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Cepheid Reports 2014 Second Quarter Results

Companies mentioned in this article: Cepheid

SUNNYVALE, Calif., July 17, 2014 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenues for the second quarter of 2014 of $116.5 million, representing growth of 21% from $96.0 million for the second quarter of 2013. Net loss in the second quarter of 2014 was $(9.8) million, or $(0.14) per share, which compares to net loss of $(6.6) million, or $(0.10) per share, in the second quarter of 2013.

Excluding stock-based compensation expense, amortization of debt discount and debt issuance costs, and amortization of purchased intangible assets, non-GAAP net income for the second quarter of 2014 was $2.3 million, or $0.03 per share. This compares to non-GAAP net income of $1.2 million, or $0.02 per share, in the second quarter of 2013.

"With continuing adoption of our GeneXpert system in both commercial and emerging HBDC geographies, we placed a record 1,084 GeneXpert systems in the quarter, more systems than we placed in all of 2012," said John Bishop, Cepheid's Chairman and Chief Executive Officer. "Furthermore, we continued to execute well on Xpert(®) test menu expansion, making Xpert HPV, Xpert Norovirus and Xpert Carba-R available for the first time to our international customers during the quarter, bringing the total number of tests available to 17."

Operational Overview

    --  Total sales were, in millions:

                         Three Months Ended June 30,

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


    Clinical Systems      $28.3                    $16.7         70%

    Clinical Reagents      83.0                     70.8         17%
                           ----                     ----

        Total Clinical    111.3                     87.5         27%


    Non-Clinical & Other    5.2                      8.5        -39%

    Total Sales          $116.5                    $96.0         21%
                         ======                    =====


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

                              Three Months Ended June 30,

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

    North America

         Clinical              $57.7                    $49.9         16%

         Non-Clinical & Other    3.9                      7.5        -47%
                                 ---                      ---

    Total North America         61.6                     57.4          7%


    International

         Clinical               53.7                     37.6         43%

         Non-Clinical & Other    1.2                      1.0         16%
                                 ---                      ---

    Total International         54.9                     38.6         42%


    Total Sales               $116.5                    $96.0         21%
                              ======                    =====

    --  During the quarter, Cepheid installed a total of 158 GeneXpert systems
        in its commercial Clinical business. Additionally, the Company placed a
        total of 926 GeneXpert systems as part of its High Burden Developing
        Country (HBDC) program. Including the HBDC systems, a cumulative total
        of 7,096 GeneXpert systems have been placed worldwide as of June 30,
        2014.
    --  GAAP gross margin on sales was 49% and non-GAAP gross margin on sales
        was 50%, which compares to 45% and 47%, respectively, in the second
        quarter of 2013.
    --  Cash, cash equivalents and investments were $385 million as of June 30,
        2014.
    --  DSO was 43 days.

Business Outlook

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

    --  Total revenue in the range of $452 to $461 million;
    --  Net loss in a range from $(0.54) to $(0.51) per share; and
    --  Non-GAAP net income in the range of $0.10 to $0.13 per share.

Expected non-GAAP net income excludes approximately $33 million related to stock-based 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                                   $(0.54)     $(0.51)

       Stock-Based Compensation Expense                     0.47         0.47

       Amortization of Debt Discount and
        Debt Issuance Costs                                 0.13         0.13

       Amortization of Purchased Intangible
        Assets                                              0.04         0.04

    Non-GAAP Measure of Net Income Per
     Share                                                 $0.10        $0.13
                                                           =====        =====

Accessing Cepheid's 2014 Second Quarter Results Conference Call

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

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 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 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; 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; 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, CFA

     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                        Six months Ended
                                                   June 30,                                 June 30,
                                                 --------                              --------

                                                  2014                       2013                       2014        2013
                                                  ----                       ----                       ----        ----


    Revenues:

    System and other
     sales                                     $29,018                    $18,796                    $47,547     $34,806

    Reagent and
     disposable sales                           87,485                     77,216                    175,863     153,144
                                                ------                     ------                    -------     -------

    Total sales                                116,503                     96,012                    223,410     187,950

    Costs and operating expenses:

    Cost of product
     sales                                      59,568                     52,889                    112,651      95,781

    Collaboration profit
     sharing                                       649                      1,425                      1,940       3,535

    Research and
     development                                23,998                     18,572                     45,738      36,299

    Sales and marketing                         23,502                     19,105                     46,960      38,231

    General and
     administrative                             14,340                      9,612                     28,007      19,375

    Total costs and
     operating expenses                        122,057                    101,603                    235,296     193,221
                                               -------                    -------                    -------     -------

