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What's Behind Guardant Health's Disappointing Q4 Results

By Keith Speights - Feb 25, 2021 at 6:04AM

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The company beat revenue expectations, but its bottom-line performance and 2021 outlook weren't what investors hoped for.

Guardant Health (GH -2.09%) started 2021 with a bang. The stock soared 39% year to date at one point earlier this month. It has since given up more than half of that gain, though, and its shares are likely to fall even more.  

The liquid biopsy pioneer announced its fourth-quarter results after the market closed on Wednesday. The healthcare stock slid nearly 7% in after-hours trading. Here are the highlights from Guardant Health's Q4 update.

Healthcare provider speaking with patient.

Image source: Getty Images.

By the numbers

Guardant Health reported revenue of $78.3 million in the fourth quarter, up 25% year over year. This result topped the average analyst estimate of $76.7 million.

The company announced a Q4 net loss of $93.7 million, or $0.94 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Guardant Health posted a GAAP net loss of $25.2 million, or $0.27 per share. The Wall Street consensus estimate was for a net loss of $0.57 per share in the fourth quarter of 2020.

Guardant also generated an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $29.8 million in Q4. This reflected deterioration from the adjusted EBITDA loss of $17.1 million in the prior-year period.

Behind the numbers

Guardant Health's precision oncology revenue, which includes sales of its flagship Guardant360 product, totaled $64.7 million in the fourth quarter. This represented 13% year-over-year growth. The clinical testing component of this precision oncology revenue jumped 47% year over year, with 17,353 clinical tests performed during the quarter.

The company recorded $13.6 million in revenue from development services and other sources. This total was up 148% from the prior-year period. Guardant attributed the increase primarily to the timing of milestone payments for its companion diagnostic development programs.

That bottom-line miss in Q4 stemmed from significant spending increases. Guardant Health's operating expenses more than doubled year over year to $141.1 million. This included a stock-based compensation expense of $56.8 million, a more than tenfold year-over-year jump.

Looking ahead

Investors were also disappointed with Guardant Health's guidance for 2021. The company projects full-year revenue of between $360 million and $370 million. The midpoint of this range reflects year-over-year growth of 27.5%, well below the growth rate in 2020.

However, it's possible that Guardant Health is sandbagging its outlook somewhat. The company easily beat its revenue growth projection for 2020. It also has a new product on the market now with Guardant Reveal, a liquid biopsy for residual disease and recurrence monitoring in patients with early stage colorectal cancer.

The important thing for investors to remember is to not focus too much on a single quarter for Guardant Health. It's the kind of stock to hold for 10 years or more. The long-term prospects for Guardant Health's liquid biopsy products remain very good.

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