Monday, April 06, 2020 3:06:16 PM
one of the main reasons for the lower margins in Q4-19 are since they onboarded a large amount of plasma donation centers (38 if I remember correctly). When onboarding centers there is an income curve whereby income must ramp up over time as centers mature. In the early days of onboarding, you have all the set-up expenses and the fees with less income, as this grows your profit per center increases. This is one of the reasons the dollar conversion was lower in Q4-19.
I don't like looking at Net Income, I prefer looking at EBITDA and gross margins as NI is blurred by non-cash items (D&A) and non-operating income/expenses (interest - which is growing as "other income" these days due to larger cash balances):
GM%/EBITDA %, respectively - below:
FY 2018:48.7% / 15.2%
Q1 2019: 52% / 14.7%
Q2 2019: 58.3% / 23.5%
Q3 2019: 59.6% / 28.9%
Q4 2019: 51.8% / 19.3%
I expect GM% to stabilize around 56-58% over the longer term this assumes some GM% expansion due to optimization w/ bank partners but not necessarily fetching the 59-60% seen in Q3-19 as we add some slightly lower margin programs for growth. As for EBITDA, I would have to model out the SG&A (will see if I have time next weekend to do a more fullsome analysis) but based on my prelim analysis. I expect we see EBITDA revertying towards 28% (or higher) as we gain operating leverage (ie. revenue and gross income grows quicker than SG&A as they have added alot of benchstrengh in terms of personel over the last years and don't expect them to increase this as much going forward)
Hope this helps.
E.
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