Cepheid Reports Fourth Quarter And Full Year 2013 Results

Record Commercial GeneXpert® System Placements and Strong Commercial Reagent Growth Highlight Building Momentum as Xpert® Test Menu Expands

Jan 30, 2014, 16:05 ET from Cepheid

SUNNYVALE, Calif., Jan. 30, 2014 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the fourth quarter of 2013 of $113.3 million.  Net loss was $10.3 million, or $(0.15) per share, which compares to revenue of $92.4 million and net income of $5.6 million, or $0.08 per share, in the fourth quarter of 2012.  Fourth quarter results for 2013 included a $4.4 million, or $0.06 per share, charge primarily associated with a small, non-core restructuring and impairment of certain assets resulting from a realignment of operations.

Excluding stock compensation expenses, the restructuring expense (which includes an impairment of certain assets), and amortization of acquired purchased intangible assets, non-GAAP net income for the fourth quarter of 2013 was $2.3 million, or $0.03 per share.  This compares to a non-GAAP net income of $14.2 million, or $0.20 per share, in the fourth quarter of 2012.

Fiscal 2013 Overview

For the year ended December 31, 2013, Cepheid reported revenue of $401.3 million which compares to revenue of $331.2 million in 2012.  Net loss for the year was $18.0 million, or $(0.27) per share, which compares to net loss of $20.0 million, or $(0.30) per share, in 2012 which included a charge of $15.1 million, or $0.23 per share, associated with a litigation settlement.

Excluding stock compensation expenses, the restructuring expense (which includes impairment of certain assets), and amortization of acquired purchased intangible assets, non-GAAP net income for the year was $17.9 million, or $0.26 per share.  This compares to a non-GAAP net income of $21.8 million, or $0.31 per share, for the full year 2012, which excluded stock compensation expenses, the amortization of purchased intangible assets, a litigation settlement and a tax benefit related to an intercompany intellectual property transaction.

"Clinical test revenue grew 25% in 2013, with notable strength in our Commercial Clinical Xpert reagents which grew 22%," said John Bishop, Cepheid's Chairman and Chief Executive Officer.  "We also placed a record number of GeneXpert systems in 2013, with strength in both our commercial and HBDC businesses, demonstrating the impact of our rapidly expanding Xpert test menu and global sales footprint."

Continued Bishop, "Adoption of our high throughput Infinity system increased with a record 52 shipments in 2013, including 23 in the fourth quarter, further highlighting Cepheid's position as a platform consolidator within the molecular diagnostics market.  With a menu of 14 tests and growing, we believe the innovative GeneXpert system is the most compelling choice for labs of all sizes looking to leverage accurate and fast diagnostics without the costs and complexities traditionally associated with molecular technologies."

Operational Overview

  • Fourth quarter of 2013 total Clinical sales of $101.0 million grew 23% from $82.2 million in the fourth quarter of 2012. For the year ended December 31, 2013, total Clinical sales of $359.9 million grew 26% from $286.3 million in 2012.
  • By industry, sales were, in millions:

Three Months Ended December 31,

Full Year Ended December 31,

2013

2012

Change

2013

2012

Change

Clinical Systems

$    20.2

$  13.4

51%

$    67.0

$    52.8

27%

Clinical Reagents

80.8

68.8

17%

292.9

233.5

25%

    Total Clinical 

101.0

82.2

23%

359.9

286.3

26%

Non-Clinical

12.3

10.2

20%

41.4

44.9

-8%

Total Sales

$  113.3

$  92.4

23%

$  401.3

$  331.2

21%

  • By geography, sales were, in millions:

Three Months Ended December 31,

Full Year Ended December 31,

2013

2012

Change

2013

2012

Change

North America

     Clinical

$    58.6

$  54.3

8%

$  212.4

$  190.0

12%

     Other

11.1

8.8

26%

37.0

38.6

-4%

Total North America

69.7

63.1

10%

249.4

228.6

9%

International

     Clinical

42.4

27.8

52%

147.5

96.3

53%

     Other

1.2

1.5

-21%

4.4

6.3

-30%

Total International

43.6

29.3

49%

151.9

102.6

48%

Total Sales

$  113.3

$  92.4

23%

$  401.3

$  331.2

21%

  • Commercial sales, including Clinical and Non-Clinical & Other, were $95.5 million in the fourth quarter of 2013 and $335.6 million for the full year 2013. Sales to High Burden Developing Countries (HBDC) in the fourth quarter of 2013 were $17.8 million and $65.7 million for the full year 2013.
  • During the fourth quarter of 2013, Cepheid placed a record total of 205 GeneXpert systems in its commercial Clinical business. Additionally, Cepheid placed a total of 178 GeneXpert systems as part of its High Burden Developing Country (HBDC) program. For the year ended December 31, 2013, Cepheid placed a total of 619 GeneXpert systems in its commercial Clinical business and an additional 1,055 GeneXpert systems as part of its HBDC program. As of December 31, 2013, a cumulative total of 5,509 GeneXpert systems have been placed worldwide.
  • GAAP gross margin on sales was 47% and non-GAAP gross margin on sales was 50% in the fourth quarter of 2013, which compares to 54% and 56%, respectively, in the fourth quarter of 2012. GAAP gross margin on sales was 48% and non-GAAP gross margin on sales was 50% for the full year 2013, which compares to 54% and 55%, respectively, for the full year 2012.
  • Cash, cash equivalents and investments were $84.7 million as of December 31, 2013.
  • DSO was 42 days.

