SWAV 2023 Q2 ER More Power, More Pulse

[Iamnzane]

Carrying over my post from the SWAV board.

SWAV ShockWave Medical press release (NASDAQ:SWAV): Q2 GAAP EPS of $0.79

• Revenue of $180.2M (49% YOY) beats by $6.42M.
• Gross margins unchanged at 86%
• Total operating expenses for the second quarter of 2023 were $123.3 million, a 66% increase from $74.4 million in the second quarter of 2022. The increase was primarily driven by sales force expansion, higher headcount to support the growth of the business, and acquisition-related expenses associated with the acquisition of Neovasc.
• Net income for the second quarter of 2023 was $28.9 million, compared to net income of $25.6 million in the same period of 2022. Basic and diluted net income per share for the period was $0.79 and $0.76, respectively.
• Cash, cash equivalents and short-term investments totaled $258.6 million as of June 30, 2023.
• 2023 Financial Guidance raised: Shockwave Medical projects revenue for the full year 2023 to range from $725 million to $730 million, vs. consensus of $716.10M, which represents 48% to 49% growth over the Company’s prior year revenue.

Seeking Alpha – 7 Aug 23

Shockwave Medical, Inc. (SWAV) Q2 2023 Earnings Call Transcript

Shockwave Medical, Inc. (NASDAQ:NASDAQ:SWAV) Q2 2023 Earnings Conference Call August 7, 2023 4:30 PM ETCompany ParticipantsDebbie Kaster - Vice President, Investor RelationsDoug Godshall -…

SWAV is releasing the new coronary C2+ in December that responds to doctors requesting more power, more pulse for long artery calcifications. SWAV plans 2 new products every year going forward.

Quick background refresh: ShockWave Medical, Inc. (Nasdaq: SWAV), a medical device company, engages in developing and commercializing intravascular lithotripsy technology to treat calcified plaque in patients with peripheral vascular, coronary vascular, and heart valve diseases worldwide. The procedural training uptake has little friction because IVL is pretty much a replacement for balloon angioplasty. Similarly, US CMS and other governments are recognizing this technology as a funded insurance procedure and device. In Q4 2022, 2023-year revenue growth forecast was conservative at below 40%, which was a significant slowdown from over 70% in 2022 and +100% in 2021. The stock sagged somewhat Q1 but then took off on acquisition rumors by Boston Scientific and some other companies. Fortunately, IMO, this did not happen and the stock has fallen back recently to the ~$250/share.

My Take on the ER call: Today’s Q2 ER reflects a 49% CAGR so I think we should have steady +45% growth going forward 2023-25. I wanted to see the revenues reaccelerate and stabilize after a mediocre Q4/Q1 and it has. The VP says that Q3 is expected as a modest seasonal quarter (especially Europe) with a seasonal tailwind hitting Q4. Additional expected catalysts for 2023 Q4 mentioned were Japan sales (approval December), Germany sales (in-patient reimbursement October), and direct sales force replacing distributors in Canada, Germany, and Italy. This will incur the sales expansion cost but by experience should realize a greater net profit gain. Cross selling the peripheral devices will also be enhanced. Other 2023 costs are increasing to expand the Costa Rica manufacturing 3x and expand the US innovation center. These costs are all signs of healthy growth but will nick the bottom line. International sales are less than 25% revenue but are growing at +70%. The stated top 3 international growth countries for 2024 are 1) Japan, 2) Germany, 3) China.

I started buying at MF recommendation spring 2020 at $29/share and more in 2021/22/23. Currently I am a bit overloaded pushing 20% of my portfolio and may lighten/rebalance. Other recommended health MF technology stocks the last 5 years have all experienced long painful downward slides; NARI, GH, and NVCR come to mind. SWAV is the winner by leaps and bounds. I think it is still worth a good look at the current price.

My 2023 Forecast: 2023 revenue 740M versus today’s SWAV forecast $725M. So, IMO their new year-end 2023 forecast is soft. I hope they are sandbagging like in the past ERs.

My QOQ forecast:

Q1 12% actual (my forecast was 12%)

Q2 12% actual (my forecast was 7%)

Q3 5% my forecast (CEO said Q3 seasonal but slowest previous quarter growth was 9% in Q4)

Q4 12% my forecast

SWAV has three primary products:

C2 catheters for treating coronary artery disease; The C2, representing an IVL catheter intended for the treatment of coronary artery disease [CAD] was CE-Marked in June 2018. It is currently being sold in US and Europe. The CAD III and PAD III IVL studies have shown superior efficacy and safety results above current standard practices.

