I listened to the two latest presentations by Arun. He indicated that the sales force doubled at the end of the 4th quarter and into the 1st quarter and now stands at 80. These size of sales force numbers continue to confuse me. His comments suggest that the company has experienced either voluntary or non voluntary turnover because I could have sworn that there were more then 40 salesmen aboard the company in the 3rd quarter of 2014.
A couple of years ago on this Board, we expected the company to reach break even by the end of the 4th quarter of 2014 and be profitable at the start of 2015. When Arun was asked on Tuesday if it was reasonable to expect the company to break even in 12 to 18 months, he was very noncommittal. And there folks is the reason we are sitting at a pps of around $10.
A couple of years ago, we regularly heard of a new application, like endometriosis. Now all of the focus is on pilar 3 and lymph nodes. Nothing new for the last year.
In spite of the fact that Arun says things will pick up strongly in the second half, the company needs to show some real progress when it reports 2nd quarter results at the end of July. I have said it before here and i will say it again, crossing the bridge from being primarily a R&D company to a marketing company is easier said then done.
There were some very positive comments made at the CC:
1) regulatory approval in Japan and their strategy there is moving forward. this may be old news to some here, but it is the first time I heard about the approval.
2) gross margins will fluctuate going forward, but the basic direction of margins will continue to be upwad.
3) salesmen productivity improved between the 1st quarter and 2nd quarter and is expected to continue in that direction.
4) marketing expenses for the rest of the year will not be increasing as revenues increase.
5) the Mayo Clinic presented a large, significant study of a large universe of patients showing a substantial reduction of expenses when spy equipment is utilized. This will be incredibly useful to the salesforce when meeting with hospital administrators.
6) Spy Elite has stabilized and number of units in hospitals increased.
7) When asked about competition, Arun basicly indicated that in spite of all the chatter, there is no competition in their marketplace.
8) strong response from surgeons for their tissue product.
9) All major clinical trials moving forward.
10) annual revenue projection was decreased because of poor 1st quarter and not because of concerns for the second half of the year.
Finally, the kind of CC we got used to back in 2012 and 2013.
During the period 4/16 to 4/30 the stock declined from $17.50 to a low of approx. $10. Surprisingly, during that period, short interest declined by 100 thousand shares.
During the period 5/1 to 5/15 the stock has been range bound in the $10 to $10.50 range. During this period, short interest increased by almost 500 thousand shares to a record high of 4.9 million shares.
One possible conclusion is that the big drop in late April was caused primarily by Some Institutions selling or reducling their positions. In early May, the shorts have worked hard to keep the price where it is. On the other hand I hate to admit it but all this negative action could be the result of the market becoming increasingly convinced that the company continues to experience real difficulty in getting their marketing house in order.
Nice move today. I wonder if there is some short interest covering going on. Short interest increased by 800 thousand shares to a record high of 5.7 million shares in the latest reporting period ended 5/29. That increase took place when the stock was bumping along around $10.
Over the past two months, the short interest on this stock has been rising at an alarming rate. Please don't tell me how massive the short squeeze is going to be. On 5/1 the short interest was 4.4 million shares. As of june 30th it now stands at 6.6 million shares. That is a 50% increase over the past two months.
This company is not a multi divisional, multi product, world wide company. The operation is pretty straight forward as is the company's business plan. Somebody or more than one somebody are making increasingly larger and larger bets that the marketing effort is falling flat on its face. I had hoped that the increase in short interest would level off or begin to decline, but the opposite is actually happening. The wall of worry i am climbing with this company keeps getting steeper.
I wonder if anyone else here walked away with the same understanding that I did. At the end when the Novadaq speaker mentioned optimism about meeting 2015 revenue projections he did not focus on Pinpoint or Luna. He seemed most positive about the fact that there is a large number of Spy units installed in hospitals under the Lifecell agreement. Most of those units are under rental agreements. He felt that the company was going to be able to convert those rental agreements into outright sales. Unless I'm mistaken that will count as
new revenue or will it? Anyone?
Over the past year, it is pretty obvious that some of the larger players who own substantial positions in this company, know how the business is doing before we do. They are probably doing channel checks. I hope this latest positive move in the pps is the result of some positive channel checks by these players.
There is no question that competition, patent estate, technology, etc are critical factors that we need to continue to be mindful. At the moment though, all I can focus on is what progress the company makes in the second quarter related to revenues. Until the past 6 months, we had an enormous first to market lead. Recently, we have seen the company begin to stumble badly in implementing an effective marketing strategy.
A very high percentage of the largest institutional investors have continued to strongly support the company.
Arun cannot expect their patience to last indefinitely. It wouldn't take but a handful of these institutions to force a sale of the company. I hope it doesn't happen but this marketing stumbling needs to end soon.
While it is still early in the cycle for reporting 6/30/15 institutional exposure, early reports have taken us over 90% institutional exposure for the first time. At this point, this continues a very strange story of institutional exposure and short interest both continuing to reach new highs at the same time.
Thank God there was a Q & A component of this CC. Who is advising Arun as to what should go out as a press release or what should be volunteered at these CC's. For example, it was only because of a question that we learned that the Japanese regulators approved the use of our equipment. That is a huge market.
