Affymetrix Sees Earnings After Two Years - Analyst Blog
06 August 2013 - 4:00AM
Zacks
Global genetic devices maker,
Affymetrix Inc.’s (AFFX) reported earnings for the
first time since the first quarter of 2011. The company posted
adjusted earnings per share of 4 cents in the second quarter of
2013 versus the Zacks Consensus Estimate of a loss of a penny and
the year-ago adjusted loss of 13 cents.
AFFX’s strategic restructuring plans are finally paying off as
demonstrated by the bottom-line growth. Moreover, the acquisition
of eBioscience has opened new avenues for Affymetrix and turned its
focus away from the beleaguered Gene Expression business.
Reported net loss in the quarter was $6.1 million (or 9 cents per
share) versus a net income of $23.6 million (or 33 cents) in the
previous-year quarter.
Revenues
Revenues increased 19.7% year over year to $79.5 million (including
the eBioscience acquisition). eBioscience, which AFFX acquired in
Jun 2012, contributed $18.8 million to total revenue in the second
quarter. Revenues were almost in line with the Zacks Consensus
Estimate.
On a combined pro forma basis (including eBioscience), revenues
from products were down 1.7% year over year to $74.2 million in the
quarter. Product revenues included consumable sales of $51.2
million, down 3.9%, and instrument sales of $4.2 million, up 10.5%
from the prior-year quarter.
Revenues from the acquired eBioscience unit increased significantly
to $18.8 million in the quarter compared to $1.4 million in the
year-ago period. However, Services and other revenues plunged 32.9%
to $5.3 million in the quarter.
Margins
Gross margin for the second quarter declined 500 basis points (bps)
to 53% from 58% in the second quarter of 2012. However, on an
adjusted basis, gross margin increased 100 bps to 60%.
Selling, general and administrative (SG&A) expenses decreased
17.3% to $33.5 million, mainly due to the company’s restructuring
plans, headcount reduction and lower IT spending. Research and
Development (R&D) expenses fell 11.8% to about $12 million, due
to reduced headcount and variable compensation expenses along with
lower spending on supplies and consulting.
Operating expenses were $45.1 million in the quarter, down 16.6%
from the year-ago level of $54.1 million. Adjusted operating
expenses were down 12.8% to $42.1 million, driven by restructuring
and headcount reduction. Reported loss from operations was roughly
$3 million, significantly down from a loss of $15.4 million in the
prior-year quarter.
Financial Condition
Affymetrix ended the second quarter of 2013 with cash and cash
equivalents of $43.7 million versus $25.7 million at the end of
2012. On an encouraging note, the company generated roughly $10.3
million in cash flow from operations in the quarter due to higher
revenues and reduced senior-secured debt by 25% year over year.
Recent Developments
In the quarter, Affymetrix launched a new product, Axiom 384HT
Genotyping Format, a high-throughput platform capable of genotyping
384 samples simultaneously and run on the GeneTitan Instrument. The
company also made changes in its top management with the
appointment of Gavin Wood as the Executive Vice President and Chief
Financial Officer.
Our Take
We are impressed with Affymetrix’s strong second-quarter results,
following a dismal first quarter. Following the announcement of the
results, the company’s share price surged 16.3% to close at $4.42
on Friday, Aug 2.
We believe that Affymetrix is ready for a turnaround and the worst
days are over for the company. In the face of declining demand for
Affymetrix’ flagship GeneChip Expression products, management's
strategy to transform AFFX into a company with a broad reach in the
high-growth markets for translational medicine, molecular
diagnostics and applied markets is encouraging.
Despite a tight U.S. academic funding environment, new products and
strategic agreements should propel growth, going forward.
Additionally, the company’s restructuring and debt reduction
efforts should boost margins and profitability.
Currently, AFFX has a Zacks Rank #1 (Strong Buy). Other companies
like Biogen Idec (BIIB), Gilead
Sciences (GILD) and Actelion (ALIOF), all
carrying a Zacks Rank #1 (Strong Buy), are also expected to do well
in the Medical-Biomed/Gene industry.
AFFYMETRIX INC (AFFX): Free Stock Analysis Report
ACTELION LTD (ALIOF): Get Free Report
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
GILEAD SCIENCES (GILD): Free Stock Analysis Report
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