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Cepheid Reports Second Quarter 2016 Results

SUNNYVALE, Calif., July 28, 2016 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the second quarter of 2016 of $146.0 million, representing growth of 10%, or 12% on a constant currency basis, from $132.5 million for the second quarter of 2015.  Net loss was $(10.2) million, or $(0.14) per share, which compares to net loss of $(16.7) million, or $(0.23) per share, in the second quarter of 2015. 

Excluding stock-based compensation expense, amortization of debt discount and transaction costs, and amortization of purchased intangible assets, non-GAAP net income for the second quarter of 2016 was $3.5 million, or $0.05 per share.  This compares to non-GAAP net loss of $(4.5) million, or $(0.06) per share, in the second quarter of 2015, which excluded stock-based compensation expense, amortization of debt discount and transaction costs, and amortization of purchased intangible assets.

"Solid second quarter performance was driven by building momentum across our commercial organization that sets us up well for strong growth in the second half of 2016," said John Bishop, Cepheid's Chairman and Chief Executive Officer.  "We also continued to move our virology and oncology products closer to market in the United States and Internationally, respectively, and made excellent progress on our next-generation platforms, the Honeycomb and Omni Systems.  Taken together, we continue to build an attractive portfolio of products that builds on our leadership in innovation and leverages our substantial worldwide installed base."

Operational Overview

Total revenue was, in millions:


Three Months Ended June 30,


2016


2015


Change
(Reported)


Change
(Constant Currency)









Systems and Other

$  24.8


$  24.4


2%


4%

Reagents and Disposables

121.2


108.1


12%


14%

Total Revenue

146.0


132.5


10%


12%

 

By geography, total revenue was, in millions:


Three Months Ended June 30,


2016


2015


Change
(Reported)


Change
(Constant Currency)









North America

$  81.2


$  76.2


7%


-

International

64.8


56.3


15%


21%

Total Revenue

146.0


132.5


10%


12%

 

  • GAAP gross margin was 50% and non-GAAP gross margin was 51% for the second quarter of 2016, which compares to 48% and 49%, respectively, in the second quarter of 2015.
  • Cash, cash equivalents and investments were $378.7 million as of June 30, 2016.
  • DSO was 39 days.

Business Outlook

For the fiscal year ending December 31, 2016, the Company now expects:

  • Total revenue to be in the range of $618 to $635 million;
  • Net loss in the range of $(0.47) to $(0.44) per share;  and
  • Non-GAAP net income in the range of $0.31 to $0.34 per share. 

Expected non-GAAP net income excludes approximately $42 million related to stock-based compensation expense, approximately $11 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 73 million shares for net loss per share, and approximately 75 million shares for non-GAAP net income per share.

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



Guidance Range for Year



Ending December 31, 2016



Low 


High

Net Loss Per Share


$ (0.47)


$ (0.44)

   Stock-Based Compensation Expense


0.56


0.56

   Amortization of Debt Discount and Transaction Costs


0.07


0.07

   Amortization of Purchased Intangible Assets


0.15


0.15

Non-GAAP Measure of Net Income Per Share


$   0.31


$   0.34

 

Accessing Cepheid's 2016 Second Quarter Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, July 28, 2016 to discuss the results.  To access the live webcast, please visit Cepheid's website at http://ir.cepheid.com .  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, including (1) non-GAAP net income and non-GAAP gross margin that do not include stock-based compensation expense, amortization of debt discount and transaction costs and amortization of purchased intangible assets and (2) revenue metrics presented on a constant currency basis.  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.

Non-GAAP Net Income and Non-GAAP Gross Margin

As described above, the Company excludes the following items from one or more of its non-GAAP net income and non-GAAP gross margin 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.

Constant Currency

The Company presents certain revenue information in this release on a constant currency basis that excludes the effect of foreign currency rate fluctuations and hedging transactions. The Company calculates constant currency revenue growth by (i) translating current quarter or year-to-date revenues to constant currency revenues using the applicable prior period exchange rates and (ii) excluding any gain or loss from foreign currency hedge contracts that are reported in revenue. The Company believes constant currency revenue growth provides useful supplemental information to investors about the financial performance of the Company's business and enables a more accurate comparison of financial results between periods, by excluding the impact of currency rate fluctuations and hedging transactions. Investors should be cautioned that the effect of changing foreign currency exchange rates has an actual effect on operating results.

