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Genoptix Reports Operating Results for the Third Quarter and First Nine Months of 2010
Date:11/4/2010

CARLSBAD, Calif., Nov. 4, 2010 /PRNewswire-FirstCall/ -- Genoptix, Inc. (Nasdaq: GXDX), a specialized laboratory services provider, today reported revenues of $49.5 million for the third quarter of 2010. Net income was $4.4 million or $0.24 per diluted share for the quarter.

"We have managed more than 46,000 patient cases year-to-date, a 10% increase in case volumes, and a 9% improvement in revenues over the same period in 2009," said Tina S. Nova, Ph.D., President and CEO of Genoptix. "We ended the third quarter with over 1,350 actively ordering physician customers, a population we hope to grow as our team continues to provide high quality diagnostic services in oncology and hematomalignancy testing."  

"This quarter, we plan to introduce our first proprietary offering utilizing HistoRX's AQUA® Technology for the analysis of fluorescent immunohistochemistry, which will enable quantitative assessment of ER/PR/HER 2 for patients with breast cancer," Dr. Nova continued. "With the introduction of these tests licensed exclusively from HistoRX on the AQUA platform, we are taking another step toward providing more comprehensive services to our physician customers and their patients."

Third quarter revenues of $49.5 million include a $1.6 million benefit from changes in accounting estimates resulting from cash collections in excess of revenue recognized in prior periods. Third quarter revenue decreased 3% from revenue of $50.8 million for the comparable period in 2009, which included a $4.4 million benefit from changes in accounting estimates. When excluding changes in accounting estimates for each period, third quarter 2010 revenues increased by approximately 3% year-over-year.

Gross profit for the third quarter of 2010 was $28.4 million, or 57% of revenue, as compared to $32.4 million, or 64% of revenue, for the third quarter of 2009. Operating income for the third quarter of 2010 was $9.0 million, or 18% of revenue, compared to operating income of $16.4 million, or 32% of revenue, for the same period in 2009. The reduction in margins is primarily due to the increase in costs related to the new laboratory facility brought into service at the end of the second quarter of 2010, increases in personnel, and the reduction in changes in revenue accounting estimates.

Net income was $4.4 million for the third quarter of 2010, or $0.24 diluted earnings per share (EPS), based on 18.1 million weighted average common shares outstanding and a tax rate for the quarter of 52%. This compares to net income of $9.5 million for the third quarter of 2009, or EPS of $0.53, based on 18.0 million weighted average common shares outstanding and a tax rate of 43%.

Year-To-Date Results  Revenues for the first nine months of 2010 totaled $147.9 million, including a $3.8 million benefit from changes in accounting estimates resulting primarily from strong cash collections related to prior years. This is an increase of approximately 9% over revenues of $135.3 million for the comparable period in 2009, which included a $6.4 million benefit from similar changes in accounting estimates. When excluding changes in accounting estimates for each period, revenues for the first nine months of 2010 increased by approximately 12% year-over-year.

Gross profit for the first nine months of 2010 was $87.5 million, up from $84.7 million for the same period in 2009. As a percentage of revenues, 2010 year-to-date gross margin was 59% of revenues as compared to 63% of revenues for the first nine months of 2009. Operating income for the first nine months of 2010 was $29.0 million, or 19% of revenues, compared to operating income of $39.9 million, or 30% of revenues, for the same period in 2009. The reduction in margins is primarily due to the increase in costs related to the new laboratory facility brought into service at the end of the first half of 2010, increases in personnel, and the reduction in changes in revenue accounting estimates.

Net income was $15.3 million for the first nine months of 2010, or EPS of $0.84, based on 18.2 million weighted average common shares outstanding and a tax rate of 48%. This compares to net income of $23.3 million for the first nine months of 2009, or EPS of $1.30.

As of September 30, 2010, the Company's total cash, cash equivalents, and investment securities were $143.3 million. Cash generated from operations was $23.1 million for the first nine months of 2010, while purchases of capital equipment for the same period totaled $26.3 million. Average days sales outstanding (DSO) was 77 days for the quarter.  

