Zealand Pharma A/S :ZLDPY-US: Earnings Analysis: Q1, 2017 By the Numbers : July 27, 2017

Zealand Pharma A/S reports financial results for the quarter ended March 31, 2017.


  • Summary numbers: Revenues of USD 11.18 million, Net Earnings of USD -3.79 million.
  • Gross margins widened from 63.93% to 86.50% compared to the same period last year, operating (EBITDA) margins now -4.43% from -885.38%.
  • Change in operating cash flow of -228.08% compared to same period last year is about the same as 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:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 11.18 25.98 5.95 1.2 0.96
Revenue Growth (%YOY) 1060.98 7.15 455.92 14.15 2.26
Earnings (mil) -3.79 7.59 -4.64 -14.78 -10.76
Earnings Growth (%YOY) 64.77 -24.96 39.37 -29.35 -30.44
Net Margin (%) -33.92 29.22 -78.07 -1232.54 -1117.81
EPS -0.15 0.3 -0.19 -0.62 -0.45
Return on Equity (%) -10 21 -19 -68.17 -33.62
Return on Assets (%) -18.19 32.91 -23.63 -77.25 -49.43

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, ZLDPY-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ZLDPY-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -56.97% and earnings by -149.95% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 63.93% to 86.50% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -885.38% to -4.43% compared to the same period last year. For comparison, gross margins were 85.80% and EBITDA margins were 32.61% in the last reporting period.

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

ZLDPY-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 376.96 days from 7,100.80 days for the same period last year.

Cash Versus Earnings – Sustainable Performance?

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

ZLDPY-US‘s year-on-year change in operating cash flow of -228.08% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -907.99% to -4.43% and (2) one-time items. The company’s pretax margins are now -35.69% compared to -1,135.03% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Zealand Pharma A/S is a biotechnology company. It focuses on the discovery, design and development of peptide based medicines. The company was founded by Lars Hellerung Christiansen and Bjarne Due Larsen on October 19, 1998 and is headquartered in Glostrup, Denmark.

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