Affymetrix Reports Third Quarter 2015 Operating Results

SANTA CLARA, Calif.--()--Affymetrix, Inc., (NASDAQ:AFFX) today reported its operating results for the third quarter of 2015.

“Itemized Reconciliation Between GAAP and Non-GAAP Net Income (Loss)”

Results for the three months ended September 30, 2015:

  • Total revenue was $86.5 million, compared to $87.1 million in third quarter of 2014.
  • Reported revenue decreased 0.6%, however, increased 3.6% on a constant currency basis.
  • GAAP net loss was $5.3 million, or $0.07 per diluted share, as compared to a GAAP net income of $2.4 million, or $0.03 per diluted share, in the third quarter of 2014, a decrease of $7.7 million or $0.10 per diluted share.
  • On October 9, 2015, we entered into a settlement agreement with Enzo Life Sciences, Inc. ("Enzo") and agreed to pay $10.0 million with respect to the lawsuit filed by Enzo in April 2012.
  • Non-GAAP net income was $8.0 million, or $0.10 per diluted share, compared to a non-GAAP net income of $6.3 million, or $0.08 per diluted share, for the third quarter of 2014. 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 $107.6 million, short term investments were $30.0 million and senior debt was $20.0 million as of September 30, 2015.
  • On October 28, 2015, we entered into a five-year Senior Credit Facility Agreement with Bank of America in an aggregate amount of $100.0 million of revolving commitment. We borrowed $20.0 million under this Senior Credit Facility and used the proceeds to pay off all of our outstanding senior debt under our credit agreement entered into in 2012.

Product revenue for the third quarter of 2015 was $80.0 million and service and other revenue was $6.5 million. This compares to product revenue of $78.1 million and service and other revenue of $9.0 million in the third quarter of 2014. Product revenue for the third quarter of 2015 included consumable revenue of $75.7 million and instrument revenue of $4.3 million. Product revenue for the third quarter of 2014 included consumable revenue of $73.7 million and instrument revenue of $4.4 million.

Total GAAP gross margin was 64%, as compared to 59% in the same period of 2014. Excluding non-GAAP adjustments such as the amortization of acquired intangible assets, non-GAAP gross margin for the third quarter of 2015 was 65% compared to 61% in the same period of 2014. This improvement was driven by higher sales as well as favorable manufacturing variances in the quarter. 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 third quarter of 2015, operating expenses were $59.5 million on a GAAP basis as compared to $46.6 million in the same period of 2014. GAAP operating expenses included $10.0 million of litigation settlement. Excluding non-GAAP adjustments, such as litigation costs and the amortization of acquired intangible assets, non-GAAP operating expenses for the third quarter of 2015 were $47.4 million, compared to an adjusted total of $44.1 million in the same period of 2014. The increase was primarily caused by higher headcount and associated compensation. Please refer to the "Itemized Reconciliation Between GAAP and Non-GAAP Operating Expenses" for a reconciliation of these GAAP and non-GAAP financial measures.

“We generated strong growth in our clinical and eBioscience businesses in Q3 which grew by more than 30% and 11% respectively, the strongest organic growth for eBioscience since we completed the acquisition more than three years ago,” stated Frank Witney, President and CEO. “We reiterate our FY15 guidance for mid-single digit revenue growth. As a result of our strong gross margin and continued cost controls, we are raising our adjusted EBITDA guidance to 18-20% for 2015.”

Recent developments:

