biOasis Technologies Inc :BTI-CA: Earnings Analysis: Q3, 2018 By the Numbers : June 14, 2018

biOasis Technologies Inc reports financial results for the quarter ended November 29, 2017.

Highlights

  • Summary numbers: Revenues of CAD 0.14 million, Net Earnings of CAD -1.18 million.
  • Gross margins widened from 15.18% to 36.99% compared to the same period last year, operating (EBITDA) margins now -855.93% from -440.56%.
  • Change in operating cash flow of -184.92% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2017-11-29 2017-08-30 2017-05-30 2017-02-27 2016-11-29
Relevant Numbers (Quarterly)
Revenues (mil) 0.14 0.14 0.22 0.11 0.13
Revenue Growth (%YOY) 0.9 22.61 41.56 -22.69 104.21
Earnings (mil) -1.18 -1.09 -0.55 -0.42 -0.61
Earnings Growth (%YOY) -93.56 -3.42 38.62 26.12 -10.22
Net Margin (%) -869.82 -756.58 -251.34 -402.57 -453.42
EPS -0.02 -0.02 -0.01 -0.01 -0.01
Return on Equity (%) -44.62 -31.94 -26.44 -81.9 -73.8
Return on Assets (%) -158.69 -116.23 -81.95 -140.17 -170.26

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, BTI-CA’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if BTI-CA’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -6.12% and earnings by -7.94% compared to the previous period.

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from -440.56% to -855.93%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 15.18% to 36.99%. For comparison, gross margins were 80.29% and EBITDA margins -741.24% in the immediate last period.

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

BTI-CA’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 1,506.18, compared to last year’s level of 289.13 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company’s cash versus earnings numbers to gauge whether its performance is sustainable.

BTI-CA’s year-on-year change in operating cash flow of -184.92% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -449.95% to -867.85% and (2) one-time items that contributed to a decrease in pretax margins from -453.42% to -869.82%

EBIT Margin History
PreTax Margin History

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Company Profile

biOasis Technologies Inc. is a development-stage biopharmaceutical company, which is focused on research, development and commercialization of technologies and products that are intended for the treatment of central nervous system (CNS) diseases and diseases of the brain. The Company researches and develops products for diagnosis and treatment of neurological diseases and disorders. It is engaged in the development of its vectors Transcend and Transcendpep for the transport of therapeutic agents across the blood brain barrier (BBB). The Transcend brain delivery platform exploits the BBB penetrating properties of a recombinant soluble human protein known as melanotransferrin (MTf or p97) and portions thereof. Transcend delivery molecules have the ability to transport a range of molecules across the BBB. The Company owns approximately 30 the United States and foreign patents/applications related to p97 as a BBB delivery vector and as a biomarker for Alzheimer’s disease.

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