Business Wire | Nov 5, 2020 04:03PM EST

Guardant Health Reports Third Quarter 2020 Financial Results

Nov. 05, 2020

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Nov. 05, 2020--Guardant Health, Inc. (Nasdaq: GH), a leading precision oncology company focused on helping conquer cancer globally through use of its proprietary blood tests, vast data sets and advanced analytics, today reported financial results for the quarter ended September 30, 2020.

Recent Highlights

* Revenue of $74.6 million for the third quarter of 2020, an increase of 23% over the corresponding period of 2019 Precision oncology revenue of $60.4 million, an increase of 16% over the corresponding period of 2019 Development services and other revenue of $14.2 million, an increase of 63% over the corresponding period of 2019 * Reported 16,950 tests to clinical customers and 3,071 tests to biopharmaceutical customers in the third quarter of 2020, representing an increase of 28% and a decrease of 42%, respectively, over the third quarter of 2019 * Received FDA-approval for Guardant360(r) CDx, becoming the first liquid biopsy test for comprehensive tumor mutation profiling across all solid cancers * Launched enhanced version of Guardant360 including tumor mutational burden (TMB) and expanded homologous recombination deficiency (HRD) and fusion gene set * Study published in Nature Medicine shows evidence of Guardant360 liquid biopsy accelerating clinical trial enrollment compared to tissue biopsy

"Our strong performance in the third quarter is a testament to our team's dedication, as they stay focused on executing for our customers and on our pipeline programs," said Helmy Eltoukhy, PhD, co-founder and CEO. "While we expect to continue to see impacts related to the pandemic in the fourth quarter, we are confident that the fundamentals of our business are firmly intact. With the FDA approval of Guardant360 CDx behind us and as we look forward to 2021, I am more confident than ever in the opportunity that lies ahead for Guardant to transform patient care across the cancer care continuum."

Third Quarter 2020 Financial Results

Revenue was $74.6 million for the three months ended September 30, 2020, a 23% increase from $60.8 million for the three months ended September 30, 2019. Precision oncology revenue grew 16% driven predominantly by an increase in average selling price. There were 16,950 clinical tests and 3,071 biopharmaceutical tests performed during the third quarter of 2020. Development services and other revenue increased 63% primarily related to the timing of project related milestones for companion diagnostic development programs.

Gross profit, or total revenue less cost of precision oncology testing and cost of development services and other, was $53.4 million for the third quarter of 2020, an increase of $11.0 million from $42.3 million for the corresponding prior year period. Gross margin, or gross profit divided by total revenue, was 72%, as compared to 70% for the corresponding prior year period.

Operating expenses were $127.6 million for the third quarter of 2020, as compared to $59.8 million for the corresponding prior year period, an increase of 113%.

Net loss attributable to Guardant Health, Inc. common stockholders was $77.7 million for the third quarter of 2020, as compared to $12.8 million for the corresponding prior year period. Net loss per share attributable to Guardant Health, Inc. common stockholders was $0.78 for the third quarter of 2020, as compared to $0.14 for the corresponding prior year period.

Non-GAAP adjusted EBITDA was $14.6 million loss for the third quarter of 2020, as compared to $9.0 million loss for the corresponding prior year period.

Cash, cash equivalents and marketable securities were $1.1 billion as of September 30, 2020.

2020 Guidance

Guardant Health is not providing 2020 financial guidance due to the continued uncertainties from the impact of COVID-19.

Webcast Information

Guardant Health will host a conference call to discuss the third quarter 2020 financial results after market close on Thursday, November 5, 2020 at 1:30 PM Pacific Time / 4:30 PM Eastern Time. A webcast of the conference call can be accessed at http://investors.guardanthealth.com. The webcast will be archived and available for replay for at least 90 days after the event.

Non-GAAP Measure

We believe that the exclusion of certain income and expenses in calculating non-GAAP Adjusted EBITDA can provide a useful measure for investors when comparing our period-to-period core operating results, and when comparing those same results to that published by our peers. To derive Adjusted EBITDA, we remove from GAAP results the impact of income (expenses) attributable to material non-cash items, specifically stock-based compensation and fair value remeasurements due to the subjectivity, management judgment, and market fluctuations involved around these amounts. We exclude certain other items because we believe that these income (expenses) do not reflect expected future operating expenses. Additionally, certain items are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance.

This non-GAAP financial measure is not intended to be considered in isolation from, as substitute for, or as superior to, the corresponding financial measure prepared in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not present the full measure of our recorded costs against its revenue. In addition, our definition of the non-GAAP financial measures may differ from non-GAAP measures used by other companies.

