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Press Release: Genomic Health Announces Record Revenue and Profit in Third Quarter 2018 Financial Results; Raises Full Year Guidance

Genomic Health Announces Record Revenue and Profit in Third Quarter 2018 Financial Results; Raises Full Year Guidance

Reported $101M in Revenue and Delivered 23 Percent Growth on a Pre-606 Adjusted Revenue Basis

Delivered $12M Profit on a GAAP Basis; $13M Profit on a Non-GAAP Basis

Achieved 13th Consecutive Quarter of Improved Non-GAAP Profitability

Raises Full Year 2018 Revenue and Net Income Guidance

PR Newswire

REDWOOD CITY, Calif., Nov. 6, 2018

REDWOOD CITY, Calif., Nov. 6, 2018 /PRNewswire/ -- Genomic Health, Inc. (NASDAQ: GHDX) today reported financial results and business progress for the quarter ended September 30, 2018.

"We continue to deliver record results in 2018, including 23 percent revenue growth and $12 million in profit for the third quarter. Our strong performance this year reflects increasing global demand and revenue for the Oncotype DX Breast Recurrence Score test, continued demand and growing reimbursement for the Genomic Prostate Score test and success in driving operational efficiencies across the business," said Kim Popovits, chairman of the board, chief executive officer and president of Genomic Health. "With three quarters of record performance this year, we are raising our full year 2018 guidance and expect to deliver more than 17 percent revenue growth for the year."

Third Quarter and Nine Months Ended September 30, 2018, Financial Results

Total revenue was $101.3 million in the third quarter of 2018, compared with pre-606 adjusted revenue* of $82.2 million for the third quarter of 2017, an increase of 23 percent. Reported revenue was $83.8 million in the third quarter of 2017.

U.S. product revenue was $85.8 million in the third quarter of 2018, compared with pre-606 adjusted revenue of $69.5 million for the third quarter of 2017, an increase of 23 percent. U.S. product reported revenue was $70.9 million in the third quarter of 2017. U.S. invasive breast revenue from Oncotype DX Breast Recurrence Score(R) tests was $76.7 million in the third quarter of 2018, compared with U.S. invasive breast pre-606 adjusted revenue of $61.6 million for the third quarter of 2017, an increase of 24 percent. U.S. invasive breast reported revenue was $63.1 million in the third quarter of 2017. U.S. prostate test revenue from Oncotype DX(R) Genomic Prostate Score(R) (GPS(TM)) tests was $6.9 million in the third quarter of 2018, compared with $5.4 million in the third quarter of 2017, an increase of 28 percent.

International product revenue was $15.5 million in the third quarter of 2018, compared with pre-606 adjusted revenue of $12.7 million for the third quarter of 2017, an increase of 22 percent, and a 20 percent increase on a non-GAAP constant currency basis. International product reported revenue was $12.9 million in the third quarter of 2017.

Net income was $12.2 million, or $0.34 and $0.32 per share on a basic and diluted basis, respectively, in the third quarter of 2018, an improvement of $14.4 million, compared with a net loss of $2.2 million, or $0.06 per share on a basic and diluted basis, in the third quarter of 2017. Operating income was $11.8 million in the third quarter of 2018, an improvement of $14.4 million, compared with an operating loss of $2.6 million in the third quarter of 2017.

On a non-GAAP basis, net income was $13.3 million in the third quarter of 2018, compared with a non-GAAP net income of $1.1 million in the third quarter of 2017. Non-GAAP operating income was $12.9 million in the third quarter of 2018, compared with a non-GAAP operating income of $0.6 million in the third quarter of 2017.

More than 34,810 Oncotype(TM) test results were delivered in the third quarter of 2018, an increase of 10 percent, compared with more than 31,580 test results delivered in the same period in 2017. Oncotype DX Breast Recurrence Score tests delivered in the U.S. grew 12 percent in the third quarter of 2018, compared with the same period in 2017. Oncotype DX GPS tests delivered in the U.S. grew 15 percent in the third quarter of 2018, compared with the same period in 2017. The number of international tests delivered grew 6 percent in the third quarter of 2018, compared with the same period in 2017 and represented approximately 25 percent of total test volume in the quarter.

Total revenue for the nine months ended September 30, 2018, was $289.5 million, compared with pre-606 adjusted revenue of $248.2 million for the same period in 2017, an increase of 17 percent, and an increase of 16 percent on a non-GAAP constant currency basis. Reported revenue was $253.3 million for the nine months ended September 30, 2017.

