Theragenics Corporation (TGX)
Q2 2012 Earnings Call
August 9, 2012 11:00 am ET
Christine Jacobs - Chairman and CEO
Frank Tarallo - CFO
Joe Munda - Sidoti & Company
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Greetings and welcome to the Theragenics' second quarter 2012 earnings conference call. (Operator Instructions) It is now my pleasure to introduce the speaker, Ms. Christine Jacobs, Chairman and CEO of Theragenics.
Good morning and welcome to Theragenics' second quarter 2012 conference call. Thank you for joining and calling in this morning. We've received positive feedback from many of you on the new conference call format that we used last quarter.
So we're going to utilize the same format this morning. We want to provide you with context and insight on our most recently completed second quarter. And we will spend less time repeating financial information that we assume you've read or you're going to read in our earnings release that we issued this morning.
So with that, I'm going to turn the call over to Frank Tarallo, our Chief Financial Officer for his comments on the results of the second quarter. Frank?
Thank you, Chris, and good morning to everybody. Before I begin my review, please be aware that some comments made during this conference call may contain forward-looking statements, involving risks and uncertainties regarding our operations and future results.
Please see our press release issued today and our filings with the Securities and Exchange Commission, including without limitation, our Form 10-K and Forms 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.
Now, I'd like to comment on our results. Our consolidated revenue of $22 million in Q2 is our highest quarterly revenue ever, and up 2% over last year. Consolidate revenue for the first half of 2012 was up 4% over last year. Our revenue is best understood by looking at our segment results, so let's do that.
Our Surgical Products revenue in the second quarter was up 3% over last year. The $15.9 million in revenue is also our highest quarterly Surgical Products revenue ever. All three of our product platforms, wound closure, vascular access and specialty needles contributed to organic growth in Q2.
For the first half of 2012, our Surgical Products revenue was up 5% over last year. And on our last call, Chris mentioned the loss of a large customer in our specialty needle business. Recovering from that loss has dampened the revenue growth, but fundamental demand is there at all three of our business units.
Turning to our Brachytherapy business, Q2 revenue was up 1% versus last year. For the first half of 2012, revenue was up 3% over last year. The acquisition of the Core customer base in February had a material impact in 2012.
Incremental sales from this acquired customer base was $1.2 million in the second quarter and $1.8 million for the first half of this year. Excluding the incremental revenue from the acquired Core customers, revenue was down, consisting primarily of our TheraSeed revenue, as we saw a slowdown in the number of Brachy procedures in Q2.
New IMRT centers continue to have an impact on Brachytherapy procedures. We also heard from physicians and others in the industry, that the recommendation against routine PSA screening, which was made by the U.S. Preventive Services Task Force earlier this year, may have also affected the number of patients being diagnosed. Even when diagnosed, it appears as though more men maybe opting for active surveillance, where the disease is simply monitored rather than treated.
It's difficult to say, whether these factors will impact the total number of prostate cancer cases that get diagnosed and treated over time, whether these factors will simply differ the procedures to some future time or whether we'll see an increase in metastatic prostate cancer, if the diagnoses come at a later stage of the disease.
I'd like to turn to profitability now. EPS was $0.02 in the second quarter compared to $0.04 last year. The drop in our Brachy profitability, which I'll address in a moment, was the reasons for the decline in EPS. For the first half of 2012, EPS was $0.05 the same as last year.
Turning now to segment profitability. Our Surgical segment recorded operating income of $588,000 in the second quarter, 18% higher than last year. Our gross profit margins were 34% in Q2 compared to 36% last year. Our sales channel mix continues to effect gross margins.
Sales to our OEM customers, which have driven much of our recent topline growth, typically carry lower margins than sales through other channels. For the first half of 2012, our gross profit margin was 34% compared to 35% last year.
SG&A in our Surgical segment as a percentage of revenue for 2012 was similar to 2011. SG&A ran at 24% in Q2 compared to 25% in second quarter of last year. For the first half of this year, SG&A was 26% compared to 25% last year.
As we continue to centralize some of our back office functions across the company, we expect to see some economies of scale and efficiencies in the SG&A area. It's difficult to predict the timing on when we'll see those economies, but we are moving towards these benefits.
R&D expenses declined in 2012 compared to last year. Although R&D expenses declined, we have not reduced the level of R&D activity. We're simply more focused and better organized in our R&D right now than we were last year at this time.