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Cepheid Reports 2014 Second Quarter Results
Date:7/17/2014

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 30,20142013ChangeClinical Systems

    $
    28.3
    $  16.770%Clinical Reagents

    83.070.817%Total Clinical 111.387.527%Non-Clinical & Other

    5.28.5-39%Total Sales$  116.5$  96.021% 

  • By geography, total sales were, in millions:
  • Three Months Ended June 30,20142013ChangeNorth AmericaClinical

    $
    57.7
    $  49.916%Non-Clinical & Other

    3.97.5-47%Total North America61.657.47%InternationalClinical

    53.737.643%Non-Clinical & Other

    1.21.016%Total International54.938.642%Total Sales$  116.5$  96.021%


  • 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 YearEnding December 31, 2014Low HighNet Loss Per Share$ (0.54)$ (0.51)Stock-Based Compensation Expense0.470.47Amortization of Debt Discount and Debt Issuance Costs

    0.130.13Amortization of Purchased Intangible Assets0.040.04Non-GAAP Measure of Net Income Per Share$   0.10$   0.13Accessing Cepheid's 2014 Second Quarter Results Conference CallThe 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 CepheidBased 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 MeasuresThe 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 StatementsThis 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

    Cepheid Corporate Communications

    Tel: (408) 400 8377

    communications@cepheid.com

    Jacquie Ross, CFA

    Cepheid Investor Relations

    Tel: (408) 400 8329

    investor.relations@cepheid.com 

    FINANCIAL TABLES FOLLOW  CEPHEIDCONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS(in thousands, except per share data)Three Months Ended
    June 30,Six months Ended
    June 30, 2014201320142013Revenues:System and other sales

    $  29,018$  18,796$
    47,547
    $  34,806Reagent and disposable sales

    87,48577,216175,863153,144Total sales

    116,50396,012223,410187,950Costs and operating expenses:Cost of product sales 

    59,56852,889112,65195,781Collaboration profit sharing 

    6491,4251,9403,535Research and development

    23,99818,57245,73836,299Sales and marketing

    23,50219,10546,96038,231General and administrative

    14,3409,61228,00719,375Total costs and operating expenses 

    122,057101,603235,296193,221Loss 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 

    69,96867,29569,62267,061Shares used in computing diluted net loss per share 

    69,96867,29569,62267,061 CEPHEIDCONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS(in thousands)June 30, 2014December
    31, 2013ASSETSCurrent assets:Cash and cash equivalents

    $
    20,981
    $
    ,072
    Short-term investments

    185,2798,837Accounts receivable, net

    55,37052,202Inventory

    123,345103,866Prepaid expenses and other current assets 

    19,02013,037Total current assets

    503,995244,014Property and equipment, net

    104,35484,886Investments

    78,7739,820Other non-current assets

    8,124958Intangible assets, net

    13,40415,245Goodwill

    39,68139,681Total assets

    $
    748,331
    $
    394,604
    LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable 

    $
    50,892
    $
    52,609
    Accrued compensation 

    24,83022,009Accrued royalties 

    4,9735,245Accrued and other liabilities 

    9,9747,440Current portion of deferred revenue

    10,4288,183Total current liabilities 

    101,09795,486Long-term portion of deferred revenue

    4,0433,424Convertible senior notes, net

    273,491-Other liabilities

    15,36210,454Total liabilities

    393,993109,364Shareholders' equity:Common stock

    407,877383,379Additional paid-in capital 

    209,431145,900Accumulated other comprehensive loss

    (261)(476)Accumulated deficit 

    (262,709)(243,563)Total shareholders' equity 

    354,338285,240Total liabilities and shareholders' equity 

    $
    748,331
    $
    394,604
      CEPHEIDCONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS(in thousands)Six Months Ended
    June 30,20142013Cash 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

    10,3408,361Amortization of intangible assets 

    1,8413,146Unrealized exchange differences

    122575Amortization of debt discount and transaction costs

    3,642-Stock-based compensation expense

    15,93012,806Changes 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)30Accounts payable and other current liabilities 

    1,9165,669Accrued compensation 

    2,8212,616Deferred revenue 

    2,8641,422Net cash provided by (used in) operating activities 

    (8,555)4,827Cash 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

    24,4989,450Proceeds 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 

    335,1108,669Effect 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 

    66,07295,779Cash and cash equivalents at end of period

    $  120,981$  85,030  CEPHEIDRECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)(in thousands, except per share data)Three Months Ended
    June 30,Six Months Ended
    June 30,2014201320142013Total Revenues

    $
    ,503
    $
    96,012
    $
    223,410
    $
    87,950
    Cost of sales

    $
    59,568
    $
    52,889
    $
    2,651
    $
    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
    $
    ,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

    $
    ,840
    $
    47,289
    $
    20,705
    $
    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
    $
    5,768
    $
    81,666
    Income (loss) from operations

    $
    (5,554)
    $
    (5,591)
    $
    (11,886)
    $
    (5,271)
      Stock-based compensation expense

    9,1486,52915,93012,806  Amortization of purchased intangible assets

    6551,2461,3072,474Non-GAAP measure of income from operations

    $
    4,249
    $
    2,184
    $
    5,351
    $
    ,009
    Net income (loss)

    $
    (9,843)
    $
    (6,580)
    $
    (19,146)
    $
    (6,267)
      Stock-based compensation expense

    9,1486,52915,93012,806  Amortization of debt discount and debt issuance cost

    2,385-3,642-  Amortization of purchased intangible assets

    6551,2461,3072,474Non-GAAP measure of net income

    $
    2,345
    $
    ,195
    $
    ,733
    $
    9,013
    Basic net income (loss) per share

    $
    (0.14)
    $
    (0.10)
    $
    (0.27)
    $
    (0.09)
      Stock-based compensation expense

    0.130.100.220.19  Amortization of debt discount and debt issuance cost

    0.03-0.05-  Amortization of purchased intangible assets

    0.010.020.020.03Non-GAAP measure of net income per share

    $
    .03
    $
    .02
    $
    .02
    $
    .13
    Diluted net income (loss) per share

    $
    (0.14)
    $
    (0.10)
    $
    (0.27)
    $
    (0.09)
      Stock-based compensation expense

    0.130.100.220.19  Amortization of debt discount and debt issuance cost

    0.03-0.05-  Amortization of purchased intangible assets

    0.010.020.020.03Non-GAAP measure of net income per share

    $
    .03
    $
    .02
    $
    .02
    $
    .13
    Shares used in computing basic net income (loss) per share

    69,96867,29569,62267,061Shares used in computing diluted net income (loss) per share

    72,70769,66672,72169,554 


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