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Cepheid Reports 2014 First Quarter Results

Companies mentioned in this article: Cepheid

SUNNYVALE, Calif., April 17, 2014 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenues for the first quarter of 2014 of $106.9 million, representing growth of 16% from $91.9 million for the first quarter of 2013. Net loss in the first quarter of 2014 was $(9.3) million, or $(0.13) per share, which compares to net income of $0.3 million, or $0.00 per share, in the first quarter of 2013.

Excluding employee stock-based compensation, amortization of debt discount and debt issuance costs, and amortization of purchased intangible assets, non-GAAP net loss for the first quarter of 2014 was $(0.6) million, or $(0.01) per share. This compares to non-GAAP net income of $7.8 million, or $0.11 per share, in the first quarter of 2013.

"We placed an additional 503 GeneXpert systems globally in the first quarter of 2014, contributing to 26% growth in our clinical business, and bringing our cumulative installed base to more than 6,000," said John Bishop, Cepheid's Chairman and Chief Executive Officer. "Growing adoption of our broad menu of 14 Xpert tests drove Commercial Clinical Xpert reagent growth of 20% in the first quarter. With the recent additions of Xpert HPV and Xpert Norovirus to our test menu outside the US, we are entering a prolific, global product cycle that will further extend the portfolio of accurate, fast and easy-to-use molecular diagnostics available to our customers."

Operational Overview

    --  Total sales were, in millions:

                         Three Months Ended March 31,

                           2014                   2013 Change
                           ----                   ---- ------


    Clinical Systems      $17.3                  $12.5         38%

    Clinical Reagents      83.1                   67.1         24%
                           ----                   ----

        Total Clinical    100.4                   79.6         26%


    Non-Clinical & Other    6.5                   12.3        -47%

    Total Sales          $106.9                  $91.9         16%
                         ------                  -----

    --  By geography, total sales were, in millions:

                              Three Months Ended March 31,

                                2014                   2013 Change
                                ----                   ---- ------

    North America

         Clinical              $57.3                  $52.2         10%

         Non-Clinical & Other    5.5                   11.4        -52%
                                 ---                   ----

    Total North America         62.8                   63.6         -1%


    International

         Clinical               43.2                   27.4         58%

         Non-Clinical & Other    0.9                    0.9          0%
                                 ---                    ---

    Total International         44.1                   28.3         56%


    Total Sales               $106.9                  $91.9         16%
                              ------                  -----

    --  During the quarter, Cepheid installed a total of 181 GeneXpert systems
        in its commercial Clinical business. Additionally, the Company placed a
        total of 322 GeneXpert systems as part of its High Burden Developing
        Country (HBDC) program. Including the HBDC systems, a cumulative total
        of 6,012 GeneXpert systems have been placed worldwide as of March 31,
        2014.

    --  GAAP gross margin on sales was 50% and non-GAAP gross margin on sales
        was 51%, which compares to 53% and 55%, respectively, in the first
        quarter of 2013.

    --  Cash, cash equivalents and investments were $391.3 million as of March
        31, 2014.
    --  DSO was 48 days.

Business Outlook

Reflecting the issuance of the Convertible Senior Notes in February 2014, the Company has updated it's guidance for the fiscal year ending December 31, 2014. The Company expects:

    --  Total revenue in the range of $446 to $461 million;

    --  Net loss in a range from $(0.43) to $(0.38) per share; and
    --  Non-GAAP net income in the range of $0.19 to $0.24 per share.

Expected non-GAAP net income excludes approximately $33 million related to stock compensation expense, approximately $9 million related to the amortization of debt discount and debt issuance costs, and approximately $3 million related to the amortization of acquired intangibles. The fully diluted share count for the year is expected to be approximately 70 million, except in the event we have non-GAAP net income, in which case the share count would be approximately 73 million shares.

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


                                         Guidance Range for
                                                Year

                                          Ending December
                                              31, 2014
                                         ----------------

                                                Low          High
                                                ---          ----

    Net Loss Per Share                               $(0.43)      $(0.38)

       Stock Compensation Expense                      0.46         0.46

       Amortization of Debt Discount and
        Debt Issuance Costs                            0.12         0.12

       Amortization of Purchased
        Intangible Assets                              0.04         0.04

    Non-GAAP Measure of Net Income Per
     Share                                            $0.19        $0.24
                                                      =====        =====

Accessing Cepheid's 2014 First Quarter Results Conference Call

The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, April 17, 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 and amortization of debt discount and debt issuance costs. 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 Debt Discount and Debt Issuance Costs. The Company incurs amortization of debt discount and debt issuance costs in connection with the issuance of Convertible Senior Notes 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.