"We have realigned our hiring plans for the remainder of the year to be consistent with current levels of business. We now expect to end the year with approximately 95 sales representatives on the team and approximately 48 hematopathologists on staff with Cartesian Medical Group, providing us with the capacity to manage our case load well into 2011," said Sam Riccitelli, Genoptix EVP and COO. "The completion of our year-long expansion is expected to provide the facilities capacity to enable us to double the size of our business in the years to come."

Performance OutlookGenoptix expects revenues for the full-year 2010 between $192 and $195 million with full-year gross margins in the mid- to high-fiftieth percentile.

Full-year operating margins for 2010 are expected to be in the high teens of total revenues, with net income between $17 and $18 million, and diluted EPS between $0.95 and $1.00 on 18.2 million shares. This assumes a tax rate of approximately 48% for the full-year, a rate inflated by an approximate 2.5% one-time increase relating to a change in California tax regulation.

The Company intends to provide detailed guidance on expectations for the coming year early in 2011.

Conference Call InformationA conference call will take place today, Thursday, November 4, 2010, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), hosted by President and CEO, Tina S. Nova, Ph.D., and other members of senior management. To access the live conference call via phone, dial 800-573-4754 in the U.S. or Canada and 617-224-4325 for international callers. Please specify to the operator that you would like to join the "Genoptix Third Quarter 2010 Earnings Conference Call." The participant code for the call is 96795959. If you are unable to listen to the live webcast, a replay of the call will be available through Thursday, November 11, 2010. Interested parties can access the rebroadcast by dialing 1-888-286-8010 or 1-617-801-6888 internationally and entering the reservation number 77666858.

The conference call will also be webcast live on the "Investors" section of the Genoptix website at www.genoptix.com. Please connect to the Genoptix website several minutes prior to the start of the webcast to ensure adequate time for any software download that may be necessary. If you are unable to listen to the live webcast, a replay will be available through Thursday, December 2, 2010.

About Genoptix, Inc.Genoptix is a leading specialized laboratory service provider focused on delivering personalized and comprehensive diagnostic services to its physician customers, community-based hematologists, and oncologists. On the forefront of personalized diagnostic services, Genoptix's highly trained group of hematopathologists utilize sophisticated technology to provide integrated testing and actionable diagnostic reports. Its diagnostic services are designed to optimize the care of patients suffering from hematomalignancies, or cancers of the blood and bone marrow, including leukemia and lymphoma, and other forms of cancer. Founded in 1999, Genoptix is a member of the Nasdaq Global Select Market, the S&P SmallCap 600 Index and the Russell 2000 Index and is headquartered in Carlsbad, California. For more information, please visit www.genoptix.com.

Non-GAAP Financial MeasuresIn addition to disclosing financial results calculated in accordance with accounting principles generally accepted in the U.S. (GAAP), this release contains non-GAAP financial measures. The comparisons of revenue for the three and nine months ended September 30, 2010 and 2009 that exclude the changes in accounting estimates for each period are non-GAAP financial measures. The Company believes that the non-GAAP financial measures included in this release provide meaningful supplemental information to both management and investors that is indicative of the Company's core operating results. The Company further believes these non-GAAP financial measures facilitate comparison of operating results across reporting periods, and uses these non-GAAP financial measures when evaluating its financial results, as well as for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP that are also included in this release.

Forward-Looking StatementsThis press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements in this press release regarding the Company's business that are not historical facts may be considered "forward-looking statements," including statements regarding the value of the Company's services, the Company's ability to focus on the needs of community-based hematologists and oncologists, to provide high quality and more comprehensive diagnostic services and to address and adapt to the changing environment, the success of the Company's business model,  the Company's ability to optimize the care of patients and have adequate capacity to manage its future case load, and the Company's growth prospects. Forward-looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties, which may cause the Company's results to differ materially and adversely from the statements contained herein. These risks and uncertainties are detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 and most recent Quarterly Report on Form 10-Q and subsequent filings with the United States Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statements to reflect new information, events, or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

® AQUA is a registered trademark of HistoRX, Inc.

