Cepheid Reports 2012 Second Quarter Results

SUNNYVALE, Calif., July 19, 2012 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenues for the second quarter of 2012 of $81.0 million, representing growth of 21% from $67.0 million for the second quarter of 2011.  Net income was $1.1 million, or $0.02 per share, which compares to net income of $1.8 million, or $0.03 per share, in the second quarter of 2011.

Excluding employee stock-based compensation and amortization of purchased intangible assets, non-GAAP net income for the second quarter was $7.9 million, or $0.11 per share.  This compares to non-GAAP net income of $7.2 million, or $0.11 per share, in the second quarter of 2011.

"Growth in our installed base was strong during the second quarter, with a total of 271 GeneXpert system placements.  With a cumulative total of 3,350 placements globally, it is clear that benefits of our innovative system and our growing menu of Xpert tests continues to drive broad market adoption of our GeneXpert system," said John Bishop, Cepheid's Chief Executive Officer.   "We continued to execute well on test menu expansion during the quarter.  Our CT/NG test is now under FDA review in the United States, and we have been very encouraged by early customer feedback following the product's release in Europe."

"Looking forward, we continue to expect sales of our Xpert MTB/RIF test to grow to volumes in the millions in the next several years.  However, we do expect that certain features of the HBDC program could slow our progress on overall profitability goals in the immediate-term," continued Bishop.  "Coupled with a number of macro factors, namely less favorable currency rates and potentially lengthening capital sales cycles as we approach elections here in the United States, we are taking a more cautious view for the remainder of the year."

Operational Overview

  • Total product sales of $78.5 million in the second quarter of 2012 compared to $63.6 million in the second quarter of 2011.  By business, product sales were, in millions:

Three Months Ended June 30,


2012


2011


Change







Clinical Systems

$     13.9


$     13.2


5%

Clinical Reagents

55.8


44.1


27%

    Total Clinical 

69.7


57.3


22%







Non-Clinical

8.8


6.3


40%

Total Product Sales

$     78.5


$     63.6


23%







  • By geography, product sales were, in millions:

Three Months Ended June 30,


2012


2011


Change

North America






     Clinical

$     47.5


$     42.1


13%

     Non-Clinical

6.9


5.6


23%

Total North America

54.4


47.7


14%







International






     Clinical

22.2


15.2


46%

     Non-Clinical

1.9


0.7


171%

Total International

24.1


15.9


52%







Total Product Sales

$     78.5


$     63.6


23%







  • During the quarter, Cepheid installed a total of 133 GeneXpert systems in its commercial Clinical business.  Additionally, the Company placed a total of 138 GeneXpert systems as part of its High Burden Developing Country (HBDC) program.  Including the HBDC systems, a cumulative total of 3,350 GeneXpert systems have been placed worldwide as of June 30, 2012.
  • GAAP gross margin on product sales was 55% and non-GAAP gross margin on product sales was 57%, which compares to 54% and 55%, respectively, in the second quarter of 2011. 
  • Cash and cash equivalents were $97.3 million as of June 30, 2012.
  • DSO was 41 days.

Business Outlook

For the fiscal year ending December 31, 2012, the Company expects:

  • Total revenue to be in the range of $333 to $347 million;
  • Net income per share in the range of $0.00 to $0.04; and
  • Non-GAAP net income per share in the range of $0.38 to $0.42

Expected non-GAAP net income per share excludes the effect of approximately $26 million related to stock-based compensation expense, approximately $2.8 million related to the amortization of acquired intangibles, and a $1.8 million tax benefit related to an intercompany intellectual property transaction.  The fully diluted share count for the year is expected to be between 70 and 71 million.

