Quidel Reports Fourth Quarter and Full Year 2018 Financial Results

SAN DIEGO–(BUSINESS WIRE)–Quidel Corporation (NASDAQ: QDEL), a provider of rapid diagnostic
testing solutions, cellular-based virology assays and molecular
diagnostic systems, announced today financial results for the fourth
quarter and year ended December 31, 2018.

Fourth Quarter 2018 Highlights:

  • Total revenue grew 15% to $132.6 million as compared to $114.9 million
    in the fourth quarter of 2017.
  • Quidel’s legacy revenue grew 3% from the fourth quarter of 2017 to
    $69.6 million.
  • Total influenza revenue increased 4% from the fourth quarter of 2017
    to $34.9 million.
  • Cardiac Immunoassay revenue grew 34% from the fourth quarter of 2017
    to $62.9 million.
  • Molecular Diagnostic Solutions revenue grew 30% to $5.8 million.
  • Reported GAAP EPS of $0.78 per diluted share and non-GAAP EPS of $0.80
    per diluted share.
  • Received CE Mark for Sofia® Quantitative Vitamin D Assay, Sofia® 2
    Lyme+ Fluorescent Immunoassay and TriageTrue™ High Sensitivity
    Troponin I Test.
  • Paid down $30.0 million on the Revolving Credit Facility.

Full Year 2018 Highlights:

  • Total revenue increased by 88% to $522.3 million, as compared to
    $277.7 million in 2017.
  • Quidel’s legacy revenue grew 11% from 2017 to $255.8 million.
  • Total influenza revenue increased 18% from 2017 to $126.7 million.
  • Reported Cardiac Immunoassay revenue of $266.5 million.
  • Molecular Diagnostic Solutions revenue grew 42% from 2017 to $19.4
    million.
  • Reported GAAP EPS of $1.86 per diluted share and non-GAAP EPS of $3.04
    per diluted share for 2018.
  • Reduced debt principal from $422.3 million to $111.7 million; at
    year-end, leverage ratio was below 1X EBITDA.

Fourth Quarter 2018 Results

Total revenue for the fourth quarter of 2018 was $132.6 million, versus
$114.9 million in the fourth quarter of 2017. The 15% increase in
revenue from the fourth quarter of 2017 was driven by a full quarter of
Cardiac Immunoassay revenue from the acquired Triage and BNP Businesses,
as well as increased sales of Rapid Immunoassay and Molecular
Diagnostics products.

Cardiac Immunoassay revenue, which includes Triage, Triage Toxicology
and BNP product revenues, totaled $62.9 million in the fourth quarter of
2018. Rapid Immunoassay product revenue (which includes QuickVue, Sofia
and Eye Health products) increased 3% in the fourth quarter of 2018 to
$50.4 million. Molecular Diagnostics revenue increased 30% to $5.8
million, led by 71% growth in Solana.

“In every respect, 2018 was an exceptional year for Quidel, as we met or
exceeded nearly all of our expectations laid out at our Analyst Day in
April last year. We expanded internationally, integrated a high
percentage of the Alere assets acquired in October 2017, and delivered
over $13.0 million in synergies. Commercial execution throughout the
year was outstanding, as well. Revenues for the Cardiac business were 7%
better than we had anticipated, and legacy revenues were up 11% over the
prior year. Placements of our flagship platform, Sofia, were nearly
10,000, far greater than in any prior year. And, we grew our molecular
business by 42%. We beat our EBITDA target, and generated significant
cash that was used in part to reduce our debt by $310.6 million,” said
Douglas Bryant, president and CEO of Quidel Corporation. “I’m proud of
the progress we’ve made, and of the ‘can-do’ culture that pervades our
company globally.”

Gross Profit in the fourth quarter of 2018 increased to $82.1 million,
an increase of $23.0 million, the result of a non-recurring inventory
step-up amortization in 2017, increased sales volumes associated with
the acquired Triage and BNP Businesses, and favorable product mix.
Overall, gross margin for the quarter was 62% as compared to 51% for the
same period last year, driven by the elimination of the 2017 inventory
step-up amortization, as well as higher factory absorption at all
manufacturing facilities, and improved yields at Summers Ridge in 2018.
R&D expense increased by $2.0 million in the fourth quarter, as compared
to the same period last year, primarily due to investments made to the
Savanna MDx platform. Sales and Marketing expense in the fourth quarter
of 2018 was in line with the fourth quarter of 2017. G&A expense
increased by $3.6 million in the quarter, primarily due to increased
personnel costs associated with the Triage and BNP Businesses, as well
as increased professional fees. Acquisition and Integration Costs were
$3.3 million, a reduction of $6.2 million from the fourth quarter of the
prior year, primarily due to lower acquisition costs, and reduced
integration activity related to the acquisition of the Triage and BNP
Businesses.

