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Oxford Immunotec Reports Second Quarter 2019 Financial Results

  • Second quarter revenue of $19.6 million, an increase of 18% compared to prior year period
  • Gross margin of 72.4%, reflecting our shift towards a pure-play kit business
  • Positive net income of $0.6 million compared to a net loss of $6.5 million in prior year period

OXFORD, United Kingdom and MARLBOROUGH, Mass., Aug. 06, 2019 (GLOBE NEWSWIRE) -- Oxford Immunotec Global PLC (OXFD), or the Company, a global, high-growth diagnostics company, today announced second quarter 2019 financial results.

“We are very pleased to be reporting another quarter of strong growth in 2019,” said Dr. Peter Wrighton-Smith, Chief Executive Officer of Oxford Immunotec. “The Company is starting to recognize the benefits of our new, more focused business model and the strategic growth initiatives which we have implemented.”

By revenue type, total revenues were, in millions:

    Three Months Ended June 30,
    2019     2018     Percent
Change
                 
Product $ 18.7   $ 15.0     24%
Service   0.9     1.7     (44)%
Total Revenue $ 19.6   $ 16.7     18%

By geography, total revenues were, in millions:

    Three Months Ended June 30,
                Percent Change
    2019     2018     As
Reported
(1)
    Constant
Currency
(2)
United States $ 7.8   $ 5.1     54%     54%  
Europe & ROW   2.2     2.2     (2)%     4%  
Asia   9.6     9.4     3%     3%  
Total Revenue $ 19.6   $ 16.7     18%     19%  
 
(1) Oxford Immunotec completed its sale of the Company’s U.S. laboratory services business on November 6, 2018. As such, Total Revenue, Product Revenue, and United States Revenue for the three months ended June 30, 2019 and June 30, 2018 are not fully comparable. Total Revenue, Product Revenue, and United States Revenue for the three months ended June 30, 2018 include sales to our former U.S. laboratory services business at our intercompany transfer price that were formerly eliminated in consolidation. Total Revenue, Product Revenue, and United States Revenue for the three months ended June 30, 2019 include revenue from T-SPOT®.TB test kits and related accessories sold to Quest Diagnostics under the terms of a long-term supply agreement.
 
(2) Changes in revenue include the impact of changes in foreign currency exchange rates. We use the non-GAAP financial measure "constant currency basis" in our filings to show changes in our revenue without giving effect to period-to-period currency fluctuations. We consider the use of a period over period revenue comparison on a constant currency basis to be helpful to investors, as it provides a revenue growth measure free of positive or negative volatility due to currency fluctuations.

Second Quarter 2019 Financial Results

Revenue for the second quarter of 2019 was $19.6 million, representing an 18% increase from second quarter 2018 revenue of $16.7 million. On a constant currency basis, revenue increased 19% versus the prior year period.

2019 second quarter product revenue was $18.7 million, representing a 24% increase from product revenue of $15.0 million in the second quarter of 2018. The increase was primarily a result of growth in the United States, including the expected shift of higher seasonal volumes, previously recognized in the third quarter, into the second quarter, as well as continued strong underlying growth of testing demand. Service revenue for the second quarter of 2019 was $0.9 million, representing a 44% decrease from second quarter 2018 service revenue of $1.7 million. The decrease in service revenue reflected the Company’s exit from the blood donor screening business in 2018, partially offset by growth in tuberculosis testing volumes in our U.K. Oxford Diagnostic Laboratories.

United States revenue was $7.8 million in the second quarter of 2019, representing a 54% increase from revenue of $5.1 million in the prior year period. The growth was due to increased tuberculosis testing volumes and a higher selling price, compared to 2018 sales to the U.S. laboratory services business at our intercompany transfer price that were formerly eliminated in consolidation, partially offset by a decline in revenue from the Company’s 2018 exit from the blood donor screening business.

Europe & Rest of World, or ROW, revenue was $2.2 million in the second quarter of 2019, down 2% when compared to the second quarter of 2018. On a constant currency basis, Europe & ROW revenue increased 4% versus the prior year period. As anticipated, the slower growth rate is a result of the Brexit stocking effect we experienced in the first quarter of 2019. For the year-to-date, Europe & ROW is up 11% compared to the same period in 2018.

Asia revenue was $9.6 million in the second quarter of 2019, representing an increase of 3% compared to second quarter 2018 revenue of $9.4 million. On a constant currency basis, Asia revenue also increased 3% versus the second quarter of 2018, primarily driven by growth in China offset by the timing of ordering patterns in Japan.

