Biostem Technologies Inc :BSEM-US: Earnings Analysis: Q3, 2017 By the Numbers : June 8, 2018

Biostem Technologies Inc reports financial results for the quarter ended September 29, 2017.

Highlights

  • Summary numbers: Revenues of USD 0.06 million, Net Earnings of USD -1.59 million.
  • Gross margins widened from 61.00% to 67.20% compared to the same period last year, operating (EBITDA) margins now -2,613.78% from -1,017.17%.
  • Change in operating cash flow of 0% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

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

2017-09-29 2017-06-29 2017-03-30 2016-12-30 2016-09-29
Relevant Numbers (Quarterly)
Revenues (mil) 0.06 0.2 0.11 0.09 0.21
Revenue Growth (%YOY) -74.17 34.03 -61.39 -42.01 41.22
Earnings (mil) -1.59 -2.84 -1.21 1.72 -2.19
Earnings Growth (%YOY) 27.17 -470.56 54.15 446.44 -120.28
Net Margin (%) -2880.01 -1421.37 -1048.74 1993.06 -1021.54
EPS -0.29 -0.61 -0.37 0.44 -0.7
Return on Equity (%) -64.26 -76.35 -33.54 81.35 -219.41
Return on Assets (%) -158.99 -212.41 -85.95 154.35 -284.87

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, BSEM-US’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 BSEM-US’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 -72.31% and earnings by 43.89% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 61.00% to 67.20%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

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

BSEM-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently -238.64, compared to last year’s level of -774.19 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.

BSEM-US’s year-on-year change in operating cash flow of 0% 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

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History

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Company Profile

Biostem Technologies, Inc. is a development-stage company. The Company is a biotechnology company focused on the development of anti-aging nutraceutical and cosmeceutical products, stem cell therapies, pharmaceuticals and educational provider of cell treatment protocols. The Company’s divisions include Biostem Cell Therapy, Biostem Pharmaceuticals and Biostem Wellness. Biostem Cell Therapy provides stem cell therapies, stem cell banking, stem cell therapy, and stem cell research and development. Biostem Pharmaceuticals provides research and product development, active pharmaceutical ingredient (API) re-packaging and lab services. Biostem Wellness provides anti-aging and rejuvenation products and services, wellness and management programs, among others. The Company’s subsidiaries include Biostem Wellness, Inc., Biostem Pharmaceuticals, Inc., Biostem Cell Therapy, Inc., Biostem International Inc. and Biostem Helps, Inc.

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