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| 8-K - 8-K - AFFYMETRIX INC | affy-20140630xpr.htm |
EXHIBIT 99.1
Contact:
Doug Farrell
Vice President of Investor Relations
408-731-5285
AFFYMETRIX REPORTS SECOND QUARTER 2014 OPERATING RESULTS
Santa Clara, Calif.—July 31, 2014—Affymetrix, Inc., (NASDAQ: AFFX) today reported its operating results for the second quarter of 2014.
Results for the three months ended June 30, 2014:
• | Total revenue was $85.4 million, compared to $79.5 million in second quarter of 2013. Total revenue grew by 7.5% over the second quarter of 2013. |
• | Product revenue was $75.9 million compared to $74.2 million in the second quarter of 2013. |
• | GAAP net loss was $0.9 million, or $0.01 per diluted share, as compared to a GAAP net loss of $6.1 million, or $0.09 per diluted share, in the second quarter of 2013. |
• | Non-GAAP net income was $5.2 million, or $0.07 per diluted share, compared to a Non-GAAP net income of $2.8 million, or $0.04 per diluted share, for the second quarter of 2013. Please refer to "Itemized Reconciliation Between GAAP and Non-GAAP Net Income (Loss)" for a reconciliation of these GAAP and Non-GAAP financial measures. |
• | Total balance in cash and cash equivalents was $51.5 million and senior debt was $25.0 million as of June 30, 2014. |
Product revenue for the second quarter of 2014 was $75.9 million and service and other revenue was $9.5 million. This compares to product revenue of $74.2 million and service and other revenue of $5.3 million in the second quarter of 2013. Product revenue for the second quarter of 2014 included consumable revenue of $72.6 million and instrument revenue of $3.3 million. Product revenue for the second quarter of 2013 included consumable revenue of $70.0 million and instrument revenue of $4.2 million.
Total gross margin was 57%, as compared to 53% in the same period of 2013. Excluding Non-GAAP adjustments such as the amortization of step-up in inventory fair value, total margin for the second quarter of 2014 was 61% compared to 60% in the same period of 2013. Please refer to the "Itemized Reconciliation Between GAAP and Non-GAAP Gross Margin" for a reconciliation of these GAAP and Non-GAAP financial measures.
For the second quarter of 2014, operating expenses were $49.1 million on a GAAP basis as compared to $45.1 million in the same period of 2013. Excluding Non-GAAP adjustments, such as the amortization of acquired intangible assets and non-recurring charges, operating expenses for the second quarter of 2014 were $46.2 million, compared to an adjusted total of $42.0 million in the same period of 2013. The increase is primarily due to higher variable compensation cost and legal costs associated with our litigation matters. Please refer to the "Itemized Reconciliation Between GAAP and Non-GAAP Operating Expenses" for a reconciliation of these GAAP and Non-GAAP financial measures.
“This is our fourth consecutive quarter of year-over-year revenue growth as we continue to execute on our strategic objectives,” stated Frank Witney, President and CEO. “For the first half of 2014 we saw consistent performance across the business and strong growth in our Genetic Analysis business unit. Accordingly we are raising our full-year guidance to total revenue of $340 million and EBITDAO in the range of 14% to 15% of revenue.”
"Since this time last year we have prepaid $42 million of our Senior Debt while increasing our overall balance of cash-on-hand," stated Gavin Wood, EVP and CFO. "We have now reduced our outstanding debt to $25 million, achieving our year-end debt target six months ahead of schedule."