Business Outlook

For the fiscal year ending December 31, 2014, the Company expects:

    • Total revenue to be in the range of $446 to $461 million;
    • Net loss in the range of $(0.26) to $(0.21) per share;
    • Non-GAAP net income in the range of $0.24 to $0.29 per share.

Expected non-GAAP net income excludes approximately $33 million related to stock compensation expense and approximately $3 million related to the amortization of purchased intangible assets.  The fully diluted share count for the year is expected to be approximately 69 million in the case of a net loss, and approximately 73 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, 2014

Low 

High

Net Income (Loss) Per Share

$ (0.26)

$ (0.21)

   Stock Compensation Expense

(0.46)

(0.46)

   Amortization of Purchased Intangible Assets

(0.04)

(0.04)

Non-GAAP Measure of Net Income Per Share

$   0.24

$   0.29

Accessing Cepheid's Fourth Quarter and Full Year 2013 Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, January 30, 2014, 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 restructuring in the quarter ended December 31, 2013, 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.

Restructuring.  The Company excluded a restructuring charge and impairment of certain assets totaling $4.4 million in the fourth quarter of 2013.   In connection with the Company's preparation of its annual operating plan, whereby the Company routinely assesses its investments to align its operations with its highest potential opportunities, the Company terminated a small international research team, eliminated a non-GeneXpert clinical product line acquired in a 2007 acquisition, including the impairment of an intangible asset of approximately $1.1 million and the write-down of approximately $0.2 million of inventory, and wrote-off certain manufacturing capital assets totaling approximately $1.3 million that management concluded will not be utilized and therefore have no future realizable value.  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.

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 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 quarter 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: 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 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; 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 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 December 31, 

Years Ended December 31, 

2013

2012

2013

2012

Sales:

System and other sales

$    22,263

$  16,876

$    76,763

$    65,111

Reagent and disposable sales

90,998

75,557

324,529

266,101

Total sales

113,261

92,433

401,292

331,212

Costs and operating expenses:

Cost of product sales 

60,483

42,896

207,933

153,365

Collaboration profit sharing 

2,567

1,416

7,512

7,183

Research and development

25,340

17,299

80,197

71,673

Sales and marketing

21,922

16,294

79,941

61,907

General and administrative

12,854

9,470

41,719

43,298

Litigation Settlement

-

-

-

15,110

Total costs and operating expenses 

123,166

87,375

417,302

352,536

Income (loss) from operations 

(9,905)

5,058

(16,010)

(21,324)

Other income (expense), net

(264)

241

(807)

(4)

Income (loss) before income taxes

(10,169)

5,299

(16,817)

(21,328)

Benefit from (provision for) income taxes

(148)

345

(1,148)

1,285

Net income (loss)

$  (10,317)

$    5,644

$  (17,965)

$  (20,043)

Basic net income (loss) per share 

$      (0.15)

$      0.09

$      (0.27)

$      (0.30)

Diluted net income (loss) per share 

$      (0.15)

$      0.08

$      (0.27)

$      (0.30)

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

68,230

66,370

67,485

65,812

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

68,230

68,787

67,485

65,812

 

 

CEPHEID

 

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS (in thousands)

December 31,

 2013

December 31,

2012

ASSETS

Current assets:

Cash and cash equivalents

$          66,072

$        95,779

Short-term investments

8,837

-

Accounts receivable, net

52,202

43,999

Inventory

103,866

70,114

Prepaid expenses and other current assets 

13,037

9,448

Total current assets

244,014

219,340

Property and equipment, net

84,886

54,830

Investments

9,820

-

Other non-current assets

958

913

Intangible assets, net

15,245

18,767

Goodwill

39,681

37,694

Total assets

$        394,604

$      331,544

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable 

$          52,609

$        33,701

Accrued compensation 

22,009

16,540

Accrued royalties 

5,245

7,992

Accrued and other liabilities 

7,246

4,235

Current portion of deferred revenue

8,183

9,599

Current portion of notes payable

194

183

Total current liabilities 

95,486

72,250

Long-term portion of deferred revenue

3,424

1,156

Notes payable, less current portion

1,479

1,685

Other liabilities

8,975

8,911

Total liabilities

109,364

84,002

Shareholders' equity:

Common stock

383,379

355,867

Additional paid-in capital 

145,900

117,217

Accumulated other comprehensive income (loss)

(476)

56

Accumulated deficit 

(243,563)

(225,598)

Total shareholders' equity 

285,240

247,542

Total liabilities and shareholders' equity 

$        394,604

$      331,544

 

 

CEPHEID

 

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS (in thousands)

Years Ended December 31, 

2013

2012

Cash flows from operating activities:

Net loss

$    (17,965)

