10-QPeriod: Q2 FY2019

Guardant Health, Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 7, 2019For Securities:GH

Summary

Guardant Health, Inc. (GH) reported significant revenue growth in its Q2 2019 10-Q filing, driven by strong performance in its Precision Oncology Testing segment. Total revenue for the quarter reached $54.0 million, a substantial increase of 178% year-over-year, primarily fueled by a 136% surge in precision oncology testing revenue. This growth was attributed to an increase in test volumes from both clinical customers and biopharmaceutical clients, alongside expanded Medicare reimbursement for lung cancer patients. The company continues to invest heavily in research and development, with R&D expenses increasing by 69% year-over-year to $19.5 million. This investment is crucial for the development of its LUNAR early detection program and the expansion of its genomic data capabilities. While revenue growth is robust, the company also reported a net loss of $11.3 million for the quarter, indicating continued investment in expansion and product development. Significant cash reserves of $822.9 million as of June 30, 2019, resulting from recent public offerings, provide a strong liquidity position to fund these initiatives and operations for at least the next 12 months.

Financial Highlights

49 data points
Beta

Revenue

$53.98M

Net Income

-$11.60M

-21.5% Net Margin

EPS (Diluted)

$-0.13

Total Assets

$939.99M

Cash & Equivalents

$174.65M

Free Cash Flow

-$16.88M

Financial Statements
Beta
Revenue$53.98M
R&D Expenses$19.53M
Operating Expenses$69.24M
Operating Income-$15.27M
Interest Expense$287K
Net Income-$11.60M
EPS (Basic)$-0.13
Shares Outstanding (Basic)89.04M

Key Highlights

  • 1Total revenue for the second quarter of 2019 increased by 178% to $54.0 million, compared to $19.4 million in the same period of 2018.
  • 2Precision Oncology Testing revenue grew by 136% to $42.1 million, driven by increased test volumes for both clinical and biopharmaceutical customers, and expanded Medicare reimbursement.
  • 3Development Services revenue saw a significant jump of 664% to $11.9 million, attributed to new projects from biopharmaceutical clients for companion diagnostic development.
  • 4Research and Development expenses increased by 69% to $19.5 million, reflecting continued investment in technology and the LUNAR early detection program.
  • 5The company's cash, cash equivalents, and marketable securities totaled $822.9 million as of June 30, 2019, providing a strong liquidity position.
  • 6Net loss for the quarter was $11.3 million, a decrease from $21.6 million in the prior year's second quarter, but indicative of ongoing investment in growth.
  • 7The company adopted ASC 606 revenue recognition standard on January 1, 2019, which impacted revenue recognition timing for clinical customers, generally leading to earlier recognition.

Frequently Asked Questions

The primary driver of revenue growth was the substantial increase in Precision Oncology Testing revenue, up 136% year-over-year to $42.1 million. This was due to higher test volumes from both clinical oncologists and biopharmaceutical companies. Additionally, expanded Medicare coverage for lung cancer patients starting in late 2018 and favorable commercial payer payments contributed to this growth. Development Services revenue also saw a dramatic increase of 664%.

Guardant Health has a strong liquidity position, with $822.9 million in cash, cash equivalents, and marketable securities as of June 30, 2019. This is largely due to proceeds from its initial public offering in October 2018 and a follow-on offering in May 2019. The company expects these resources to be sufficient for at least the next 12 months.

The adoption of ASC 606 on January 1, 2019, has changed how revenue is recognized, particularly for clinical customers. Historically, revenue for these services was recognized upon cash receipt if the price was not fixed or determinable. Under ASC 606, revenue is now recognized upon delivery of test results at an estimated transaction price, which generally leads to earlier revenue recognition. This transition had a positive impact on reported revenue for the current period, although comparative prior periods were not restated.

Guardant Health is heavily investing in Research and Development, with expenses increasing significantly year-over-year. Key areas of investment include the development of new products like the LUNAR early detection program, enhancing genomic and medical data management, and conducting clinical trials. The company is also expanding its sales and marketing efforts to drive market adoption and international expansion through its joint venture.