Recent developments:
• | The Company and Leica Biosystems announced the launch of Affymetrix’s fully automated RNA in situ hybridization ViewRNA™ eZ Assays on the Leica BOND RX staining platform. These assays detect coding RNA as well as novel non-coding markers in formalin-fixed paraffin-embedded (FFPE) tissues. The assays provide researchers with a powerful automated solution for drug discovery, translational research, and the development of new diagnostic tests for personalized medicine. The automation significantly reduces hands-on time and assay run time for profiling RNA biomarkers in tissue samples. |
• | The launch of new analysis software, Nexus Copy Number for Affymetrix, which is specifically designed for data generated by the Company’s genetic analysis platforms for cancer research, including CytoScan® Cytogenetics Suite and OncoScan® FFPE Assay Kit. With the use of Nexus Copy Number, an advanced discovery tool for interrogating large data sets, researchers have been able to identify biomarkers that drive disease progression. The new Nexus Copy Number for Affymetrix software offers researchers a version of the Nexus Copy Number software that is easier to access and has been specifically tailored for use with Affymetrix cytogenetic assays. |
• | On July 28, 2014, the Company entered into a fifth amendment to its Credit Agreement dated as of June 25, 2012. The fifth amendment provides, among other things, for (1) an uncommitted incremental term loan facility in an aggregate amount not to exceed $50.0 million and (2) the reduction of interest rate margins. |
Affymetrix will host a conference call on Thursday, July 31, 2014 at 2:00 p.m. PT to review its operating results for the second quarter of 2014. A live webcast can be accessed by visiting the Investor Relations section of the Company's website at www.affymetrix.com. In addition, investors and other interested parties can listen by dialing domestic: (877) 407-8291, international: (201) 689-8345.
A replay of this call will be available from 5:00 p.m. PT on July 31, 2014 until 8:00 p.m. PT on August 7, 2014 at the following numbers: domestic: (877) 660-6853, international: (201) 612-7415. The conference call passcode to access the replay is 13585791. An archived webcast of the conference call will be available under the Investor Relations section of the Company's website.
About Affymetrix
Affymetrix technology is used by the world's top pharmaceutical, diagnostic, and biotechnology companies, as well as leading academic, government, and nonprofit research institutes. More than 2,300 systems have been shipped around the world and more than 65,000 peer-reviewed papers have been published using the technology. Affymetrix is headquartered in Santa Clara, California, and has manufacturing facilities in Cleveland, Ohio, San Diego, California, Singapore and Vienna, Austria. The Company has about 1,100 employees worldwide and maintains sales and distribution operations across Europe, Asia and Latin America.
All statements in this press release that are not historical are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act as amended, including statements related to our plans to return to growth and sustained profitability as well as other statements regarding Affymetrix's "expectations," "beliefs," "hopes," "intentions," "strategies" or the like. Such statements are subject to risks and uncertainties that could cause actual results to differ materially for Affymetrix from those projected, including, but not limited to: Affymetrix's ability to stabilize its business and grow revenue, Affymetrix's ability to timely and successfully integrate and realize the anticipated strategic benefits and costs savings or other synergies of the acquisition of eBioscience in a cost-effective manner while minimizing the disruption to its business; risks that eBioscience's future performance may not be consistent with its historical performance; risks relating to Affymetrix's ability to make scheduled payments of the principal of, to pay interest on or to refinance its indebtedness; risks relating to Affymetrix's ability to successfully
develop and commercialize new products, including its ability to successfully develop and commercialize novel molecular solutions based on eBioscience's portfolio of reagents; risks relating to past and future acquisitions, including the ability of Affymetrix to successfully integrate such acquisitions into its existing business; risks of Affymetrix's ability to achieve and sustain higher levels of revenue, higher gross margins and reduced operating expenses; risks relating to Affymetrix's ability to generate cash after interest and principal payments; uncertainties relating to technological approaches; risks associated with manufacturing and product development; personnel retention; uncertainties relating to cost and pricing of Affymetrix products; dependence on collaborative partners; uncertainties relating to sole-source suppliers; uncertainties relating to FDA and other regulatory approvals; competition; risks relating to intellectual property of others and the uncertainties of patent protection and litigation. These and other risk factors are discussed in Affymetrix's Annual Report on Form 10-K for the year ended December 31, 2013, and other SEC reports. Affymetrix expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Affymetrix's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.
In addition to providing financial measures based on generally accepted accounting principles in the United States (GAAP), Affymetrix has disclosed in this press release its net loss and net loss per share as well as its total gross margin and operating expenses for the second quarter of 2014 and 2013 excluding specified items. Reconciliation of GAAP to Non-GAAP measures can be found in the tables included in this press release. Affymetrix has determined to disclose this financial information to investors because it believes it will be useful, as a supplement to GAAP measures, in comparing Affymetrix's operating performance in the second quarter of 2014 as compared to the prior-year period. These Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
PLEASE NOTE:
Affymetrix, the Affymetrix logo, GeneChip, and all other trademarks are the property of Affymetrix, Inc.
