SANTA CLARA, Calif.--(BUSINESS WIRE)-- Affymetrix, Inc., (NASDAQ:AFFX) today reported its operating results for the second quarter of 2010. Total revenue for the quarter was $71.7 million, in line with previously announced expectations, as compared to total revenue of $81.6 million in the second quarter of 2009.
For the second quarter of 2010, product revenue was $65.1 million, service revenue was $4.7 million, and royalties and other revenue were $1.9 million. This compares to second quarter 2009 product revenue of $67.2 million, service revenue of $12.2 million, and royalties and other revenue of $2.2 million.
The Company reported a net loss of approximately $5.5 million, or $0.08 per diluted share, in the second quarter of 2010, which includes a $1.7 million, or $0.02 per diluted share, gain on debt repurchase from the convertible notes buyback of $26.7 million of aggregate principal amount. This compares to a net income of $7.3 million, or $0.11 per diluted share, in the second quarter of 2009, which included a $17.4 million, or $0.25 per diluted share, gain on debt repurchase from the convertible notes buyback.
For the second quarter of 2010, cost of product sales was $27.5 million compared to $29.9 million in the same period of 2009, which included $4.6 million of manufacturing consolidation-related costs. Cost of services and other was $3.6 million compared to $7.6 million in the same period of 2009.
Product gross margin was 57.7 percent, as compared to 55.5 percent in the same period of 2009.
For the second quarter of 2010, operating expenses were $46.2 million as compared to operating expenses of $52.3 million in the second quarter of 2009.
“Despite the market and commercial challenges that impacted our second quarter results, we continued to make significant operational improvements, including expanding product gross margins and reducing our operating expenses by 12% year-over-year,” stated Kevin M. King, president and CEO. “We remain confident and are committed to our strategy of expanding the business in the large and growing validation and routine testing markets.”
“Since the beginning of the second quarter, we have bought back approximately $96 million of our 3.5% convertible notes, strengthening our balance sheet and significantly reducing future interest payments,” said Tim Barabe, executive vice president and CFO. “Our balance sheet remains strong, with approximately $120 million in net cash, and we continue to be cash-flow positive from operations.”
Since the beginning of the second quarter, the Company repurchased a total of $95.8 million of its 3.5% convertible notes maturing in January 2013 for $88.9 million. During the second quarter, the Company repurchased $26.7 million of notes at face value for $24.6 million, and since June 30, 2010, it repurchased an additional $69.1 million face value of notes for $64.3 million. At the end of the second quarter, the Company had approximately $220 million of outstanding convertible debt, and, as of July 15, 2010, following the additional notes repurchases, the Company had approximately $151 million of outstanding convertible debt.
Quarterly Highlights • The launch of the Axiom™ Genome-Wide ASI Array, the first commercial product to provide maximum power for genome-wide association studies (GWAS) in East Asian populations. This array is the second catalog release for the Axiom Genotyping Solution, which includes a suite of population-optimized arrays for genomic studies that will be delivered in the next year. • The launch of the Family Finder DNA test for connecting family members across all ancestral lines by Family Tree DNA, the first and largest genealogical DNA testing company. The test utilizes Affymetrix’ Axiom genotyping technology and the GeneTitan®System to confidently match a wide range of family relationships within five generations. • The delivery of the first custom array designed for a 100,000-sample genotyping project to be performed using the Axiom Genotyping Solution. The array, optimized for European populations, was developed in conjunction with researchers from the Kaiser Permanente Division of Research and University of California, San Francisco (UCSF) as part of an NIH-funded project to create a new resource for studying disease, health, and aging. • The signing of a Powered by Affymetrix™ (PbA) agreement by Signature Diagnostics, under which Signature obtains a worldwide license to use Affymetrix microarray technology to develop and commercialize diagnostic and prognostic colorectal cancer (CRC) tests. Signature plans to launch two microarray-based in vitro diagnostic (IVD) products by the fourth quarter of this year to enable earlier diagnosis and improved prognosis for CRC. Approximately 396,000 people are diagnosed with CRC annually in the five major European countries and the US, and millions more go undetected because of limitations in current diagnosis methods. Signature will launch the tests in Europe and plans to seek US regulatory approval in the future. • The launch of Axiom custom genotyping arrays, the newest addition to the Axiom Genotyping Solution. Researchers can now leverage Affymetrix’ Axiom Genomic Database, the world’s largest collection of validated common and rare SNPs, to create custom arrays containing tens of thousands to up to 2.6 million SNPs. In the near future, this capability will expand to support custom array designs containing more than 5 million SNPs. This inherent flexibility allows researchers to conduct genome-wide association, replication, fine mapping, and candidate gene studies on a single platform. • Launched QuantiGene® ViewRNA Assay formats, which enable a new era of “in situ multiplex gene expression analysis” by allowing drug screening of native cells and advancing the pace of biomarker disease research and stem cell studies. QuantiGene ViewRNA Assays reliably quantitate gene expression while precisely localizing RNA trafficking within the cell at the single-copy level. The assays’ high specificity, bright signals, multiplex capability, and use across broad sample types, including tissues and blood, provide researchers with a new level of in situ gene expression analysis. Affymetrix’s management team will host a conference call on July 21, 2010 at 2:00 p.m. PT to review its operating results for the second quarter of 2010. 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: (866) 500-AFFX, international: (706) 643-2771.
