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Codexis Grows Revenue 28% in Second Quarter

REDWOOD CITY, Calif., Aug 05, 2010 /PRNewswire via COMTEX/ --

Codexis, Inc. (Nasdaq: CDXS), a clean technology company, today announced financial results for the second quarter ended June 30, 2010.

Financial Highlights

Revenue: For the second quarter of 2010, the company reported revenue of $24.5 million, an increase of 28% from $19.2 million in the second quarter of 2009. Product revenue of $8.5 million increased 102% over the same time period.

Operating Expenses: Research and development expenses in the second quarter of 2010 were $13.0 million compared to $12.1 million for the second quarter of 2009. The increase was primarily due to higher depreciation and stock-based compensation expenses. Selling, general and administrative expenses in the second quarter of 2010 were $8.7 million compared to $6.2 million for the second quarter of 2009. The increase was primarily due to increased headcount, legal and accounting costs associated with preparing to become a public company and higher stock-based compensation expenses.

Net Income/(Loss): Net loss was ($3.9) million, or ($0.15) per share, based on 26.6 million weighted average common shares outstanding in the second quarter of 2010. The company ended the quarter with 34.2 million shares outstanding as a result of the conversion of preferred stock and the issuance of new shares of common stock in connection with the company's initial public offering.

Adjusted EBITDA: On a non-GAAP basis, Adjusted EBITDA increased from ($0.1) million in the second quarter of 2009 to $0.5 million in 2010. Adjusted EBITDA is calculated by adding depreciation, amortization, net interest expense, income taxes, stock-based compensation and preferred stock warrants fair market value adjustment to our net loss. A reconciliation of Adjusted EBITDA to net loss is presented below.

Cash: Cash, cash equivalents and marketable securities for the second quarter of 2010 increased to $100.3 million compared to $39.3 million at March 31, 2010 and $55.6 million at December 31, 2009. Codexis completed an initial public offering in April 2010, generating net proceeds of $72.5 million.

Outlook

For 2010, Codexis affirms its forecast for 2010 annual revenue of $94 million to $98 million, which would represent growth of 13% to 18% compared to 2009, and affirms its expectation that Adjusted EBITDA will be positive for full year 2010.

Recent Events

In June 2010, Merck and Codexis announced joint receipt of the Presidential Green Chemistry Challenge Award, given by the U.S. Environmental Protection Agency (EPA). The award recognized development of a novel biocatalytic production method for sitagliptin, the active pharmaceutical ingredient in Merck's Januvia. The new process improved efficiency and significantly decreased waste products, and was the subject of a joint Merck-Codexis paper published June 17, 2010 in the leading peer-review journal Science. This was Codexis' second EPA Green Chemistry award. The first was received in 2006 for an improved process for a key building block of atorvastatin, the active ingredient in Lipitor from Pfizer.

On June 28, 2010, Peter Strumph joined Codexis as Senior Vice President, Commercial Operations, a new position. Mr. Strumph is responsible for Codexis pharmaceutical product management and manufacturing operations worldwide. He brings to Codexis two decades of experience in senior manufacturing and operations management in the biopharmaceutical industry.

"We are very pleased with the results of our second quarter, highlighted by strong financial performance and important milestones in both pharmaceuticals and bioindustrials," said Alan Shaw, Ph.D., President and Chief Executive Officer. "We continue to make excellent progress building a strong, sustainable clean technology company."

Conference Call

Codexis will hold a conference call for investors on August 5, 2010 at 1:30 p.m. PT (4:30 p.m. ET). The conference call dial-in numbers are US: 866-788-0541 or International: 857-350-1679, access code 54501345. A live webcast of the call will also be available from the Investor Relations section of www.codexis.com. A recording of the call will be available by calling US: 888-286-8010 or International: 617-801-6888, access code 87964645 beginning approximately two hours after the call, and will be available for up to thirty days. A webcast replay from today's call will also be available from the Investor Relations section of www.codexis.com approximately two hours after the call and will be available for up to thirty days.

About Codexis, Inc.

Codexis is a clean technology company. Codexis develops optimized biocatalysts that make industrial processes faster, cleaner and more efficient. Codexis' technology is commercialized with leading global pharmaceutical companies and in development for advanced biofuels with Shell. Other potential markets include carbon capture, water treatment and chemicals.

Forward-Looking Statements

This press release contains forward-looking statements relating to the Company's forecast for 2010 revenue and Adjusted EBITDA, which is defined elsewhere in this press release. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and that could materially affect actual results. Factors that could materially affect actual results can be found in Codexis' Quarterly Report on Form 10-Q dated May 28, 2010, including under the caption "Risk Factors." Codexis expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law.