Net income for the fourth quarter of 2018 was $32.5 million, or $0.78
per diluted share, as compared to a net loss of $5.1 million, or $(0.15)
per share, for the fourth quarter of 2017. On a non-GAAP basis,
excluding amortization of intangibles, stock compensation expense and
certain non-recurring items, net income for the fourth quarter of 2018
was $34.3 million, or $0.80 per diluted share, as compared to net income
of $20.2 million, or $0.56 per diluted share, for the same period in
2017.

Full Year 2018 Results

Total revenues for the twelve-month period ended December 31, 2018
increased 88% to $522.3 million, from $277.7 million in 2017. The
increase in revenue was primarily driven by the full-year effect of
Cardiac Immunoassay revenue from the acquired Triage and BNP Businesses,
as well as 11% growth from the legacy Quidel business. Growth in the
legacy business was due to increased sales of Rapid Immunoassay and
Molecular Diagnostics products.

Cardiac Immunoassay revenue totaled $266.5 million for the year. Rapid
Immunoassay revenue in 2018 increased 11% over 2017 to $183.2 million.
Specialized Diagnostics grew 2% from 2017 to $53.2 million, mostly due
to 7% growth from Specialty Products. Molecular Diagnostics revenue
increased 42% to $19.4 million, led by 101% growth in Solana.

Gross Profit for the full year 2018 increased by $159.6 million, or 102%
over 2017 to $315.7 million, due to the full-year impact of the Cardiac
Immunoassay products from the acquisition of the Triage and BNP
Businesses, and increased influenza sales in the current year. Gross
margins increased by 420 basis points during 2018 due to higher volumes
with the addition of Cardiac Immunoassay products and improved product
mix in the current year. Amortization of intangibles reduced the gross
margin by 170 basis points, and the Triage/BNP inventory step-up of fair
value reduced the consolidated gross margin by an additional 70 basis
points. R&D expense for 2018 increased by $18.0 million over last year
primarily due to additional expenses associated with the Triage business
and investment in the Savanna MDx platform. Sales and Marketing expense
increased by $41.7 million over prior year, primarily due to expenses
associated with the acquired Triage and BNP Businesses. G&A increased by
$15.8 million in 2018, primarily due to additional costs associated with
the acquired Triage and BNP Businesses, higher professional service fees
and higher compensation costs. Acquisition and Integration costs in 2018
declined 14%, primarily due to lower acquisition costs, and reduced
integration activity related to the acquisition of the Triage and BNP
Businesses.

For the year ended 2018, net income was $74.2 million, or $1.86 per
diluted share, as compared to a net loss of $8.2 million, or $(0.24) per
share, for the year ended 2017. On a non-GAAP basis, net income for the
year ended 2018 was $129.5 million, or $3.04 per diluted share, as
compared to net income of $37.5 million, or $1.07 per diluted share, for
the year ended 2017.

Non-GAAP Financial Information

The Company is providing non-GAAP financial information to exclude the
effect of stock-based compensation, amortization of intangibles and
certain non-recurring items on earnings (loss) and net earnings (loss)
per share as a supplement to its consolidated financial statements,
which are presented in accordance with generally accepted accounting
principles in the U.S., or GAAP.

Management is providing the adjusted net earnings and adjusted net
earnings per share information for the periods presented because it
believes this enhances the comparison of the Company’s financial
performance from period-to-period, and to that of its competitors,
although the Company’s non-GAAP measures may not be comparable to
similarly titled measures used by other companies. These non-GAAP
measures presented in this press release are not meant to be considered
in isolation, or as a substitute for results prepared in accordance with
GAAP. A reconciliation of the non-GAAP financial measures to the
comparable GAAP measures is included in this press release as part of
the attached financial tables.

Conference Call Information

Quidel management will host a conference call to discuss the fourth
quarter and full year 2018 results as well as other business matters
today beginning at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).
During the conference call, management may answer questions concerning
business and financial developments and trends. Quidel’s responses to
these questions, as well as other matters discussed during the
conference call, may contain or constitute material information that has
not been previously disclosed.

To participate in the live call by telephone from the U.S., dial
877-930-5791, or from outside the U.S. dial 253-336-7286, and enter the
pass code 887-9337.

A live webcast of the call can be accessed at http://ir.quidel.com/
and the website replay will be available for 14 days. The telephone
replay will be available for 48 hours beginning at 8:00 p.m. Eastern
Time (5:00 p.m. Pacific Time) today by dialing 855-859-2056 from the
U.S., or 404-537-3406 for international callers, and entering pass code
887-9337.

