Biocept, Inc. :BIOC-US: Earnings Analysis: Q2, 2016 By the Numbers : August 9, 2016

Biocept, Inc. reports financial results for the quarter ended June 30, 2016.

We analyze the earnings along side the following peers of Biocept, Inc. – Genomic Health, Inc., Exact Sciences Corporation, Cepheid, Foundation Medicine, Inc. and Veracyte Inc (GHDX-US, EXAS-US, CPHD-US, FMI-US and VCYT-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 0.66 million, Net Earnings of USD -4.59 million.
  • Gross margins widened from -1,183.37% to -151.87% compared to the same period last year, operating (EBITDA) margins now -671.60% from -4,987.89%.
  • Year-on-year change in operating cash flow of -12.49% 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 -5,255.77% to -693.01%.

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

2015-06-30 2015-09-30 2015-12-31 2016-03-31 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 0.08 0.16 0.22 0.22 0.66
Revenue Growth (%YOY) 298.9 1504.59 188.65 47.58 763.46
Earnings (mil) -4.04 -4.5 -4.62 -4.88 -4.59
Earnings Growth (%YOY) -34.65 -16.49 -18.96 -28.27 -13.86
Net Margin (%) -5256.23 -2727.35 -2115.37 -2202.29 -693.08
EPS -0.22 -0.24 -0.24 -0.25 -0.2
Return on Equity (%) -131.05 -200.07 -347.8 -1217.47 N/A
Return on Assets (%) -82.31 -110.63 -149.05 -224.56 -280.9

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Market Share Versus Profits

Revenues History
Earnings History

BIOC-US‘s change in revenue this period compared to the same period last year of 763.46% 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 BIOC-US is holding onto its market share. Also, for comparison purposes, revenues changed by 199.44% and earnings by 5.76% 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 -1,183.37% to -151.87%, while operating margins improved from -4,987.89% to -671.60% over this period. For comparison, gross margins were -566.21% and EBITDA margins -2,121.47% 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

BIOC-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 211.14 days from 19,206.67 days for the same period last year.

Gross Margin Versus Working Capital Days


Cash Versus Earnings – Sustainable Performance?

BIOC-US‘s change in operating cash flow of -12.49% 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 -5,068.37% to -683.76% and pretax margins widened from -5,255.77% to -693.01%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Biocept, Inc. is an oncology laboratory service company, which focuses on the development and marketing of novel laboratory products in the detection of rare cells to include circulating tumor cells. It develops and commercializes proprietary circulating tumor cell and circulating tumor DNA tests utilizing a standard blood sample. The company utilizes cell enrichment and extraction technology for the detection and analysis of circulating tumor DNA tests. It also offers services to other laboratory testing providers, academic institutions, research organizations, biopharmaceutical companies and clinical trial support. The company was founded on May 12, 1997 and is headquartered in San Diego, CA.

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