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…
Earnings analysis · 10-Q
NEGG earnings analysis
Filed May 9, 2012 · Our reading of the company's report
The latest report
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…
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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.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Reported figures
- 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 stood out
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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.
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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.
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Operating income expansion
Operating income grew 52.44% to approximately $450,000 in Q1 2012 from approximately $295,000 in Q1 2011.
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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).
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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.
What to watch
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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.
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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).
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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.
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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.
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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.
Management's outlook
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).
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.