Hi Everyone,
In preparation of next week’s Q4 results, here are the following things that I believe are worth watching for those interested:
- Projected rate of decreasing tapering of COVID testing revenue.
- Results of core genetic testing business. Expected growth rate.
- Impact of the above two factors on 2021 cost structure.
- Possible updates on distribution related acquisition.
- Overall update on COVID.
- More information on the add-on subscription service models introduced due to customer demand discussed in previous industry presentation
Q3 recap below:
Financial summary
I/S: Substantial shorter term revenue increase with positive longer term implications in all aspects.
B/S: Substantial increase in retained earnings and current assets with non-proportional minimal increase in liability.
C/F: Healthy and self-sustaining.
Operating: Increase in AR
Investing: Expansion related PPE
Financing: Pre-arranged shelf offering, institutional
Three Months Ended
September 30,
2020 2019 Change Change%
Statement of Operations Data: (dollars and billable tests in thousands, except per billable test data)
Revenue 101,716 10,347 91,369 883%
Cost of revenue 26,261 3,885 22,376 576%
Gross profit 75,455 6,462 68,993 1,068%
Operating expenses:
Research and development 3,177 1,744 1,433 82%
Selling and marketing 5,014 1,687 3,327 197%
General and administrative 3,741 1,522 2,219 146%
Total operating expenses 11,932 4,953 6,979 141%
Operating income (loss) 63,523 1,509 62,014 4,110%
Net income (loss) 46,638 1,462 45,176 3,090%
Other Operating Data:
Billable tests delivered(1) 1,035 21 1,014 4,829%
Average price per billable test
delivered(2) 98 493 (395) (80%)
Cost per billable test delivered(3) 25 185 (160) (86%)
**Impairments, provision for taxes, etc removed for formatting
Nine Months Ended
September 30,
2020 2019 Change Change%
Statement of Operations Data:
Revenue 126,734 24,141 102,593 425%
Cost of revenue 38,035 10,473 27,562 263%
Gross profit 88,699 13,668 75,031 549%
Operating expenses:
Research and development 7,004 4,742 2,262 48%
Selling and marketing 9,871 4,263 5,608 132%
General and administrative 7,575 4,682 2,893 62%
Total operating expenses 24,450 13,687 10,763 79%
Operating income (loss) 64,249 (19) 64,268 338,253%
Net income (loss) 48,003 (115) 48,118 41,842%
Other Operating Data:
Billable tests delivered(1) 1,229 45 1,184 2,631%
Average price per billable test
delivered(2) 103 536 (433) (81%)
Cost per billable test delivered(3) 31 233 ($202) (87%)
**Impairments, provision for taxes, etc removed for formatting
Simplified pro forma income statements
Pro Forma Genetic Testing Only 12/20 9/20 6/20 3/20 Est. 2020
(dollars in thousands, except per share data)
Statement of Operations Data:
Revenue 10,253 8,916 7,753 7,753 34,675 100%
Cost of revenue 7,717 7,717 7,717 4,057 27,208 78%
Gross profit 9,548 9,548 9,548 3,696 32,340 93%
Operating expenses:
Research and development 1,849 1,849 1,849 1,978 7,525 22%
Selling and marketing 3,260 3,260 3,260 1,597 11,377 33%
General and administrative 1,799 1,799 1,799 2,035 7,432 21%
Total operating expenses 6,908 6,908 6,908 5,610 26,334 76%
Operating income (loss) 2,640 2,640 2,640 (1,914) 6,006 17%
Net income (loss) 6,666 5,329 3,321 (1,956) 13,360 39%
**Assumptions and plug variables
- Impairments, provision for taxes, etc removed for formatting
- 15% quarterly growth rate based on stated 57% growth.
- Used the lower June cost structure. Implied operating leverage.
Pro Forma COVID Only 12/20 9/20 6/20 3/20 Est. 2020
(dollars in thousands, except per share data)
Statement of Operations Data:
Revenue 180,000 92,800 9,512 7,753 290,065 100%
Cost of revenue 26,261 26,261 7,717 4,057 64,296 22%
Gross profit 75,455 75,455 9,548 3,696 164,154 57%
Operating expenses:
Research and development 3,177 3,177 1,849 1,978 10,181 4%
Selling and marketing 5,014 5,014 3,260 1,597 14,885 5%
General and administrative 3,741 3,741 1,799 2,035 11,316 4%
Total operating expenses 11,932 11,932 6,908 5,610 36,382 13%
Operating income (loss) 63,523 63,523 2,640 (1,914) 127,772 44%
Net income (loss) 71,638 46,638 3,321 (1,956) 119,641 41%
**Assumptions and plug variables
- Impairments, provision for taxes, etc removed for formatting
- Subtracted estimated revenue from non-covid testing.
- Used the higher September cost structure. Implied operating leverage.
Pro Forma Genetic Testing Only 12/21 9/21 6/21 3/21 Est. 2021
(dollars in thousands, except per share data)
Statement of Operations Data:
Revenue 17,933 15,594 13,560 11,791 58,879 100%
Cost of revenue 7,717 7,717 7,717 7,717 30,868 52%
Gross profit 9,548 9,548 9,548 9,548 38,192 65%
Operating expenses:
Research and development 1,849 1,849 1,849 1,849 7,396 13%
Selling and marketing 3,260 3,260 3,260 3,260 13,040 22%
General and administrative 1,799 1,799 1,799 1,799 7,196 12%
Total operating expenses 6,908 6,908 6,908 6,908 27,632 47%
Operating income (loss) 2,640 2,640 2,640 2,640 10,560 18%
Net income (loss) 14,346 12,007 9,973 8,204 44,531 76%
**Assumptions and plug variables
- Impairments, provision for taxes, etc removed for formatting
- Used 15% quarterly growth rate based on stated 57% growth.
- Used lower June 2020’s cost structure. Implied operating leverage.
I understand that there are practical limitations of pro formas but approximately separating out the COVID and the core genetic testing provides additional insight and context when viewing the actual numbers I believe.
The numbers are personal workbooks for self-use so I don’t constrain myself with GAAP limitations, build assumptions that I think are reasonable, and try not to spend too much time on some of the details. Just brief
exercises that help focus in on the big picture to be right directionally long-term.
Open to feedback and hope some of it was helpful.
Thank you,
Eddie