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








Guidance Range for Year



Ending December 31, 2012



Low 


High

Net Income Per Share


$             -


$           0.04

   Stock Compensation Expense


0.37


0.37

   Tax Benefit Related to Intercompany IP Transaction


(0.03)


(0.03)

   Amortization of Purchased Intangible Assets


0.04


0.04

Non-GAAP Measure of Net Income Per Share


$         0.38


$           0.42

Accessing Cepheid's Second Quarter Results' Conference Call

The Company will host a management presentation at 2:00 p.m. Pacific Time on Thursday, July 19, 2012 to discuss the results.  To access the live webcast, please visit Cepheid's website at www.cepheid.com/investors 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 stock-based compensation expense, amortization of acquired intangible assets and a tax benefit related to an intercompany intellectual property transaction.  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 an 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 and for the six months ended June 30, 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 future volumes of product sales and future revenues, future net income per share and  future non-GAAP net income per share.  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 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; 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

June 30,


Six months Ended

June 30,


2012


2011


2012


2011









Revenues:








System sales

$ 14,539


$ 14,138


$ 27,770


$ 26,829

Reagent and disposable sales

63,915


49,454


125,977


94,400

Total product sales

78,454


63,592


153,747


121,229

Other revenues

2,561


3,437


4,560


6,019

Total revenues

81,015


67,029


158,307


127,248

Costs and operating expenses:








Cost of product sales

35,072


29,254


70,680


54,564

Collaboration profit sharing

1,645


1,093


3,329


2,185

Research and development

16,118


13,915


38,220


27,489

Sales and marketing

15,108


11,879


29,620


23,326

General and administrative

11,011


8,905


22,062


16,535

Total costs and operating expenses

78,954


65,046


163,911


124,099

Income (loss) from operations

2,061


1,983


(5,604)


3,149

Other expense, net

(572)


(400)


(334)


(599)

Income (loss) before income taxes

1,489


1,583


(5,938)


2,550

Benefit from (provision for) income taxes

(354)


244


1,547


(196)

Net income (loss)

$ 1,135


$ 1,827


$ (4,391)


$ 2,354









Basic net income (loss) per share

$ 0.02


$ 0.03


$ (0.07)


$ 0.04









Diluted net income (loss) per share

$ 0.02


$ 0.03


$ (0.07)


$ 0.04









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

65,695


62,120


65,361


61,638









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

68,869


66,390


65,361


65,727

 

CEPHEID


CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands)



June

30, 2012


December
31, 2011





ASSETS




Current assets:




Cash and cash equivalents

$       97,267


$  115,008

Accounts receivable, net

36,826


35,375

Inventory

70,997


62,239

Prepaid expenses and other current assets 

12,721


5,245

Total current assets

217,811


217,867

Property and equipment, net

45,795


35,833

Other non-current assets

834


730

Intangible assets, net

19,089


13,795

Goodwill

26,911


18,445

Total assets

$     310,440


$  286,670





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable 

$       26,680


$    32,167

Accrued compensation 

16,616


17,928

Accrued royalties 

7,878


8,357

Accrued and other liabilities 

2,335


3,086

Current portion of deferred revenue

8,418


8,176

Current portion of notes payable

161


-

Total current liabilities 

62,088


69,714

Long-term portion of deferred revenue

2,200


2,003

Notes payable, less current portion

1,623


-

Other liabilities

4,268


3,120

Total liabilities

70,179


74,837

Shareholders' equity:




Common stock

345,302


324,211

Additional paid-in capital 

104,732


93,144

Accumulated other comprehensive income

173


33

Accumulated deficit 

(209,946)


(205,555)

Total shareholders' equity 

240,261


211,833

Total liabilities and shareholders' equity 

$     310,440


$  286,670









 


CEPHEID


CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)



Six Months Ended

June 30,


2012


2011

Cash flows from operating activities:




Net income (loss)

$   (4,391)


$     2,354

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




Depreciation and amortization of property and equipment

6,308


5,031

Amortization of intangible assets 

2,633


3,452

Stock-based compensation related to employees and consulting services rendered

11,567


9,343

Changes in operating assets and liabilities:




Accounts receivable 

761


(3,527)

Inventory 

(5,950)


(7,650)

Prepaid expenses and other current assets 

(7,475)


(1,440)