About Quidel Corporation

Quidel Corporation serves to enhance the health and well-being of people
around the globe through the development of diagnostic solutions that
can lead to improved patient outcomes and provide economic benefits to
the healthcare system. Marketed under the Sofia®, QuickVue®, D3® Direct
Detection, Thyretain®, Triage® and InflammaDry® leading brand names, as
well as under the new Solana®, AmpliVue® and Lyra® molecular diagnostic
brands, Quidel’s products aid in the detection and diagnosis of many
critical diseases and conditions, including, among others, influenza,
respiratory
syncytial virus
, Strep A, herpes, pregnancy, thyroid
disease
and fecal
occult blood
. Quidel’s recently acquired Triage® system of tests
comprises a comprehensive test menu that provides rapid, cost-effective
treatment decisions at the point-of-care (POC), offering a diverse
immunoassay menu in a variety of tests to provide diagnostic answers for
quantitative BNP, CK-MB, d-dimer, myoglobin, troponin I and qualitative
TOX Drug Screen. Quidel’s research and development engine is also
developing a continuum of diagnostic solutions from advanced immunoassay
to molecular diagnostic tests to further improve the quality of
healthcare in physicians’ offices and hospital and reference
laboratories. For more information about Quidel’s comprehensive product
portfolio, visit quidel.com.

This press release contains forward-looking statements within the
meaning of the federal securities laws that involve material risks,
assumptions and uncertainties. Many possible events or factors could
affect our future financial results and performance, such that our
actual results and performance may differ materially from those that may
be described or implied in the forward-looking statements. As such, no
forward-looking statement can be guaranteed. Differences in actual
results and performance may arise as a result of a number of factors
including, without limitation, adverse changes in competitive conditions
in domestic and international markets, the reimbursement system
currently in place and future changes to that system, changes in
economic conditions in our domestic and international markets, lower
than anticipated market penetration of our products, our reliance on
sales of our influenza diagnostic tests, fluctuations in our operating
results resulting from the timing of the onset, length and severity of
cold and flu seasons, seasonality, government and media attention
focused on influenza and the related potential impact on humans from
novel influenza viruses, the quantity of our product in our
distributors’ inventory or distribution channels, changes in the buying
patterns of our distributors, and changes in the healthcare market and
consolidation of our customer base; our development and protection of
proprietary technology rights; our development of new technologies,
products and markets; our reliance on a limited number of key
distributors; our exposure to claims and litigation, including
litigation currently pending against us involving Beckman Coulter;
intellectual property risks, including but not limited to, infringement
litigation; our need for additional funds to finance our capital or
operating needs; the financial soundness of our customers and suppliers;
acceptance of our products among physicians and other healthcare
providers; competition with other providers of diagnostic products;
adverse actions or delays in new product reviews or related to
currently-marketed products by the U.S. Food and Drug Administration
(the “FDA”) or other regulatory authorities or loss of any previously
received regulatory approvals or clearances; changes in government
policies; costs of or our failure to comply with government regulations
in addition to FDA regulations; compliance with government regulations
relating to the handling, storage and disposal of hazardous substances;
third-party reimbursement policies; our failure to comply with laws and
regulations relating to billing and payment for healthcare services; our
ability to meet demand for our products; interruptions in our supply of
raw materials; product defects; business risks not covered by insurance;
failure in our information technology and storage systems; our exposure
to cyber-based attacks and security breaches; competition for and loss
of management and key personnel; international risks, including but not
limited to, compliance with product registration requirements, exposure
to currency exchange fluctuations and foreign currency exchange risk
sharing arrangements, longer payment cycles, lower selling prices and
greater difficulty in collecting accounts receivable, reduced protection
of intellectual property rights, political and economic instability,
taxes, and diversion of lower priced international products into U.S.
markets; changes in tax rates and exposure to additional tax liabilities
or assessments; risks relating to the acquisition and integration of the
Triage and BNP Businesses; Alere’s failure to perform under various
transition agreements relating to our acquisition of the Triage and BNP
Businesses; that we may incur substantial costs to build our information
technology infrastructure to transition the Triage and BNP Businesses;
that we may have to write off goodwill relating to our acquisition of
the Triage and BNP Businesses; that we our ability to manage our growth
strategy; the level of our indebtedness; the amount of, and our ability
to repay, renew or extend, our outstanding debt and its impact on our
operations and our ability to obtain financing; that substantially the
Senior Credit Facility is secured by substantially all of our assets;
our prepayment requirements under the Senior Credit Facility; the
agreements for our indebtedness place operating and financial
restrictions on the Company; that an event of default could trigger
acceleration of our outstanding indebtedness; that we may incur
additional indebtedness; increases in interest rate relating to our
variable rate debt; dilution resulting from future sales of our equity;
volatility in our stock price; provisions in our charter documents,
Delaware law and the indenture governing our Convertible Senior Notes
that might delay or impede stockholder actions with respect to business
combinations or similar transactions; and our intention of not paying
dividends. Forward-looking statements typically are identified by the
use of terms such as “may,” “will,” “should,” “might,” “expect,”
“anticipate,” “estimate,” “plan,” “intend,” “goal,” “project,”
“strategy,” “future,” and similar words, although some forward-looking
statements are expressed differently. The risks described in reports and
registration statements that we file with the Securities and Exchange
Commission (the “SEC”) from time to time, should be carefully
considered. You are cautioned not to place undue reliance on these
forward-looking statements, which reflect management’s analysis only as
of the date of this press release. Except as required by law, we
undertake no obligation to publicly release the results of any revision
or update of these forward-looking statements, whether as a result of
new information, future events or otherwise.

