I did not respond because I was trying to rebuild and calibrate my model for Novadaq. There are many currents in this model that have very little historical data points to model. In addition they are not linear, independent interactions. The Duracell product will interact with SpyElite sales and recurring revenues. How strong will the feedback loop be? As stated in the CC this is not a simple model. Sorry for the delay in responding. For one aspect look at my response to the SpyElite "bulge" possible response above. A similarly complex analysis is required for Duracell, for Pinpoint, for Luna, and what happens if the FILM study is a "knockout" in the field of cancerous Lymph Nod identification (as I suspect it will be)?
Bottom line..this company has so many very very positives going for it that as Arun stated in the CC "2015 will be the year of execution".
I'll list them in the order of importance (from my perspective):
1. 2015 40% Rev Growth Est. (Arun stated he is very confident this is a "baseline", versus 2014's "median")
2. increasing direct marketing personnel from 82 (current) to 112 during 2015
3. add LifeNet DermACELL products to our Ecosystem's recurring sales complement in 2015
4. introducing the EasyLDI laser Doppler instrument as part of our "Ecosystem" in the next few months
5. will have transitioned from 30%/70% revenue Internal/Partner generated in 2014 to 90%/10% in 2015
6. will be starting the PILLAR III this month
7. will be starting the FILM (Lymphatic Mapping) study in this quarter
8. were a few million short in Q4 revenue due to LifeCell shortfall
9. Will be in 18 countries by end of year
All in all...very positive presentation if you are willing to read the implications.
I believe it is short selling, pure and simple...but jmho. We've had this discussion before.
There are no earnings, no dividends, just a story in the making. With such a small float, and average daily volume, it's short selling heaven. But keep in mind that the more pressure applied on the bow, the faster and stronger the arrow flies...
It's basic stock market physics, aka short covering.
Sentiment: Strong Buy
A friend of mine called Stephen and the question was posed to him.
"He (Stephen Kilmer) stated that they will announce the date next week (week of Feb 9th) and it will be during the week of the 23rd of February."
There was no indication of the reason for the delay.
Perhaps the transition of SpyElite (from one company to another and all the out of the ordinary costs, revenues, categorizing's may be slightly different from LifeCell than Novadaq's categories including past quarters that are still ongoing) has causes complications. There are also new international distributors that may need messaging to meet the current NVDQ accounting standards. I see no "ominous" forebodings from this, just one time issues that could be counted differently depending on which company or the domicile of that company.
I came to the same conclusion. All else being equal LifeCell marketed to 30 hospital systems and expected sales in the month of December from a good portion of them. Enough so that they negotiated it into the contract release agreement. That means there are 30 sales ready to pop. If Novadaq, which knows which hospitals they are...how else would they be off limits for the month of December?, targets those hospitals they should be able to close a majority of them. At $200k per system, that would be somewhere between $3.0 million and $4.0 million in Q1. If one subtracts the quantity sold in Q1 2014 (Est 5--"15 sold in the first 3 quarters" from CC), and one figures 50% revenue sharing during 2014 that should be ~$2.5 to $3.5 million in additional revenue from Spy Elite in Q1. Why Arun has only 20% revenue growth for Q1 is not clear. I expect an upside bump. But being that we are 2/3 thru Q1 Arun may have knowledge about other factors influencing these pipeline sales. We should all know in 2 months or so.
One other note: the response of institutions lately is that they sense blood in the water and have been building their holdings...do they have contacts with the hospitals in question? If I was a Fidelity I would send boots on the ground to talk to hospital administrators from the big hospital systems to glean their intentions before buying 15% of the shares!!!!
If this hypothesis is close to being reality, the 4.4 million shorted shares will be squeezed. If 87% of the shares are being held by institutions, that only leaves 7.2 million non-institutional shares--take out 2 million held by management and there are precious few shares left for the shorter to pursue. The graph of yesterday fits this hypothesis. As the price rises, the shorts will face margin calls in the next few days and the price could break $18@. I don't expect this, nor do I want my readers to base purchases on this, but it is fun to think about.
The value of SPY is the key to my long term investment. Short term stock gyrations are less important . I bring up the short interest only as the icing on the cake.
Von, I went back and listened to the conference again. Clearly the 50%/25%/25% comment was about the LifeCell accounts and not the marketing staff in general. We'll get more clarification in a month or so. We are probably entering the 30 day blackout until the Q1 results are released. Good news would be good. Sounds like one of Yogi Berra's lines.