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, test menu expansion and utilization, consistency of product availability and delivery, sales organization productivity, improving gross margins, execution of manufacturing operations, product sales under the High Burden Developing Country (HBDC) program, commercial test and commercial system sales and resolution of manufacturing scale-up issues. 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 ability to manage our inventory levels; 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 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 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; 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.


    CONTACTS:

    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

FINANCIAL TABLES FOLLOW


                              CEPHEID




     CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

               (in thousands, except per share data)


                                         Three Months Ended
                                              March 31,
                                              ---------

                                              2014                  2013
                                              ----                  ----


    Sales:

    System and other sales                 $18,529               $16,010

    Reagent and disposable sales            88,378                75,928
                                            ------                ------

    Total sales                            106,907                91,938
                                           -------                ------

    Costs and operating expenses:

    Cost of sales                           53,083                42,892

    Collaboration profit sharing             1,291                 2,110

    Research and development                21,740                17,727

    Sales and marketing                     23,458                19,126

    General and administrative              13,667                 9,763

    Total costs and operating expenses     113,239                91,618
                                           -------                ------

    Income (loss) from operations           (6,332)                  320

    Other income (expense), net             (2,291)                  374
                                            ------                   ---

    Income (loss) before income taxes       (8,623)                  694

    Provision for income taxes                (680)                 (381)

    Net income (loss)                      $(9,303)                 $313
                                           =======                  ====


    Basic net income (loss) per share       $(0.13)                $0.00
                                            ======                 =====


    Diluted net income (loss) per share     $(0.13)                $0.00
                                            ======                 =====


    Shares used in computing basic net
     income (loss) per share                69,272                66,824
                                            ======                ======


    Shares used in computing diluted
     net income (loss) per share            69,272                69,406
                                            ======                ======


                                                          CEPHEID




                                      CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

                                                       (in thousands)


                                                         March 31,                    December
                                                                      2014                     31, 2013
                                                                      ----                     --------


                                   ASSETS

    Current assets:

    Cash and
     cash
     equivalents                                                  $136,718                      $66,072

    Short-term
     investments                                                   131,035                        8,837

    Accounts
     receivable,
     net                                                            56,602                       52,202

    Inventory                                                      119,564                      103,866

    Prepaid
     expenses
     and other
     current
     assets                                                         19,493                       13,037
                                                                    ------                       ------

    Total
     current
     assets                                                        463,412                      244,014

    Property
     and
     equipment,
     net                                                            96,949                       84,886

    Investments                                                    123,552                        9,820

    Other non-
     current
     assets                                                          7,633                          958

    Intangible
     assets,
     net                                                            14,326                       15,245

    Goodwill                                                        39,681                       39,681

    Total
     assets                                                       $745,553                     $394,604
                                                                  ========                     ========


                    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:

    Accounts
     payable                                                       $60,924                      $52,609

    Accrued
     compensation                                                   20,413                       22,009

    Accrued
     royalties                                                       3,884                        5,245

    Accrued and
     other
     liabilities                                                     7,270                        7,440

    Current
     portion of
     deferred
     revenue                                                         9,978                        8,183

    Total
     current
     liabilities                                                   102,469                       95,486

    Long-term
     portion of
     deferred
     revenue                                                         3,708                        3,424

    Convertible
     senior
     notes, net                                                    271,207                            -

    Other
     liabilities                                                    15,067                       10,454
                                                                    ------                       ------

    Total
     liabilities                                                   392,451                      109,364
                                                                   -------                      -------

    Shareholders' equity:

    Common
     stock                                                         405,010                      383,379

    Additional
     paid-in
     capital                                                       201,042                      145,900

    Accumulated
     other
     comprehensive
     loss                                                              (84)                        (476)

    Accumulated
     deficit                                                      (252,866)                    (243,563)
                                                                  --------                     --------

    Total
     shareholders'
     equity                                                        353,102                      285,240

    Total
     liabilities
     and
     shareholders'
     equity                                                       $745,553                     $394,604
                                                                  ========                     ========


                                       CEPHEID




              CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

                                    (in thousands)


                                                              Three Months Ended
                                                                  March 31,
                                                                  ---------

                                                                    2014             2013
                                                                    ----             ----

    Cash flows from operating activities:

    Net income (loss)                                            $(9,303)            $313