A replay of this call will be available from 5:00 p.m. PT on July 21, 2010 until 8:00 p.m. PT on July 28, 2010 at the following numbers: domestic: (800) 642-1687, international: (706) 645-9291. The passcode for both replays is 85766840. 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. Almost 2,000 systems have been shipped around the world and almost 22,000 peer-reviewed papers have been published using the technology. Affymetrix is headquartered in Santa Clara, Calif., and has manufacturing facilities in Cleveland, Ohio, and Singapore. The Company has about 1,000 employees worldwide and maintains sales and distribution operations across Europe and Asia. For more information about Affymetrix, please visit the Company’s website.
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 regarding Affymetrix’ “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: risk relating to the Company’s ability to successfully commercialize new products, risk relating to past and future acquisitions, including the ability of the Company to successfully integrate such acquisitions into its existing business; risks of the Company’s ability to achieve and sustain higher levels of revenue, higher gross margins and reduced operating expenses; 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’ Annual Report on Form 10-K for the year ended December 31, 2009, and other SEC reports, including its Quarterly Reports on Form 10-Q for subsequent quarterly periods. 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’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.
PLEASE NOTE: Affymetrix, the Affymetrix logo, GeneChip, and all other trademarks are the property of Affymetrix, Inc. AFFYMETRIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
June 30, December 31, 2010 2009 ASSETS: (Note 1) Current assets: Cash and cash equivalents $ 77,184 $ 65,642 Restricted cash—short-term portion 2,564 1,686 Available-for-sale securities—short-term portion 223,877 213,377 Accounts receivable, net 52,435 64,933 Inventories 55,311 54,490 Deferred tax assets—current portion 1,256 1,172 Prepaid expenses and other current assets 12,475 15,903 Total current assets 425,102 417,203 Available-for-sale securities—long-term portion 30,440 64,760 Property and equipment, net 64,017 68,182 Acquired technology rights, net 43,928 49,855 Deferred tax assets—long-term portion 4,673 4,720 Restricted cash—long-term portion 109 1,109 Other assets 14,185 25,121 Total assets $ 582,454 $ 630,950 LIABILITIES AND STOCKHOLDERS’ EQUITY: Current liabilities: Accounts payable and accrued liabilities $ 50,210 $ 57,183 Deferred revenue—current portion 13,731 14,534 Total current liabilities 63,941 71,717 Deferred revenue—long-term portion 3,694 3,898 Other long-term liabilities 10,792 10,295 Convertible notes 220,499 247,201 Stockholders’ equity: Common stock 708 710 Additional paid-in capital 737,486 733,378 Accumulated other comprehensive income 795 4,051 Accumulated deficit (455,461 ) (440,300 ) Total stockholders’ equity 283,528 297,839 Total liabilities and stockholders’ equity $ 582,454 $ 630,950 Note 1: The condensed consolidated balance sheet at December 31, 2009 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, 2009. AFFYMETRIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009 REVENUE: Product sales $ 65,103 $ 67,156 $ 138,546 $ 132,026 Services 4,742 12,221 9,205 23,777 Royalties and other revenue 1,833 2,177 4,114 4,312 Total revenue 71,678 81,554 151,865 160,115 COSTS AND EXPENSES: Cost of product sales 27,535 29,885 55,994 64,319 Cost of services and other 3,554 7,567 8,143 15,157 Research and development 17,815 20,361 36,294 41,644 Selling, general and administrative 28,428 31,686 59,807 65,668 Restructuring charges - 226 - 2,193 Total costs and expenses 77,332 89,725 160,238 188,981 Loss from operations (5,654 ) (8,171 ) (8,373 ) (28,866 ) Interest income and other, net 738 1,356 (2,860 ) 516 Interest expense 2,340 2,903 4,772 6,080 Gain on repurchase of convertible notes 1,744 17,447 1,744 17,447 (Loss) income before income taxes (5,512 ) 7,729 (14,261 ) (16,983 ) Income tax provision 29 409 900 902 Net (loss) income $ (5,541 ) $ 7,320 $ (15,161 ) $ (17,885 ) Basic net (loss) income per common share $ (0.08 ) $ 0.11 $ (0.22 ) $ (0.26 ) Diluted net (loss) income per common share $ (0.08 ) $ 0.11 $ (0.22 ) $ (0.26 ) Shares used in computing basic net (loss) income per common share 69,030 68,651 68,981 68,527 Shares used in computing diluted net (loss) income per common share 69,030 68,939 68,981 68,527
Contacts Affymetrix, Inc. Doug Farrell, 408-731-5285 Vice President, Investor Relations & Treasury
