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Summary

  • NxStage Medical’s second quarter revenue increased 13% year-over-year to a record $74.1 million.
  • However, the company failed to post a profit and reported a net loss of $7.1 million, or $0.12 per share.
  • In my original article, I said that the company’s long-term growth depends on the number of patients who adopt home-based hemodialysis and how quickly they adopt it.
  • The company’s second quarter revenue growth was driven by strong adoption of its home-based hemodialysis machine both in the US and international markets, which confirms my view.

NxStage Medical (NASDAQ:NXTM) reported record second quarter revenue that exceeded the top end of its guidance range. Its revenue increased 13% year-over-year to a record $74.1 million, compared to revenue of $65.5 million for the second quarter of 2013. Strong adoption of the NxStage System One home-based hemodialysis machine, both within US and international markets, as well as in the Critical Care market, drove the revenue growth. Home revenue increased 18%, Critical Care revenue increased 15% and in-center revenue remained flat. The company revised its revenue guidance upwards and now expects that its full-year revenue for 2014 would be between $290 and $293 million, compared to its previous guidance of $283 to $288 million.

Although established players like Fresenius (NYSE:FMS) and DaVita (NYSE:DVA) account for more than half of the conventional dialysis market segment in the US, NxStage Medical's System One is currently the only portable system specifically indicated for use in the home hemodialysis market segment in the country. Jeffrey H. Burbank, Founder and CEO of NxStage, said, "Home is tracking ahead of plan with second quarter revenue up 18%, representing the best year over year growth in Home since Q4 of 2011. Consistent with our plans, we are accelerating adoption of home hemodialysis with the System One and building a long-term sustainable growth path for NxStage."

NXTM reported a net loss of $7.1 million, or $0.12 per share, which is a bit disappointing. The company's full-year net loss guidance for 2014 remains unchanged at $23 to $27 million. In my original article, I estimated that the company would post an EBITDA of approximately $85 million in fiscal 2015, and based on that my target for the stock was $15.59, which the stock achieved immediately after my article was published in January this year. However, if the company fails to break-even or narrow its loss significantly in fiscal 2015, the stock could correct massively.

Source: Update: NxStage Medical Earnings