Diplomat Pharmacy, Inc. (NYSE:DPLO) – Earning Spotlight

Diplomat Pharmacy, Inc. (NYSE:DPLO) stock soared 0.06% and closed at 23.27 on Monday. The stock opened the session at $23.37 and touched its highest price point at $24.06. Its recent trading capacity is 1354073 shares versus to its average trading volume of 895186 shares. The company’s stock’s lowest price point for the session stood at $22.94.DPLO traded as low as $ 13.39 in the past 52 weeks, and shares hit its peak level to $27.78.

Diplomat Pharmacy, Inc. (NYSE:DPLO) reported financial results for the quarter and year ended December 31, 2017.  All comparisons, unless otherwise noted, are to the quarter or year ended December 31, 2016.

Jeff Park, Interim CEO, commented “Our strong performance for the fourth quarter and full year reflects the successful execution of our strategy, as well as the actions we took to position Diplomat for long-term growth, including entering the PBM market and bolstering our bench of talent. As evidenced by our 2018 outlook, we are confident in our ability to build on this momentum and capture the growth opportunities ahead. As we execute on our go-to-market strategies across specialty, infusion and PBM, we are focused on continuing to accelerate growth and profitability, and enhance value for our shareholders while keeping our patients at the center of everything that we do.”

Fourth Quarter Financial Summary:

Revenue for the fourth quarter of 2017 was $1,155 million, compared to $1,145 million in the fourth quarter of 2016, an increase of $10 million or 1%.  The increase was principally driven by acquisitions completed in 2017.  This increase was partially offset by a business decision to exit less profitable contracts at the end of 2016 and a decrease in the demand for hepatitis C drugs versus the prior year period.

Gross profit in the fourth quarter of 2017 was $93.5 million and generated 8.1% gross margin, compared to $83.8 million and 7.3% gross margin in the fourth quarter of 2016. The gross margin increase was primarily due to the impact of acquisitions and a business decision to exit less profitable contracts at the end of 2016.

Selling, general, and administrative expenses (“SG&A”) for the fourth quarter of 2017 were $90.6 million, an increase of $13.6 million, compared to $77.0 million in the fourth quarter of 2016.  Of this change, $9.0 million related to employee cost, which was principally driven by acquisitions.  Also contributing to the increase was a one-time $1.7 million increase in the fair value of contingent consideration and an increase in amortization expense from definite-lived intangible assets, both of which are associated with our acquired entities.  As a percentage of revenue, SG&A, excluding change in fair value of contingent consideration, was 7.7% for the three months ended December 31, 2017 compared to 6.7% in the prior year period.

Net income (loss) attributable to Diplomat for the fourth quarter of 2017 was $6.5 million compared to $(1.1) million in the fourth quarter of 2016.  The increase was driven by a $10.0 million improvement in income taxes primarily driven by the Tax Cuts and Jobs Act (the “Tax Act”) due to the impact of the federal tax rate reduction reducing our net deferred tax liabilities, the revenue and gross profit explanations above, and a one-time $4.7 million impairment expense that occurred in the prior year period.  These increases were partially offset by additional SG&A and increased interest expense due to our new financing arrangement as well as the one-time expense of $1.4 million of debt issuance costs in accordance with debt modification accounting standards versus the prior year period.  Adjusted EBITDA for the fourth quarter of 2017 was $26.6 million compared to $26.1 million in the fourth quarter of 2016.

Earnings per common share for the fourth quarter of 2017 was $0.09 per basic/diluted share, compared to $(0.02) per basic/diluted common share for the fourth quarter of 2016.  Diluted non-GAAP adjusted earnings per share (“Adjusted EPS”) was $0.18 in the fourth quarter of this year compared to $0.08 in the fourth quarter of 2016.

Full Year 2017 Financial Summary:

Revenue for 2017 was $4,485 million, compared to $4,410 million in 2016, an increase of $75 million or 2%.  The increase was principally driven by the acquisitions completed in 2017, partially offset by a business decision to exit less profitable contracts at the end of 2016 and a decrease in the demand for hepatitis C drugs versus the prior year.

Gross profit in 2017 was $348.7 million and generated a 7.8% gross margin, compared to $324.8 million and a 7.4% gross margin in 2016.  The gross margin increase was primarily due to the impact of acquisitions and a business decision to exit less profitable contracts at the end of 2016.

Selling, general, and administrative expenses (“SG&A”) for 2017 were $330.1 million, an increase of $52.3 million, compared to $277.8 million in 2016.  Of this increase, $26.9 million related to employee cost, which was principally driven by acquisitions.  We also experienced a one-time increase of $12.5 million in the fair value of contingent consideration and a $10.0 million increase in amortization expense from definite-lived intangible assets, both associated with our recently acquired entities.  As a percentage of revenue, SG&A, excluding change in fair value of contingent consideration, was 7.3% for 2017 compared to 6.4% in the prior year.

Net income attributable to Diplomat for 2017 was $15.5 million compared to $28.3 million for 2016, a decrease of $12.8 million.  The decrease was driven by a $28.5 million decrease in income from operations and a $4.1 million increase in interest expense as we entered into a new financing arrangement during the fourth quarter of 2017, which increased our outstanding debt and caused us to expense $1.4 million of debt issuance costs in accordance with debt modification accounting standards.  These decreases were partially offset by an improvement in income taxes primarily driven by the Tax Act due to the impact of the federal tax rate reduction reducing our net deferred tax liabilities, a one-time definite-lived asset impairment and the write down of a cost method investment that occurred in the prior year.  Adjusted EBITDA for 2017 was $101.8 million versus $107.4 million for 2016.

Earnings per common share for 2017 was $0.23, compared to $0.43 per common share for 2016.  On a diluted basis, earnings per share was $0.23 per common share for 2017, compared to $0.42 per common share in the prior year.  Adjusted EPS was $0.84 in 2017 compared to $0.75 for 2016.  Compared to the prior year, diluted weighted average common shares outstanding in 2017 were approximately 1.0% higher, impacted by the use of shares as partial consideration for acquisitions and stock option exercise activity.

2018 Financial Outlook

For the full-year 2018, we provide financial guidance as follows:

Revenue between $5.3 and $5.6 billion

Net income attributable to Diplomat between $4.5 and $13.0 million

Adjusted EBITDA between $164 and $170 million

Diluted EPS between $0.06 and $0.17

Adjusted EPS between $0.87 and $0.97

Our EPS and Adjusted EPS expectations assume approximately 74,900,000 weighted average common shares outstanding on a diluted basis and a tax rate of 24% and 27%, for the low- and high-end of the range, respectively, for the full year 2018, which could differ materially.

Shares of Diplomat Pharmacy, Inc. have been recently spotted trading -16.23% off of the 52-week high price. On the other end, company shares have been noted 73.85% away from the low price over the last 52-weeks. 52 week range of the stock remained $ 13.39 – 27.78. Switching over to some distances from popular moving averages, we see that the stock has been recorded -0.40% away from the 50 day moving average and 20.51% away from the 200 day moving average. Moving closer, we can see that shares have been trading -5.43% off of the 20-day moving average.

About the Author

Kyle Webster
Kyle Webster
Kyle Webster is a self taught investor and follows the value investing approach to picking stocks. He possesses over 10 years of investment experience, an M.B.A. from Louisiana State University, and is also certified in Risk Management Assurance. Kyle is a Certified Internal Auditor, Data Miner, and author with a career broadly spanning over multiple business areas. He has exploited those observations and developed investment tactics within a fundamentally sound long-term investment strategy. He currently covers Research News category for our site. He can be reached via Email Contact -  kyle@mostvolatilestocks.com.

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