 litigation settlement expenses, employee stock-based compensation expense, a non-cash charge associated with the termination of a patent license, impairment of intangible assets and licenses 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:

Litigation Settlement Expenses. These expenses consist primarily of expenses related to the settlement of our previously outstanding 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 income statement as Litigation settlement in the year ended December 31, 2012 represents 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 is non-recurring in nature, and does not have a direct impact on the operation of the Company's core business. 

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.

Impairment of Intangible Assets and Licenses and Amortization of Purchased Intangible Assets.  The Company incurs amortization of purchased intangible assets in connection with acquisitions and incurs impairment of intangible assets and licenses.  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 year ended December 31, 2012.  The Company excluded this item as it believes it is 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 income/loss and profitability, including on a non-GAAP basis, and 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 success in increasing direct sales and the effectiveness of our sales personnel; the performance and market acceptance of new products; sufficient customer demand; 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; variability in systems placements and reagent pull-through in the Company's HBDC program and the level of sales through that program; 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.

FINANCIAL TABLES FOLLOW

 

CEPHEID

 

 

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 






Three Months Ended December 31, 


Years Ended
December 31, 


2012


2011


2012


2011









Revenues:








System sales

$  14,101


$  20,371


$   55,447


$  61,948

Reagent and disposable sales

75,557


56,576


266,101


203,576

Total product sales

89,658


76,947


321,548


265,524

Other revenues

2,775


3,167


9,664


12,051

Total revenues 

92,433


80,114


331,212


277,575

Costs and operating expenses:








Cost of product sales 

42,896


38,632


153,365


122,840

Collaboration profit sharing 

1,416


1,582


7,183


4,863

Research and development

17,299


16,650


71,673


59,362

Sales and marketing

16,294


14,490


61,907


50,691

General and administrative

9,470


10,153


43,298


36,004

Litigation settlement

-


-


15,110


-

Total costs and operating expenses 

87,375


81,507


352,536


273,760

Income (loss) from operations 

5,058


(1,393)


(21,324)


3,815

Other income (expense), net

241


(506)


(4)


(1,143)

Income (loss) before income taxes

5,299


(1,899)


(21,328)


2,672

Benefit from (provision for) income taxes

345


250


1,285


(45)

Net income (loss)

$    5,644


$  (1,649)


$ (20,043)


$    2,627









Basic net income (loss) per share 

$      0.09


$    (0.03)


$     (0.30)


$      0.04









Diluted net income (loss) per share 

$      0.08


$    (0.03)


$     (0.30)


$      0.04









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

66,370


64,113


65,812


62,735









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

68,787


64,113


65,812


66,750

CEPHEID

 

 

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands)

 






December 31,
2012


December
31, 2011





ASSETS




Current assets:




Cash and cash equivalents

$          95,779


$     115,008

Accounts receivable, net

43,999


35,375

Inventory

70,114


62,239

Prepaid expenses and other current assets 

9,448


5,245

Total current assets

219,340


217,867

Property and equipment, net

54,830


35,833

Other non-current assets

913


730

Intangible assets, net

18,767


13,795

Goodwill

37,694


18,445

Total assets

$        331,544


$     286,670





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable 

$          33,701


$       32,167

Accrued compensation 

16,540


17,928

Accrued royalties 

7,992


8,357

Accrued and other liabilities 

4,235


3,086

Current portion of deferred revenue

9,599


8,176

Current portion of notes payable

183


-

Total current liabilities 

72,250


69,714

Long-term portion of deferred revenue

1,156


2,003

Notes payable, less current portion

1,685


-

Other liabilities

8,911


3,120

Total liabilities

84,002


74,837

Shareholders' equity:




Common stock

355,867


324,211

Additional paid-in capital 

117,217


93,144

Accumulated other comprehensive income

56


33

Accumulated deficit 

(225,598)


(205,555)

Total shareholders' equity 

247,542


211,833

Total liabilities and shareholders' equity 

$        331,544


$     286,670





 

CEPHEID

 

 

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)

 



Years Ended December 31,


2012


2011

Cash flows from operating activities:




Net income (loss)

$  (20,043)


$      2,627

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




Depreciation and amortization of property and equipment

13,446


10,298

Amortization of intangible assets 

4,965


6,523

Amortization of terminated patent license and impairment of acquired intangible assets

1,399


5,372

Stock-based compensation related to employees and consulting services rendered

24,496


19,768

Changes in operating assets and liabilities:




Accounts receivable 

(6,443)


(7,830)

Inventory 

(5,105)


(23,982)

Prepaid expenses and other current assets 

(2,714)


(237)

Other non-current assets

(172)


(122)

Accounts payable and other current liabilities 

(5,740)


11,365

Accrued compensation 

(1,736)


5,334

Deferred revenue 

575


(2,084)

