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.
AFFYMETRIX, INC. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 30,
December 31,
2014
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 Six
Months Ended June 30, 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
Six Months Ended June 30, 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 Six Months Ended June
30, 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 Six Months Ended June
30, 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 %
Affymetrix, Inc.Doug Farrell, 408-731-5285Vice President of
Investor Relations
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