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NxStage Medical Inc. Reports Operating Results (10-Q)

August 08, 2012 | About:

10qk

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NxStage Medical Inc. (NXTM) filed Quarterly Report for the period ended 2012-06-30.

Nxstage Medical, Inc. has a market cap of $826.5 million; its shares were traded at around $13.345 with and P/S ratio of 3.8.

Highlight of Business Operations:

We offer certain customers rebates based on sales to specific end users and discounts for early payment. Our revenues are presented net of these rebates and discounts. As of June 30, 2012, we had $1.8 million and $0.9 million reserved against trade accounts receivable for future rebates and discounts for customers in our In-Center and System One segments, respectively. We recorded $1.9 million and $1.6 million during the three months ended June 30, 2012 and 2011, respectively, and $3.2 million and $3.0 million during the six months ended June 30, 2012 and 2011, respectively, as a reduction of In-Center segment revenues in connection with rebates and discounts. For the System One segment, we recorded $1.3 million and $0.5 million during the three months ended June 30, 2012 and 2011, respectively, and $2.6 million and $1.1 million during the six months ended June 30, 2012 and 2011, respectively, in connection with rebates and discounts.

During the three months ended June 30, 2012 we grew our revenues by 10% to $59.0 million and during the six months ended June 30, 2012 we grew our revenues by 11% to $116.0 million with growth occurring in each market: home, critical care and in-center. Home revenues drove the growth, increasing $3.7 million, or 14%, and $7.2 million, or 14%, for the three and six months ended June 30, 2012 versus the prior year comparable periods, driven by an increase in the number of patients prescribed to use and centers offering the System One. We expect to see continued growth in our System One segment revenues, primarily driven by the annuity nature of our business, as well as the life-sustaining, non-elective nature of dialysis therapy.

In the home market, revenues increased $3.7 million, or 14%, and $7.2 million, or 14% for the three and six months ended June 30, 2012, respectively, versus the prior year comparable periods, driven by the increase in the number of patients prescribed to use and centers offering the System One. We have increased both the number of patients at existing centers and centers offering the System One, primarily through our existing relationships with service providers, including DaVita and Fresenius. Critical care market revenues increased $0.8 million, or 9%, and $3.1 million, or 20%, for the three and six months ended June 30, 2012, respectively versus the prior year comparable periods, due to increased sales of disposables from our growing number of System One equipment placed within hospitals. We expect future demand for our products and revenue growth in both the home and critical care markets to be strong as we further penetrate these markets, expand internationally, and leverage the annuity nature of our business. Our two largest customers in the home market, DaVita and Fresenius, will be important to that growth, specifically in the U.S. market. If the purchasing patterns of either of these customers adversely change, our business could be negatively affected. As our international business grows, our System One revenue will be susceptible to fluctuations in international equipment sales and changes in inventory levels at our international distributors.

Gross profit increased $3.5 million, or 19%, and $6.8 million, or 18%, and increased as an overall percentage of revenue for both the three and six months ended June 30, 2012, respectively, versus the prior year comparable periods, driven in large part by the System One Segment. Gross profit for the System One segment increased $3.3 million, or 22%, and $7.0 million, or 24%, for the three and six months ended June 30, 2012, respectively, versus the prior year comparable periods, due to increased revenues and improvement in gross profit as a percentage of revenues. The improvement in gross profit as a percentage of revenues for the three and six months ended June 30, 2012 was attributable to several factors, including lower product costs driven by certain cost savings initiatives, improvement in product design and reliability, continued leveraging of our manufacturing infrastructure, increased relative sales of higher margin products, and lower depreciation expense on our field equipment assets resulting from the change in the useful life of certain of these assets from five to seven years. Additionally, for the three months ended June 30, 2012 we realized favorable impact of foreign exchange rate fluctuations versus the U.S. dollar.

Net cash provided by (used in) operating activities. Net cash provided by (used in) operating activities increased by $4.6 million during the six months ended June 30, 2012, versus the prior year comparable period. Net loss after adjustments for non-cash charges, such as depreciation, amortization and stock-based compensation expense, had a favorable impact on cash flows increasing to a positive $10.0 million during the six months ended June 30, 2012 versus a positive $8.3 million for the prior year comparable period. Additionally, working capital requirements decreased with lower inventory requirements and higher total liabilities relative to the prior year comparable period, including accrued expenses and other liabilities. We expect working capital to fluctuate from quarter to quarter due to various factors including inventory requirements and timing of payments from our customers and to our vendors. Deferred revenues decreased $1.3 million during the six months ended June 30, 2012 and increased $0.6 million during the six months ended June 30, 2011, reflecting an increase of $1.5 million of amortization of deferred revenues into revenues from $7.6 million during the six months ended June 30, 2011 to $9.1 million during the six months ended June 30, 2012 and lower sales of new home equipment during 2012 compared to 2011 as a result of the timing of patient additions, efficiencies in our customers utilization of purchased equipment and the conversion of rental equipment to sold equipment.

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