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Q2 2013 Earnings Call
July 31, 2013 5:00 pm ET
Doug Farrell - Vice President of Investor Relations and Treasury
Franklin R. Witney - Chief Executive Officer, President and Director
Gavin Wood - Chief Financial Officer and Executive Vice President
Peter Lawson - Mizuho Securities USA Inc., Research Division
Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division
Isaac Ro - Goldman Sachs Group Inc., Research Division
Bryan Brokmeier - Maxim Group LLC, Research Division
Daniel Brennan - Morgan Stanley, Research Division
Shaun Rodriguez - Cowen and Company, LLC, Research Division
Justin Bowers - Leerink Swann LLC, Research Division
Previous Statements by AFFX
» Affymetrix Management Discusses Q1 2013 Results - Earnings Call Transcript
» Affymetrix Management Discusses Q4 2012 Results - Earnings Call Transcript
» Affymetrix's CEO Presents at 2012 Lazard Life Sciences Conference (Transcript)
Thank you, operator. Good afternoon, everybody. Welcome to the call. Today we're going to review our results for the second quarter of 2013, which were released at the close of the market today. If you haven't had a chance to review those yet, you can get access to the press release on our website at Affymetrix .com.
Joining me on the call today is our President and CEO, Frank Witney; as well as our Chief Financial Officer, Gavin Wood.
I'd like to remind callers that our discussion may include forward-looking statements about future expectations, plans and prospects for the company. We believe these statements are based on reasonable assumptions, but actual results may differ materially from those indicated. Important factors which could cause our actual results to differ are indicated in our forward-looking statements and detailed in SEC filings.
It is our intent that these forward-looking statements be protected under the Safe Harbor created by the Private Securities Litigation Reform Act of 1995. We encourage you to review these documents carefully as we make no obligation to update this information.
Additionally, we will be making GAAP to non-GAAP comparisons today. A full reconciliation of the non-GAAP measures to GAAP can be found in our press release as well. As a reminder, this call is being recorded and the audio from the call is being webcast over the Internet on our homepage at affymetrix.com.
Before I turn the call over to Frank, I'd like to provide an update to a figure in the third bullet point of our press release. The GAAP net loss of $21.5 million was actually a year-to-date figure for 2013, not a Q2 number for 2012. The figures in the income statement will show you the year-over-year comparisons.
So with that, let me turn the call over to Frank.
Franklin R. Witney
Thanks, Doug. Good afternoon, and thank you, all, for joining us on the call today. Before I discuss our second quarter results, I'd like to formally welcome Gavin Wood to the executive management team. As most of you know, Gavin was appointed Chief Financial Officer at Affymetrix in May, following the announcement of Tim Barabe's retirement. Gavin has been with the company since 2006 and most recently served as our Vice President of International Finance, where he's an integral part of our financial and commercial efforts in Europe and in Asia. For those of you have not have the chance to meet Gavin yet, we look forward to having that opportunity during the fall conference season.
I'd like to begin by restating the goals of the second phase of our strategic plan, which spans 2013 and '14. During this phase, our goals are: First, to grow our top line revenue by expanding our product portfolio and further penetrating the translational sciences markets, to establish the company as a key provider of molecular diagnostics products, and to build our presence in the applied genomics market, in particular in agrigenomics. Second, to achieve sustained profitability. And third, to strengthen our balance sheet and increase our strategic flexibility.
I'd like to highlight some key metrics to demonstrate that we are making steady progress in all 3 of our priorities. From a revenue perspective, in Q2 2013, $74.2 million of our total revenues comprised the product sales. On a pro forma basis, product revenue in Q2 2012 was about $75.5 million, a decline of less than 2% in 2013.
This continued stabilization of our revenue demonstrates that our acquisition of eBioscience has significantly reduced our dependence on Gene Expression. From a diversification perspective, we closed our acquisition of eBioscience in late June last year. In Q2 2012, our Expression business accounted for approximately 45% of our revenues, while in Q2 this year our RNA Expression products accounted for only 31% of our revenue.
When I discuss each business unit in more detail, I'll highlight a number of exciting new product launches and initiatives, each of which will further contribute to our efforts to return to consistent top line growth. We continue to aggressively grow both segments of our Genetic Analysis business, genotyping and clinical arrays, and achieve some improvement in our Gene Expression business in the quarter. Secondly, with regard to profit, our EBITDA for the second quarter of 2013 was $13.6 million or 17% of sales, and year-to-date EBITDA is more than $24 million or 15% of sales. We remain committed to achieving EBITDA margins of approximately 15% of sales in 2013.
Finally, since we closed the eBioscience acquisition, we have made significant progress in strengthening our balance sheet by reducing our senior debt from $85 million to $63.7 million, a reduction of about $21 million and more than 25% in just 13 months. Overall, we are encouraged by our second quarter results. We saw strong growth in our Genetic Analysis business unit and improved revenue trends across all other business units compared to the last quarter.