Q4 Financial Performance Falls Short of Expectations; '09 Outlook Bleak
We downgrade Celera (CRA) shares from Hold to Sell based on the company's worse-than-expected calendar 4th quarter 2008 financial performance and bleak outlook for 2009.
In the 4th quarter, ended December 31, 2008, total revenue was $47.3 million, compared to $40.3 million in the prior year quarter, up 17.4% year on year and 3.3% sequentially. The 4th quarter results in 2007 and 2008 included revenues from Berkeley HeartLab, Inc. (BHL) and Atria Genetics Inc., which were acquired during the 4th quarter of calendar 2007. Total revenue in calendar 4th quarter of 2008 was slightly short of our estimate of $48 million.
Revenue by segment for the 4th quarter of calendar 2008 was as follows:???????????
- Lab Services revenue was $29.2 million, compared to $21.2 million in the prior-year quarter. This number was $3.3 million less than our estimate of $32.5 million???????????
- Products revenue was $11.2 million, compared to $9.5 million in the prior-year quarter. Product revenue was slightly less than our estimate of $11.5 million for the quarter???????????
- Corporate revenue was $6.9 million, compared to $9.6 million in the prior-year quarter. Corporate revenue was better than our estimate of $4 million for the quarter.
For the 4th quarter of calendar 2008, Celera reported a net loss of $6.1 million, or $0.08 per share, compared to net income of $0.3 million, or $0.00 per share, for the prior-year quarter. On an adjusted basis, a non-GAAP net loss was $2.7 million or $0.03 per share in 4Q08, compared to net income of $1.7 million or $0.02 per share in 4Q07. We expected a profitable 4th quarter of 2008 with a net income of $0.5 million, or $0.01 per share.
At December 27, 2008, Celera's cash and short-term investments were approximately $316 million. The company also maintains a $200 million unsecured revolving credit agreement with 4 banks that matures on April 15, 2010. Cash burn is not a concern.
Celera provided revenue guidance for 2009 far below our expectations. The company expects revenue for the full fiscal year 2009 to be in the range of $192 - $202 million, well below our estimate of $227.5 million. The company expects non-GAAP EPS in the middle single digit in 2009 versus our double-digit EPS for 2009.
Celera thinks the guidance reflects an increasing portion of BHL's business under contract with third-party insurance payors. We believe this is more related to current economic downturn. As such, we lower our revenue estimate for 2009 from original $227.5 million to $199 million. We also lower our revenue estimates from 2010 to 2012. We don't believe the company will achieve profitability in 2009.
As such, we downgrade Celera shares from Hold to Sell with a price target of $6.