Definition of Non-GAAP Adjusted EBITDA

"Adjusted EBITDA" is defined as net loss attributable to Guardant Health, Inc. common stockholders before: (i) interest income,(ii) interest expense (iii) provision for (benefit from) income taxes, (iv) depreciation and amortization expense, (v) other (income) expense, net, (vi) stock-based compensation expense, (vii) adjustments relating to non-controlling interest and contingent consideration and, if applicable in a reporting period, and (viii) acquisition-related expenses, and other non-recurring items.

About Guardant Health

Guardant Health is a leading precision oncology company focused on helping conquer cancer globally through use of its proprietary blood tests, vast data sets and advanced analytics. The Guardant Health Oncology Platform leverages capabilities to drive commercial adoption, improve patient clinical outcomes and lower healthcare costs across all stages of the cancer care continuum. Guardant Health has launched liquid biopsy-based Guardant360(r), Guardant360(r) CDx, Guardant360 LDT and GuardantOMNI(r) tests for advanced stage cancer patients. These tests fuel development of our LUNAR program, which aims to address the needs of early stage cancer patients with neoadjuvant and adjuvant treatment selection, cancer survivors with surveillance, asymptomatic individuals eligible for cancer screening and individuals at a higher risk for developing cancer with early detection.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws, including statements regarding the potential benefits and advantages of Guardant Health's platforms, assays and tests, which involve risks and uncertainties that could cause Guardant Health's actual results to differ materially from the anticipated results and expectations expressed in these forward-looking statements. These statements are based on current expectations, forecasts and assumptions, and actual outcomes and results could differ materially from these statements due to a number of factors. These and additional risks and uncertainties that could affect Guardant Health's financial and operating results and cause actual results to differ materially from those indicated by the forward-looking statements made in this press release include those discussed under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operation" and elsewhere in its Annual Report on Form 10-K for the year ended December 31, 2019 and in its other reports filed with the Securities and Exchange Commission, including, its Quarterly Report on Form 10-Q for the period ended March 31, 2020. The forward-looking statements in this press release are based on information available to Guardant Health as of the date hereof, and Guardant Health disclaims any obligation to update any forward-looking statements provided to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based, except as required by law. These forward-looking statements should not be relied upon as representing Guardant Health's views as of any date subsequent to the date of this press release.

Guardant Health, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Precision oncology $ 60,384 $ 52,147 $ 171,621 $ 123,048 testing

Development services and 14,185 8,701 36,793 28,430 other

Total revenue 74,569 60,848 208,414 151,478

Costs and operating expenses:

Cost of precision 16,699 16,578 52,699 42,251 oncology testing ^(1)

Cost of development 4,488 1,936 11,429 6,631 services and other

Research and development 36,245 24,569 109,580 60,417 expense ^(1)

Sales and marketing 25,095 18,802 75,225 56,048 expense ^(1)

General andadministrative expense ^ 66,294 16,440 123,265 42,540 (1)

Total costs and 148,821 78,325 372,198 207,887 operating expenses

Loss from operations (74,252 ) (17,477 ) (163,784 ) (56,409 )

Interest income 2,313 4,286 8,271 9,870

Interest expense (8 ) (280 ) (30 ) (860 )

Other (expense) income, 345 179 2,421 275 net

Loss before provision (71,602 ) (13,292 ) (153,122 ) (47,124 )for income taxes

Provision for (benefit 68 (202 ) 116 (1,383 )from) income taxes

Net loss (71,670 ) (13,090 ) (153,238 ) (45,741 )

Adjustment of redeemable (6,000 ) 300 (6,800 ) (4,700 )noncontrolling interest

Net loss attributable toGuardant Health, Inc. $ (77,670 ) $ (12,790 ) $ (160,038 ) $ (50,441 )common stockholders

Net loss per shareattributable to GuardantHealth, Inc. common $ (0.78 ) $ (0.14 ) $ (1.66 ) $ (0.56 )stockholders, basic anddiluted

Weighted-average sharesused in computing netloss per shareattributable to Guardant 99,554 93,303 96,659 89,452 Health, Inc. commonstockholders, basic anddiluted

(1) Amounts includestock-based compensation expense as follows:

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019



Cost of precision $ 428 $ 266 $ 1,138 $ 562 oncology testing

Research and development 2,369 2,066 7,355 4,704 expense

Sales and marketing 2,320 1,458 6,285 2,930 expense

General and 50,081 1,694 72,573 3,686 administrative expense

Total stock-based $ 55,198 $ 5,484 $ 87,351 $ 11,882 compensation expense

Guardant Health, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except share and per share data)

