Novadaq Technologies, Inc. :NVDQ-US: Earnings Analysis: Q1, 2016 By the Numbers

Novadaq Technologies, Inc. reports financial results for the quarter ended March 31, 2016.

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

Highlights

  • Summary numbers: Revenues of USD 17.73 million, Net Earnings of USD -6.98 million.
  • Gross margins widened from 63.90% to 71.41% compared to the same period last year, operating (EBITDA) margins now -37.36% from -82.82%.
  • Year-on-year change in operating cash flow of 10.38% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as 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) 11.69 15.07 17.04 20.02 17.73
Revenue Growth (%YOY) 13.53 35.1 40.46 53.73 51.62
Earnings (mil) -11.29 -6.03 -3.71 -9.81 -6.98
Earnings Growth (%YOY) 29.95 -195.94 -222.6 44.12 38.15
Net Margin (%) -96.53 -40 -21.79 -48.99 -39.38
EPS -0.2 -0.22 -0.11 -0.17 -0.14
Return on Equity (%) -28.15 -15.43 -9.72 -26.66 -18.92
Return on Assets (%) -23.25 -12.87 -8.13 -21.97 -16.28

Access our Ratings and Scores for Novadaq Technologies, Inc.


Market Share Versus Profits

Revenues History
Earnings History

NVDQ-US‘s change in revenue this period compared to the same period last year of 51.62% 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 NVDQ-US is holding onto its market share. Also, for comparison purposes, revenues changed by -11.45% and earnings by 28.83% compared to the immediate last period.

Revenues Growth Versus Earnings Growth


Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 63.90% to 71.41% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -82.82% to -37.36% compared to the same period last year. For comparison, gross margins were 71.79% and EBITDA margins were -22.29% in the last reporting 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 639.96 days from 1,188.92 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 10.38% 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 growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -96.96% to -47.22% and (2) one-time items. The company’s pretax margins are now -39.38% compared to -96.53% for the same period last year.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Novadaq Technologies, Inc.


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.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of NVDQ-US.