FQ3/23: Revenues and GMs ahead of estimates, but investing in OpEx resulted in a higher net loss
TSX: OPS | CAD 1.69 | Outperform | Speculative Risk | Price Target CAD 3.50
Sentiment: Positive
Our view: OpSens reported FQ3/23 (May-qtr) revenues at $13.2MM, meaningfully above RBCe ($11.1MM) and consensus ($11.5MM). Revenues were up +22% q/q and +31% y/y. However, net loss of $4.2MM during the quarter was worse vs. RBCe ($3.2MM loss) and consensus ($3.4MM loss) due to higher operating expenses, as the company invests for future growth, which more than offset the better-than-expected GMs. TAVR (SavvyWire) revenues grew +64% q/q to $0.8MM as the company ramps up commercialization of SavvyWire but were light vs. RBCe ($0.9MM). The company is finalizing plans to move from a controlled market release to a full market release in FQ4/23 (Aug-qtr). On the earnings call, we expect the focus to be on the SavvyWire ramp-up in the US and Canada. We will also look for any early trends related to US physicians adopting LV pacing during TAVR, as we have stated previously. Currently, only ~10% of US surgeons use LV pacing during TAVR procedures in contrast to significantly higher levels in Canada and Europe. In our view, the ramp-up of SavvyWire in the US will be dependent on the shift to LV pacing for TAVR procedures over time. We will look for additional commentary related to any commercial synergies between OptoWire and SavvyWire since both the wires utilize the same OptoMonitor device. Finally, we will look for any updates to EU approval timelines for SavvyWire (expected in CY23) and regulatory filing for SavvyWire approval in Japan.
Revenues above RBCe and consensus estimates. FQ3/23 revenues of $13.2MM (+22% q/q and +31% y/y) were ~19% above RBCe ($11.1MM) and ~14% above consensus ($11.5MM). Total medical revenues were $12.5MM (+26% q/q; +36% y/y), including FFR and dPR sales of $6.8MM (+4% y/y), ahead of RBCe ($5.9MM). FFR and dPR revenues were led by strong performance in North America with US sales growing at 31% y/y (likely reflecting revenue synergies with the SavvyWire launch and benefits from the increase in the US sales force), EMEA (served through distributors) recorded growth of 2% y/y, while Asia Pacific (also served through distributors) saw a decline of 14% y/y, due to some headwinds (including FX). We note that Japan revenues benefited from pent-up in the base quarter as FQ2/22 was negatively impacted by Omicron and supply chain issues in Japan. Optical medical products revenues (including the supply agreement with Abiomed) were $4.9MM (+92% y/y), above RBCe ($3.4MM). TAVR (SavvyWire) revenues were $0.8MM (+64% q/q) below RBCe ($0.9MM). Industrial revenues were $0.7MM (-22% y/y) and came below RBCe ($0.8MM).
FQ4 net loss of $4.2MM compared to RBCe ($3.2MM loss) and consensus ($3.4MM loss). Gross margins were ~59%, above RBCe (~56%) and consensus (~58%) and prior quarter (~57%) led by a favourable product mix, a higher weighting of direct sales to hospitals and higher sales volume. Operating expenses at $11.8MM (+26% q/q; +50% y/y) were ahead of RBCe and consensus (~$9.4MM) led by higher marketing and R&D spends vs. estimates. Operating expenses have increased y/y as the company has invested in sales and marketing of the SavvyWire product launch along with an increase in R&D due to structural heart and coronary artery projects.
Cash position. OpSens ended FQ3/23 with a cash position of $20.5MM (vs. $21.9MM as of FQ2/23).
Operational updates. Management noted increased adoption of both OptoWire and SavvyWire. OPS is finalizing plans to move from a controlled market release to a full market release of SavvyWire in the ongoing quarter (FQ4/23). Additionally, OPS is also benefiting from the increased demand in optical sensors for business partnerships and expects continued growth in the future.
Conference call at 11:00am ET today. Dial-in details: 1-833-756-0865 or 1-412-317-5754 or via a live webcast (link).