Brian Marckx, CFA
Vicor Technologies Inc (VCRT) reported earnings for the third quarter on November 12, 2010. Revenue of $14k was below our $54.3k estimate and while the source (product placements versus testing revenue) of revenue was not disclosed, based on the 93% gross margin, we believe all of it was related to testing. EPS of ($0.03) was better than our ($0.05) estimate due to a $1.14 million gain related to the marking-to-market of embedded derivatives in the company’s various financial instruments including convertible bonds and preferred stock.
Cash used in operations was $923k in the quarter and was $1.38 million ($460k/month) when excluding changes in working capital. This is actually better than the $500k – $600k burn per month that we had anticipated. This more moderate burn rate along with the new $2.5 million (net) financing bodes well for Vicor in extending the time until they will need to tap additional financing. If all goes well the next round of financing could come in the form of a sizeable equity issuance.
The company did not provide an update on the number of units that have been placed to-date but based on our assumptions we believe that Vicor now has a total of 40 units placed (37 units sold through August 2010 which was noted in the Q2 10-Q plus 3 units leased during Q3). And, as we highlighted in our initial report and noted in our previous updates, it is highly promising that Vicor appears to be generating testing revenue, as testing revenue will be the driving force behind what we expect to be significant revenue growth in the next 12 – 24 months.
The Q3 10-Q did mention that Vicor is now offering the units for lease as well as outright purchase and during the third quarter had signed three lease agreements. The leases are a financing vehicle which essentially allows customers to make installment payments on the Analyzer in lieu of one lump sum. Vicor recognizes the lease revenue over the term of the lease – typically 12 months.
This additional payment option, along with Vicor’s recently beefed up sales force, greater exposure through various presentations and interviews, and expanded approved indications (normal range, CHF and trauma potentially in the next 12 months) could provide a rapid acceleration in unit placements over the next six to twelve months.
We continue to remain highly positive on Vicor’s long-term prospects. We are maintaining our Outperform rating on the shares and our $1.07 price target, based 25x our $0.07 2013 EPS estimate, discounted back at an annual rate of 15%. An acceleration in the unit placement rate above our forecast and/or higher testing volumes would prompt us to raise our price target.
For a full copy of the updated research report, please email scr@zacks.com with the ticker VCRT as the title.
VICOR TECHNOLOG (VCRT): Free Stock Analysis Report
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