Gross profit for the second quarter of 2019 was $14.2 million, an increase of $2.1 million from gross profit of $12.1 million in the same period of 2018. Gross margin was 72.4%, a decrease of 40 basis points from gross margin of 72.8% in the second quarter of 2018 and up sequentially 100 basis points versus the first quarter of 2019.

Operating expenses were $15.2 million in the second quarter of 2019, a decrease of $0.9 million compared to $16.1 million in the second quarter of 2018.

Net income for the second quarter of 2019 was $0.6 million, or $0.02 per share on both a basic and diluted basis, compared to a net loss of $(6.5) million, or $(0.25) per share on both a basic and diluted basis, in the second quarter of 2018. Basic net income/(loss) per share was based on 26,625,572 and 25,845,124 weighted average ordinary shares outstanding for the second quarters of 2019 and 2018, respectively. Diluted net income/(loss) per share was based on 26,889,232 and 25,845,124 weighted average ordinary shares outstanding for the second quarters of 2019 and 2018, respectively.

EBITDA for the second quarter of 2019 was $(0.2) million compared to $(4.0) million in the second quarter of 2018. Adjusted EBITDA was $(48,000) for the second quarter of 2019 compared to $(2.0) million in the same period in 2018. Both EBITDA and Adjusted EBITDA are non-GAAP measures.

Business Outlook

For full year 2019, the Company now expects revenues of between $71 and $73 million. The Company expects revenues of between $20 and $21 million in the third quarter.

Conference Call

Oxford Immunotec will host a conference call on Tuesday, August 6, 2019 at 8:00 a.m. Eastern Daylight Time to discuss its second quarter 2019 financial results. The call will be concurrently webcast. To listen to the conference call on your telephone, please dial (855) 363-5047 for United States callers and +1 (484) 365-2897 for international callers and reference confirmation code 9969246 approximately ten minutes prior to start time. To access the live audio webcast or subsequent archived recording, visit the Investor Relations section of Oxford Immunotec's website at www.oxfordimmunotec.com. The replay will be available on the Company's website for approximately 60 days.

About Oxford Immunotec

Oxford Immunotec Global PLC is a global, high-growth diagnostics company focused on developing and commercializing proprietary assays for immunology and infectious disease. The Company's T-SPOT.TB test has been approved for sale in over 50 countries, including the United States, where it has received pre-market approval from the Food and Drug Administration, Europe, where it has obtained a CE mark, as well as Japan and China. The Company is headquartered near Oxford, United Kingdom and in Marlborough, Massachusetts.  Additional information can be found at www.oxfordimmunotec.com.

T-SPOT, the Oxford Immunotec logo, ODL, and the Oxford Diagnostic Laboratories logo are trademarks of Oxford Immunotec Limited. Immunetics is a trademark of Immunetics, Inc.

Forward-Looking Statements

This release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this release are forward-looking statements. This includes statements about Oxford Immunotec's anticipated plans and objectives, future performance and revenues, financial condition, prospects for sales of its products, growth, strategies, expectations and objectives of management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements contained in this release reflect Oxford Immunotec's current expectations and are subject to risks and uncertainties. Actual results may differ materially from those projected or implied by forward-looking statements. Other factors that could adversely affect Oxford Immunotec's business and prospects are described under the "Risk Factors" section in its filings with the Securities and Exchange Commission ("SEC"). Oxford Immunotec's SEC filings are available for free by visiting the investor section of its website, www.oxfordimmunotec.com, or the SEC's website, www.sec.gov.

Investors should give careful consideration to these risks and uncertainties. Forward-looking statements contained herein are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. Investors should not place undue reliance on forward-looking statements contained herein, which speak only as of the date of this release. Oxford Immunotec does not undertake to update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law.

CONTACTS:

For Media and Investor Inquiries:
Matt McLaughlin
Chief Financial Officer
Oxford Immunotec
Tel: +1 (508) 573-9953
mtmclaughlin@oxfordimmunotec.com


Oxford Immunotec Global PLC
Condensed consolidated statements of operations
(unaudited)