 
QUIDEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data; unaudited)

 
  Three months ended December 31,
  2018       2017  
Total revenues $ 132,588 $ 114,890
Cost of sales   50,456     55,763  
Gross profit   82,132     59,127  
Research and development 12,641 10,674
Sales and marketing 26,380 26,373
General and administrative 12,299 8,709
Acquisition and integration costs   3,274     9,484  
Total costs and expenses   54,594     55,240  
Operating income 27,538 3,887
Other expenses, net
Interest expense, net (4,808 ) (9,201 )
Loss on extinguishment of debt        
Total other expense, net   (4,808 )   (9,201 )
Income (loss) before benefit for income taxes 22,730 (5,314 )
Benefit for income taxes   (9,749 )   (226 )
Net income (loss) $ 32,479   $ (5,088 )
 
Basic earnings (loss) per share $ 0.82 $ (0.15 )
Diluted earnings (loss) per share $ 0.78 $ (0.15 )
Shares used in basic per share calculations 39,507 34,333
Shares used in diluted per share calculations 42,816 34,333
 
Gross profit as a % of total revenues 62 % 51 %
Research and development as a % of total revenues 10 % 9 %
Sales and marketing as a % of total revenues 20 % 23 %
General and administrative as a % of total revenues 9 % 8 %
 
Condensed balance sheet data (in thousands):   12/31/2018     12/31/2017  
Cash, cash equivalents and restricted cash $ 43,695 $ 36,086
Accounts receivable, net 58,677 67,046
Inventories 67,379 67,078
Total assets 806,371 935,251
Short-term debt 54,550 20,315
Long-term debt 56,865 381,110
Stockholders’ equity 425,584 227,104
 
Three months ended December 31,
Consolidated net revenues by product category are as follows (in
thousands):
  2018     2017  
Rapid Immunoassay $ 50,420 $ 49,125
Cardiac Immunoassay 62,943 47,030
Specialized Diagnostic Solutions 13,384 14,247
Molecular Diagnostic Solutions   5,841   $ 4,488  
Total revenues $ 132,588   $ 114,890  
 
QUIDEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data; unaudited)

 
  Twelve months ended December 31,
  2018       2017  
Total revenues $ 522,285 $ 277,743
Cost of sales   206,572     121,601  
Gross profit   315,713     156,142  
Research and development 51,649 33,644
Sales and marketing 108,987 67,248
General and administrative 44,951 29,192
Acquisition and integration costs   14,197     16,506  
Total costs and expenses   219,784     146,590  
Operating income 95,929 9,552
Other expense, net:
Interest expense, net (24,283 ) (17,588 )
Loss on extinguishment of debt   (8,262 )    
Total other expense, net   (32,545 )   (17,588 )
Income (loss) before income taxes 63,384 (8,036 )
(Benefit) provision for income taxes   (10,799 )   129  
Net income (loss) $ 74,183   $ (8,165 )
 
Basic earnings (loss) per share $ 1.95 $ (0.24 )
Diluted earnings (loss) per share $ 1.86 $ (0.24 )
Shares used in basic per share calculations 37,995 33,734
Shares used in diluted per share calculations 42,554 33,734
 
Gross profit as a % of total revenues 60 % 56 %
Research and development as a % of total revenues 10 % 12 %
Sales and marketing as a % of total revenues 21 % 24 %
General and administrative as a % of total revenues 9 % 11 %
 
