U.S. Markets closed

Why TransEnterix Is Cratering Today

George Budwell, The Motley Fool

What happened

Shares of the robotic surgery company TransEnterix (NYSEMKT: TRXC) dropped by as much as 29.4% in pre-market trading Friday in response to the company's rough first-quarter earnings report, which it released after the closing bell Thursday.

Not only did the company miss Wall Street's consensus estimate for its non-GAAP EPS by 10%, it also whiffed on revenue by a staggering 62% for the period. In fact, TransEnterix's sales fell by 54% in Q1 compared to the same period a year ago. That's a steep drop-off any way you slice it.

A downward trending red arrow set against a black and red grid.

Image Source: Getty Images.

So what

Those unexpectedly poor financial results boil down to the simple fact that TransEnterix only sold a single Senhance System during the quarter -- reportedly to a hospital in Taiwan. 

After Senhance's lightening-fast start last year, Wall Street doubtless didn't expect this type of abrupt decline in the system's commercial momentum. Senhance, after all, appeared to be well on its way to becoming a healthy revenue source for the company. 

Now what

TransEnterix CEO Todd Pope did give investors a reason to be optimistic, however. Pope noted that the company expects to sell two to four units in the second quarter. So, while Senhance's commercial progress has definitely slowed down from the five units sold in Q4 2018, the system isn't dead in the water.

Unfortunately, there is more bad news for investors to digest this morning. The company exited Q1 with only $48.4 million in the bank. Management said that this amount, combined with additional debt proceeds, should be sufficient to fund operations into late 2020. However, Senhance sales will have to pick up in order for the company to meet this projected cash runway. Investors, therefore, might want to forgo trying to catch this falling knife today.

More From The Motley Fool

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.