If you listen to the CC, you will notice that the early questioners never said congrats on a good quarter. But as the questions continued and we received greater and greater insight into what took place in the quarter, the later questioners said congrats on a good quarter.
This might seem like a petty point to make. It isn't. Arun knows that the issue of competition has been weighing down the pps, but it took a question for him to indicate that no competition currently exist in the market. These points are important and should be put on the table by Arun and not depend on a question to be asked to reveal important information.
Sorry for the rant.
Thanks for the input. I would like to clarify one point you make. You indicate that these folks suddenly
started with a large stake in NVDQ. The records show that Primecap has been an investor in NVDQ from at least late 2014. As of 3/31/15 they owned 1,085,000 shares, up 325,000 from a 760,000 share position as of
It will be interesting to see the details of institutional ownership as of 6/30/15.
I hope your right that shorts exist to be squeezed. Unfortunately, after 40 years of investing, it has been my experience that the vast majority of potential short squeezes never come to pass. Sure there is the occasional NFLX, but they are rare. The legitimate question we have to ask ourselves is why the current bet AGAINST the company has now reached $72 million. That is a $72 million dollar bet by institutions and hedge funds and retail shorters probably account for less than 5% of that amount. These players could be wrong and I certainly hope they are, but let's not fool ourselves into thinking these folks are dumb and uninformed. There is no big herd mentality present here as existed with NFLX. These are big players who do substantial due diligence.
As usual i appreciate the time and effort you put into your postings. No one can deny that a high level of potential exist with this company. Three years ago I was happy to take the long view of their potential. It was rather easy to do that back then because everything was moving along well with no hiccups.
18 months ago, we had a reasonable expectation that 2015 would mark the year that Spy became standard of care in breast reconstruction and the company as a whole would begin turning quarterly profits. Those expectations have been delayed indefinitely. Certainty of direction and results of operation that existed 2 years ago has now been replaced by uncertainty. While i would love to take the long view, at the moment, I simply have my fingers crossed related to the next couple of quarters.
Not wanting to be too picky, but the earnings release is really one week sooner then last year.
Last year's second quarter revenue was $11.2 million. A 25% increase would be $14 million in revenues. If that is the actual number and they have a positive CC, the recent rally could be sustained. Right now, the RSI on the stock is over 70, indicating we are already in an over bought scenario. A revenue number in the $15 million range would add a great deal of credibility to their projections for the second half of 2015.
I would agree that #4 is critical. If they can hold marketing expenses constant from now through 2016, they could be profitable in 2016. Also, do not underestimate the potential of the Japanese marketplace. Those folks demand the very best in medical treatment and we do not have any marketing expenses there. Also, the marketing expenses inherent in recurring income is very modest. The absolute key is an existing sales force that remains professional and successful. That has always been the key when companies in the medical industry cross the bridge from research to business development.
Some time ago, I did exchange emails with Steve Kilmer on this subject. The issue revolved around what constitutes materiality. In my mind, anyone who knows anything about Japanese regulatory agencies knows how difficult it is to obtain approval. Novadaq received approval and already has a marketing partner in place. The japanese marketplace is as large as Europe and about half the size of the U.S. It is a huge arena of opportunity for Novadaq since the japanese are very serious about high quality health care. To not put out a press release at the time of approval is incompetent.
Here is another one. At the CC Arun mentioned that the Mayo clinic completed a very large study of the cost benefits to hospitals that utilize Spy equipment. We are talking here about the Mayo Clinic. Somebody tell me this information is not worthy of a press release.
If any regulars on this board feel the same way, send Steve Kilmer an email and complain. I have and will continue to do so.
p.s. 400 thousand shares already traded and up 5%.
I could not agree with you more. A few months ago I made a posting here that was not very well received. As with you I too have seen companies and CEO's in particular who were great in terms of their R & D and the products that came out of that research effort. Then they have to cross a bridge from being an R&D company to a revenue generating organization with the emphasis now on marketing and less so on research. Some CEO's have a problem effectively making that transition, not from a lack of effort but from a lack of experience.
Over and over during this recent CC Arun stumbled on questions related to marketing. For example, it took repeated questions from one of the analyst to get Arun to address pipeline. His response indicated that all levels of the pipeline were improving late in the 1st quarter. This was positive information that he should have addressed himself right at the outset of his comments. Thank God, the analyst asked the question.
I continue to be confused by the issue of salesman productivity and why it is taking almost a year for a salesman to reach full productivity. I also believe Arun and his team underestimated the difficulties of taking over the Lifecell accounts ans Spy Elite. I know this is Monday morning quarterbacking but it looks like they should have waited until their own marketing effort on Pinpoint and Luna were fully established before taking over Spy Elite.
more to come
We are right now at a critical juncture for this company. We are about 90% owned by Institutions. Just about all of the recent heavy volume is institutional activity. Some have been unquestionably been selling heavily.
That selling has been soaked up by other institutions albeit at lower and lower prices. The overall stock market has been booming and we have been slipping back. It is obvious that some of the larger investors have a great belief in the products and continue to be very patient. How long can we expect that to last. Personally I am hoping that the stock holds at this level till the 2nd quarter report and CC. At that time, Arun MUST show clear evidence that the pipeline is fulling up.