Expect A Loss When Chembio Diagnostics Inc. (NASDAQ: CEMI) Reports 2Q


Chembio Diagnostics Inc. (NASDAQ: CEMI) has offered a glimpse into how it fared in 2Q2016. Though the management tried to make a case for a positive future, the company has to cope with tiny revenue metrics and operating losses in the meantime.

For 2Q2016, Chembio Diagnostics Inc. (NASDAQ: CEMI) said that it sees revenue coming in the range of $3.20 to $3.30 million. If you go back one quarter and then look back further to a year-ago quarter you see that revenue nearly halved in the latest quarter. CEMI posted revenue of $6.60 million in the last quarter and $6.23 million in the same quarter a year ago.

Though the management cautioned that the reported figure might differ from the preliminary numbers already shared, not a major change that would cover the gab seen between the prior quarter and a year-ago quarter is expected.

Looking deeper into the 2Q results

A deeper look into Chembio’s preliminary results for 2Q2016 shows that the company plans a charge of $6 million related to valuation allowance based on deferred tax. If you take the charge into consideration, net loss for 2Q is expected to be in the band of $8.30 to $8.50 million.

But Chembio Diagnostics Inc. (NASDAQ: CEMI) said its operating loss for the quarter is likely to be in the range of $2.30 to $2.50 million.

What impacted the revenue?

According to the management of Chembio, the revenue decrease as highlighted in the preliminary results came about as a result of soft sales in the U.S. and Brazil.

Something of note is that Chembio is in the process of taking control of the distribution of its products as it shifts away from third-party distribution to in-house distribution channel. Bringing distribution in-house should provide margins lift, which should boost earnings over the long-term.

Cash position – Chembio Diagnostics Inc. (NASDAQ: CEMI)

Chembio Diagnostics Inc. (NASDAQ: CEMI) closed 2Q with $1.44 million in cash and deferred revenue totaling about $0.82 million. The management didn’t say whether the available cash is adequate or not to fund continued operation.


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