    Three months ended
June 30,
  Six months ended
June 30,
(in thousands, except share and per share data)     2019       2018       2019       2018  
Revenue:                
Product   $ 18,666     $ 15,012     $ 32,507     $ 25,141  
Service     922       1,645       1,870       3,195  
Total revenue     19,588       16,657       34,377       28,336  
Cost of revenue:                
Product     5,078       3,477       8,993       6,129  
Service     322       1,061       635       2,168  
Total cost of revenue     5,400       4,538       9,628       8,297  
Gross profit     14,188       12,119       24,749       20,039  
Operating expenses:                
Research and development     2,089       1,849       4,413       4,215  
Sales and marketing     7,485       7,072       13,764       14,223  
General and administrative     5,491       5,657       10,699       11,217  
Settlement expense     104       1,560       203       1,767  
Total operating expenses     15,169       16,138       29,079       31,422  
Operating loss from continuing operations     (981 )     (4,019 )     (4,330 )     (11,383 )
Other expense:                
Interest income (expense), net     1,162       (734 )     2,362       (1,338 )
Foreign exchange gains (losses)     291       (151 )     (593 )     (254 )
Other income (expense)     42       (195 )     42       (247 )
Income (loss) from continuing operations before income taxes     514       (5,099 )     (2,519 )     (13,222 )
Income tax benefit (expense) from continuing operations     76       (634 )     1,613       (697 )
Income (loss) from continuing operations     590       (5,733 )     (906 )     (13,919 )
Discontinued operations:                
Loss from discontinued operations before income taxes           (738 )           (2,878 )
Income tax expense                        
Loss from discontinued operations             (738 )           (2,878 )
Net income (loss)   $ 590     $ (6,471 )   $ (906 )   $ (16,797 )
Net income (loss) per ordinary share—basic:                
Income (loss) from continuing operations   $ 0.02     $ (0.22 )   $ (0.03 )   $ (0.54 )
Loss from discontinued operations           (0.03 )           (0.11 )
Net income (loss)   $ 0.02     $ (0.25 )   $ (0.03 )   $ (0.65 )
Net loss per ordinary share—diluted:                
Income (loss) from continuing operations   $ 0.02     $ (0.22 )   $ (0.03 )   $ (0.54 )
Loss from discontinued operations           (0.03 )           (0.11 )
Net income (loss)   $ 0.02     $ (0.25 )   $ (0.03 )   $ (0.65 )
Weighted-average shares used to compute net income (loss) per ordinary share—basic     26,625,572       25,845,124       26,571,025       25,782,366  
Weighted-average shares used to compute net income (loss) per ordinary share—diluted     26,889,232       25,845,124       26,571,025       25,782,366  


Reconciliation of net income (loss) to Adjusted EBITDA (1)
(unaudited)

    Three months ended June 30,   Six months ended June 30,
(in thousands)     2019       2018       2019       2018  
Net income (loss)   $ 590      $ (6,471 )   $ (906 )   $ (16,797 )
Loss from discontinued operations             (738 )           (2,878 )
Loss from continuing operations     590       (5,733 )     (906 )     (13,919 )
Income tax (benefit) expense     (76 )     634       (1,613 )     697  
Interest (income) expense, net     (1,162 )     594       (2,362 )     1,058  
Depreciation and amortization expense     430       316       900       657  
Accretion and amortization of loan fees           140             280  
EBITDA     (218 )     (4,049 )     (3,981 )     (11,227 )
                 
Reconciling items:                
Share-based compensation expense     846       843       1,691       2,603  
Unrealized exchange gains     (780 )     (324 )     (231 )     (483 )
Settlement expense     104       1,560       203       1,767  
Adjusted EBITDA   $ (48 )   $ (1,970 )   $ (2,318 )   $ (7,340 )
 
(1) EBITDA and Adjusted EBITDA are non-GAAP measures that we calculate as net income (loss), adjusted for the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. We believe that these measures provide useful information to investors in understanding and evaluating our operating results in the same manner as our management and Board of Directors. Our presentation of these measures is not made in accordance with U.S. GAAP, and our computation of these measures may vary from others in the industry. Our use of these measures has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
 
The above table presents a reconciliation of net income (loss), the most comparable U.S. GAAP measure, to EBITDA and Adjusted EBITDA for each of the periods indicated.


Oxford Immunotec Global PLC
Condensed consolidated balance sheets
(unaudited)

    June 30,   December 31,
(in thousands, except share and per share data)     2019       2018  
Assets        
Current assets:        
Cash and cash equivalents   $ 187,291      $ 192,844   
Accounts receivable, net     13,778        9,158   
Other receivable     9,115        4,500   
Inventory, net     9,957        7,767   
Prepaid expenses and other assets     3,199        2,511   
Total current assets     223,340        216,780   
Restricted cash, non-current     100        100   
Other receivable             4,500   
Property and equipment, net     6,658        7,144   
Operating lease right-of-use assets     6,892           
Goodwill     2,483        2,483   
Other intangible assets, net     50        61   
Deferred tax asset     2,508        1,052   
Total assets   $ 242,031      $ 232,120   
Liabilities and shareholders’ equity        
Current liabilities:        
Accounts payable   $ 2,519      $ 2,801   
Accrued liabilities     9,227        10,891   
Current portion of operating lease liability     480           
Settlement liability     4,289        4,106   
Deferred income     214        125   
Current portion of loans payable             85   
Total current liabilities     16,729        18,008   
Long-term portion of operating lease liability     7,489           
Long-term portion of loans payable     30        106   
Total liabilities     24,248        18,114   
Shareholders’ equity:        
Ordinary shares, £0.006705 nominal value; 38,978,604 shares authorized at June 30, 2019 and December 31, 2018, and 26,807,101 and 26,439,334 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively     280       276  
Additional paid-in capital     307,882       303,015  
Accumulated deficit     (81,668 )     (80,762 )
Accumulated other comprehensive loss     (8,711 )     (8,523 )
Total shareholders’ equity     217,783       214,006  
Total liabilities and shareholders’ equity   $  242,031     $ 232,120  