Thanks for clarifying the 50/25/25 percentages. I didn't hear it that way, but a reading of the transcript probably sheds more light. I certainly would prefer that it pertains only to Life Cell, that's for sure.
I always appreciate your thoughtful posts!
It would be nice to see combined revenues of $8.1 million for Pinpoint and luna for the 1st quarter. That would represent a 40% increase in revenues over the 4th quarter for these products. That would certainly indicate, at least to me, improving salesmen productivity in the most important arena for this company.
According to Nasdaq, the short interest is at a record 4.58 M as of Feb 27, the latest reporting period.
This represents over 8% of the outstanding shares, also a record, I believe. The days to cover was reduced from 20 down to 17, because the average daily volume increased slightly. Still, 17 elephants charging out the door at the same time to cover their shorts, is a lot of elephants! ( Hopefully a perfect storm for us bulls). Maybe Arun can excite some of these elephants tomorrow on the 11:15 am live webcast at the Barclays Healthcare conference.
I too missed hearing the Q and A. However I don't believe that was Arun's decision to make.
In any case, he said that having Lifecell back in the family "bodes well" for 2015, and I take him at his word. As a future long tern holder, I say to you~
The story is intact and actually improving with each new patent and each new move the company makes. I'm focusing on the future (1-5 years).
Patience is the key to acquiring wealth.
Sentiment: Strong Buy
Von, it was standard but couldn't be counted toward revenue because the FDA hadn't approved it yet for use on the Xi. The approval was obtained in the third quarter and the revenues including past shipped Xi's was counted. The revenue and earnings from the "partnership" relationships was far and away in the favor of the "partner". Last year (2014) the revenue from the Internal sales / Partnership sales force was 30% / 70% and I'm sure the earnings from those "parnerships" were even more skewed. For 2015 with the SpyElite returned from LifeCell and the rapid growth of PINPOINT and LUNA sales the mix is projected to be 90%/ 10%. Since the 10% is Intuitive Surgical (vast majority of partner revenues) and the exclusive marketing of the newly acquired DermACELL, the impact of Intuitive Surgicals sales is very minor. 10% at best. If ISRG doubles sales this year (very unlikely) it would only add about 8% to revenues and probably around 5% to earnings.
Clearly the future and results for Novadaq's performance is in their hands as it should be. Arun has the goal for 2015 to add 30 on the ground front line sales persons, 100 (2015) versus 70 (2014) a 43% increase in staff where it counts. Also remember that by the agreement with LifeCELL, no personnel could be hired by Novadaq for 1 year from the end of the contract (12/01/2014). I would expect a half dozen or so of the old LifeCELL marketing persons would be tempted to jump ship for the up and coming Novadaq's "Ecosytem" of diagnostic and clinical guidance technologies. These folks were the ones that established the existing 400 hospital accounts for SpyElite and would want to take over those accounts they once managed.
Sorry for the verbose response Von.
Slow and steady wins the race right....sometimes I need reminding of that. The pieces are here and I believe they will come together. I am still ambivalent regarding the circumstances around the miss though.
The insight that you, AG, Endo and a few others provide on a regular basis is much appreciated from this end. Thank you for sharing!
Jay why do you say it is a joke? The technology is effective and proven. It is cost beneficial in that it not only provides guidance to surgeons in making decisions on treatment and surgeries but it saves repair and the subsequent legal costs. The $6.00 stock estimate is based on what? I see the price higher than would be demanded from the current revenue and market penetration, but this is a new technology / service and will need time to penetrate the medical community. I ask in all sincerity. I am an investor and am always open to views and insights other than mine for re-evaluation.
Thanks in advance
From the CC, only two Spy Elites were sold in the month of December by Lifecell in spite of their insistence in the termination agreement that for thirty-some-odd accounts that they, and they only, be able to book capital sales. Customers commented that they wanted to defer sales until they could buy directly from Novadaq, the company that would servicing their accounts in the future. It looks like a bulge in the pipeline.
As an aside, the number of shares short sits at 4.4M shares, up 5.5% for the latest reporting period (mid February). This is yet again another all-time high, up 90% in just over 6 months. The days-to-cover figure is also a new record - 20 days.
So far price has moved against me but they have badly missed guidance and consensus every quarter I have been short the stock. This will play out but it will take a little longer for the longs to figure things out than I thought possible. I mean seriously, Pinpoint and Luna added 8 instrauments to the fully installed base number Arun gives! Spy Elite is fully penetrated, lifecell coulnt sell them, and novadaq will do no better.
Sentiment: Strong Sell