    Loss from operations                       (5,554)                   (5,591)                  (11,886)    (5,271)

    Other expense, net                         (3,370)                     (717)                   (5,661)      (343)
                                                ------                       ----                     ------        ----

    Loss before income
     taxes                                     (8,924)                   (6,308)                  (17,547)    (5,614)

    Provision for income
     taxes                                       (919)                     (272)                   (1,599)      (653)

    Net loss                                  $(9,843)                  $(6,580)                 $(19,146)   $(6,267)
                                               =======                    =======                   ========     =======

    Basic net loss per
     share                                     $(0.14)                   $(0.10)                   $(0.27)    $(0.09)
                                                ======                     ======                     ======      ======

    Diluted net loss per
     share                                     $(0.14)                   $(0.10)                   $(0.27)    $(0.09)
                                                ======                     ======                     ======      ======

    Shares used in
     computing basic net
     loss per share                             69,968                     67,295                     69,622      67,061
                                                ======                     ======                     ======      ======

    Shares used in
     computing diluted
     net loss per share                         69,968                     67,295                     69,622      67,061
                                                ======                     ======                     ======      ======


                                                               CEPHEID


                                           CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

                                                            (in thousands)


                                                              June 30, 2014                December
                                                                                                      31, 2013
                                                                                                     --------


                                        ASSETS

    Current assets:

    Cash and cash equivalents                                                 $120,981                 $66,072

    Short-term investments                                                     185,279                   8,837

    Accounts receivable, net                                                    55,370                  52,202

    Inventory                                                                  123,345                 103,866

    Prepaid expenses and other
     current assets                                                             19,020                  13,037
                                                                                ------                  ------

    Total current assets                                                       503,995                 244,014

    Property and equipment, net                                                104,354                  84,886

    Investments                                                                 78,773                   9,820

    Other non-current assets                                                     8,124                     958

    Intangible assets, net                                                      13,404                  15,245

    Goodwill                                                                    39,681                  39,681

    Total assets                                                              $748,331                $394,604
                                                                              ========                ========


                         LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:

    Accounts payable                                                           $50,892                 $52,609

    Accrued compensation                                                        24,830                  22,009

    Accrued royalties                                                            4,973                   5,245

    Accrued and other
     liabilities                                                                 9,974                   7,440

    Current portion of deferred
     revenue                                                                    10,428                   8,183
                                                                                ------                   -----

    Total current liabilities                                                  101,097                  95,486

    Long-term portion of
     deferred revenue                                                            4,043                   3,424

    Convertible senior notes,
     net                                                                       273,491                       -

    Other liabilities                                                           15,362                  10,454
                                                                                ------                  ------

    Total liabilities                                                          393,993                 109,364
                                                                               -------                 -------

    Shareholders' equity:

    Common stock                                                               407,877                 383,379

    Additional paid-in capital                                                 209,431                 145,900

    Accumulated other
     comprehensive loss                                                          (261)                  (476)

    Accumulated deficit                                                      (262,709)              (243,563)
                                                                              --------                --------

    Total shareholders' equity                                                 354,338                 285,240

    Total liabilities and
     shareholders' equity                                                     $748,331                $394,604
                                                                              ========                ========



                                   CEPHEID


          CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

                                (in thousands)

                                                       Six Months Ended
                                                           June 30,
                                                           --------

                                                          2014               2013
                                                          ----               ----

    Cash flows from operating activities:

    Net loss                                         $(19,146)          $(6,267)

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

     Depreciation
     and
     amortization
     of
     property
     and
     equipment                                          10,340              8,361

     Amortization
     of
     intangible
     assets                                              1,841              3,146

     Unrealized
     exchange
     differences                                           122                575

     Amortization
     of debt
     discount
     and
     transaction
     costs                                               3,642                  -

    Stock-
     based
     compensation
     expense                                            15,930             12,806

    Changes in operating assets and
     liabilities:

    Accounts
     receivable                                        (3,167)           (2,586)

    Inventory                                         (19,809)          (14,491)

    Prepaid
     expenses
     and
     other
     current
     assets                                            (5,867)           (6,454)

    Other
     non-
     current
     assets                                               (42)                30

    Accounts
     payable
     and
     other
     current
     liabilities                                         1,916              5,669

    Accrued
     compensation                                        2,821              2,616

    Deferred
     revenue                                             2,864              1,422
                                                         -----              -----

    Net cash
     provided
     by (used
     in)
     operating
     activities                                        (8,555)             4,827


    Cash flows from investing activities:

    Capital
     expenditures                                     (25,745)          (18,974)

    Payments
     for
     technology
     license                                                 -           (1,125)

