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Small-Cap Confidential
Undiscovered stocks that can make you rich

November 4, 2022

Procept (PRCT) beat on the top line and missed on the bottom line. Revenue grew 135% to $20.3 million ($3.1 million beat) while EPS of -$0.51 missed by $0.03.


Procept (PRCT) beat on the top line and missed on the bottom line. Revenue grew 135% to $20.3 million ($3.1 million beat) while EPS of -$0.51 missed by $0.03. This was the fifth quarterly revenue beat in a row. Management raised full-year 2023 guidance to $72.5 million (+110%) from the previous range of $66 – $68 million (implies Q4 should be better than expected too). It’s worth mentioning 2022 revenue will be roughly 50% higher than had been expected a year ago. The company sold 26 systems in the quarter, bringing the U.S. installed base up to 139 (+85%). Average selling price was $377,000. Handpiece sales rose 179% to 2,340. Utilization continues to improve (low 6s versus mid-5s in the last few quarters). On the call, management said they’re moving manufacturing into a larger facility and that will put pressure on margin expansion in the coming quarters but help in 2024. The term “firing on all cylinders” applies here. In a better market I’d move PRCT back to buy but given the hawkishness from the Fed this week we’ll keep at hold for now. HOLD HALF

TransMedics (TMDX) blew it out (again) in Q3, smashing expectations to deliver revenue of $25.7 million (+378%), a $6.8 million beat, and delivering EPS of -$0.25, a $0.15 beat. Of the beat, $1.4 million was due to an updated trial benefit, but even backing that out, this was a terrific quarter. Management raised full-year guidance from $67 – $75 million to $80 – $85 million, far above consensus (about $76 million). Management talked about back-ordered perfusion modules and the holidays as potential headwinds into Q4 so it’s possible (but don’t count on it) that Q4 could end up being better than full-year guidance implies. There is a second shift going, working now to try to help meet demand and a clean room expansion is slated to be done by the end of this year with greater sterilization capacity expected later next year. Management is also working to expand air and ground transportation networks (this is a logistics-dependent business). Bottom line, this was a great quarter for a rapidly growing company and the stock is acting appropriately (+20%). Continue to hold. HOLD 3/4

Sprout Social (SPT) beat on both the top and bottom line, delivering Q3 revenue of $65.3 million (+33%), a $310K beat, and adjusted EPS of -$0.02, a $0.02 beat. Not a huge beat but enough (so far) to keep SPT trading in the trading range (47 to 70) that’s held since mid-June. Full-year guidance was increased modestly to about $254 million and implies 35% growth. Beneath the surface, Sprout is seeing weakness with smaller accounts but continued strong momentum with larger accounts, helped by the new (this year) partnership with (CRM). Prices for those customers are going up, indicating SPT still has pricing power (we think, we’ll see how it goes). Bottom line here is that SPT is putting up good numbers in a tough market (especially for SaaS stocks), and with just a partial position (one of our few SaaS stocks at the moment) we’ll continue to hold on. HOLD HALF

Next Week’s Earnings Reports:
Flywire (FLYW) and Treace Medical (TMCI) on Tuesday 11/8
Xometry (XMTR) on Thursday 11/10

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.