Novadaq Technologies, Inc. :NVDQ-US: Earnings Analysis: Q3, 2016 By the Numbers : November 22, 2016

Novadaq Technologies, Inc. reports financial results for the quarter ended September 30, 2016.

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


  • Summary numbers: Revenues of USD 22.16 million, Net Earnings of USD -10.90 million.
  • Gross margins narrowed from 73.72% to 71.72% compared to the same period last year, operating (EBITDA) margins now -39.84% from -25.57%.
  • Year-on-year change in operating cash flow of -99.36% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 22.16 20.12 17.73 20.02 17.04
Revenue Growth (%YOY) 30.07 33.52 51.62 53.73 40.46
Earnings (mil) -10.9 -16.53 -6.98 -9.81 -3.71
Earnings Growth (%YOY) -193.51 -174.4 38.15 44.12 -222.6
Net Margin (%) -49.17 -82.2 -39.38 -48.99 -21.79
EPS -0.19 -0.29 -0.14 -0.17 -0.11
Return on Equity (%) -32.39 -45.35 -18.92 -26.66 -9.72
Return on Assets (%) -28.18 -40.56 -16.28 -21.97 -8.13

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Market Share Versus Profits

Revenues History
Earnings History

NVDQ-US‘s change in revenue this period compared to the same period last year of 30.07% 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 10.15% and earnings by 34.10% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 73.72% to 71.72%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from -25.57% to -39.84% in this time frame. For comparison, gross margins were 71.94% and EBITDA margins were -73.33% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

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 decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 417.19 days from 727.70 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

NVDQ-US‘s change in operating cash flow of -99.36% 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

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -35.87% to -49.35% and (2) one-time items that contributed to a decrease in pretax margins from -22.07% to -49.14%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
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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