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, market penetration and expansion, development and timing of new products, effectiveness of product development and commercialization efforts and the breadth and speed of test menu expansion, geographic expansion, customer segment expansion and market 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: the Company's success in increasing commercial and HBDC sales and the effectiveness of its sales personnel; the efficacy of the Company's on-going cost-reduction and gross margin improvement efforts; 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 speed and extent of test menu expansion and utilization; the performance and market acceptance of new products, including the Honeycomb module and Omni System and new products related to oncology and genetics; the Company's ability to sell directly to the smaller hospital market and independent reference laboratory market; the on-going expansion of the Company's United States sales organization; sales organization productivity and the productivity and effectiveness of the Company's distributors; the Company's reliance on distributors in some regions to market, sell and support its products; sufficient customer demand, customer confidence in product availability and available customer budgets for the Company's products; the Company's 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 potential impact of guidelines or recommendations and studies published by various organizations; 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; the Company's ability to manage its inventory levels; the Company's 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 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; the Company's ability to penetrate new geographic markets and manage the operational risks associated with such new markets; 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 
June 30,


Six Months Ended 
June 30,


2016


2015


2016


2015

Revenue

$      146,001


$      132,475


$      290,781


$      265,112

Costs and operating expenses:








Cost of sales

73,235


69,377


145,830


130,578

Collaboration profit sharing

1,284


1,326


1,942


2,593

Research and development

33,592


28,092


63,506


52,078

Sales and marketing

29,874


28,078


58,669


54,014

General and administrative

15,418


16,352


30,473


31,994

Total costs and operating expenses

153,403


143,225


300,420


271,257









Loss from operations

(7,402)


(10,750)


(9,639)


(6,145)

Other income (expense):








Interest income

799


416


1,459


789

Interest expense

(3,812)


(3,646)


(7,577)


(7,250)

Foreign currency exchange gain (loss) and other, net

298


(1,496)


(230)


(2,440)

Other expense, net

(2,715)


(4,726)


(6,348)


(8,901)









Loss before income taxes

(10,117)


(15,476)


(15,987)


(15,046)

Provision for income taxes

(115)


(1,254)


(846)


(778)

Net loss

$      (10,232)


$      (16,730)


$      (16,833)


$      (15,824)

Basic net loss per share

$          (0.14)


$          (0.23)


$          (0.23)


$          (0.22)

Diluted net loss per share

$          (0.14)


$          (0.23)


$          (0.23)


$          (0.22)

Shares used in computing basic net loss per share

72,921


71,861


72,754


71,563

Shares used in computing diluted net loss per share

72,921


71,861


72,754


71,563

 

CEPHEID


CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)



June 30,


December 31,


2016


2015





ASSETS




Current assets:




Cash and cash equivalents

$ 100,331


$       112,568

Short-term investments

223,155


210,147

Accounts receivable, net

62,828


66,550

Inventory, net

156,815


148,690

Prepaid expenses and other current assets

23,384


18,515

Total current assets

566,513


556,470

Property and equipment, net

151,999


127,639

Investments

55,184


62,175

Other non-current assets

5,665


4,205

Intangible assets, net

22,383


25,241

Goodwill

39,681


39,681

Total assets

$ 841,425


$       815,411





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$   64,296


$         57,771

Accrued compensation

35,944


39,015

Accrued royalties

4,730


5,469

Accrued and other liabilities

29,483


27,451

Current portion of deferred revenue

15,116


12,778

Total current liabilities

149,569


142,484

Long-term portion of deferred revenue

7,489


5,538

Convertible senior notes, net

287,005


281,627

Other liabilities

19,665


15,779

Total liabilities

463,728


445,428





Shareholders' equity:




Common stock

454,488


449,704

Additional paid-in capital

282,337


263,429

Accumulated other comprehensive loss, net

(53)


(908)

Accumulated deficit

(359,075)


(342,242)

Total shareholders' equity

377,697


369,983

Total liabilities and shareholders' equity

$ 841,425


$       815,411

 

CEPHEID


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



Six Months Ended 
June 30,


2016


2015

Cash flows from operating activities:




Net loss

$ (16,833)


$ (15,824)

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




Depreciation and amortization of property and equipment

15,331


13,435

Amortization of intangible assets

2,858


3,334

Unrealized foreign exchange differences

57


1,338

Amortization of debt discount and transaction costs

5,377


5,044

Impairment of acquired intangible assets, licenses, property and equipment


224

Stock-based compensation expense

18,839


15,799

Excess tax benefits from stock-based compensation expense


(53)

Other non-cash items

547


28

Changes in operating assets and liabilities:




Accounts receivable

3,722


(8,949)

Inventory, net

(8,058)


(9,267)

Prepaid expenses and other current assets

(4,252)


(5,151)

Other non-current assets

(91)


(207)

Accounts payable and other current and non-current liabilities

6,024


9,695

Accrued compensation

(3,071)


(2,514)

Deferred revenue

4,288


991

Net cash provided by operating activities

24,738


7,923

Cash flows from investing activities:




Capital expenditures

(34,167)


(19,308)

Cost of acquisitions, net


(3,000)

Proceeds from sale of equipment and an intangible asset

44


834

Proceeds from sales of marketable securities and investments

40,730


44,873

Proceeds from maturities of marketable securities and investments

112,313


118,497

Purchases of marketable securities and investments

(158,527)


(156,401)

Transfer from (to) restricted cash

(2,049)


1,328

Net cash used in investing activities

(41,656)


(13,177)

Cash flows from financing activities:




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

4,836


20,592

Excess tax benefits from stock-based compensation expense


53

Principal payment of notes payable

(85)


(80)

Net cash provided by financing activities

4,751


20,565

Effect of foreign exchange rate change on cash and cash equivalents

(70)


(1,405)