• M5 catheters for treating above-the-knee peripheral artery disease; The M5, representing an IVL catheter with five sonic wave emitters, intended for the treatment of peripheral artery disease [PAD] above the knee in the US and internationally. It was CE-Marked in April 2018 and approved by the US FDA in July 2018
• S4 catheters for treating below-the-knee peripheral artery disease. It serves interventional cardiologists, vascular surgeons, and interventional radiologists through sales representatives and sales managers, and distributors. The S4 is intended for the treatment of PAD below the knee. ShockWave has acquired US 510[k] clearance and a CE Mark.

SWAV is my highest conviction stock and largest holding at ~20%. With new forecast now at 49% YOY growth, 40 P/E, 15 P/S, and stable 86% margins, net income now positive; I see the current price as a strong buy.

-zane

[Iamnzane]

Ouch! SWAV down $25/share 10%. The only thing I can find is that consensus expected .87/share earnings. Whose consensus? The SWAV earnings and my forecast was at .79/share. So the headlines read SWAV misses on the bottom line. Sell on the news? The SWAV announcement clearly calls out .79 and the news says .76. I don’t get it, misinformation?

Shockwave Medical (SWAV) came out with quarterly earnings of $0.76 per share, missing the Zacks Consensus Estimate of $0.87 per share. This compares to earnings of $0.68 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -12.64%. A quarter ago, it was expected that this medical device compnay would post earnings of $0.81 per share when it actually produced earnings of $1.03, delivering a surprise of 27.16%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Gosh, I cannot find where my analysis and conviction was flawed. OPEX did increase due to several factors which I thought were good growing pains. Guess I’ll do a deeper dive into the financials. I am not as fast as some of you guys. I must have missed something.

Total operating expenses for the second quarter of 2023 were $123.3 million, a 66% increase from $74.4 million in the second quarter of 2022. The increase was primarily driven by sales force expansion, higher headcount to support the growth of the business, and acquisition-related expenses associated with the acquisition of Neovasc.

flummoxed

-zane

[JabbokRiver42]

I can’t speak to SWAV, but if you’re looking at why anything is down today, look no further than Moody’s starting off today by downgrading a bunch of big banks. It hit everything.

Global-e (GLBE) reported this morning, with a good beat on all sides and raised guidance for the year. The 8 am call was positive, with almost every analyst offering congratulations and lots of talk of strong pipelines and a bright future. Should have been up. It was down 5% on the call and was down over 14% at the open. Everything I own was red, as were all of the indices.

SWAV and GLBE are totally different companies, but if it took a dive today, it likely had little to do with the report and everything to do with the Moody’s downgrade.

JabbokRiver

[Iamnzane]

thx for the feedback. Guess misery loves company. Perhaps its time to start a position in GLBE. I have been watching it.

-zane

[MAS4R]

I am not into deep numbers dives, but I saw zero issues with the SWAV report just as I saw zero issues with my bigger medical device company, INSP.

In fact, both INSP and SWAV have performed at extremely high level. With SWAV, I was concerned by management dis-engagement at the time of acquisition explorations (during Q1 call) but management sounded right to me yesterday. There was also talk about previous management being too optimistic about the cadence of certain trials, and we know that a revenue issue due to paperwork is coming next year. The increased spending makes perfect sense.

All in all, while I would call INSP 100%, all-cylinders, SWAV is IMO not far behind.

And SWAV has stellar profitability metrics.

Why am I not adding? Well, I have no money (I might after today’s slate of earnings!), but I have also come to pay attention to the 200 SMA, which is one of very few indicators shown by actual financial research to merit respect. There is always a chance the market “senses” something we cannot see.

In any case, SWAV is second only to INSP and ahead of KNSL in my Top 3 highest confidence companies at the moment.

EDIT: by “stellar profitability” I mean that it has roughly 240 mln of TTM net income out of some 1,000 employees.

[brittlerock]

Thanks for the information. GLBE was down a bunch on what looked like a great quarterly report. MNDY was also down a bunch for no apparent reason. I thought maybe something happened in Israel that impacted the business community.

But if it was Moody’s that helps to explain the why the rest of the market took a hit. A week ago Fitch downgraded the US for what seemed like not only spurious reasons, but stale reasons as well. The stupid, political argument over the debt ceiling happened weeks ago. And the divisiveness of the country is nothing new. So why issue a downgrade now? Even Janet Yellen, Secretary of the Treasury called it arbitrary. My guess is somebody at Fitch shorted the market. Maybe this week it was somebody at Moody’s.