NEGG earnings analysis
What we found in NEGG's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Dehaier reported Q1 revenue of $3.316 million, up 12.30% from $2.953 million a year earlier, with gross margin improving to 37.43% from 33.78% and operating income rising 52.44% to approximately $0.45 million. Reported net income fell to approximately $0.13 million (down 37.73%) primarily due to a non-cash fair value loss on warrants of $199,508; excluding that item adjusted net income would have been $325,529 (up 66.18%). Cash and cash equivalents declined to $2,299,270 from $3,694,486 at year-end. Management reiterates growth plans for respiratory/homecare products and says working capital of $27,524,771 (including $2,299,270 cash) should be adequate for at least 12 months.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Top-line growth
- Total revenues increased 12.30% to $3,316,000 for the three months ended March 31, 2012 from $2,953,000 in the prior-year quarter.
- Improving gross margin
- Gross margin expanded to 37.43% in Q1 2012 from 33.78% in Q1 2011, with gross profit rising to $1.24 million from $1.00 million.
- Operating income expansion
- Operating income grew 52.44% to approximately $450,000 in Q1 2012 from approximately $295,000 in Q1 2011.
- Adjusted profitability stronger
- Excluding non-cash change in fair value of warrants (a loss of $199,508 in Q1 2012 vs a gain of $9,526 in Q1 2011), adjusted net income would have been $325,529 in Q1 2012 (up 66.18% vs $195,888).
- Working capital coverage
- Management states available working capital of $27,524,771, including cash of $2,299,270, should be adequate to meet cash needs for at least 12 months.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Reported net income declined
- Reported net income fell 37.73% to approximately $130,000 in Q1 2012 from approximately $210,000 in Q1 2011, driven largely by a $199,508 non-cash warrants fair value loss.
- Material cash decline quarter-to-date
- Cash and cash equivalents decreased from $3,694,486 at December 31, 2011 to $2,299,270 at March 31, 2012 (a decline of $1,395,216).
- Increased selling expense
- Selling expenses rose 32.95% to $319,000 in Q1 2012 from $240,000 in Q1 2011, which management says may continue to grow and could pressure margins.
- Reliance on short-term financing activity
- During Q1 2012 the Company repaid $631,428 of a short-term bank loan and entered a new loan agreement for $791,315, indicating ongoing dependence on debt financing.
- Tax/withholding exposure in PRC
- MD&A notes potential withholding tax on payments from BDL to the parent (withholding rates discussed as 10% to 20%), posing possible tax risk to cash flows and distributions.
What they reported.
What the company itself reported, taken out of the document.
- Gross margin
- 37.43%
- Operating margin
- 13.57%
- Segment
- Medical Devices — described as the largest product line and main contributor; no separate segment revenue disclosed (company total revenue $3,316,000).
- Segment
- Respiratory & Oxygen Homecare (including HOTS) — management expects this line to grow faster on a percentage basis; HOTS launched Q3 2011 and management focusing on building delivery network in 2012 (no segment revenue disclosed).
What they said about what is next.
No explicit numeric guidance provided. MD&A contains forward-looking statements and qualitative outlooks (e.g., 'we anticipate' faster growth in respiratory/homecare and that working capital of $27,524,771 including $2,299,270 cash should fund operations for at least 12 months).
The filing reads about the same as the one before it.
What came before.
- 10-Q · August 11, 2011
- Dehaier reported strong top-line growth in Q2 2011 with revenue of $7.71 million (Q2) and $10.67 million (six months), driving higher operating income and net income versus prior-year periods. Revenue growth was…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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