Net increase (decrease) in cash and cash equivalents

(12,237)


13,906

Cash and cash equivalents at beginning of period

112,568


96,663

Cash and cash equivalents at end of period

$ 100,331


$ 110,569

 

CEPHEID


RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands, except per share data)

(unaudited)



Three Months Ended 
June 30,


Six Months Ended 
June 30,


2016


2015


2016


2015

Revenue, as reported

$  146,001


$  132,475


$290,781


$   265,112

Foreign currency exchange impact on Q2'16 revenue using Q2'15 rates

(88)


-


2,481


-

Loss/(benefit) from cash flow hedges

248


(2,391)


222


(4,585)

Revenue, at constant currency

$  146,161


$  130,084


$293,484


$  260,527









Revenue growth, as reported

10%




10%



Revenue growth, at constant currency

12%




13%











International Revenue, as reported

$   64,799


$   56,288


$127,189


$  106,620

Foreign currency exchange impact on Q2'16 revenue using Q2'15 rates

(88)


-


2,481


-

Loss/(benefit) from cash flow hedges

248


(2,391)


222


(4,585)

Revenue, at constant currency

$   64,959


$   53,897


$129,892


$  102,035









International Revenue growth, as reported

15%




19%



International Revenue growth, at constant currency

21%




27%











Systems and Other Revenue, as reported

$     24,838


$    24,360


$    49,122


$    43,074

Foreign currency exchange impact on Q2'16 revenue using Q2'15 rates

(2)


-


319


-

Loss/(benefit) from cash flow hedges

(19)


(515)


(18)


(681)

Systems and Other Revenue, at constant currency

$    24,817


$    23,845


$    49,423


$    42,393









Systems and Other  Revenue growth, as reported

2%




14%



Systems and Other  Revenue growth, at constant currency

4%




17%











Reagents and Disposables Revenue, as reported

$ 121,163


$ 108,115


$241,659


$  222,038

Foreign currency exchange impact on Q2'16 revenue using Q2'15 rates

(86)


-


2,162


-

Loss/(benefit) from cash flow hedges

267


(1,876)


240


(3,904)

Reagents and Disposables Revenue, at constant currency

$ 121,344


$ 106,239


$244,061


$ 218,134









Reagents and Disposables  Revenue growth, as reported

12%




9%



Reagents and Disposables  Revenue growth, at constant currency

14%




12%











Cost of sales

$     73,235


$     69,377


$   145,830


$   130,578

Stock-based compensation expense

(1,583)


(1,008)


(3,098)


(2,048)

Amortization of purchased intangible assets

(829)


(1,024)


(1,658)


(2,048)

Non-GAAP measure of cost of sales

$     70,823


$     67,345


$   141,074


$   126,482

Gross margin on revenue per GAAP

50%


48%


50%


51%

Gross margin on revenue per Non-GAAP

51%


49%


51%


52%

Operating expenses

$     78,884


$     72,522


$   152,648


$   138,086

Stock-based compensation expense

(8,272)


(7,262)


(15,795)


(13,779)

Amortization of purchased intangible assets

(341)


(382)


(681)


(766)

Non-GAAP measure of operating expenses

$     70,271


$     64,878


$   136,172


$   123,541

Loss from operations

$    (7,402)


$  (10,750)


$    (9,639)


$    (6,145)

Stock-based compensation expense

9,855


8,270


18,893


15,827

Amortization of purchased intangible assets

1,170


1,406


2,339


2,814

Non-GAAP measure of income (loss) from operations

$       3,623


$    (1,074)


$     11,593


$     12,496

Net loss

$  (10,232)


$  (16,730)


$  (16,833)


$  (15,824)

Stock-based compensation expense

9,855


8,270


18,893


15,827

Amortization of debt discount and transaction cost

2,710


2,542


5,377


5,044

Amortization of purchased intangible assets

1,170


1,406


2,339


2,814

Non-GAAP measure of net income (loss)  

$       3,503


$    (4,512)


$       9,776


$       7,861

Basic net loss per share

$      (0.14)


$      (0.23)


$      (0.23)


$      (0.22)

Stock-based compensation expense

0.14


0.12


0.26


0.23

Amortization of debt discount and transaction cost

0.04


0.03


0.07


0.06

Amortization of purchased intangible assets

0.01


0.02


0.03


0.04

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

$         0.05


$      (0.06)


$         0.13


$         0.11

Diluted net loss per share

$      (0.14)


$      (0.23)


$      (0.23)


$      (0.22)

Stock-based compensation expense

0.14


0.12


0.26


0.23

Amortization of debt discount and transaction cost

0.04


0.03


0.07


0.06

Amortization of purchased intangible assets

0.01


0.02


0.03


0.04

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

$       0.05


$      (0.06)


$       0.13


$       0.11

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

72,921


71,861


72,754


71,563

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

74,267


71,861


74,143


74,330

 

For Media & Investor Inquiries:
Jacquie Ross, CFA
Tel: (408) 400 8329
corporate.communications@cepheid.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cepheid-reports-second-quarter-2016-results-300305653.html

SOURCE Cepheid

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