- Financial Charts to Follow -
AFFYMETRIX, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
June 30, 2014 | December 31, 2013 | ||||||
ASSETS: | (Note 1) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 51,500 | $ | 57,128 | |||
Accounts receivable, net | 49,631 | 50,862 | |||||
Inventories—short-term portion | 54,043 | 58,059 | |||||
Deferred tax assets—short-term portion | 1,613 | 767 | |||||
Prepaid expenses and other current assets | 6,567 | 8,920 | |||||
Total current assets | 163,354 | 175,736 | |||||
Property and equipment, net | 16,906 | 18,671 | |||||
Inventories—long-term portion | 6,001 | 5,972 | |||||
Goodwill | 161,201 | 161,595 | |||||
Intangible assets, net | 119,814 | 131,108 | |||||
Deferred tax assets—long-term portion | 368 | 355 | |||||
Other long-term assets | 10,583 | 11,074 | |||||
Total assets | $ | 478,227 | $ | 504,511 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY: | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 42,891 | $ | 45,534 | |||
Term loan—short-term portion | 4,000 | 12,750 | |||||
Deferred revenue—short-term portion | 12,681 | 18,660 | |||||
Total current liabilities | 59,572 | 76,944 | |||||
Deferred revenue—long-term portion | 2,670 | 2,824 | |||||
Convertible notes | 105,000 | 105,000 | |||||
Term loan—long-term portion | 20,950 | 26,700 | |||||
Other long-term liabilities | 21,182 | 21,496 | |||||
Total liabilities | 209,374 | 232,964 | |||||
Stockholders' equity: | |||||||
Common stock | 732 | 723 | |||||
Additional paid-in capital | 776,390 | 768,149 | |||||
Accumulated other comprehensive income | 8,833 | 8,392 | |||||
Accumulated deficit | (517,102 | ) | (505,717 | ) | |||
Total stockholders' equity | 268,853 | 271,547 | |||||
Total liabilities and stockholders' equity | $ | 478,227 | $ | 504,511 | |||
Note 1: | The condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013. |
AFFYMETRIX, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
REVENUE: | |||||||||||||||
Product sales | $ | 75,880 | $ | 74,170 | $ | 149,576 | $ | 145,728 | |||||||
Services and other | 9,552 | 5,294 | 18,827 | 11,681 | |||||||||||
Total revenue | 85,432 | 79,464 | 168,403 | 157,409 | |||||||||||
COSTS AND EXPENSES: | |||||||||||||||
Cost of product sales | 30,560 | 33,587 | 60,071 | 68,021 | |||||||||||
Cost of services and other | 6,028 | 3,706 | 12,932 | 7,213 | |||||||||||
Research and development | 12,882 | 11,959 | 24,517 | 24,207 | |||||||||||
Selling, general and administrative | 36,266 | 33,518 | 74,828 | 68,638 | |||||||||||
Litigation settlement | — | — | 5,100 | — | |||||||||||
Restructuring charges | — | (355 | ) | — | 4,487 | ||||||||||
Total costs and expenses | 85,736 | 82,415 | 177,448 | 172,566 | |||||||||||
Loss from operations | (304 | ) | (2,951 | ) | (9,045 | ) | (15,157 | ) | |||||||
Interest income and other, net | 1,418 | 89 | 1,711 | 432 | |||||||||||
Interest expense | 1,623 | 2,724 | 3,377 | 5,622 | |||||||||||
Loss before income taxes | (509 | ) | (5,586 | ) | (10,711 | ) | (20,347 | ) | |||||||
Income tax provision (benefit) | 402 | 521 | 674 | 1,196 | |||||||||||
Net (loss) income | $ | (911 | ) | $ | (6,107 | ) | $ | (11,385 | ) | $ | (21,543 | ) | |||
Basic and diluted net (loss) income per common share | $ | (0.01 | ) | $ | (0.09 | ) | $ | (0.16 | ) | $ | (0.30 | ) | |||
Shares used in computing basic and diluted net (loss) income per common share | 72,944 | 71,154 | 72,722 | 71,038 | |||||||||||
AFFYMETRIX, INC.