September 30, 2020

December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

142,945

$

143,228

Short-term marketable securities

870,459

379,574

Accounts receivable, net

36,255

47,986

Inventory

27,731

15,181

Prepaid expenses and other current assets, net

9,898

11,389

Total current assets

1,087,288

597,358

Long-term marketable securities

51,398

268,783

Property and equipment, net

61,882

43,668

Right-of-use assets

36,103

29,140

Intangible assets, net

16,645

8,524

Goodwill

3,290

3,290

Capitalized license fees

50

6,890

Other assets, net

5,453

4,882

Total Assets

$

1,262,109

$

962,535

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

18,281

$

16,197

Accrued compensation

24,037

18,557

Accrued expenses

22,312

25,703

Deferred revenue

7,337

12,277

Total current liabilities

71,967

72,734

Long-term operating lease liabilities

39,682

33,256

Obligation related to royalty

-

6,880

Other long-term liabilities

1,856

1,672

Total Liabilities

113,505

114,542

Redeemable noncontrolling interest

56,400

49,600

Stockholders' equity:

Common stock, par value of $0.00001 per share; 350,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 99,897,188 and 94,261,414 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

1

1

Additional paid-in capital

1,601,188

1,150,090

Accumulated other comprehensive income

3,862

1,111

Accumulated deficit

(512,847)

(352,809)

Total Stockholders' Equity

1,092,204

798,393

Total Liabilities, Redeemable Noncontrolling Interest and Stockholders' Equity

$

1,262,109

$

962,535

Guardant Health, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in thousands, except share and per share data)



September 30, December 2020 31, 2019

ASSETS

Current assets:

Cash and cash equivalents $ 142,945 $ 143,228

Short-term marketable securities 870,459 379,574

Accounts receivable, net 36,255 47,986

Inventory 27,731 15,181

Prepaid expenses and other current assets, net 9,898 11,389

Total current assets 1,087,288 597,358

Long-term marketable securities 51,398 268,783

Property and equipment, net 61,882 43,668

Right-of-use assets 36,103 29,140

Intangible assets, net 16,645 8,524

Goodwill 3,290 3,290

Capitalized license fees 50 6,890

Other assets, net 5,453 4,882

Total Assets $ 1,262,109 $ 962,535

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 18,281 $ 16,197

Accrued compensation 24,037 18,557

Accrued expenses 22,312 25,703

Deferred revenue 7,337 12,277

Total current liabilities 71,967 72,734

Long-term operating lease liabilities 39,682 33,256

Obligation related to royalty - 6,880

Other long-term liabilities 1,856 1,672

Total Liabilities 113,505 114,542

Redeemable noncontrolling interest 56,400 49,600

Stockholders' equity:

Common stock, par value of $0.00001 per share;350,000,000 shares authorized as of September 30,2020 and December 31, 2019; 99,897,188 and 1 1 94,261,414 shares issued and outstanding as ofSeptember 30, 2020 and December 31, 2019,respectively

Additional paid-in capital 1,601,188 1,150,090

Accumulated other comprehensive income 3,862 1,111

Accumulated deficit (512,847) (352,809)

Total Stockholders' Equity 1,092,204 798,393

Total Liabilities, Redeemable Noncontrolling $ 1,262,109 $ 962,535 Interest and Stockholders' Equity

Guardant Health, Inc.

Reconciliation of Net Loss Attributable to Guardant Health, Inc. Common Stockholders (1) to Non-GAAP Adjusted EBITDA (unaudited)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net loss attributable to Guardant Health, Inc. common stockholders

$

(77,670)

$

(12,790)

$

(160,038)

$

(50,441)

Adjustments:

Interest income

(2,313)

(4,286)

(8,271)

(9,870)

Interest expense

8

280

30

860

Other (income) expense, net

(345)

(179)

(2,421)

(275)

Provision for (benefit from) income taxes

68

(202)

116

(1,383)

Depreciation and amortization

4,353

2,952

11,462

7,963

Stock-based compensation expense

55,198

5,484

87,351

11,882

Adjustments relating to non-controlling interest and contingent consideration

6,070

(300)

6,680

4,700

Acquisition related expenses (2)

-

-

9,707

422

Adjusted EBITDA (non-GAAP)

$

(14,631)

$

(9,041)

$

(55,384)

$

(36,142)

(1) Net Loss attributable to Guardant Health, Inc. common stockholders is the most directly comparable GAAP operating financial measure.

(2) For the nine months ended September 30, 2020, acquisition related expenses consist of a dispute settlement expense of $1.2 million and an IPR&D technology write off for $8.5 million incurred during the three months ended March 31, 2020 in connection with a settlement and a license purchase agreement. For the nine months ended September 30, 2019, acquisition related expenses of $0.4 million primarily include certain diligence, accounting, and legal expenses incurred related to our Bellwether acquisition.

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CONTACT: Investor Contact: Carrie Mendivil investors@guardanthealth.com

CONTACT: Media Contact: Anna Czene press@guardanthealth.com