Twelve months ended December 31,
Consolidated net revenues by product category are as follows (in
thousands):
  2018     2017  
Rapid Immunoassay $ 183,160 $ 165,099
Cardiac Immunoassay 266,524 47,030
Specialized Diagnostic Solutions 53,243 51,978
Molecular Diagnostic Solutions   19,358     13,636  
Total revenues $ 522,285   $ 277,743  
 
 

QUIDEL CORPORATION

Reconciliation of Non-GAAP Financial Information
(In thousands, except per share data; unaudited)
 
  Three months ended December 31,
Gross Profit   Operating Income   Net Income   Diluted EPS
2018   2017 2018   2017   2018       2017   2018     2017  
GAAP Financial Results $ 82,132 $ 59,127 $ 27,538   $ 3,887 $ 32,479 $ (5,088 )
Interest expense on Convertible Senior Notes, net of tax (a)   775      
Net income (loss) used for diluted earnings per share, if-converted
method
  33,254     (5,088 ) $ 0.78 $ (0.15 )
 
Adjustments:
Interest expense on Convertible Senior Notes (a) 1,399
Non-cash stock compensation expense 12 225 2,519 3,123 2,519 3,123
Amortization of intangibles 1,973 3,340 7,006 8,537 7,006 8,537
Amortization of debt discount and issuance costs on credit facility 101 494
Non-cash interest expense for deferred consideration 2,314 2,608
Amortization of inventory step-up of fair value 10,950 10,950 10,950
Loss on extinguishment of Convertible Senior Notes
Loss on extinguishment of Senior Credit Facility
Change in fair value of acquisition contingencies 369 369
Acquisition and integration costs 3,274 9,484 3,274 9,484
Income tax impact of adjustments (a)(b) (2,961 ) (12,811 )
Income tax impact of valuation allowance for deferred tax assets           (11,588 )   1,535      
Adjusted (c) $ 84,117 $ 73,642 $ 40,706 $ 35,981 $ 34,288   $ 20,231   $ 0.80 $ 0.56  

____________________

 
(a) The if-converted method was not applicable during 2017 as the
Convertible Senior Notes were not convertible.
 
(b) Income tax impact of adjustments represents the tax impact related
to the non-GAAP adjustments listed above and reflects an effective
tax rate of 19% for 2018 and 35% for 2017.
 
(c) Adjusted net earnings per share for the three months ended December
31, 2018 was calculated using an adjusted diluted weighted average
shares outstanding of 42.8 million shares. Adjustments from GAAP
diluted weighted average shares outstanding consisted of 1.8 million
potentially dilutive shares issuable from Convertible Senior Notes
and 1.5 million potentially dilutive shares issuable from stock
options and unvested RSUs.
 

QUIDEL CORPORATION

Reconciliation of Non-GAAP Financial Information
(In thousands, except per share data; unaudited)
 
  Twelve months ended December 31,
Gross Profit   Operating Income   Net Income   Diluted EPS
2018   2017 2018   2017   2018       2017   2018     2017  
GAAP Financial Results $ 315,713 $ 156,142 $ 95,929   $ 9,552 $ 74,183 $ (8,165 )
Interest expense on Convertible Senior Notes, net of tax (a)   4,927      
Net income (loss) used for diluted earnings per share, if-converted
method
  79,110     (8,165 ) $ 1.86 $ (0.24 )
 
Adjustments:
Interest expense on Convertible Senior Notes (a) 5,528
Non-cash stock compensation expense 763 579 11,709 9,061 11,709 9,061
Amortization of intangibles 8,712 8,883 28,896 16,142 28,896 16,142
Amortization of debt discount and issuance costs on credit facility 861 494
Non-cash interest expense for deferred consideration 10,000 2,608
Loss on extinguishment of Convertible Senior Notes 2,304
Loss on extinguishment of Senior Credit Facility 5,958
Amortization of inventory step-up of fair value 3,650 10,950 3,650 10,950 3,650 10,950
Change in fair value of acquisition contingencies 1,114 1,114
Acquisition and integration costs 14,197 16,506 14,197 16,506
Income tax impact of adjustments (a)(b) (14,951 ) (21,451 )
Income tax impact of valuation allowance for deferred tax assets           (13,374 )   5,799      
Adjusted (c) $ 328,838 $ 176,554 $ 155,495 $ 62,211 $ 129,474   $ 37,472   $ 3.04 $ 1.07  

Contacts

Quidel Contact:
Quidel Corporation
Randy Steward
Chief
Financial Officer
858.552.7931

Media and Investors Contact:
Quidel Corporation
Ruben Argueta
858.646.8023
ruben.argueta@quidel.com

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