RESULTS OF OPERATIONS – NON-GAAP
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME (LOSS)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
GAAP net loss - basic and diluted | $ | (911 | ) | $ | (6,107 | ) | $ | (11,385 | ) | $ | (21,543 | ) | |||
Amortization of inventory fair value adjustment | 1,770 | 4,495 | 4,666 | 9,084 | |||||||||||
Amortization of acquired intangible assets | 4,298 | 4,520 | 8,680 | 9,155 | |||||||||||
Acquisition-related integration costs | — | 233 | — | 748 | |||||||||||
Litigation settlement | — | — | 5,100 | — | |||||||||||
Restructuring charges | — | (355 | ) | — | 4,487 | ||||||||||
Non-GAAP net income (loss) - basic and diluted | $ | 5,157 | $ | 2,786 | $ | 7,061 | $ | 1,931 | |||||||
Non-GAAP basic and diluted net income (loss) per common share | $ | 0.07 | $ | 0.04 | $ | 0.10 | $ | 0.03 | |||||||
Shares used in computing Non-GAAP basic and diluted net income (loss) per common share | 72,944 | 71,154 | 72,722 | 71,038 | |||||||||||
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP GROSS MARGIN
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||
GAAP total gross margin | $ | 48,844 | 57 | % | $ | 42,171 | 53 | % | $ | 95,400 | 57 | % | $ | 82,175 | 52 | % | |||||||||||
Amortization of inventory fair value adjustment | 1,770 | 2 | % | 4,495 | 5 | % | 4,666 | 3 | % | 9,084 | 6 | % | |||||||||||||||
Amortization of acquired intangible assets | 1,362 | 2 | % | 1,325 | 2 | % | 2,722 | 2 | % | 2,691 | 3 | % | |||||||||||||||
Non-GAAP total gross margin | $ | 51,976 | 61 | % | $ | 47,991 | 60 | % | $ | 102,788 | 62 | % | $ | 93,950 | 61 | % | |||||||||||
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP OPERATING EXPENSES
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Total GAAP operating expenses | $ | 49,148 | $ | 45,122 | $ | 99,345 | $ | 97,332 | |||||||
Amortization of acquired intangible assets | (2,936 | ) | (3,195 | ) | (5,958 | ) | (6,464 | ) | |||||||
Acquisition-related integration costs | — | (233 | ) | — | (748 | ) | |||||||||
Litigation settlement | — | — | (5,100 | ) | — | ||||||||||
Restructuring charges | — | 355 | — | (4,487 | ) | ||||||||||
Total Non-GAAP operating expenses | $ | 46,212 | $ | 42,049 | $ | 88,287 | $ | 85,633 | |||||||
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP EBITDAO AS PERCENTAGE OF REVENUE
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
GAAP net loss | $ | (911 | ) | $ | (6,107 | ) | $ | (11,385 | ) | $ | (21,543 | ) | |||
Depreciation and amortization | 7,808 | 10,124 | 16,527 | 20,464 | |||||||||||
Amortization of inventory fair value adjustment | 1,770 | 4,495 | 4,666 | 9,084 | |||||||||||
Share-based compensation | 3,128 | 1,275 | 6,272 | 3,110 | |||||||||||
Interest expense, net | 1,607 | 2,719 | 3,331 | 5,633 | |||||||||||
Income tax provision | 402 | 521 | 674 | 1,196 | |||||||||||
Litigation charges | 1,462 | 506 | 8,359 | 1,237 | |||||||||||
Restructuring and integration charges | — | 200 | — | 5,557 | |||||||||||
Other adjustments | (1,402 | ) | (85 | ) | (1,664 | ) | (442 | ) | |||||||
EBITDAO | $ | 13,864 | $ | 13,648 | $ | 26,780 | $ | 24,296 | |||||||
Revenue | $ | 85,432 | $ | 79,464 | $ | 168,403 | $ | 157,409 | |||||||
Non-GAAP EBITDAO as percentage of revenue | 16 | % | 17 | % | 16 | % | 15 | % | |||||||