Net cash provided by operating activities 

2,928


27,032





Cash flows from investing activities:




Capital expenditures 

(23,150)


(18,922)

Cash paid for intangible asset

(2,140)


-

Payments for technology licenses 

-


(1,655)

Cost of acquisitions, net

(24,021)


(296)

Net cash used in investing activities 

(49,311)


(20,873)





Cash flows from financing activities:




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

27,079


35,857

Proceeds from notes payable

156


-

Principal payment of notes payable

(72)


(6,669)

Net cash provided by financing activities 

27,163


29,188





Effect of exchange rate change on cash

(9)


123

Net increase (decrease) in cash and cash equivalents 

(19,229)


35,470

Cash and cash equivalents at beginning of period 

115,008


79,538

Cash and cash equivalents at end of period

$   95,779


$  115,008


 

CEPHEID

 

 

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

(in thousands, except per share data)







Three Months Ended
December 31,


Years Ended
December 31,


















2012


2011


2012


2011

Cost of product sales




$ 42,896


$ 38,632


$ 153,365


$ 122,840

  Stock compensation expense



(808)


(443)


(3,037)


(1,684)

  Impairment of intangible assets and licenses


(1,233)


(5,372)


(1,233)


(5,372)

  Amortization of purchased intangible assets


(332)


(347)


(1,330)


(1,383)

Non-GAAP measure of cost of product sales


$ 40,523


$ 32,470


$ 147,765


$ 114,401













Gross margin on product sales per GAAP


52%


50%


52%


54%

Gross margin on product sales per Non-GAAP


55%


58%


54%


57%













Operating expenses




$ 43,063


$ 41,293


$ 176,878


$ 146,057

  Stock compensation expense



(5,756)


(4,806)


(21,415)


(18,084)

  Impairment of intangible assets and licenses


(328)


-


(328)


-

  Amortization of purchased intangible assets


(376)


(107)


(1,452)


(429)

Non-GAAP measure of operating expenses


$ 36,603


$ 36,380


$ 153,683


$ 127,544













Income (loss) from operations



$   5,058


$ (1,393)


$ (21,324)


$     3,815

  Stock compensation expense



6,564


5,249


24,452


19,768

  Amortization of purchased intangible assets


708


454


2,782


1,812

  Impairment of intangible assets and licenses


1,561


5,372


1,561


5,372

  Litigation settlement




-


-


15,110


-

Non-GAAP measure of income from operations


$ 13,891


$   9,682


$   22,581


$   30,767













Net income (loss)




$   5,644


$ (1,649)


$ (20,043)


$     2,627

  Stock compensation expense



6,564


5,249


24,452


19,768

  Amortization of purchased intangible assets


708


454


2,782


1,812

  Impairment of intangible assets and licenses, net of tax


1,288


5,372


1,288


5,372

  Litigation settlement




-


-


15,110


-

  Tax benefit related to intercompany IP transaction


-


-


(1,815)


-

Non-GAAP measure of net income



$ 14,204


$   9,426


$   21,774


$   29,579













Basic net income (loss) per share



$     0.09


$   (0.03)


$     (0.30)


$       0.04

  Stock compensation expense



0.09


0.08


0.37


0.32

  Amortization of purchased intangible assets


0.01


0.01


0.04


0.03

  Impairment of intangible assets and licenses, net of tax


0.02


0.09


0.02


0.08

  Litigation settlement




-


-


0.23


-

  Tax benefit related to intercompany IP transaction


-


-


(0.03)


-

Non-GAAP measure of net income per share


$     0.21


$     0.15


$       0.33


$       0.47













Diluted net income (loss) per share



$     0.08


$   (0.03)


$     (0.30)


$       0.04

  Stock compensation expense



0.09


0.08


0.35


0.29

  Amortization of purchased intangible assets


0.01


0.01


0.04


0.03

  Impairment of intangible assets and licenses, net of tax


0.02


0.08


0.02


0.08

  Litigation settlement




-


-


0.23


-

  Tax benefit related to intercompany IP transaction


-


-


(0.03)


-

Non-GAAP measure of net income per share


$     0.20


$     0.14


$       0.31


$       0.44













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


66,370


64,113


65,812


62,735













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


68,787


64,113


65,812


66,750

  Impact of dilutive securities in periods of GAAP net loss and Non-GAAP net income


589


4,480


3,888


878

Shares used in computing Non-GAAP diluted net income per share

69,376


68,593


69,700


67,628

 

CONTACTS:


For Media Inquiries:

For Investor Inquiries:

Jared Tipton

Cepheid Corporate Communications

Tel: (408) 400 8377

communications@cepheid.com

Jacquie Ross

Cepheid Investor Relations

Tel: (408) 400 8329

investor.relations@cepheid.com









SOURCE Cepheid



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