ADMA Biologics, Inc. :ADMA-US: Earnings Analysis: Q1, 2016 By the Numbers : June 1, 2016

ADMA Biologics, Inc. reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of ADMA Biologics, Inc. – Novavax, Inc., Repligen Corporation, Vical Incorporated and CEL-SCI Corporation (NVAX-US, RGEN-US, VICL-US and CVM-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 2.12 million, Net Earnings of USD -4.61 million.
  • Gross margins widened from -30.25% to -19.91% compared to the same period last year, operating (EBITDA) margins now -190.22% from -205.26%.
  • Year-on-year change in operating cash flow of -22.44% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -239.87% to -217.17%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 1.5 1.31 1.85 2.51 2.12
Revenue Growth (%YOY) -3.68 -12.69 35.62 68.75 41.3
Earnings (mil) -3.61 -4.68 -5.1 -4.58 -4.61
Earnings Growth (%YOY) 38.93 -18.13 -50.75 -28.6 -27.93
Net Margin (%) -239.87 -357.22 -275.45 -182.42 -217.17
EPS -0.37 -0.44 -0.48 -0.43 -0.43
Return on Equity (%) -148.38 -163.11 -282.81 -639.23 N/A
Return on Assets (%) -47.17 -58.74 -70.84 -71.13 -85.02

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Market Share Versus Profits

Revenues History
Earnings History

ADMA-US‘s change in revenue this period compared to the same period last year of 41.30% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ADMA-US is holding onto its market share. Also, for comparison purposes, revenues changed by -15.46% and earnings by -0.65% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from -30.25% to -19.91%, while operating margins improved from -205.26% to -190.22% over this period. For comparison, gross margins were 40.18% and EBITDA margins -159.76% in the immediate last period.

Gross Margin Versus EBITDA Margin

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ADMA-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 645.71 days from 1,425.31 days for the same period last year.

Gross Margin Versus Working Capital Days

Cash Versus Earnings – Sustainable Performance?

ADMA-US‘s change in operating cash flow of -22.44% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from -213.05% to -195.80% and pretax margins widened from -239.87% to -217.17%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

ADMA Biologics, Inc. is a biopharmaceutical company, which engages in the development and commercialization of human plasma and plasma-derived therapeutics. The company’s targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disease or who may be immune-suppressed for medical reasons. It also operates an FDA-licensed, GHA-certified source plasma collection facility. The company was founded by Adam S. Grossman and Jerrold B. Grossman on June 2, 2006 and is headquartered in Hackensack, NJ.

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