Polynovo (ASX:PNV) share price flat as revenue grows 32% in FY21

Polynovo shares are stalled after the medical devices company broke even in FY21.

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The Polynovo Ltd (ASX: PNV) share price is languishing in early trade on Thursday as the medical devices company reported its FY21 earnings.

Let’s investigate further.

Polynovo share price stalls on strong revenue and on turning a profit

Here are the highlights of the company’s earnings report:

  • Total revenue increased 32% year on year to $29.3 million
  • Distributor sales also grew by 53% over the year
  • Gross margin increased by 3% from “manufacturing efficiency gains”
  • Corporate and overhead expenses also increased by 10% as the business expanded
  • Net profit after tax of $260,000 when adding back in non-cash items.
  • Achieved break even in FY21.

What happened in FY21 for Polynovo?

In a positive for the Polynovo share price, the company grew revenue and product sales by 32% and 34% respectively from the year prior.

As a result of “manufacturing efficiencies”, the company saw a 3% improvement in its FY21 gross margin, helping an operating profit of $400,000, up from a loss of $1.2 million the year prior.

Operating expenses increased by 26% year on year to $27.3 million as a reflection of the business expanding. As a result, corporate and overhead expenditures widened by 10% from this as well.

Polynovo also increased its staff headcount from 78 to 106, a 36% increase over the year. This helped to drive sales and also grew “employee-related expenses” by about 30%.

Consequently, the company reached its break-even point in FY21 and turned a net profit after tax (NPAT) of $260,000 and EBITDA of $635,000 which could weigh in on the Polynovo share price.

This was backed by a 55% year on year growth in research and development (R&D) to focus on key clinical trials.

Polynovo left the quarter with $7.7 million in cash on hand, flat on its half-year results, but down from $11.6 million in FY20. Although, there was “minimal cash burn from operations” at $250,000.

The company also commissioned its Unit 1 manufacturing facility to produce polymers, micro-spheres, foam cutting and a raft of other functions.

In addition, the company also obtained 99 new hospital customers and 7 new distributors that will be covering 9 markets.

What did management say?

Speaking on its FY21 performance, Polynovo’s directorship said:

Sales in all our direct markets continue to grow with the second half providing strong improvement in revenues, new account acquisitions and sales team expansion. Importantly PolyNovo achieved a small profit (excluding non-cash items) and was cash breakeven, a significant company milestone. Our cash on hand position is strong as at 30 June 2021 and forward cashflows are building despite forecast expenditure required for growing sales teams and investing in new product development.

What’s next for Polynovo?

Polynovo expects strong results in FY22 across all of its key markets, including the US, Europe, UK Middle East, Asia, Australia and New Zealand.

The company’s NovoSorb graft is expected to see sales growth in FY22, with “70% of burns centres now having purchased” the product.

Furthermore, Polynovo intends to exhibit “aggressive revenue growth” by further expanding its headcount and entering into new markets, particularly within the European Union.

Finally, the company will continue its key clinical trials throughout the coming periods in FY22.

Regarding its outlook, Polynovo’s directorship concluded “the business will continue to reinvest cash flows to expand market share in existing markets, enter new markets, and develop new products”.

The Polynovo share price is down 0.94% on the day and is in the red by 46% this year to date. This extends the loss over the last 12 months of about 3%.

These results have lagged the S&P/ASX 200 index (ASX: XJO)’s gain of around 25% over the last year.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended POLYNOVO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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