Nanosonics Ltd (ASX: NAN) share price is sinking after announcing its first-half results for FY22.
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Nanosonics designs and manufactures infection prevention equipment for hospitals and healthcare environments.
Nanosonics share price down despite 41% top-line growth
Currently, the Nanosonics share price is down 11.12% to $4.19.
Key financial results for the half ending 31 December include:
- Revenue of $60.6 million, up 41% year-on-year (YoY)
- Capital revenue of $19.0 million, up 102% YoY
- Consumables and service revenue of $41.6 million, up 23% YoY
- Earnings before tax and interest of $3.3 million, up from $0.2 million in the prior half
Nanosonics utilises a razor (capital equipment) and blade (consumables) sales model.
It installs a capital device inside a hospital and then sells the ongoing single-use products for the equipment.
The doubling of capital equipment sales is largely a result of a weak comparable period that was severely impacted by pandemic restrictions.
CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) also called out COVID-19 headwinds in their results.
Nanosonics also benefitted from upgrading existing customers to new products.
About 25% of its current installed base is older than seven years old, illustrating meaningful potential growth in moving customers onto newer products.
Growth in consumables was more subdued and actually fell 3% when compared against the most recent half.
Again, COVID-19 disruptions continue to impact, particularly on ultrasound volumes.
North America remained the main breadwinner, with a positive contribution from Asia.
Europe and the Middle East retraced due to pandemic impacts on sales efforts.
Nanosonics eeked a small bump in its earnings as it begins to reach scale.
Investing for the future
Research and development (R&D) increased in line with revenue. A particular focus in the new endoscope reprocessing product platform Nanosonics Coris.
Nanosonics also announced it would move to a new headquarters based in Sydney.
The facility will triple its R&D capacity with new laboratories in microbiology, chemistry and engineering.
What’s next for the Nanosonics share price?
The Nanosonics share price likely fell in response to the vague guidance about the remainder of FY22.
Sales growth will be double-digit after accounting for the $13-$16 million in lost revenue from the transition away from distributor GE.
Operating expenses for the full year are expected to be $93.0 million.
The business will continue to drive new capital sales as markets begin to reopen.
Looking beyond FY22, Japan and China will be key expansion markets in addition to growth in new and existing products.