                                                Codexis, Inc.
                               Condensed Consolidated Statements of Operations
                                                 (Unaudited)
                                     (In Thousands, Except Share Amounts)


                                              Three Months
                                                 Ended
                                               June 30,
                                            2010          2009  % change
                                            ----          ----  --------
    Revenues:
         Product                          $8,484        $4,193       102%
         Related party collaborative
          research and development        14,653        14,544         1%
         Collaborative research and
          development                        851           461        85%
         Government grants                   492             -     nm
                                             ---           ---

        Total revenues                    24,480        19,198        28%
                                          ------        ------

    Costs and operating expenses:
         Cost of product revenues          6,075         3,412        78%
              Gross margin $               2,409           781
    Gross margin %                           28%           19%
         Research and development         13,004        12,112         7%
         Selling, general and
          administrative                   8,652         6,178        40%
                                           -----         -----

    Total costs and operating
     expenses                             27,731        21,702        28%
                                          ------        ------

    Loss from operations                  (3,251)       (2,504)       30%

         Interest income                      46            45         2%
         Interest expense and other, net    (654)         (358)       83%
    Loss before provision for income
     taxes                                (3,859)       (2,817)       37%
         Provision for income taxes           87            41       112%
                                             ---           ---
    Net loss                             $(3,946)      $(2,858)       38%
                                         =======       =======

    Net loss per share of common
     stock,
    basic and diluted                     $(0.15)       $(1.09)
                                          ------        ------

    Weighted average common shares
     used in computing net loss per
     share of common stock, basic and
     diluted                              26,557         2,613
                                          ======         =====




                                           Six Months Ended
                                               June 30,
                                            2010          2009  % change
                                            ----          ----  --------
    Revenues:
         Product                         $14,760        $8,765        68%
         Related party collaborative
          research and development        30,695        28,963         6%
         Collaborative research and
          development                      1,511           869        74%
         Government grants                 3,214            12     nm
                                           -----           ---

        Total revenues                    50,180        38,609        30%
                                          ------        ------

    Costs and operating expenses:
         Cost of product revenues         11,293         7,268        55%
              Gross margin $               3,467         1,497
    Gross margin %                           23%           17%
         Research and development         25,986        27,246        -5%
         Selling, general and
          administrative                  17,252        12,241        41%
                                          ------        ------
                                               .             .
    Total costs and operating
     expenses                             54,531        46,755        17%
                                          ------        ------

    Loss from operations                  (4,351)       (8,146)      -47%

         Interest income                      74            76        -3%
         Interest expense and other, net  (1,012)         (786)       29%
    Loss before provision for income
     taxes                                (5,289)       (8,856)      -40%
         Provision for income taxes           26            95       -73%
                                             ---           ---
    Net loss                             $(5,315)      $(8,951)      -41%
                                         =======       =======

    Net loss per share of common
     stock,
    basic and diluted                     $(0.36)       $(3.44)
                                          ------        ------

    Weighted average common shares
     used in computing net loss per
     share of common stock, basic and
     diluted                              14,701         2,602
                                          ======         =====


                                 Codexis, Inc.
                     Condensed Consolidated Balance Sheets
                                  (Unaudited)
                                 (In Thousands)


                                                                   December
                                                        June 30,      31,
                                                             2010       2009
                                                             ----       ----
    Assets
    Current assets:
       Cash and cash equivalents                          $51,413    $31,785
       Marketable securities                               48,894     23,778
       Accounts receivable, net                             7,197      7,246
       Related party accounts receivable                       92          -
       Inventories                                          2,176      2,915
       Prepaid expenses and other current
        assets                                              4,788      1,658
                                                            -----      -----
          Total current assets                            114,560     67,382

    Restricted cash                                           668        731
    Property and equipment, net                            21,332     21,581
    Intangible assets, net                                    650        928
    Goodwill                                                3,241      3,241
    Other non-current assets                                3,224      5,173
                                                            -----      -----
        Total assets                                     $143,675    $99,036
                                                         ========    =======

    Liabilities, redeemable convertible preferred stock, and
     shareholders' equity (deficit)
    Current liabilities:
       Accounts payable                                    $8,036     $9,999
       Accrued compensation                                 5,041      6,518
       Related party payable                                  268      1,314
       Other accrued liabilities                            7,550     10,376
       Redeemable convertible preferred stock
        warrant liability                                       -      2,009
       Deferred revenues                                      501      2,240
       Related party deferred revenues                      4,084     13,161
       Financing obligations                                5,367      5,368
          Total current liabilities                        30,847     50,985

    Deferred revenues, net of current
     portion                                                1,764      1,856
    Related party deferred revenues, net of
     current portion                                        5,445      7,487
    Financing obligations, net of current
     portion                                                    -      2,574
    Other long-term liabilities                             1,324      1,307
                                                            -----      -----
          Total  liabilities                               39,380     64,209

    Redeemable convertible preferred stock
     issuable in series A to F                                  -    179,672