  • The Green Super Rice project selected the Company’s Axiom Solution as the genotyping platform-of-choice which it will use it to build a genotyping program for large-scale molecular breeding activities within the international rice research community. The goal of this project, which is coordinated by the Chinese Academy of Agricultural Sciences and funded by the by the Chinese government and the Bill & Melinda Gates Foundation, is to develop at least fifteen new rice varieties and deliver them to small-hold farmers in 16 countries in Africa and Asia within the next three years. The long-term objective of the project is to benefit at least 20 million resource-limited rice farmers and to boost rice productivity by 20% in the target countries.
  • Introduced the Axiom® Transplant Genotyping Array, designed in collaboration with an international team of surgeons and scientists for research studies to improve transplantation success and individualize donor/patient selection and treatment. The array includes more than 30,000 variants that may contribute to transplant rejection or other complications. Researchers will also find the array useful in the study of immunology, disease and drug treatments; meta-analyses may be conducted, combining data with other genotype databases such as the UK Biobank cohort, a collection of more than 500,000 volunteers genotyped using the Affymetrix UK Biobank Axiom Array.
  • The Company signed a distribution agreement under which eBioscience, a business unit of Affymetrix, will sell Luminex’s MAGPIX®, Luminex® 200™ and FLEXMAP 3D® multiplexed assay platforms in specified countries in the Americas, Asia and Europe. Affymetrix will sell the Luminex instruments together with ProcartaPlex® multiplexed immunoassays and QuantiGene® Plex multiplexed quantitative gene expression assays, offering complete solutions to customers working in the fields of drug discovery and development, immuno-oncology and translational research. Through the first nine months of 2015 the ProcartaPlex and QuantiGene products lines have grown by 30% and 15% respectively.
  • The Company expanded its QuantiGene® Single-plex assay for PCR-free gene expression measurement to include a 384-well format that is easily automatable for high-throughput compound screening. The easy-to-use, high-sensitivity assay measures gene expression with minimal sample preparation, using branched DNA for signal amplification.

Affymetrix will host a conference call on Wednesday, October 28, 2015 at 2:00 p.m. PT to review its operating results for the third quarter of 2015. 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 October 28, 2015 until 8:00 p.m. PT on November 4, 2015 at the following numbers: domestic: (877) 660-6853, international: (201) 612-7415. The conference call passcode to access the replay is 13621453. 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 94,500 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 1,200 employees worldwide and maintains sales and distribution operations across Europe, Asia and Latin America.

All statements in this press release that are not historical in nature, are predicative in nature or that depend upon or refer to future events or conditions are "forward-looking statements" within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These include statements regarding our strategic initiatives, market expectations, integration of and synergies related to eBioscience, anticipated product and revenue growth, financial strength and regulatory environment, as well as all other "expectations," "beliefs," "hopes," "intentions," "strategies" and words of similar import and the negatives thereof. Such statements are based on our current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. We cannot assure you that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, those discussed in “Risk Factors” contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014. These forward-looking statements speak only as of the date of the press release. Unless required by law, we do not undertake to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our 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 income (loss) and net income (loss) per share as well as its total gross margin and operating expenses for the third quarter of 2015 and 2014 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 third quarter of 2015 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. Our management uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods.

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)
 
  September 30,   December 31,
2015 2014
ASSETS: (Note 1)
Current assets:
Cash and cash equivalents $ 107,593 $ 79,923
Short-term investments 30,000
Accounts receivable, net 47,849 46,896
Inventories, net—short-term portion 53,391 50,676
Deferred tax assets—short-term portion 3,709 3,778
Prepaid expenses and other current assets   8,580     9,197  
Total current assets 251,122 190,470
Property and equipment, net 21,365 18,087
Inventories, net—long-term portion 4,816 5,956
Goodwill 155,515 156,178
Intangible assets, net 106,374 106,183
Deferred tax assets—long-term portion 306 303
Other long-term assets   7,802     9,371  
Total assets $ 547,300   $ 486,548  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued liabilities $ 59,392 $ 53,063
Current portion of long-term debt 4,000 4,000
Deferred revenue—short-term portion   7,534     9,210  
Total current liabilities 70,926 66,273
Deferred revenue—long-term portion 2,236 2,372
4.00% notes 105,000 105,000
Term loan—long-term portion 15,950 18,950
Other long-term liabilities   20,694     21,626  
Total liabilities   214,806     214,221  
Stockholders’ equity:
Common stock 799 743
Additional paid-in capital 843,120 781,747
Accumulated other comprehensive income (7,930 ) (612 )
Accumulated deficit   (503,495 )   (509,551 )
Total stockholders’ equity   332,494     272,327  
Total liabilities and stockholders’ equity $ 547,300   $ 486,548  
Note 1:   The condensed consolidated balance sheet at December 31, 2014 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, 2014.
 
