Marty Chilberg's  Instablog

Marty Chilberg
Send Message
Marty Chilberg is a seasoned financial professional with over 30 years of executive leadership, board, consulting and advisory experience.  He began his career as a certified public accountant (CPA). He moved to Silicon Valley in 1981 to begin his career in the software industry, working for... More
  • Sequenom: Q2 2014 Earnings Preview 2 comments
    Jul 22, 2014 11:54 AM | about stocks: SQNM

    Sequenom will be announcing June 2014 earnings after the market closes on July 29th. Things to watch for this quarter include:

    1. The presentation of historical earnings will change due to the sale of the Bioscience segment. I would expect the current and prior years to be reclassified. They should come to a subtotal for operating income from continuing operations which would exclude revenues, cost of revenues and identifiable operating expenses attributable to the Bioscience segment. Below the line we should see two lines for discontinued operations. One would be the historical Bioscience operating results collapsed into one line and the second would be the gain/loss on the sale.
    2. The gain or loss will result from the cumulative proceeds, including at least $2 million of the contingent proceeds, compared to the basis of the segment. The amount is relatively meaningless to the value proposition looking forward. More important is the net cash infusion resulting from the sale.
    3. Comparing the revenues and earnings from continuing operations to analyst expectations will be messy. Some estimates are still including Bioscience revenues for some or all of the current quarter which will make any comparison to consensus problematic. Also worth noting is that the business press headlines tied to the earnings announcement could get tagged with inaccurate headlines noting a decline in revenues or a growth rate that compares diagnostic revenues to some prior period that includes Biosciences. That could cause some knee jerk selling before analysts can analyze and report on the quarter.
    4. The diagnostics revenues this quarter are expected to include some recognition of revenues from prior periods that were previously unrecognized. The magnitude of this must be separately considered to better understand the quarter and project the future. Collection of prior billings that are on a cash basis is the first component. The company has done a good job disclosing this impact which has ranged from $12.5 million to $21.2 million over the past four quarters. The second component is the impact of any conversion to accrual basis. The company has guided that they expect to convert a portion of their receivables to accrual basis. They have not disclosed the potential impact of the conversion other than to say that it would likely not be material. It will also be important to compare this cumulative recognition catch up with any change in the estimate of unrecognized receivables remaining at quarter end.
    5. Government payer revenues and covered lives is a fairly important metric, likely more so that the remaining business. This has been a constraint for growth in the past and appears to be emerging as a tail wind.
    6. International revenue growth is very important looking forward while the domestic market awaits reimbursement on the average risk market. Progress this quarter would be an important driver of increased forecasts. Any news on the two pending international relationships would also be a catalyst.
    7. Look for some discussion of the impact of the new Quest agreement and how that could help accelerate penetration of the OB/GYN community.
    8. The VisibiliT pending August launch internationally has been announced. Hopefully we will hear more about which markets and whether royalty partners are gearing up for clinical validation to offer the test. I also expect analysts to ask about the US self pay market and whether the company will provide the test upon request.
    9. Some attention should be given to G&A spending this quarter and any discussion of future savings. These costs were not allocated to segments but I expect the company to reduce spending in the future with the elimination of the Bioscience segment.

    Lots of moving parts this quarter. That should provide a marginal advantage for investors able to analyze results and understand the meaning of any confusing components.

    Disclosure: The author is long SQNM.

    Stocks: SQNM
Back To Marty Chilberg's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • Insiderz
    , contributor
    Comments (100) | Send Message
    Wedbush notes
    "We believe consensus estimates do not reflect full pro forma and as a result,
    are not apples to apples versus our estimates and to what SQNM will likely
    report on 7/29. We are expecting SQNM to post sales of $40 MM and an EPS
    loss of ($0.12) when the company reports 2Q14 results after the market close on
    Tuesday, July 29, 2014
    Wall Street consensus
    estimates are for $46 MM and a loss of ($0.10), which we believe still include
    around $6 MM in genetic analysis revenue and $0.02 of EPS."
    22 Jul 2014, 01:24 PM Reply Like
  • Marty Chilberg
    , contributor
    Comments (579) | Send Message
    Author’s reply » Thanks for the comment. Wedbush appears to understand the situation well. Their forecast for revenues is a little below mine but the back collections and conversion impact are just a stab in the dark for everyone so it could have a range of $5 million or so and would still be within norms.
    22 Jul 2014, 01:35 PM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.