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VIVE: Q3 Revenue Beats, Details Imply Strong Q4

10/23/2017
By Brian Marckx, CFA

NASDAQ:VIVE

Q3 2017 Preannouncement

Earlier this week Viveve (NASDAQ:VIVE) preannounced Q3 revenue and console and treatment tip unit sales.  Revenue, expected to come in at approximately $4.1, compares to our $3.7M estimate.  Meanwhile, VIVE expects to report that there were 60 consoles (geographic breakdown not disclosed) placed and about 2,700 treatment tips sold – compared to our 60 (26 U.S., 34 int’l) and 2,900 estimates.  Given that the treatment tips are relatively inexpensive, we think the ~400k beat to revenue may mostly relate to a (actual vs. estimated) difference in geographic sales mix – with the proportional mix favoring the U.S. (where VIVE sells direct and benefits from higher pricing).  

If that is indeed the case, there may also be other benefits – one being a relatively beefy gross margin and the other having to do with DMT, Viveve’s distributor in China and other parts of Asia (including Taiwan).  DMT is obligated to purchase a minimum of 75 systems in 2017 – but as of the close of Q2 the indication was that most (perhaps all) of this minimum had remained outstanding.  And while we do not know how many systems were sold OUS (throughout all of VIVE’s ex-U.S. territories) in Q3, based on the preannounced revenue and unit sales, we now estimate that it was about 18 systems (we had previously modeled 35 OUS system sales in Q3).  That would mean the bulk of DMT’s minimum purchase quota would still remain unfulfilled – which would in-turn imply that Q4 2017 could be extraordinarily strong from a OUS consoles sales standpoint.  The Viveve System just received (October 10th) regulatory clearance in Taiwan – so we think it’s likely that some of DMT’s sales will be to that region in Q4.          

VIVE Continues Rapid Global Expansion 
Speaking of OUS sales, VIVE continues its rapid spread across the globe.  Since the beginning of 2017, the Viveve System has gained regulatory approval/clearance in nine new markets, including several in just the last six weeks.  In addition to Taiwan, the most recent approvals came in Bahrain, Kuwait, Qatar (sold through Medica, VIVE’s Middle East distributor) and Mexico (sold through Vitre-Tech). The Viveve System is now approved for sale in more than 50 countries. 

Model Updates
We have updated our model which, in addition to the adjustments for the Q3 numbers, also includes an upward revision to Q4 total revenue given our supposition that OUS placements (particularly in DMTs markets) will be greater than we had previously forecasted.  The updates have resulted in our 2017 full-year revenue estimate moving from $14.8M to $15.4M.    

We cover VIVE with a target price of $11/share. See below for free access to our Investor Note on VIVE which includes our updated model

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