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SUNNYVALE, Calif. , Jan. 29, 2015 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the fourth quarter of 2014 of $131.5 million.  Net loss was $23.8 million, or $(0.34) per share, which compares to revenue of $113.3 million and net loss of $10.3 million, or $(0.15) per share, in the fourth quarter of 2013.  2014 fourth quarter net loss included a legal contingency charge of $20 million, or $(0.28) per share.

Excluding stock compensation expenses, a legal contingency charge, amortization of debt discount and transaction costs, and amortization of purchased intangible assets, non-GAAP net income for the fourth quarter of 2014 was $7.8 million, or $0.11 per share.  This compares to non-GAAP net income of $2.3 million, or $0.03 per share, for the fourth quarter of 2013, which excluded stock compensation expenses, a restructuring charge (including impairment of certain assets), and amortization of purchased intangible assets.

Fiscal 2014 Overview

For the year ended December 31, 2014, Cepheid reported revenue of $470.1 million which compares to revenue of $401.3 million in 2013.  Net loss for the year was $50.1 million, or $(0.72) per share, which compares to net loss of $18.0 million, or $(0.27) per share, in 2013.  2014 full year net loss included a legal contingency charge of $20 million, or $(0.29) per share.

Excluding stock compensation expenses, a legal contingency charge, amortization of debt discount and transaction costs, and amortization of purchased intangible assets, non-GAAP net income for the full year 2014 was $14.2 million, or $0.19 per share.  This compares to a non-GAAP net income of $17.9 million, or $0.26 per share, for the full year 2013, which excluded stock compensation expenses, a restructuring charge (including impairment of certain assets), and amortization of purchased intangible assets.

"2014 was a very strong year for Cepheid, marked by record revenue, record GeneXpert® System placements, and a record number of additions to our Xpert test menu, in addition to solid progress in further improving our gross margin," said John Bishop, Cepheid's Chairman and Chief Executive Officer.  "While we are targeting Commercial Clinical growth of 20% or higher in 2015, we continue to invest strategically and aggressively in further test menu expansion, geographic expansion, and market segment expansion, which we believe sets the stage for a prolonged period of growth ahead for Cepheid."

Operational Overview

• Fourth quarter of 2014 total Clinical sales of $122.2 million grew 21% from $101.0 million in the fourth quarter of 2013. For the year ended December 31, 2014, total Clinical sales of $441.1 million grew 23% from $359.9 million in 2013.
• By industry, sales were, in millions:

 

 

• By geography, sales were, in millions:

 

 

• Commercial Clinical sales were $104.8 million in the fourth quarter of 2014 and $356.0 million for the full year 2014. Sales to High Burden Developing Countries (HBDC) in the fourth quarter of 2014 were $17.4 million and $85.1 million for the full year 2014.
• During the fourth quarter of 2014, Cepheid placed a total of 261 GeneXpert systems in its commercial Clinical business. Additionally, Cepheid placed a total of 211 GeneXpert systems as part of its High Burden Developing Country (HBDC) program. For the year ended December 31, 2014, Cepheid placed a total of 773 GeneXpert systems in its commercial Clinical business and an additional 1,743 GeneXpert systems as part of its HBDC program. As of December 31, 2014, a cumulative total of 8,025 GeneXpert systems have been placed worldwide.
• GAAP gross margin on sales was 54% and non-GAAP gross margin on sales was 56% in the fourth quarter of 2014, which compares to 47% and 50%, respectively, in the fourth quarter of 2013. GAAP gross margin on sales was 51% and non-GAAP gross margin on sales was 52% for the full year 2014, which compares to 48% and 50%, respectively, for the full year 2013.
• Cash, cash equivalents and investments were $373.1 million as of December 31, 2014.
• DSO was 48 days.

Business Outlook

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

• Total revenue to be in the range of $538 to $553 million;
• Net loss in the range of $(0.55) to $(0.51) per share;
• Non-GAAP net income in the range of $0.19 to $0.23 per share.

Expected non-GAAP net income excludes approximately $37 million related to stock compensation expense, approximately $10 million related to the amortization of debt discount and transaction costs, and approximately $6 million related to the amortization of purchased intangible assets.  The fully diluted share count for the year is expected to be approximately 71 million in the case of a net loss, and approximately 74 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:

 

 

Accessing Cepheid's Fourth Quarter and Full Year 2014 Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, January 29, 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.

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, a legal contingency charge, amortization of purchased intangible assets, amortization of debt discount and transaction costs, and a restructuring charge in the quarter ended December 31, 2013.   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.

Legal Contingency. In the fourth quarter of 2014, the Company recorded a charge for an estimated loss related to ongoing legal proceedings.  The Company excluded this item as it believes it is not reflective of ongoing operating results in the period incurred.

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.

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 $0.3 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.

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 the scale and sustainability of future growth, future revenues and future net loss/income and profitability, including on a non-GAAP basis, strategic investments, 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: 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.

FINANCIAL TABLES FOLLOW

 

 

 

 

 

 

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SOURCE Cepheid