International product revenue was $43.4 million for the nine months ended September 30, 2018, compared with pre-606 adjusted revenue of $38.6 million for the nine months ended September 30, 2017, an increase of 12 percent, and a 9 percent increase on a non-GAAP constant currency basis. International product reported revenue was $39.4 million for the nine months ended September 30, 2017.

GAAP net income was $16.8 million for the nine months ended September 30, 2018, an improvement of $22.5 million, compared with a net loss of $5.7 million for the nine months ended September 30, 2017. Operating income increased to $14.5 million for the nine months ended September 30, 2018, an improvement of $23.1 million, compared with an operating loss of $8.6 million for the nine months ended September 30, 2017.

Non-GAAP net income was $27.3 million for the nine months ended September 30, 2018, compared with a $4.5 million non-GAAP net loss for the nine months ended September 30, 2017. Non-GAAP operating income was $26.5 million for the nine months ended September 30, 2018, compared with a non-GAAP operating loss of $5.4 million for the same period in 2017.

Cash and cash equivalents and short-term marketable securities at September 30, 2018 were $183.3 million, which included the fair value of the company's investment in marketable securities of $3.8 million, compared with $129.6 million at December 31, 2017, which included the fair value of the company's investment in marketable securities of $3.5 million.

2018 Financial Outlook

"We are on track to deliver revenue growth of 17 percent in 2018, surpassing both the top-end of our original revenue guidance for the full year and our annual revenue growth goal of 15 percent," said Brad Cole, chief financial officer of Genomic Health. "We are raising our revenue and net income guidance for the full year ending December 31, 2018, which assumes 17 to 19 percent year-over-year revenue growth in the fourth quarter and our 14(th) consecutive quarter of improved non-GAAP profitability."

Below is a table summarizing the 2018 full-year guidance revisions:

Updated Guidance Former Guidance
Low High Low High
Revenue(1) $ 389 $ 391 $ 366 $ 382
Revenue Growth(2) 17% 17% 10% 15%

Net Income (GAAP) (1) $ 26 $ 28 $ 0 $ 5
GAAP Basic EPS (3) $ 0.72 $ 0.78 $ 0.00 $ 0.14

Net Income (Non-GAAP) (1) (4) $ 37 $ 39 $ 14 $ 20
Non-GAAP Basic EPS (3) $ 1.03 $ 1.08 $ 0.39 $ 0.56



(1) In millions.
(2) The outlook for revenue growth in 2018 represents management's estimates
for 2018 versus 2017 reported revenues adjusted to reflect the impact of
ASC 606 revenue recognition rules, which were effective January 1,
2018. Under the new rules, the company will report most uncollectible
balances as a reduction in net revenues; historically, certain
uncollectible amounts were classified as bad debt expense and were
approximately 2.5% of revenue and classified within selling, general and
administrative expenses. The company does not expect ASC 606 to impact
net income or EPS.
(3) Based on 36 million estimated shares outstanding.
(4) Non-GAAP net income exclusions, see "Non-GAAP Disclosure" paragraph in
press release below.

Recent Business Highlights

-- The National Comprehensive Cancer Network (NCCN) elevated the Oncotype DX
Breast Recurrence Score to its "preferred" category as the only
multi-gene test to predict chemotherapy treatment benefit for patients
with node-negative early-stage breast cancer in its 2018 breast cancer
guidelines.

-- The German Institute for Quality and Efficiency in Health Care (IQWiG)
concluded that "only the Oncotype DX Breast Recurrence Score test has
sufficient evidence to guide breast cancer adjuvant chemotherapy
decisions based on TAILORx study results" in its updated assessment of
breast cancer gene expression profiling tests.

-- Nature Partner Journals Breast Cancer published a systematic review of
seven studies including more than 8,000 patients with node-positive
breast cancer, confirming that the Oncotype DX test accurately predicts
clinical outcomes in node-positive breast cancer.

-- Palmetto GBA, a Medicare Administrative Contractor that assesses
molecular diagnostic technologies, issued a positive final local coverage
determination (LCD) for the Oncotype DX(R) AR-V7 Nucleus Detect(TM) test
for qualified Medicare patients throughout the U.S., effective in
December 2018.

-- Established new reimbursement for the Oncotype DX Genomic Prostate Score
test with Blue Shield California, bringing the total number of U.S.
covered lives to more than 100 million, including Medicare.

-- Reviews in Urology published real-world clinical evidence demonstrating
that Oncotype DX Genomic Prostate Score testing resulted in significantly
higher use of active surveillance compared to no testing.

-- An independent study published by University of California, San Francisco
(UCSF) researchers in the Journal of Urology demonstrated that the

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