Other non-current assets

(105)


(74)

Accounts payable and other current liabilities 

(12,233)


2,145

Accrued compensation 

(1,312)


1,069

Deferred revenue 

438


13

Net cash provided by (used in) operating activities 

(9,759)


10,716





Cash flows from investing activities:




Capital expenditures 

(11,168)


(6,974)

Payments for technology license

-


(1,000)

Cost of acquisitions, net

(17,462)


(296)

Net cash used in investing activities 

(28,630)


(8,270)





Cash flows from financing activities:




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

21,091


16,962

Principal payment of notes payable

-


(757)

Net cash provided by financing activities 

21,091


16,205





Effect of exchange rate change on cash

(443)


63

Net increase (decrease) in cash and cash equivalents 

(17,741)


18,714

Cash and cash equivalents at beginning of period 

115,008


79,538

Cash and cash equivalents at end of period

$   97,267


$   98,252





 


CEPHEID


RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

(in thousands, except per share data)







Three Months Ended

June 30,


Six Months Ended

June 30,


















2012


2011


2012


2011

Cost of product sales




$ 35,072


$ 29,254


$ 70,680


$ 54,564

  Stock compensation expense



(700)


(435)


(1,335)


(934)

  Amortization of purchased intangible assets


(333)


(345)


(666)


(689)

Non-GAAP measure of cost of product sales


$ 34,039


$ 28,474


$ 68,679


$ 52,941













Gross margin on product sales per GAAP


55%


54%


54%


55%

Gross margin on product sales per Non-GAAP


57%


55%


55%


56%













Operating expenses




$ 42,237


$ 34,699


$ 89,902


$ 67,350

  Stock compensation expense



(5,346)


(4,508)


(10,209)


(8,409)

  Amortization of purchased intangible assets


(381)


(107)


(697)


(215)

Non-GAAP measure of operating expenses


$ 36,510


$ 30,084


$ 78,996


$ 58,726













Income (loss) from operations



$   2,061


$ 1,983


$ (5,604)


$  3,149

  Stock compensation expense



6,046


4,943


11,544


9,343

  Amortization of purchased intangible assets


714


452


1,363


904

Non-GAAP measure of income from operations


$  8,821


$ 7,378


$  7,303


$ 13,396













Net income (loss)




$   1,135


$ 1,827


$  (4,391)


$  2,354

  Stock compensation expense



6,046


4,943


11,544


9,343

  Tax benefit related to intercompany IP transaction


-


-


(1,815)


-

  Amortization of purchased intangible assets


714


452


1,363


904

Non-GAAP measure of net income



$   7,895


$ 7,222


$  6,701


$ 12,601













Basic net income (loss) per share



$     0.02


$  0.03


$   (0.07)


$     0.04

  Stock compensation expense



0.09


0.08


0.18


0.15

  Tax benefit related to intercompany IP transaction


-


-


(0.03)


-

  Amortization of purchased intangible assets


0.01


0.01


0.02


0.01

Non-GAAP measure of net income per share


$     0.12


$ 0.12


$    0.10


$     0.20













Diluted net income (loss) per share



$     0.02


$  0.03


$   (0.07)


$    0.04

  Stock compensation expense



0.08


0.07


0.18


0.14

  Tax benefit related to intercompany IP transaction


-


-


(0.03)


-

  Amortization of purchased intangible assets


0.01


0.01


0.02


0.01

Non-GAAP measure of net income per share


$     0.11


$ 0.11


$  0.10


$   0.19













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


65,695


62,120


65,361


61,638













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


68,869


66,390


65,361


65,727

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


-


-


3,174


-

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


68,869


66,390


68,535


65,727













For Media Inquiries:

For Investor Inquiries:



Jared Tipton    

Jacquie Ross

Cepheid Corporate Communications   

Cepheid Investor Relations

Tel: (408) 400 8377   

Tel: (408) 400 8329

communications@cepheid.com   

investor.relations@cepheid.com

SOURCE Cepheid

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