    Proceeds
     from
     maturities
     and
     sales of
     marketable
     securities
     and
     investments                                        89,065                  -

    Cost of
     acquisitions,
     net                                                     -           (3,571)

    Purchase
     of
     marketable
     securities
     and
     investments                                     (334,800)                 -
                                                      --------                ---

    Net cash
     used in
     investing
     activities                                      (271,480)          (23,670)


    Cash flows from financing activities:

    Net
     proceeds
     from the
     issuance
     of
     common
     shares
     and
     exercise
     of stock
     options                                            24,498              9,450

    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                                              (95)             (781)
                                                           ---               ----

    Net cash
     provided
     by
     financing
     activities                                        335,110              8,669


    Effect of
     exchange
     rate
     change
     on cash                                             (166)             (575)
                                                          ----               ----

    Net
     increase
     (decrease)
     in cash
     and cash
     equivalents                                        54,909           (10,749)

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

    Cash and
     cash
     equivalents
     at end
     of
     period                                           $120,981            $85,030
                                                      ========            =======



                                                  CEPHEID


                          RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

                                   (in thousands, except per share data)


                                    Three Months Ended                             Six Months Ended
                                         June 30,                                      June 30,
                                       --------                                   --------

                                        2014                           2013                          2014        2013
                                        ----                           ----                          ----        ----

    Total Revenues                  $116,503                        $96,012                      $223,410    $187,950


    Cost of sales                    $59,568                        $52,889                      $112,651     $95,781

      Stock-based
       compensation
       expense                       (1,473)                         (840)                      (1,854)    (1,382)

      Amortization of
       purchased
       intangible assets               (223)                         (805)                        (446)    (1,659)
                                        ----                           ----                          ----

    Non-GAAP measure
     of cost of sales                $57,872                        $51,244                      $110,351     $92,740


    Gross margin on
     sales per GAAP                      49%                           45%                          50%        49%

    Gross margin on
     sales per Non-
     GAAP                                50%                           47%                          51%        51%


    Operating expenses               $61,840                        $47,289                      $120,705     $93,905

      Stock-based
       compensation
       expense                       (7,675)                       (5,689)                     (14,076)   (11,424)

      Amortization of
       purchased
       intangible assets               (432)                         (441)                        (861)      (815)
                                        ----                           ----                          ----        ----

    Non-GAAP measure
     of operating
     expenses                        $53,733                        $41,159                      $105,768     $81,666


    Income (loss) from
     operations                     $(5,554)                      $(5,591)                    $(11,886)   $(5,271)

      Stock-based
       compensation
       expense                         9,148                          6,529                        15,930      12,806

      Amortization of
       purchased
       intangible assets                 655                          1,246                         1,307       2,474
                                         ---                          -----                         -----       -----

    Non-GAAP measure
     of income from
     operations                       $4,249                         $2,184                        $5,351     $10,009


    Net income (loss)               $(9,843)                      $(6,580)                    $(19,146)   $(6,267)

      Stock-based
       compensation
       expense                         9,148                          6,529                        15,930      12,806

      Amortization of
       debt discount and
       debt issuance cost              2,385                              -                        3,642           -

      Amortization of
       purchased
       intangible assets                 655                          1,246                         1,307       2,474
                                         ---                          -----                         -----       -----

    Non-GAAP measure
     of net income                    $2,345                         $1,195                        $1,733      $9,013


    Basic net income
     (loss) per share                $(0.14)                       $(0.10)                      $(0.27)    $(0.09)

      Stock-based
       compensation
       expense                          0.13                           0.10                          0.22        0.19

      Amortization of
       debt discount and
       debt issuance cost               0.03                              -                         0.05           -

      Amortization of
       purchased
       intangible assets                0.01                           0.02                          0.02        0.03
                                        ----                           ----                          ----        ----

    Non-GAAP measure
     of net income per
     share                             $0.03                          $0.02                         $0.02       $0.13


    Diluted net income
     (loss) per share                $(0.14)                       $(0.10)                      $(0.27)    $(0.09)

      Stock-based
       compensation
       expense                          0.13                           0.10                          0.22        0.19

      Amortization of
       debt discount and
       debt issuance cost               0.03                              -                         0.05           -

      Amortization of
       purchased
       intangible assets                0.01                           0.02                          0.02        0.03
                                        ----                           ----                          ----        ----

    Non-GAAP measure
     of net income per
     share                             $0.03                          $0.02                         $0.02       $0.13


    Shares used in
     computing basic
     net income (loss)
     per share                        69,968                         67,295                        69,622      67,061


    Shares used in
     computing diluted
     net income (loss)
     per share                        72,707                         69,666                        72,721      69,554

SOURCE Cepheid