Shares of Intersect ENT (XENT), a medical device company focused on products that treat ear, nose, and throat problems, were down 17% as of 11:50 a.m. EDT Wednesday. Investors can blame the plunge on mixed quarterly results and weak guidance.
Here's a look at the key numbers from the second quarter:
- Revenue grew 10% to $26.3 million. For context, Wall Street was expecting the company to post $28.2 million in revenue.
- Gross margin declined 600 basis points to 79%. The drop was blamed on the recent launch of the Sinuva Sinus Implant.
- Net loss was $4.2 million, or $0.14 per share. This was a few pennies better than the $0.17-per-share loss that market watchers were expecting.
- Cash balance at quarter-end was $104.9 million.
If the mixed quarterly results weren't bad enough, management's guidance for the upcoming quarter and full year were also uninspiring:
- Revenue in the third quarter is projected to land between $23.8 million and $24.3 million. The midpoint of this range represents growth of 8% year over year. That's far below the $27.6 million in revenue that Wall Street was expecting.
- Full-year revenue is now expected to land between $106 million and $109 million. This represents a pullback from management's prior guidance range of $111 million to $116 million. It's also well shy of the $116.3 million in total revenue that market watchers were projecting.
Given the disappointing revenue growth and weak guidance, it's easy to understand why Intersect ENT stock is falling hard today.
CEO Lisa Earnhardt knew that this muted growth projection wasn't going to sit well with investors, so she did her best to project optimism about the business, stating: "We are meeting the challenges of the launch by taking action including expanding and leveraging the reimbursement hub and growing our sales and reimbursement teams. We remain convinced that Sinuva has a bright future and that, with these measures in place, we will be in a position to expand our launch and continue to grow Propel."
Intersect's stock has been sinking like a stone over the last two months, so it's possible that shares have gotten cheap enough to justify opening up a small position today even though growth is slowing down.
Personally, I continue to believe that long-term optimism is warranted, but the large deceleration in revenue growth is worrisome. For that reason, I think that looking elsewhere for more promising investment opportunities makes sense right now.