April 11, 2016 11:49am

 

MDXG is trading DOWN -$0.86 or -9.53% to $8.13 – BUY on dip

 

MiMedx Group (MDXG) Shares down post Q1/16 results – three initiatives created temporary issues and effects. 

 

The good news, MDXG’s FY16 revenue forecast of $260 million to $270 million remains unchanged.

 

 

MDXG revenue fell short of its forecasted guidance by about $2 M.

After seventeen straight quarters of meeting or exceeding revenue guidance, MDXG had its first miss. Three key issues contributed to our first quarterly revenue shortfall. The principal one of these was the initial effects that our installation of a very sophisticated Sales Management System (SMS) had on our sales organization.  The second issue related to Q1/16 movement and realignment of certain sales management to prepare its surgical business for more autonomous growth. The last of the contributing issues was the distraction to core business resulting from the initial assimilation of Stability Biologics into the organization.

MDXG emphasizes that these Q1/16 issues resulted in lower than expected revenues are not competitive related or systemic to advance wound care or its SSO business.  They were the consequence of initiatives to make changes in order to continue orderly growth in the future.

 

Q1/16 revenue:

  • Q1 2016 revenue of $53.4 Million is 31% increase over Q1 2015 revenue of $40.8 million.
  • Surgical, Sports Medicine and Orthopedics (SSO) revenue grew 28% over Q1/15
  • Wound Care revenue grew 32% over Q1 2015

 

The Bottom Line: MDXG’s initiatives made changes in order to continue orderly growth in the future, and put in place a sophisticated and highly metrics driven SMS. These Q1/16 issues resulted in lower than expected revenues are not competitive related or systemic to advance wound care or our SSO business.  They were the consequence of

In addition, MDXG’s initiative to split two sales organizations required that sales persons "tag" all orders in the new SMS.  There were some initial flaws in the tagging process, which caused confusion and distraction from day to day sales activities.  MDXG has made progress toward resolving issues as they were presented, but these conditions ultimately were relatively disruptive to our order flow.

The good news is that MDXG has built SMS around Salesforce.com and customized its own applications specifically focused on what MDXG want to achieve in the advanced wound care sector. 

 

MDXG is trading DOWN -$0.86 or -9.53% to $8.13 – BUY on dip

 

MiMedx Group Inc. fell 14% at the open, the biggest move since Oct. 29, 2015, and almost 14 X its industry group;

  • The shares fell to $7.70 from $8.99 in the previous session.
  • Trading volume was more than 80 X the average for this time of day. MDXG's move compares with the 1.1% drop in the Nasdaq Biotechnology Index and the 0.2% gain in the Standard & Poor's 500 Index;
  • In addition to the falling stock price, institutional holdings of MiMedx shares decreased by 7.2%, according to the latest filings by the company and investors.

Additional key insights

  • Stock price volatility over the past year has been 57.8% vs 33.6% for comps average;
  • Estimated blended forward operating margin is 20.4% vs 4.5% average over past 5 years;
  • The stock is 41% below the <Bloomberg consensus> one- year target price. It returned a negative -18% so far this year and a loss of -29% in the past 52 weeks;
  • MiMedx trades at 35 times trailing 12-month earnings per share and 22 times its estimates for the coming year. Its Bloomberg peers are priced at an average of 30 times trailing per-share earnings;
  • Short interest was 24 times the company's average daily trading and represented 20 percent of the shares available as of the latest quarterly filing.

 

Time will salve all "wounds"