Mazor Robotics (NASDAQ: MZOR) , a robotic surgery company focused on spine and brain procedures, reported its third-quarter results on Tuesday, Nov. 7. Revenue more than doubled, margins expanded, and net loss shrank. When adding in the company's transformative deal with Medtronic (NYSE: MDT) , it was truly a quarter for the record books.
Mazor Robotics Q3 results: The raw numbers
|Metric||Q3 2017||Q3 2016||Year-Over-Year Change|
|Revenue||$17.2 million||$7.6 million||126%|
|Net loss||($3.7 million)||($5.2 million)||N/A|
EPS = Earnings per share. Data source: Mazor Robotics.
What happened with Mazor Robotics this quarter?
The big news from the quarter was that Medtronic and Mazor entered into the next phase of their strategic partnership. Medtronic made a $40 million investment in Mazor (its third) and also assumed worldwide distribution rights to the Mazor X.
As of November 1st, 29 former Mazor employees have joined the Medtronic robotic sales team, and all Mazor X activities have been successfully transferred.
If that wasn't exciting enough, the Mazor X also received regulatory approval in Europe on September 20th.
Updates aside, here's a review of the key financial takeaways from the quarter:
- U.S. revenue grew 170% to $15.4 million. A total of 17 systems were sold in the States (16 Mazor X's and one Renaissance.)
- International revenue fell 5% to $1.8 million.
- System sales revenue grew 209% to $10.2 million.
- Recurring revenue -- which includes disposables and services -- grew 63% to $7 million thanks to a larger base of installed systems. As of Septemeber, more than 170 Mazor systems are in use worldwide.
- Gross margin increased 3.5 percentage points to 69.2%.
- Operating expenses grew 48% to $15.7 million. However, this number is expected to decrease now that Medtronic is footing the bill for the Mazor X commercialization. Mazor is currently projecting $13 million in annual savings.
- Cash usage for the quarter was $2.9 million.
- Cash balance at quarter end was $99 million.
- 22 systems were ordered during the quarter (19 Mazor X's and 3 Renaissances). The backlog as of September 30th was 17 systems (15 Mazor X's and two Renaissance's).
What management had to say
CEO Ori Hadomi was thrilled with the company's third-quarter results:
Our performance demonstrates that we are executing our objectives to drive market penetration and increased utilization of our systems. We entered the next phase with Medtronic, our commercial partner, for the Mazor X system, and the smooth transition ensures continued sales momentum while significantly lowering our operating costs beginning Q4 2017.
Hadomi also highlighted prospective clinical data that was presented at a recent medical conference. The data showed that using the company's Mazor Core technology during lumbar fusion surgeries led to a five-fold reduction in surgical complications and a seven-fold reduction in revision surgeries when compared to freehand techniques.
Mazor doesn't offer guidance, but when asked about the company's ability to achieve profitability, Hadomi shared an interesting response:
I want to make sure that at any given time we can move to profitably, but I'm not committed to a short-term to move to profitability. I believe that the best investment we can make at this time is in innovation and R&D.
The company's clear commitment to investing in innovation should be music to patient investors' ears given the potential competition .
In total, all the pieces appear to be falling into place. Mazor's revenue is growing rapidly, the company successfully executed its transformative deal with Medtronic, and profitability should be within reach with a couple of years.
Hadomi ended his prepared marks on the investor call by succinctly summarizing the company's position:
We have set the standard for scientific scrutiny of spine robotic products, focusing also an evidence-based medicine and patient outcome. We have partnered with the leader in the spine operating room and navigation to commercialize the product. We continue innovating. I believe our success has the capability to challenge today's standard of care.
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