[Financial tables follow]GENOPTIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)(in thousands, except per share data)Three Months Ended
September 30, Nine Months Ended
September 30, 2010 2009 2010 2009 Revenues

$
49,522$
50,807$
47,858$
35,294Cost of revenues

21,10418,40260,34950,603Gross profit

28,41832,40587,50984,691Operating expenses:Sales and marketing

10,2248,21731,07522,538General and administrative

8,4787,28725,94321,168Research and development

7205221,5291,049Total operating expenses

19,42216,02658,54744,755Income from operations

8,99616,37928,96239,936Interest and other income

2003347301,268Income before income taxes

9,19616,71329,69241,204Income tax expense

4,7997,25114,35017,926Net income

$
4,397$
9,462$
5,342$
23,278Net income per share:Basic

$
.25$
.55$
.88$
.38Diluted

$
.24$
.53$
.84$
.30Shares used to compute net income per share:Basic

17,59117,08917,49216,909Diluted

18,14517,96518,16917,892GENOPTIX, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)September 30,
2010 December 31,
2009 (unaudited) AssetsCurrent assets: Cash and cash equivalents

$
20,068$
27,945 Short-term investment securities

118,503113,049 Accounts receivable, net

35,80127,707 Income tax receivable

1,598- Deferred tax asset

5,4065,406 Other current assets

3,3913,320Total current assets

184,767177,427Property and equipment, net

37,36113,826Restricted cash

180270Long-term investment security

4,5243,786Long-term deferred tax asset

1,5251,800Other long-term assets

1,824346Total assets

$
230,181$   197,455Liabilities and Stockholders' EquityCurrent liabilities: Accounts payable and accrued expenses

$
8,759$
8,322 Accrued compensation

7,7334,667 Income tax payable

1,4171,557 Deferred revenues

1,4541,225 Deferred rent

306331Total current liabilities

19,66916,102Long-term deferred rent

1,7221,732Other long-term liabilities

101117Stockholders' equity:Preferred stock

--Common stock

1817Additional paid-in capital

173,468160,064Treasury stock

(68)(25)Accumulated other comprehensive loss

(65)(546)Retained earnings

35,33619,994Total stockholders' equity

208,689179,504Total liabilities and stockholders' equity

$
230,181$   197,455GENOPTIX, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)(in thousands)Nine Months Ended

September 30, 2010 2009 Operating activities:Net income

$
5,342$
23,278Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization

3,2012,583Provision for doubtful accounts

3,9632,240Stock-based compensation expense

9,5417,306Excess tax benefits from stock-based compensation awards

(2,964)(3,403)Amortization of premium on investment securities, net

1,640458Deferred taxes

-(29)Realized gain on sale of investment securities

(6)-Loss on sale of property and equipment

36Changes in operating assets and liabilities:Accounts receivable

(12,057)(10,165)Other current and long-term assets

(53)(713)Accounts payable and accrued expenses

(138)2,922Accrued compensation

3,0664,552Income taxes

1,2293,756Deferred revenues

229754Deferred rent

13743Net cash provided by operating activities

23,13333,588Investing activities:Purchase of property and equipment

(26,332)(3,240)Purchase of investment securities

(102,890)(120,508)Proceeds from sales and maturities of investment securities

95,82067,434Purchase of intangibles

(1,520)(150)Release of restricted cash

9090Net cash used in investing activities

(34,832)(56,374)Financing activities:Proceeds from issuance of common stock, net

1,4961,609Payment of taxes for issuance of restricted stock units

(595)(458)Excess tax benefits from stock-based compensation awards

2,9643,403Repurchase of common stock

(43)(11)Net cash provided by financing activities

3,8224,543Net decrease in cash and cash equivalents

(7,877)(18,243)Cash and cash equivalents at beginning of period

27,94538,108Cash and cash equivalents at end of period$
20,068$
9,865
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SOURCE Genoptix, Inc.
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