Manufacturer of innovative dialysis products, NxStage Medical Inc. NXTM, reported adjusted loss of 8 cents per share in the fourth quarter of 2014, narrower than the Zacks Consensus Estimate of loss by a couple of cents. Adjusted loss per share was, however, flat on a year-over-year basis.
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Quarter Details
Total revenue increased 15.1% from the year-ago quarter to $80 million, beating the Zacks Consensus Estimate of $76 million. Total revenue was also ahead of management’s upgraded guidance of $78 million.
The upside in total revenue is primarily attributable to an improved performance from the company’s System One segment which consists of Home and Critical Care.
Home revenue increased 21% to $42.5 million and managed to exceed the top end of management’s recent guidance. The growth was primarily driven by increased adoption of the NxStage System One.
Revenues from the company’s Critical Care segment increased 31.2% to $15.2 million, whereas the same from In-Center segment declined 5.4% to $19.5 million.
Gross margin contracted 160 basis points (bps) on a year-over-year basis to 38.6%. The contraction may be primarily contributed to the company’s investments in NxStage Kidney Care.
Selling and marketing expenses, as percentage of revenues, contacted 40 bps from the year-ago quarter to 18.4%. Research and development (R&D) expenses contracted 20 bps.
Total operating expenses, as percentage of revenues, contracted 260 bps from the year-ago quarter to 44.2%.
Operating loss, as a result, declined 2.3% to $4.5 million.
Financial Position
Cash and cash equivalents, as of Dec 31, 2014 was $52.9 million, compared with $54.6 million at the end of the previous quarter.
Guidance
For the first quarter of 2015, NxStage Medical expects total revenue in the range of $77.5–$78.5 million and a net loss of $6.5–$7.5 million. According to the company, the bulk of the projected net loss will be on account of investments in NxStage Kidney Care.
Management expects total revenue for full year 2015 in the band of $324–$328 million and net loss of $20–$24 million.
Management projects Home business segment to achieve 15% annual growth in 2015. Critical care segment is expected to achieve 9% growth on a year-over-year basis. In-Center segment revenues are estimated to be down 9%. NxStage Kidney Care is expected to achieve annual net revenue of $3 million.
Our Take
NxStage Medical reported better-than-expected fourth quarter 2014 results, in which both the top and the bottom line outperformed expectations.
We are particularly impressed with the stellar performance of the company’s System One segment.
Moreover, NxStage Medical recently secured the U.S. Food and Drug Administration (FDA) approval for its home nocturnal hemodialysis product. This is a key positive in our view.
However, significant investment in NxStage Kidney Care is expected to impact the bottom line, going forward. Also, the In-Center segment will likely persist as a soft spot in the near term.
Zacks Rank
Currently, NxStage Medical has a Zacks Rank #3 (Hold). Some top-ranked stocks in the medical sector are Affymetrix AFFX, Luminex LMNX and Abaxis ABAX. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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