Saul, In your recent monthly portfolio update you mentioned that you felt that for NARI “…their conference call and guidance for the rest of the year had an air of extreme caution, hesitation, and worry”. When I first read the transcript I didn’t get the same impression as you - but my ‘spidey senses’ are certainly not as well developed as yours. Can you please explain what comments in the call lead you the draw the above conclusion? Thanks for your feedback.
Hi MoneySpin,
First, it’s apparent that I wasn’t the only one surprised and shocked, as the share price fell off a cliff and hasn’t come back. I would have expected a lot of enthusiasm like: “We are out of Covid finally, we can get into the hospitals, we are expecting great things, etc”. Instead we got some of the quotes you quoted:
"While recent developments are encouraging, we continue to believe that some caution in the short and intermediate-term is prudent." [But they are more prudent than ever]
"We have noticed for example some hospitals are full of non-COVID patients as they return for treatment that was deferred during the pandemic". [Implying that they are having trouble getting in].
“we are kind of thinking through how we will make it through Q2”
“While we continue to experience COVID-related challenges and uncertainties, we are comfortable providing forward-looking guidance as follows. For the full year of 2021, we are guiding to $240 million to $250 million in revenue.”
This was after $57.4 for the first quarter. Which multiplied by 4 gives a run rate of $230 million. So $240 to $250 is not just cautious, it is basically allowing for almost no sequential growth for the rest of the year.
In the first quarter, in the middle of Covid, they were up 18% sequentially.
If they slowed up and grew just 12% sequentially each of the next three quarters they would be at $274.4 million for the year. They could have guided to $274 and been sure of beating it, or to be even more cautious to $270 or $265 million.
But they went all the way to a midpoint of $245!!!. They didn’t guide to the next quarter even though they were half way through the quarter. Something seemed wrong. Oh, and if they continued sequential growth of 18% like they had in the first quarter, they would be at $299.3 million. That’s with no acceleration post-Covid, just hitting that 18% they had in the first quarter.
So, as I said, maybe they were being just excessively super-duper cautious, but this was beyond cautious, and it worried me (and lots of others, apparently). If I was wrong I can always change my mind.
Sorry,
Saul