Research Note - Opsens Inc. (OPS:TSX, $2.10|BUY $4.00 TARGET) - Update To Our Expectations For FY23
Based on a recent meeting with Louis Laflamme, President & Chief Executive Officer of Opsens Inc. we are updating our expectations heading into 2023 and providing our view on potential future catalysts. Based on our discussions we have tightened our FY/23 revenue expectations to $53.3M (from $57.4M) and lowered our FY/23 EBITDA expectations to -$9.7M (from +$3.1M, due to increasing sales expense). We see gross margins improving into H2/23 as SavyWire begins to take hold in the market, a reflection of the sales effort OPS is materializing into 2023. We are keeping our industrial segment estimates steady with a positive outlook for the potential of the segment. We continue to view the TAVR market with optimism; a steady stream of break throughs and procedural improvement are constantly expanding the potential of the TAVR market. We see OPS meeting their guidance of $100M revenue for FY25.
2023 Expectations: Looking forward we are adjusting our revenue and EBITDA estimates for FY/23. Revenue is being adjusted down ($53.3M vs. $57.4M previously) with a clearer runway for the year. To ramp up sales on SavyWire OPS has approximately doubled their sales team and is in the process of sending team members to health centres across the US. The goal of the OPS salesforce is to have one representative per centre to start, with each representative taking on more than one centre as relationships are developed.
We believe the new hire sales activity will ramp up into H2/23 and as a result we are modelling a slower QoQ revenue growth rate Q1/Q2 2023. We are modelling sales and marketing expenses at 50% of revenue for FY/23 until we have more clarity on the long-term costs. Incumbent firms with a mature sales force can expect sales costs to be ~35% of revenues. OPS sales and marketing expenses were 48% of sales in Q4/22. We see gross margins increasing into H2/23 and are currently modelling ~50% gross margin Q1/23 improving to ~60% Q4/23 into FY/24 as SavyWire becomes a larger portion of the manufacturing mix. The result of these adjustments brings our new FY/23 Revenue expectation to $53.3M (from $57.4M) and FY/23 EBITDA expected at -$9.7M (from +$3.1M). We are expecting Q1/23 revenue to come in at $11.5M and Q1/23 EBITDA to come in at -$3.1M. As we move towards FY/24 we see gradual improvement in sales costs as a percentage of revenue and as a result improving EBITDA margins.