Novadaq Technologies, Inc. Earnings Analysis: 2015 By the Numbers

Novadaq Technologies, Inc. reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of Novadaq Technologies, Inc. – Intuitive Surgical, Inc., Digirad Corporation, CryoLife, Inc., Royal Philips NV Sponsored ADR and General Electric Company (ISRG-US, DRAD-US, CRY-US, PHG-US and GE-US) that have also reported for this period.


  • Gross margins widened from 60.61% to 63.59% compared to the same period last year, operating (EBITDA) margins now -45.74% from -26.84%.
  • Year-on-year change in operating cash flow of -19.72% 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:

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 15.29 22.99 35.02 46.6 63.81
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings -10.15 -12.34 -22.3 -24.35 -30.83
Earnings Growth (YOY) N/A -21.58 -80.67 -9.2 -26.59
Net Margin -66.39 -53.7 -63.68 -52.26 -48.31
EPS -0.32 -0.32 -0.47 -0.44 -0.63
Return on Equity N/A -86.97 -21.83 -14.43 -20.19
Return on Assets -57.83 -30.71 -16.52 -11.88 -16.5

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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 -26.84% to -45.74%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 60.61% to 63.59%. For comparison, gross margins were 60.61% and EBITDA margins -26.84% 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

NVDQ-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 815.84 days from 1,344.65 days for the same period last year.

Gross Margin Versus Working Capital Days

Cash Versus Earnings – Sustainable Performance?

NVDQ-US‘s change in operating cash flow of -19.72% 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 -39.10% to -56.47%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -52.15% to -48.37%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Novadaq Technologies, Inc. develops, manufactures and markets real-time fluorescence imaging products. Its products are designed for use by surgeons in the operating room and other clinical settings where open, minimally invasive or interventional surgical procedures are performed. The company’s products include SPY imaging system, pinpoint endoscopic fluorescence imaging system, firefly system for robotic surgery and CO2 heart laser system. Its SPY Imaging core technology platform provides clinically relevant anatomic and physiologic images during a wide variety of complex surgical procedures without exposing the patient to radiation. Novadaq Technologies was founded by Rick Mangat on April 14, 2000 and is headquartered in Mississauga, Canada.

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