In its most recent earnings report, disruptive healthcare technology company Shockwave Medical (SWAV) reported a staggering revenue increase of more than 400% from year-ago levels. In this Motley Fool Live video clip, recorded on Aug. 12, contributor Brian Feroldi gives viewers a breakdown of the key numbers and discusses the important takeaways to keep in mind. 

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Brian Feroldi: For those that don't know Shockwave Medical, ticker symbol is SWAV. This company came public in 2018. The long-term returns have been favorable. This is a company that is focused on atherosclerosis, which is a narrowing of the arteries due to the progressive built-up of fat. It's a more severe version of that. Occasionally that fat can become calcified, so calcium literally builds up in the artery. When that happens, blood flow becomes very restricted and getting that calcium out is a major challenge. Historically, there's a couple of ways that doctors have been able to do that. One is with balloons, but they don't really work that well on calcium. Another technology is called an atherectomy, which is like a roto-rooter. Essentially, a drill goes into your veins and drills out the calcium. That doesn't sound too great to me. Another one is to use specialty balloons, which have like scoring devices on them. They literally tear apart the calcium from the inside. Again, not that attractive.

What Shockwave has done is it launched a new technology that basically takes the process of getting calcium or treating calcium, but does it way safer than any of those existing technologies. You put this balloon into the patient's body, shockwaves are created inside the artery that actually blast apart and cracks the calcium. The calcium does not move, it just becomes cracked. Then a regular balloon can be expanded and it basically takes the vessel and it opens it up. This is dramatically safer for the patient.

Now, Shockwave is taking this technology and they believe that there's several parts of the body that can be used. They were estimating that their total addressable market opportunity was about $6 billion. They have three different product lines, two of which are proven on the market right now. The first are used on the peripheral arteries, so things like the legs and arms. Then they have a coronary product that was just recently approved in the United States. This is a C2 products and that's actually performed when there's calcium in the heart.

How did the company do? That's the wrong slide. The most recent quarter, they grew their revenue 444% to $56 million. That beat Wall Street's estimate pretty handedly. Now, the eye-popping growth is mostly due to an easy comparison period. This is the period when hospitals were essentially shutdown and procedures like this were non necessary or not a 100% necessary. In the year-ago period, they didn't have the C2 device approved in the United States so you add those together and you get some really strong top-line growth. The growth was strongest in the United States where we got FDA approval for that C2.

Revenue was $43 million, but this is also an international business and has been for a few years. They actually are getting revenue outside the country. If you look at the product lines, the legacy peripheral products grew about almost 200%, but the C2, the heart products that grew 905%, so very strong result in the top line. As a result of that huge growth, gross margin here expanded from 65% to 82%. This is a high margin business with recurring revenue. I like both of those words.

Operating expenses did grow pretty substantially. They almost doubled, but that was a far slower pace of growth than revenue. As a result, this company's net loss was just half million dollars. Wall Street was expecting $0.40 per share in loss, the company reported one cent in earnings-per-share loss. It was a massive beat on the top line and the bottom line. I personally thought this company was going to be losing money for many more years, but they are really close already to profitability. Even with those losses, not problem, they have $175 million in cash and no debt.

What news came out in the quarter, the big news was about payments and reimbursement, they got something called transitional pass-through payments for the Shockwave C2 device that came effective as of July 1st, so not included in these quarterly results. They got a new technology add-on payment for the coronary IVL which comes effective October 1st, again, not in this quarter's results. If you dig into some of, of course that they said on the call, they noted that 44% of their current customers are buying both devices. That's great that the physicians are using both devices. But that also means that there's a whole bunch that aren't using both devices and there's room for them to grow within their current customer base.

To continue to execute, they hired more sales reps. They now have more than 70 in the United States. Given this company size, that's probably close to as big as it's going to get. But it might grow a little bit from there, but that's good to see that their sales and marketing team is reaching the scale that it needs you to do to cover essentially the entire U.S. They said that the big opportunity for them in the near-term are going to be continued penetration as well as higher reimbursement rates and they're also expanding geographically.

Now, when you add all that together, they actually believe that their total addressable market opportunity now is no longer $6 billion, they think it's $8.5 billion. They believe that their produce market opportunity grew quite nicely. They are also working on ways to continue to drive down the cost of the device and they believe that there are continued margin gains for their products so that 82% gross margin could still continue to take higher. As for guidance for the year, management raised at significantly. They were previously expecting $200 million, now they're expecting $220 million. That's a nice bump sequentially. If you look at what analysts, I believe, they're only predicting $200 million right now, that's huge growth and they are expecting another 64% growth next year. It's possible that that number is below given the reimbursement that we've come up with. Of course, it's just a guess. This is roughly a six billion dollar company, again, estimating for $220 million in revenue this year, assuming they hit that and don't exceed it or decline, that means the stock is trading at about 30 times sales. Expensive? Sure is, but triple-digit growth plus an accelerating margin plus reaching cash flow positive, I understand why the market is excited. That's Shockwave, SWAV.