Procept BioRobotics (PRCT) and Avalara (AVLR) Report
Procept BioRobotics (PRCT) delivered another “beat and raise” quarter after the close yesterday (third since going public) with revenue up 97% to $14.2 million ($2.1 million beat) and GAAP EPS of -$0.39 beating by $0.10. Pretty much everything was good, starting with a $4 million increase to full-year guidance, which now sits at $58 - $62 million (+68% - 80%). Hospitals report second and third urologists are starting to use systems (i.e., expansion within hospitals) and also using the robots on smaller prostates (i.e., market expansion). In some cases, Aquablation is becoming the standard of care.
The installed base jumped 15 over Q4 2021 to 93. As new systems get placed, utilization is seen coming down (takes a few quarters for urologists to ramp up procedures), however management continues to be conservative on this front which means upside potential.
The positive coverage policies mentioned previously (Aetna U.S. Healthcare, CareFirst, Independence Blue Cross Blue Shield) are positives, as are recent approvals in the Asia Pacific region (Korea and Japan). The first robot was placed in Korea in Q1 with the first procedure completed in April. Reimbursement in new markets will take a while but seems an eventuality.
Taking it all in, this report “should” be enough to help PRCT stock hold up. The caveat is that this market stinks. And as we’ve seen in too many situations, good companies with solid growth are being taken to the woodshed. Given that backdrop and the better than 40% gain we had in PRCT heading into earnings I recommended selling half your position yesterday. While that may prove to be overly conservative, a bird in the hand … HOLD HALF
Avalara (AVLR) reported better than expected numbers as results shrugged off some of the mounting concerns around e-commerce exposure. Revenue was up 33% to $204.5 million (beating by $6.4 million), and adjusted EPS of $0.08 improved from an -$0.08 loss in the year ago quarter and beat by $0.20. Billings of $219.2 million (+28%) surpassed consensus of $207.4 million as cross selling and moves both up and down market drive growth. Avalara added 890 new core customers (+25%) to end the quarter at 19,160 customers. International was strong. Avalara expanded partnerships, including with Shopify. This may help ease some concerns about the Strips/TaxJar tie-up (i.e., competitions).
Key to a potential recovery in the stock is that management explained how the subscription model, complete with wide bands on volume allowances, insulates Avalara from some of the e-commerce (roughly 1/3 of revenue) volatility. A heavy business-to-business slant (versus direct to consumer, like many retailers) also appears to be insulating Avalara from some volatility. As if looking into a crystal ball for what investors want, management was also able to implement efficiency measures that cut full-year operating loss expectations by more than half (note the $0.20 EPS beat in the quarter). Or perhaps Avalara just wasn’t able to hire (sales staff growth below expectations). Either way, I think the bottom-line improvement is a win.
At the end of the day, the business appears to be doing better than expected and the value proposition (reduces risk and cost of tax compliance) continues to pull in new customers and inspire existing ones to increase spend with Avalara. Management raised full-year revenue guidance by $12.5 million (almost twice the Q1 beat), to a range of $867 - $871 million (+24%).
In this market I’m not sure the results are good enough to turn AVLR stock around. A modest pre-market bump is encouraging but we’ll need more evidence of buyers stepping in – not only with AVLR but across tech/software – before allocating more capital to AVLR. As a reminder, we sold another one-quarter position yesterday for a roughly 80% gain, leaving us with one quarter of our original stake. We’ll sit on that for now. HOLD A QUARTER