I've heard Arun say on several occasions, including the latest cc, that he wants the company "to maintain our first mover advantage". Now since they already have enough cash on hand to fund multiple clinical studies, R and D, and hire the salespeople they need, I think we're looking at either a large acquisition or an international buildout, probably in Japan. jmo
Sentiment: Strong Buy
Not much to add here other than to agree that Arun obviously has his sights set on something - either complimentary surgical imaging technology or IP/patents that perhaps run into the tens of millions or more. Funding a faster marketing launch - say 150 salespeople by YE 14, that does not require $185m. Also, the randomized clinical studies do not cost this much - and in many cases they don;t have to sponsor all of it. Perhaps they enter an intl JV where they want to retain a much larger slice of the economics, than what a small co would typically get as a margin dealing w/ Olympus, GE, Siemens, etc. It is frustrating - ISRG is a $400 stock 10yrs later partly b/c they never breached 40m shares. At some point NVDQ will grow only 13% y/y, we just negated that future yr with dilution. But I nitpick..
Conference call indicated multiple new studies in the near term, international launch early next year will need marketing boots on the ground overseas and they also want to add another 100 domestic sales reps next year in anticipation of very positive results from the studies. They will need 200+ marketing persons to cover the US as a minimum. Remember the statement from earlier CC--"they are expected to bring in ~$1 million in revenue (annual) per person once up to speed." Sound like they want to up the ante and grow ~100% per year revenue for the next 3-5 years.
They implied that they would be partnering any foreign distribution efforts, which is the only logical strategy - building an international marketing/distribution network from scratch would be ridiculous. Assuming they are partnering international, that would not typically require any cash - in most cases if the product is strong enough, you would get a distributor to pay you upfront for the rights. In any event, they seem to be growing revenues in line with the US marketing expansion over the past few quarters, so I can't imagine they need the cash for the US expansion of Luna or Pinpoint - they had plenty of cash on hand to handle that. That leaves acquisitions?
I would agree that the company has a great many plans in place that will cost a great deal of cash outflow. I would also agree that when money is available at an attractive price growth companies should go for it. However, at this stage, $186 million cash position seems a little aggressive. My gut tells me an acquisition might very well be part of the equation and is in the works. We shall see what we shall see.
I agree. I think it has to be an acquisition as they could get any infrastructure improvements at Richmond financed, though I had thought that the manufacturing capacity would be adequate right now anyhow. I don't know what technology is out there or its valuation, but based on their purchases thusfar I don't see any other obvious way to spend $105M+. Anyone have any ideas on what company it could be? I know there is a European competitor out there...
They did it because they could. They took advantage of positive news in earnings, growing sales and an increasing price per share. Excellent timing for the company and #$%$ timing for the shareholders. Now existing shareholders do not know what to do. They suspect something new down the road in order to justify holding or buying more shares. The pps will drop short term and shareholders will get over it. We should have taken advantage of the two pops to $18 and then we would not be questioning their decision as we would have gained around 17 per cent twice in a few weeks. Too late for that. I will wait to see what the pps will be today and try to buy at the bottom.