    Stockholders' equity (deficit):
    Common stock                                                4          -
    Additional paid-in capital                            269,077     15,015
    Accumulated other comprehensive income
     (loss)                                                   137       (252)
    Accumulated deficit                                  (164,923)  (159,608)
                                                         --------   --------
          Total  stockholders' equity (deficit)           104,295   (144,845)
                                                          -------   --------
        Total liabilities, redeemable
         convertible preferred stock, and
         shareholders' equity (deficit)                  $143,675    $99,036
                                                         ========    =======


                                  Codexis, Inc.
                 Condensed Consolidated Statements of Cash Flow
                                   (Unaudited)
                                 (In Thousands)


                                                      Six Months Ended
                                                          June 30,
                                                      2010           2009
                                                      ----           ----
    Operating activities:
      Net loss                                     $(5,315)       $(8,951)
      Adjustments to reconcile net loss to
       cash used in
         operating activities:
            Amortization of intangible assets          302            462
            Depreciation and amortization of
             property and equipment                  3,438          2,346
            Revaluation of redeemable convertible
             preferred stock warrant liability         677              6
            Stock-based compensation                 3,951          1,893
            Amortization of debt discount              104            200
            Accretion (amortization) of premium/
             discount on marketable securities         183            131
      Changes in operating assets and
       liabilities:
         Accounts receivable                           (42)            91
         Inventories                                   739           (630)
         Prepaid expenses and other current
          assets                                    (3,126)          (617)
         Other assets                                2,395             50
         Accounts payable                           (1,413)        (1,952)
         Accrued compensation                       (1,477)           139
         Accrued related party payable              (1,046)             2
         Other accrued liabilities                  (5,133)        (3,924)
         Deferred revenues                        (12,950)          1,290
                                                   -------          -----
              Net cash (used in) operating
               activities                         (18,713)         (9,464)

    Investing activities:
      Decrease  in restricted cash                      65            203
      Purchase of property and equipment            (3,192)        (4,518)
      Purchase of marketable securities           (49,051)        (28,802)
      Proceeds from sales of marketable
       securities                                    1,605              -
      Proceeds from maturities of
       marketable securities                        21,960         11,500
              Net cash (used in) investing
               activities                         (28,613)        (21,617)

    Financing activities:
      Principal payments on financing
       obligations                                  (2,681)        (2,674)
      Payments in preparation for initial
       public offering                              (3,106)             -
      Proceeds from issuance of preferred
       stock                                             -         40,000
      Proceeds from issuance of common
       stock on IPO                                 72,539              -
      Proceeds from exercises of stock
       options                                         254             62
                                                       ---            ---
             Net cash provided by financing
              activities                            67,006         37,388

        Effect of exchange rate changes on
         cash and cash equivalents                     (52)           (56)
                                                       ---            ---

    Net increase in cash and cash
     equivalents                                    19,628          6,251
    Cash and cash equivalents:
       Beginning of the period                      31,785         21,903
                                                    ------         ------
       End of the period                            51,413         28,154

       Marketable securities at the end of
        period                                      48,894         32,403

    Cash, cash equivalents and marketable
     securities                                   $100,307        $60,557
                                                  ========        =======


Reconciliation of GAAP to Non-GAAP Financial Information

Adjusted EBITDA (earnings before interest, tax, depreciation, amortization, stock-based compensation and warrant related costs) for the second quarter of 2010 was $0.5 million compared to a loss of $0.1 million in the second quarter of 2009. For the six months ended June 30, 2010, Adjusted EBITDA improved to $3.3 million from a loss of $3.5 million in the same period in 2009. The key driver of this improvement was a $3.6 million reduction in net loss.

We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA as a factor in evaluating management's performance when determining incentive compensation and to evaluate the effectiveness of our business strategies.

A reconciliation of GAAP net income (loss) to Adjusted EBITDA is included in the table below.


                                  Codexis, Inc.
           Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
                            (Unaudited, In Thousands)


                                          Three Months         Six Months
                                             Ended               Ended
                                            June 30             June 30
    Calculation of Adjusted EBITDA       2010      2009     2010      2009
    ------------------------------       ----      ----     ----      ----
    Net income (loss)                 $(3,946)  $(2,858) $(5,315)  $(8,951)
    Adjustments:
    Minus: Interest income                (46)      (45)     (74)      (76)
    Plus: Interest expense                 96       358      394       761
    Plus: Income taxes                     87        41       26        95
    Plus: Depreciation and
     amortization                       1,884     1,444    3,740     2,808
    Plus: Stock-based compensation      2,171       962    3,885     1,862
    Plus: Preferred stock warrant
     fair market valuation adjustment     281         -      677         6

       Adjusted EBITDA                   $527      $(98)  $3,333   $(3,495)



Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:

  • Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
  • Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.


    Contacts:
    Investors:  Derick Sutton, derick.sutton@codexis.com, 650-421-8130
    Media: Lyn Christenson, lyn.christenson@codexis.com, 650-421-8144 or
     Saskia Sidenfaden, ssidenfaden@mww.com, 212-827-3771.


SOURCE Codexis, Inc.

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