Abaxis Inc. (ABAX) reported first quarter 2012 EPS of 10 cents, 37.5% down from the year-ago quarter EPS as well as the Zacks Consensus Estimate of 16 cents.
The decline in EPS was partly driven by an increase in share count from 22,750,000 in year-ago quarter to 23,095,000 in the reported quarter. Effective tax rate in the quarter was 37% compared with 39% in the previous-year quarter.
Net sales during the quarter budged up 3% year over year to $36 million, but missed the Zacks Consensus Estimate of $39 million. The sluggish growth was mainly attributable to a huge 12% fall in international revenues to $6.3 million, partly mitigated by a 7% rise in North America sales to $29.7 million.
Within the customer group, Medical Market revenues witnessed an upside of 11% in the reported quarter to $7.2 million while the Veterinary Market grew 3% to $27.7 million. However, sales from the Other customer group plummeted 30.5% year over year to $1.2 million.
Total consumable sales climbed 5% year over year to $1.4 million. Moreover, instrumental sales spiked 3% year over year to $204,000.
Both medical and veterinary reagent disc sales and total medical and veterinary instrument sales increased 3% to $20.7 million and $7.5 million, respectively, during the first quarter of 2012.
Gross profit in the quarter plunged 2.8% year over year to $19.2 million, leading to 320 basis points (bps) contraction in gross margin to 53.4%.
During the quarter, the company witnessed a 12.2% rise in research and development expenses to $3.5 million. Sales and marketing expenses grew 6.0% to $9.2 million while general and administrative expenses shot up 60.9% to 3.4 million. As a result, operating income decreased 46.2% to $3.2 million, leading to a stupendous 810-bp contraction in operating margin to 8.9%.
Abaxis exited the first quarter with cash and cash equivalents and short-term investments of $108.9 million compared with $98.4 million at the end of June 2010.
Abaxis operates in a niche market of portable medical and veterinary blood analysis systems. Low worldwide penetration provides scope for substantial growth in this niche industry. The company’s margins continues to disappoint based on several challenges. The presence of many big players like Alere (ALR) has made the human and veterinary diagnostic market highly competitive. Furthermore, soft international market is also a headwind for Abaxis.
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