Sientra, Inc. :SIEN-US: Earnings Analysis: Q3, 2017 By the Numbers : December 1, 2017

Sientra, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Sientra, Inc. – DENTSPLY SIRONA, Inc., Zimmer Biomet Holdings, Inc., West Pharmaceutical Services, Inc. and Glaukos Corp (XRAY-US, ZBH-US, WST-US and GKOS-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 9.82 million, Net Earnings of USD -14.38 million.
  • Gross margins narrowed from 73.11% to 64.67% compared to the same period last year, operating (EBITDA) margins now -99.26% from -144.89%.
  • Year-on-year change in operating cash flow of -148.63% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -151.81% to -146.30%.

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

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 9.82 8.17 7.49 6.49 6.53
Revenue Growth (%YOY) 50.34 30.83 409.11 322.12 -34.22
Earnings (mil) -14.38 -20.39 -11.42 -8.07 -9.96
Earnings Growth (%YOY) -44.34 -100.05 4.31 71.42 -50.86
Net Margin (%) -146.46 -249.61 -152.52 -124.43 -152.55
EPS -0.74 -1.07 -0.61 -0.43 -0.55
Return on Equity (%) -28.92 -31.35 -14.47 -9.24 -10.49
Return on Assets (%) -57.45 -86 -43.44 -27.45 -33.25

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Market Share Versus Profits

Revenues History
Earnings History

SIEN-US’s change in revenue this period compared to the same period last year of 50.34% 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 SIEN-US is holding onto its market share. Also, for comparison purposes, revenues changed by 20.20% and earnings by 29.47% 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 earnings decline was driven by the drop in gross margins from 73.11% to 64.67%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from -144.89% to -99.26%. For comparison purposes, gross margins were 68.64% and EBITDA margins were -112.93% 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

SIEN-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 are now 418.14 days from 1,223.96 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?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SIEN-US’s change in operating cash flow of -148.63% 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

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from -149.62% to -111.48% and pretax margins widened from -151.81% to -146.30%.

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

Sientra, Inc. is a medical aesthetics company, which engages in developing and commercializing plastic surgery implantable devices. Its products include breast implants, breast tissue expanders, silicone scar treatment, and additional tissue expanders. The company was founded in 2006 by Hani M. Zeini and is headquartered in Santa Barbara, CA.

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