QIAGEN Reports Second Quarter 2013 Results and Announces New Share Repurchase Program
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QIAGEN N.V. announced results of operations for the second quarter and first half of 2013 and announced plans to launch a new program to repurchase up to $100 million of its shares.
Adjusted net sales (includes non-GAAP revenues from Ingenuity) in the second quarter rose 3% (+3% at constant exchange rates, CER) to $316.4 million from the second quarter of 2012. Adjusted operating income in the quarter declined 3% to $83.4 million, as the adjusted operating income margin fell to 26% of net sales. Adjusted diluted earnings per share (EPS) rose to $0.27 in the second quarter of 2013 from $0.25 in the year-ago quarter. A restructuring charge of $76 million was taken in the second quarter of 2013 as part of implementing the last group of actions to complete a major efficiency project designed to free up resources for reallocation to strategic initiatives.
“QIAGEN delivered growth across all regions in the second quarter of 2013 despite challenging economic conditions, particularly given the funding concerns for life sciences research in the United States and Europe. Our focus on accelerating innovation and growth is delivering value with improving results in Molecular Diagnostics, Pharma and Academia,” said Peer M. Schatz, Chief Executive Officer of QIAGEN N.V. “Multiple growth drivers are propelling QIAGEN forward, including the QuantiFERON-TB latent tuberculosis test, our industry-leading Personalized Healthcare portfolio and the successful QIAsymphony automation platform. We are moving ahead with plans to provide a unique solution for targeted areas of next-generation sequencing with a differentiated GeneReader sample-to-result workflow that integrates our rapidly expanding portfolio of GeneRead NGS assay panels and Ingenuity’s gold-standard biological data interpretation solutions. We are completing the transformation of QIAGEN through an efficiency project that has strengthened our capabilities to capture growth opportunities in a fast-changing environment. Our conviction about QIAGEN’s growth prospects is backed by a new $100 million share repurchase program. Based on the solid results in the first half of the year, QIAGEN continues to be well-positioned to achieve its goals for 2013.”
Adjusted net sales grew 3% at constant exchange rates (CER) in the second quarter of 2013 on growth in all regions, as well as in Molecular Diagnostics (+4% CER), Pharma (+4% CER) and Academia (+3% CER). The ongoing product portfolio grew 1% CER, while Ingenuity (acquired April 29, 2013) and AmniSure (acquired May 3, 2012) provided approximately two percentage points of additional CER growth. Currency movements had no significant impact on reported sales growth.
An operating loss of $34.2 million in the second quarter of 2013 was primarily due to a restructuring charge of $76 million that included costs for the last group of actions in the major efficiency project, as compared to operating income of $45.4 million in the same period of 2012. Adjusted operating income, which excludes items such as restructuring and acquisition-related costs, share-based compensation and amortization of intangible assets, declined 3% to $83.4 million compared to $86.4 million in the second quarter of 2012. The adjusted operating income margin was 26% of net sales in the second quarter of 2013 compared to 28% in the 2012 period.
In the second quarter of 2013, all regions advanced at single-digit CER rates. The Asia-Pacific / Japan region (+8% CER, 19% of sales) grew on double-digit CER gains in China, India and Singapore. The Europe / Middle East / Africa region (+2% CER, 32% of sales) rose on improving results in Turkey, the Nordic region and the United Kingdom. The Americas (+2% CER, 48% of sales) was led by Brazil and Mexico, while the U.S. was stable as lower sales of products used for HPV (human papillomavirus) screening were offset by growth in the rest of the product portfolio. Sales in the top seven emerging markets (China, Brazil, Turkey, Korea, India, Russia and Mexico) rose 12% CER and represented 13% of total sales.
Consumables and related revenues (+5% CER, 87% of sales) rose across all customer classes, led by Applied Testing and Molecular Diagnostics. Contributions from Ingenuity (recorded in this product category) also supported underlying sales growth in Academia and Pharma.
Instruments (-8% CER, 13% of sales) were lower as a result of the ongoing transition among Molecular Diagnostics customers to reagent rental agreements for QIAsymphony automation system placements, where revenues are recognized over a multi-year period, and also due to lower capital spending trends in Pharma, Applied Testing and Academia. Pharma delivered the strongest growth, while Academia sales were unchanged compared to the year-ago period. Instrument sales were significantly lower in Applied Testing against very strong results in the second quarter of 2012.
