Abaxis Inc.(ABAX) reported second-quarter fiscal 2011 earnings per share (EPS) of 17 cents, beating both the Zacks Consensus Estimate of 16 cents and the year-ago quarter’s 14 cents.
Net sales during the quarter increased 17% year over year to $35.3 million, marginally beating the Zacks Consensus Estimate of $35 million. The growth was attributable to an increase in Veterinary sales (23%), strong growth in Consumables (21%) and higher sales of Piccolo Chemistry analyzers (38%) in the reported quarter.
The sales growth also reflected the company’s strong investment in sales and research activities to support the improvement of existing products and introduction of new products on a constant basis. Geographically, Abaxis’ North America revenue increased 19% year over year to $29.5 million, while international revenue increased 3.6% to $5.7 million.
Within the customer group, second quarter revenues saw increase of 9.5% in the Medical Market to $6.8 million and 22.5% in the Veterinary Market to $26.6 million. However, the Other customer group decreased 18% year over year to $1.8 million.
During the reported quarter, instruments (including chemistry analyzers, hematology instruments, coagulation analyzers and i-STAT analyzers) and consumables (including reagent discs, hematology reagent kits, coagulation cartridges, i-STAT cartridges and heartworm rapid tests) sales increased a respective 17% and 21% year over year.
On the basis of units, the total medical and veterinary instrument sales were 2,013 units, up 14% over the year-ago quarter. Abaxis sold a total of 988 instruments, an increase of 7% or 62 instruments. Moreover, 383 Vet scans were sold in the quarter as compared with 363 in the year-ago quarter. Hematology instruments sales increased by 15 units annually to 225, while about 198 Piccolos were sold (including 26 sold to the government), compared with 143 sold in the second quarter of fiscal 2010).
Gross profit increased 11% annually to $19.8 million. However, gross margin was down 61 basis points sequentially and 30 bps annually to 56%, due to an increase of 25% in the costs of sales and product mix.
Operating income of $5.4 million increased 8.2%, although operating margin declined 120 bps to 15.3%.
Operating expenses have shown an improvement to 40.7% of sales in the quarter from 42.5% of sales in the year-ago quarter attributable to lower spending in marketing and administration expenses. Expenses increased due to 10.5% increase in sales and marketing expenses to $8.4 million (23.8% of sales) and 27% increase in research and development expenses to $3.3 million (9.3% of sales), offset by an 8.9% decline in administration charges to $2.7 million (7.5% of sales). Despite the increase in operating expenses, higher revenue helped boost margin.
The increase in R&D expenses indicates Abaxis’ continued focus on the development of hemoglobin on the disc for both Veterinary and Medical Markets. Currently, Abaxis’ main priority is the expansion of the rapid test menu, which is in the final stage of completion.
Abaxis exited the second quarter with cash and cash equivalents of $100.6 million as compared with $87.6 million at the end of September 2009.
The company operates in a niche market of portable medical and veterinary blood analysis systems. Low worldwide penetration provides for substantial growth within the industry. Furthermore, the company derives strong recurring revenue from its razor/razor blade business model that hedges it from any meaningful sales shortfall in challenging economic times.
ABAXIS INC (ABAX): Free Stock Analysis Report
Zacks Investment Research