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

    Depreciation and
     amortization of property
     and equipment                                                 4,977            3,768

    Amortization of intangible
     assets                                                          919            1,560

    Unrealized exchange
     differences                                                     (52)             444

    Amortization of debt
     discount and transaction
     costs                                                         1,257                -

    Stock-based compensation
     related to employees and
     consulting services
     rendered                                                      6,782            6,277

    Changes in operating assets and liabilities:

    Accounts receivable                                           (4,400)          (1,047)

    Inventory                                                    (15,270)          (7,814)

    Prepaid expenses and other
     current assets                                               (5,842)          (3,528)

    Other non-current assets                                         122              168

    Accounts payable and other
     current and non-current
     liabilities                                                   3,470            8,342

    Accrued compensation                                          (1,595)            (614)

    Deferred revenue                                               2,079            2,608
                                                                   -----            -----

    Net cash provided by (used
     in) operating activities                                    (16,856)          10,477


    Cash flows from investing activities:

    Capital expenditures                                          (8,762)          (8,929)

    Payments for technology
     licenses                                                          -           (1,000)

    Proceeds from maturities
     and sales of marketable
     securities and investments                                   23,438                -

    Purchases of marketable
     securities and investments                                 (259,553)               -

    Net cash used in investing
     activities                                                 (244,877)          (9,929)


    Cash flows from financing activities:

    Net proceeds from the
     issuance of common shares
     and exercise of stock
     options                                                      21,631            6,145

    Proceeds from borrowings of
     convertible senior notes,
     net of issuance costs                                       335,789                -

    Purchase of convertible
     note hedge ("capped call")                                  (25,082)               -

    Principal payment of notes
     payable                                                         (48)             (41)
                                                                     ---              ---

    Net cash provided by
     financing activities                                        332,290            6,104


    Effect of exchange rate
     change on cash                                                   89             (443)
                                                                     ---             ----

    Net increase in cash and
     cash equivalents                                             70,646            6,209

    Cash and cash equivalents
     at beginning of period                                       66,072           95,779

    Cash and cash equivalents
     at end of period                                           $136,718         $101,988
                                                                ========         ========


                               CEPHEID

       RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

                (in thousands, except per share data)


                                             Three Months Ended
                                                 March 31,
                                                 ---------

                                               2014                     2013
                                               ----                     ----

    Cost of sales                           $53,083                  $42,892

      Stock compensation expense               (381)                    (542)

      Amortization of purchased
       intangible assets                       (223)                    (854)
                                               ----                     ----

    Non-GAAP measure of cost of sales       $52,479                  $41,496


    Gross margin on sales per GAAP               50%                      53%

    Gross margin on sales per Non-GAAP           51%                      55%


    Operating expenses                      $58,865                  $46,616

      Stock compensation expense             (6,401)                  (5,735)

      Amortization of purchased
       intangible assets                       (429)                    (374)
                                               ----                     ----

    Non-GAAP measure of operating
     expenses                               $52,035                  $40,507


    Income (loss) from operations           $(6,332)                    $320

      Stock compensation expense              6,782                    6,277

      Amortization of purchased
       intangible assets                        652                    1,228
                                                ---                    -----

    Non-GAAP measure of income from
     operations                              $1,102                   $7,825


    Net income (loss)                       $(9,303)                    $313

      Stock compensation expense              6,782                    6,277

      Amortization of debt discount and
       debt issuance costs                    1,257                        -

      Amortization of purchased
       intangible assets                        652                    1,228

    Non-GAAP measure of net income
     (loss)                                   $(612)                  $7,818


    Basic net income (loss) per share        $(0.13)                   $0.00

      Stock compensation expense               0.09                     0.10

      Amortization of debt discount and
       debt issuance costs                     0.02                        -

      Amortization of purchased
       intangible assets                       0.01                     0.02

    Non-GAAP measure of net income
     (loss) per share                        $(0.01)                   $0.12


    Diluted net income (loss) per
     share                                   $(0.13)                   $0.00

      Stock compensation expense               0.09                     0.09

      Amortization of debt discount and
       debt issuance costs                     0.02                        -

      Amortization of purchased
       intangible assets                       0.01                     0.02

    Non-GAAP measure of net income
     (loss) per share                        $(0.01)                   $0.11


    Shares used in computing basic net
     income (loss) per share                 69,272                   66,824


    Shares used in computing diluted
     net income (loss) per share             69,272                   69,406

SOURCE Cepheid