An overview of performance in QIAGEN’s four customer classes (based on total sales results including organic growth and acquisitions at CER):
In the second quarter of 2013, net loss attributable to owners of QIAGEN N.V. was $51.8 million, or $0.22 per diluted share (based on 234.1 million shares), compared to net income of $33.3 million, or $0.14 per diluted share (based on 240.2 million shares) in the year-ago period. Adjusted net income attributable to owners of QIAGEN N.V. rose 6% to $64.2 million, or $0.27 per share on an adjusted diluted EPS basis (based on 240.5 million shares), compared to $60.8 million, or $0.25 per share (based on 240.2 million shares), in the 2012 quarter.
“QIAGEN has the financial resources to invest in attractive business opportunities that create value while also improving returns to shareholders, such as through our plans for a new $100 million share repurchase program,” said Roland Sackers, Chief Financial Officer of QIAGEN N.V. “We are convinced the charges that are being taken to complete the efficiency project in 2013 will enable QIAGEN to grow faster, and to translate this growth into improving profitability and higher cash flows. We are also making two changes starting in 2014 in terms of financial reporting: With the completion of the efficiency project in 2013, restructuring costs will only be adjusted for business integration and acquisition-related activities; and share-based compensation costs will no longer be excluded from adjusted earnings. We are convinced QIAGEN is on track to deliver improved results in 2013 and capture a broad range of attractive growth opportunities.”
Molecular Diagnostics (Q2 2013: +4% CER, 49% of sales) advanced as a solid single-digit CER improvement in sales of consumables more than offset a high-single-digit CER drop in instrument sales, which fell mainly due to emphasis on QIAsymphony placements under multi-year reagent rental agreements. In Prevention, the QuantiFERON-TB test for detection of latent tuberculosis (TB) again delivered more than 20% CER growth on successful market penetration initiatives, particularly in the U.S. and the Asia-Pacific region. Sales of products for HPV testing (-17% CER, 14% of total adjusted net sales) declined in the second quarter of 2013, with sales continuing to decline in the U.S. due to implementation of multi-year customer agreements in light of new competitor pricing actions but rising in the Asia-Pacific / Japan region. In Profiling, consumables sales rose at a robust double-digit CER pace, supported by QIAsymphony placements. Personalized Healthcare sales were slightly higher as double-digit CER growth in companion diagnostic assays was partially offset by lower revenues from co-development projects compared to the same period in 2012. In Point of Need, the AmniSure assay continued to benefit from integration into QIAGEN’s global commercial network following the May 2012 acquisition. In the first half of 2013, Molecular Diagnostics rose 7% CER compared to the same period in 2012 and represented 50% of sales, and advanced 16% CER excluding the global HPV franchise.
Applied Testing (Q2 2013: -4% CER, 8% of sales) faced a tough comparison against 28% CER sales growth in the year-ago quarter, which included contributions from the 2012 launch of the QIAsymphony automation platform’s application package for this customer class. In the second quarter of 2013, consumables grew at a double-digit CER rate based on the ongoing business expansion in human identification / forensics, veterinary medicine and food safety, but this was more than offset by significantly lower instrument sales. In the first half of 2013, Applied Testing sales were unchanged compared to the same period in 2012 and represented 8% of sales.
Pharma (Q2 2013: +4% CER, 20% of sales) grew across all regions, led by double-digit CER growth in instruments, as well as higher consumables sales despite the ongoing adverse impact of restructuring activities and site consolidations among some customers. Also supporting the underlying sales growth were first-time contributions from Ingenuity. In the first half of 2013, Pharma sales were unchanged compared to the same period in 2012 and represented 19% of sales.
Academia (Q2 2013: +3% CER, 23% of sales) global sales were higher in the second quarter of 2013 as weak results in the U.S. and some areas of Europe were more than offset by growth in Latin America, China and other markets worldwide. Underlying sales gains in consumables were supported by first-time contributions from Ingenuity, while instrument sales were largely unchanged compared to the second quarter of 2012. QIAGEN continues to see very cautious buying patterns among customers in the U.S., primarily due to concerns about the U.S. government sequestration that took effect in March 2013, as well as in certain areas of Europe facing constrained budgets. In the first half of 2013, Academia sales declined 1% CER compared to the same period in 2012 and represented 23% of sales.