Abaxis Inc. (ABAX) reported third-quarter fiscal 2011 EPS of 17 cents, beating the year-ago quarter’s 15 cents but missing Zacks Consensus Estimate by a penny.
Net sales during the quarter increased 16% year over year to $35.9 million, in line with Zacks Consensus Estimate of $36 million. The growth was mainly attributable to 21% increase in sales to $30.1 million in North America partially offset by 4.26% reduction from international market.
Within the customer group, Abaxis’s third quarter revenues saw stupendous increase of 57% in the Medical Market to $8.1 million and 10% in the Veterinary Market to $26.3 million. However, the Other customer group decreased 22.9% year over year to $1.4 million.
Total consumable sales surged 22% year over year to $ 4.4 million strongly driven by increased medical and veterinary reagent disc sales of 20% year over year. Moreover an increase in instrumental sales which include chemistry analyzers, hematology instruments, coagulation analyzers and i-STAT analyzers also contributed to the growth (up 10% year over year). Piccolo units sold ( excluding sales to the U.S. government) increased 35%.
The sales growth also reflected Abaxis’s strong investment in sales and research activities to support the improvement of existing portfolio.
Gross profit for the quarter increased 8.2% year-over-year to $19.8 million. However, gross margin was down 390 basis points to 55.1% mainly due to an increase of 26.6% in the costs of sales.
Operating income of $5.8 million increased 7.6%, although operating margin declined 120 bps to 16.2% led by a sharp 8.5% increase in operating expenses. This was driven by rise in sales and marketing (9.6% to $8.2 million), research and development (4% to $2.9 million) and general and administrative expenses (10.5% to 2.8 million).
Abaxis exited the third quarter with cash and cash equivalents of $43.5 million as compared with $27.8 million at the end of March 2010.
Abaxis is intended to penetrate the future point-of-care diagnostic testing market as this will be used in a more integrated way by physicians into their everyday operations.The company operates in a niche market of portable medical and veterinary blood analysis systems. One of its competitors is Alere Inc. (ALR).
Low worldwide penetration provides scope for substantial growth in this niche industry. We are encouraged by the company’s strong revenue growth, particularly in the veterinary division.
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