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It's been an up-and-down year for NxStage Medical (NASDAQ:NXTM) shareholders. The medical technology company's stock dropped over 35% by mid-February only to rebound strongly over the past three months. 

NxStage reported its second-quarter results before the markets opened on Thursday. Did those results bode well for the company's business outlook going forward? Here are the highlights.

NxStage results: The raw numbers


Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)


$92.2 million

$80.3 million


Net loss from continuing operations 

($2.23 million)

($5.59 million)


Net loss per share 




YOY: Year over year. Data source: NxStage Medical.

What happened with NxStage this quarter

Chalk up most of NxStage's second-quarter improvement to growing System One sales in the home and critical care markets. Home revenue climbed 14% year over year to $51.1 million. Critical care sales jumped 28% to $18.7 million.

NxStage's gross profit margin also increased in the second quarter. The company's products business profit margin in the second quarter of 2016 was 47%, up from 44% in the prior year period. 

The bad news from the second quarter continued to be with NxStage's in-center dialysis business segment. NxStage reported in-center segment sales of $16.7 million, a 9.9% drop from the second quarter of 2015.

Third quarter results will likely be impacted also by weakness in the in-center kidney care segment. NxStage continues to forecast lower sales from this business unit. As a result of this weakness, the company expects revenue for the third quarter to be between $89 million and $91 million.

However, NxStage anticipates that the strength of its System One business will be robust for 2016 as a whole. The company increased its full-year revenue guidance to a range of $360 million to $365 million. That's up from the $355 million to $360 million range provided last quarter. NxStage also projects its full-year net loss will be at the better end of the $7 million to $12 million loss given in earlier guidance.

What management had to say

Jeffrey H. Burbank, Founder and CEO of NxStage, expressed optimism about his company's second-quarter performance. Burbank said:

We delivered another strong quarter of growth and improving profitability. Looking ahead, we believe we are well positioned with tremendous growth opportunities which include an impressive stream of system launches expected over the next three years: our next generation hemodialysis system, our peritoneal dialysis system and our next generation critical care system.

Looking forward

NxStage still believes that it can reach profitability in 2017. The company also thinks that revenue of $700 million is attainable by 2020. What will NxStage need to do in the months ahead to achieve these goals?

For one thing, the company must make its in-center kidney care operations at least break even financially. NxStage expects to accomplish this over the next couple of years. Investors will want to watch for incremental improvement from this business. 

The company also should demonstrate its ability to expand into new markets. In particular, NxStage needs to execute well with its forays into the skilled nursing and international markets. Some successes have already been racked up in skilled nursing with the System One individualized dialysis product.

Keep an eye especially on new products on the horizon. Major upgrades are planned for System One that will reduce costs and add nice new features including a touch screen interface and an integrated blood pressure monitor. NxStage also expects to launch a new peritoneal dialysis system in late 2017 followed by its next generation critical care system in late 2018. These new additions to the product lineup could prove to be the ticket for NxStage to prove its mettle to investors.

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