$    (20,043)

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

Depreciation and amortization of property and equipment

17,769

13,446

Amortization of intangible assets 

5,418

4,965

Impairment of terminated patent license, acquired intangible assets and property and equipment

2,855

1,399

Unrealized exchange differences

419

-

Stock-based compensation related to employees and consulting services rendered

27,635

24,496

Changes in operating assets and liabilities:

Accounts receivable 

(6,960)

(6,443)

Inventory 

(32,638)

(5,105)

Prepaid expenses and other current assets 

(5,263)

(2,714)

Other non-current assets

150

(172)

Accounts payable and other current liabilities 

17,334

(5,740)

Accrued compensation 

5,421

(1,736)

Deferred revenue 

837

575

Net cash provided by operating activities 

15,012

2,928

Cash flows from investing activities:

Capital expenditures 

(47,526)

(23,150)

Cash paid for intangible asset

-

(2,140)

Cash paid for technology licenses

(1,125)

-

Cost of acquisitions, net

(3,669)

(24,021)

Proceeds from maturities and sales of marketable securities and investments

3,850

-

Purchases of marketable securities and investments

(22,511)

-

Net cash used in investing activities 

(70,981)

(49,311)

Cash flows from financing activities:

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

27,512

27,079

Proceeds from notes payable

-

156

Principal payment of notes payable

(874)

(72)

Net cash provided by financing activities 

26,638

27,163

Effect of exchange rate change on cash

(376)

(9)

Net increase (decrease) in cash and cash equivalents 

(29,707)

(19,229)

Cash and cash equivalents at beginning of period 

95,779

115,008

Cash and cash equivalents at end of period

$      66,072

$      95,779

 

CEPHEID

 

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED) (in thousands, except per share data)

Three Months Ended

December 31,

Years Ended

December 31,

2013

2012

2013

2012

Cost of sales

$          60,483

$         42,896

$       207,933

$     153,365

  Stock compensation expense

(1,084)

(808)

(2,927)

(3,037)

  Restructuring charge including impairment of intangibles

(2,651)

(1,038)

(2,651)

(1,038)

  Amortization of purchased intangible assets

(345)

(527)

(2,349)

(1,525)

Non-GAAP measure of cost of sales

$          56,403

$         40,523

$       200,006

$     147,765

Gross margin on sales per GAAP

47%

54%

48%

54%

Gross margin on sales per Non-GAAP

50%

56%

50%

55%

Operating expenses

$          60,116

$         43,063

$       201,857

$     176,878

  Stock compensation expense

(6,534)

(5,756)

(24,708)

(21,415)

  Restructuring charge including impairment of intangibles

(1,783)

(328)

(1,783)

(328)

  Amortization of purchased intangible assets

(458)

(376)

(1,715)

(1,452)

Non-GAAP measure of operating expenses

$          51,341

$         36,603

$       173,651

$     153,683

Income (loss) from operations

$          (9,905)

$           5,058

$        (16,010)

$      (21,324)

  Stock compensation expense

7,618

6,564

27,635

24,452

  Amortization of purchased intangible assets

803

903

4,064

2,977

  Restructuring charge including impairment of intangibles

4,434

1,366

4,434

1,366

  Litigation settlement

-

-

-

15,110

Non-GAAP measure of income from operations

$            2,950

$         13,891

$         20,123

$       22,581

Net income (loss)

$        (10,317)

$           5,644

$        (17,965)

$      (20,043)

  Stock compensation expense

7,618

6,564

27,635

24,452

  Amortization of purchased intangible assets

803

903

4,064

2,977

  Restructuring charge including impairment of intangibles

4,201

1,093

4,201

1,093

  Litigation settlement

-

-

-

15,110

  Tax benefit related to intercompany IP transaction

-

-

-

(1,815)

Non-GAAP measure of net income

$            2,305

$         14,204

$         17,935

$       21,774

Basic net income (loss) per share

$            (0.15)

$             0.09

$            (0.27)

$          (0.30)

  Stock compensation expense

0.11

0.09

0.41

0.37

  Amortization of purchased intangible assets

0.01

0.01

0.06

0.04

  Restructuring charge including impairment of intangibles

0.06

0.02

0.07

0.02

  Litigation settlement

-

-

-

0.23

  Tax benefit related to intercompany IP transaction

-

-

-

(0.03)

Non-GAAP measure of net income per share

$              0.03

$             0.21

$             0.27

$           0.33

Diluted net income (loss) per share

$            (0.15)

$             0.08

$            (0.27)

$          (0.30)

  Stock compensation expense

0.11

0.09

0.41

0.35

  Amortization of purchased intangible assets

0.01

0.01

0.06

0.04

  Restructuring  charge including impairment of intangibles

0.06

0.02

0.06

0.02

  Litigation settlement

-

-

-

0.23

  Tax benefit related to intercompany IP transaction

-

-

-

(0.03)

Non-GAAP measure of net income per share

$              0.03

$             0.20

$             0.26

$           0.31

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

68,230

66,370

67,485

65,812

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

70,644

69,376

69,928

69,700

 

 

SOURCE Cepheid



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