Oxford Immunotec Global PLC
Unaudited pro forma condensed combined statements of operations

    Three months ended
June 30,
  Six months ended
June 30,
(in thousands, except share and per share data)     2019       2018       2019       2018  
    Actual   Pro forma   Actual   Pro forma
Revenue:                
Product   $ 18,666      $ 16,108      $ 32,507      $ 27,769   
Service     922        1,663        1,870        3,213   
Total revenue     19,588        17,771        34,377        30,982   
Cost of revenue:                
Product     5,078        4,778        8,993        8,639   
Service     322        1,062        635        2,169   
Total cost of revenue     5,400        5,840        9,628        10,808   
Gross profit     14,188        11,931        24,749        20,174   
Gross Margin     72.4 %     67.1 %     72.0 %     65.1 %
Operating expenses:                
Research and development     2,089        1,851        4,413        4,217   
Sales and marketing     7,485        7,073        13,764        14,224   
General and administrative     5,491        5,658        10,699        11,218   
Settlement expense     104        1,560        203        1,767   
Total operating expenses     15,169        16,142        29,079        31,426   
Loss from operations     (981 )     (4,211 )     (4,330 )     (11,252 )
Other expense:                
Interest income (expense), net     1,162        (733 )     2,362        (1,337 )
Foreign exchange gains (losses)     291        (151 )     (593 )     (254 )
Other income (expense)     42        (196 )     42        (248 )
Income (loss) before income taxes     514        (5,291 )     (2,519 )     (13,091 )
Income tax benefit (expense)     76        (634 )     1,613        (697 )
Net income (loss)   $ 590     $ (5,925 )   $ (906 )   $ (13,788 )
Net income (loss) per ordinary share—basic   $ 0.02     $ (0.23 )   $ (0.03 )   $ (0.53 )
Net income (loss) per ordinary share—diluted   $ 0.02     $ (0.23 )   $ (0.03 )   $ (0.53 )
Weighted-average shares used to compute net income (loss) per ordinary share—basic     26,625,572       25,845,124       26,571,025       25,782,366  
Weighted-average shares used to compute net income (loss) per ordinary share—diluted     26,889,232       25,845,124       26,571,025       25,782,366  
 
Effective November 6, 2018, the Company completed the sale of its U.S. laboratory services business for gross proceeds of $170 million in cash to Quest Diagnostics Incorporated, or Quest, pursuant to a Limited Liability Company Interest Purchase Agreement, dated September 25, 2018, or the Transaction. The above condensed combined statements of the Company for the three and six months ended June 30, 2018 were derived from Exhibit 99.1 to Form 8-K filed on January 7, 2019.
 
The above unaudited pro forma financial information of the Company reflected results as though the Transaction had occurred prior to the 2018 periods and were based on the best information available at the time and assumptions that management believed were factually supportable and reasonable. In addition, such adjustments were estimates. Pro forma results reflected the Company’s revenue and cost of revenue as if the Transaction had already occurred and the Company had been selling its T-SPOT.TB test kits at an estimated market rate. For purposes of the pro forma adjustments, revenue was based on U.S. laboratory test volumes, as opposed to shipments of T-SPOT.TB test kits. This methodology was not intended to be indicative of the future timing of revenue. The unaudited pro forma consolidated information is provided for illustrative and informational purposes only and is not intended to reflect what our consolidated results of operations would have been had the disposition occurred prior to 2018 and is not necessarily indicative of our future consolidated results of operations.
 
Amounts for the three and six months ended June 30, 2018 included blood donor screening revenue of about $800,000 and $1.6 million, respectively, and related cost of revenue, despite the Company’s decision to exit this business upon the closing of the Transaction. This unaudited pro forma financial information should be read in conjunction with the Form 8-K filed on January 7, 2019 and the Company’s historical financial statements, which are included in the Company’s latest annual report on Form 10-K and quarterly reports on Forms 10-Q.
 
Amounts for the respective 2019 periods are the Company’s actual results of operations.