Delcath Systems, Inc. :DCTH-US: Earnings Analysis: Q2, 2016 By the Numbers : August 18, 2016

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

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


  • Summary numbers: Revenues of USD 0.51 million, Net Earnings of USD -6.67 million.
  • Gross margins widened from 52.68% to 70.65% compared to the same period last year, operating (EBITDA) margins now -741.49% from -741.63%.
  • Year-on-year change in operating cash flow of 30.64% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from -777.47% to -757.53%.

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) 0.47 0.4 0.44 0.37 0.51
Revenue Growth (%YOY) 85.66 83.87 50.86 -16.67 9.66
Earnings (mil) -3.7 -2.42 -5.09 -1.81 -6.67
Earnings Growth (%YOY) 19.59 46.86 -72.94 48.02 -80.24
Net Margin (%) -793.78 -607.02 -1160.14 -490 -1304.7
EPS -4.8 -1.92 -3.74 -1.28 -70.56
Return on Equity (%) -100.19 -72.77 -184.23 -88.12 -401.38
Return on Assets (%) -75.8 -52.43 -115.42 -51.32 -98.93

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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 9.66% 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 38.11% and earnings by -267.73% 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 52.68% to 70.65%, while operating margins improved from -741.63% to -741.49% over this period. For comparison, gross margins were 70% and EBITDA margins -912.16% 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

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 80.14 days from 2,766.42 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 30.64% 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


Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from -777.47% to -757.53%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from -793.78% to -1,304.70%.

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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