 
AFFYMETRIX, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
  Three Months Ended   Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
REVENUE:
Product sales $ 80,041 $ 78,069 $ 239,305 $ 227,644
Services and other   6,489     9,017     24,909     27,845  
Total revenue   86,530     87,086     264,214     255,489  
COSTS AND EXPENSES:
Cost of product sales 26,760 29,140 81,501 89,211
Cost of services and other 4,257 6,426 15,284 19,358
Research and development 13,003 12,926 38,035 37,443
Selling, general and administrative 36,526 33,718 107,599 108,546
Litigation settlement   10,000         10,000     5,100  
Total costs and expenses   90,546     82,210     252,419     259,658  
Income (loss) from operations (4,016 ) 4,876 11,795 (4,169 )
Other income (expense), net 74 (1,008 ) (324 ) 703
Interest expense   1,468     1,595     4,422     4,972  
Income (loss) before income taxes (5,410 ) 2,273 7,049 (8,438 )
Income tax expense (benefit)   (74 )   (111 )   993     563  
Net income (loss) $ (5,336 ) $ 2,384   $ 6,056   $ (9,001 )
 
Basic net income (loss) per common share $ (0.07 ) $ 0.03   $ 0.08   $ (0.12 )
Diluted net income (loss) per common share $ (0.07 ) $ 0.03   $

0.07

  $ (0.12 )
 
Shares used in computing basic net income (loss) per common share   79,856     73,413    

77,930

    72,955  
Shares used in computing diluted net income (loss) per common share   79,856     76,315    

80,908

    72,955  
 
 
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   Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
GAAP net income (loss) - basic and diluted $ (5,336 ) $ 2,384 $ 6,056 $ (9,001 )
Amortization of inventory fair value adjustment 4,666
Amortization of acquired intangible assets 3,358 3,913 10,304 12,593
Litigation settlement   10,000       10,000   5,100  
Non-GAAP net income - basic and diluted $ 8,022   $ 6,297 $ 26,360 $ 13,358  
 
Non-GAAP basic net income per common share $ 0.10   $ 0.09 $

0.34

$ 0.18  
Non-GAAP diluted net income per common share $ 0.10   $ 0.08 $

0.33

$ 0.18  
 
Shares used in computing Non-GAAP basic net income per common share   79,856     73,413  

77,930

  72,955  
Shares used in computing Non-GAAP diluted net income per common share (Note 1)   79,856     76,315  

80,908

  72,955  
Note 1:  

Weighted average shares outstanding includes the dilutive effect, if any, of employee stock options, employee stock purchase plan, and restricted stock awards.

 
 

ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP GROSS MARGIN

 
  Three Months Ended September 30,   Nine Months Ended September 30,
2015   2014 2015   2014
GAAP total gross margin $ 55,513   64 % $ 51,520   59 % $ 167,429   63 % $ 146,920   58 %
Amortization of inventory fair value adjustment % % % 4,666 2 %
Amortization of acquired intangible assets   1,253 1 %   1,352 2 %   3,768 1 %   4,073 1 %
Non-GAAP total gross margin $ 56,766 65 % $ 52,872 61 % $ 171,197 64 % $ 155,659 61 %
 
 

ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP OPERATING EXPENSES

 
  Three Months Ended   Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
Total GAAP operating expenses $ 59,529 $ 46,644 $ 155,634 $ 151,089
Amortization of acquired intangible assets (2,105 ) (2,561 ) (6,536 ) (8,520 )
Litigation settlement   (10,000 )       (10,000 )   (5,100 )
Total Non-GAAP operating expenses $ 47,424   $ 44,083   $ 139,098   $ 137,469  
 
 

ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP ADJUSTED EBITDA AS PERCENTAGE OF REVENUE

 
  Three Months Ended   Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
GAAP net income (loss) $ (5,336 ) $ 2,384 $ 6,056 $ (9,001 )
Depreciation and amortization 5,348 7,318 16,222 23,844
Amortization of inventory fair value adjustment 4,666
Interest expense, net 1,430 1,588 4,399 4,919
Income tax provision   (74 )   (111 )   993     563  
EBITDA 1,368 11,179 27,670 24,991
 
Adjustments to EBITDA:
Share-based compensation 3,655 3,164 10,943 9,436
(Gain) loss on foreign currency (19 ) 1,472 912 1,807
Litigation charges 10,967 801 11,279 9,160
(Gain) loss on sales of securities 1 (444 ) (53 ) (1,684 )
Other adjustments   (18 )   (14 )   (532 )   (772 )
Adjusted EBITDA $ 15,954   $ 16,158   $ 50,219   $ 42,938  
       
Revenue $ 86,530   $ 87,086   $ 264,214   $ 255,489  
 
Adjusted EBITDA as percentage of revenue   18 %   19 %   19 %   17 %
 

Contacts

Affymetrix, Inc.
Doug Farrell, 408-731-5285
Vice President of Investor Relations

Affymetrix, Inc.