Delcath Systems, Inc. :DCTH-US: Earnings Analysis: Q1, 2016 By the Numbers : May 26, 2016

Delcath Systems, Inc. reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of Delcath Systems, Inc. – AngioDynamics, Inc., Insulet Corporation, ICU Medical, Inc., Retractable Technologies, Inc., Merit Medical Systems, Inc., Tandem Diabetes Care, Inc., Baxter International Inc. and Teleflex Incorporated (ANGO-US, PODD-US, ICUI-US, RVP-US, MMSI-US, TNDM-US, BAX-US and TFX-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 0.37 million, Net Earnings of USD -1.81 million.
  • Gross margins widened from 47.97% to 70% compared to the same period last year, operating (EBITDA) margins now -912.16% from -700.23%.
  • Year-on-year change in operating cash flow of 13.53% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

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) 0.44 0.47 0.4 0.44 0.37
Revenue Growth (%YOY) 43.23 85.66 83.87 50.86 -16.67
Earnings (mil) -3.49 -3.7 -2.42 -5.09 -1.81
Earnings Growth (%YOY) 33.91 19.59 46.86 -72.94 48.02
Net Margin (%) -785.59 -793.78 -607.02 -1160.14 -490
EPS -0.32 -0.3 -0.12 -0.23 -0.08
Return on Equity (%) -80.72 -100.19 -72.77 -184.23 -88.12
Return on Assets (%) -61.44 -75.8 -52.43 -115.42 -51.32

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Market Share Versus Profits

Revenues History
Earnings History

DCTH-US‘s change in revenue this period compared to the same period last year of -16.67% 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 DCTH-US is holding onto its market share. Also, for comparison purposes, revenues changed by -15.72% and earnings by 64.40% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 47.97% to 70%. 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 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

DCTH-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 1,948.38 days from 3,400.31 days for the same period last year.

Gross Margin Versus Working Capital Days

Cash Versus Earnings – Sustainable Performance?

DCTH-US‘s change in operating cash flow of 13.53% 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


The company’s operating (EBIT) margins contracted from -744.37% to -935.68%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -785.59% to -490%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Delcath Systems, Inc. is a pharmaceutical and medical device company, which focuses on oncology and liver cancer therapy. Its proprietary drug and device combination product, Delcath Hepatic Delivery System is designed to administer high dose chemotherapy and other therapeutic agents to the liver, while controlling the systemic exposure of those agents. The company was founded on August 5, 1988 and is headquartered in New York, NY.

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