Retractable Technologies, Inc. Results for the Period Ended March 31, 2024

Rhea-AI Summary

Retractable Technologies (NYSE American: RVP) reported a net sales decline to $7.6 million for Q1 2024 from $11.0 million in Q1 2023, resulting in a higher operating loss of $3.0 million compared to $2.7 million last year. The decline was mainly due to reduced international syringe sales for COVID-19 vaccinations, while domestic revenues rose by 22.5%. Operating expenses decreased by 12.9%, thanks to new property tax legislation. A new 50% tariff on syringes and needles, set to take effect in Q3 2024, poses a significant risk as over 90% of products were sourced from China. Unrealized gains on investments contributed positively to net income.

Positive

• Operating expenses decreased by 12.9%, attributed to new property tax legislation.
• Domestic revenues rose 22.5%, with domestic unit sales increasing by 18.3%.
• Unrealized gain on debt and equity securities was $1.7 million, boosting net income.

Negative

• Net sales declined from $11.0 million to $7.6 million, a 30.9% decrease.
• Operating loss increased to $3.0 million from $2.7 million due to lower gross profit.
• International revenues plummeted by 82.8%, primarily due to fewer COVID-19 vaccination-related sales.
• Overall unit sales dropped by 48.2%, increasing uncertainty about future international orders.
• A new 50% tariff on syringes and needles will take effect in Q3 2024, increasing costs as 90% of products are sourced from China.

Insights

Financial Analyst

The financial performance of Retractable Technologies for Q1 2024 reveals several key takeaways. The company reported $7.6 million in net sales, a sharp decline from $11.0 million in the same period last year. This drop is largely attributable to the significant decrease in international sales, especially for COVID-19 vaccinations, which the company had capitalized on in previous years. The lower sales volume has resulted in an operating loss of $3.0 million, compared to $2.7 million in the first quarter of 2023.

Domestic Sales: Despite the overall decline, domestic revenues increased by 22.5% and domestic unit sales rose by 18.3%. This shift indicates a higher reliance on the U.S. market, which accounted for 87.4% of revenues in Q1 2024, compared to 49.3% in the same period last year.

Operating Expenses: Operating expenses decreased by 12.9%, driven in part by lower property tax expenses due to new legislation. However, this cost-saving measure was insufficient to offset the revenue decline.

Tariffs and Risks: Looking forward, the impending tariff of 50% on syringes and needles imported from China poses a significant risk. Given that Retractable sourced over 90% of its products from China in Q1 2024, the additional tariffs could compress margins further and challenge profitability.

Investors should be cautious about the company's future as it navigates these headwinds. The decrease in international sales and the new tariffs could weigh heavily on financial performance in the coming quarters.

Market Research Analyst

The data provided indicates a significant shift in market dynamics for Retractable Technologies. The pronounced drop in international sales, particularly those related to COVID-19 vaccinations, highlights the company's previous reliance on pandemic-related demand. With international revenues plummeting by 82.8%, the company now faces uncertainty in its international sales pipeline.

Market Demand: Domestically, there seems to be an overhang of inventory from past vaccination efforts, which could continue to suppress domestic demand. The transition from pandemic highs to current operational levels is a critical adjustment period for the company. The 22.5% increase in domestic revenues and an 18.3% rise in domestic unit sales demonstrate some resilience, but the overall drop in unit sales by 48.2% is a red flag.

Competitive Landscape: The introduction of a new 50% tariff on Chinese imports will further complicate the competitive positioning of Retractable. This tariff will either force the company to absorb higher costs, thus reducing margins, or pass on these costs to customers, potentially affecting demand negatively.

Given the substantial international revenue drop and the upcoming tariff challenges, the market's outlook for Retractable Technologies remains cautious. Investors should monitor how the company adjusts its supply chain and market strategies to mitigate these risks.

LITTLE ELM, Texas--(BUSINESS WIRE)-- Retractable Technologies, Inc. (NYSE American: RVP) reports total net sales of $7.6 million for the first three months of 2024 and an operating loss of nearly $3.0 million for the period, as compared to total net sales for the same period last year of $11.0 million and an operating loss of $2.7 million. The differences in the revenues and operating losses are largely due to the lack of syringe sales to the international market for COVID-19 vaccination efforts in the first quarter of 2024 as compared to a high volume of such sales in the first quarter of 2023. Operating expenses decreased 12.9% as compared to the prior year due in part to a significant reduction in property tax expense as a result of newly enacted legislation. Unrealized gains on investments were a significant factor in the computation of net income for the first quarter of 2024. Retractable reports that domestic demand may be depressed due to the retention of products previously provided for vaccination purposes in customers’ inventory.

Retractable’s Form 10-Q filed on May 15, 2024 additionally reports that a new 50% tariff on syringes and needles will likely take effect in the third quarter of 2024. As Retractable purchased over 90% of its products from China in the first quarter of 2024, most of which would likely be subject to the newly announced tariffs, the new tariffs are a significant risk factor.

Retractable experienced significant growth in late 2020 through early 2022 due to material orders from the U.S. government to supply syringes for COVID-19 vaccination efforts. Such orders included payment for certain freight charges as well. As a result, comparability to revenues and expenses in recent years may be challenging. Below are first quarter revenue figures from 2018 – 2024, as obtained from Retractable’s Quarterly Reports on Form 10-Q as filed with the U.S Securities and Exchange Commission.

		Three Months Ended March 31,
(Amounts in millions)		2024			2023			2022			2021			2020			2019			2018
U.S. sales (excluding U.S. government)	$	6.6		$	5.4		$	10.2		$	11.0		$	8.3		$	6.1		$	6.6
Sales to U.S. government		—			—			15.7			37.8			—			—			—
North and South America sales (excluding U.S.)		0.2			4.8			11.1			0.9			2.8			1.3			1.0
Other international sales		0.8			0.8			7.7			0.4			0.1			0.5			0.1
Total sales	$	7.6		$	11.0		$	44.7		$	50.1		$	11.2		$	7.9		$	7.7

Retractable reports the following results of operations for the three months ended March 31, 2024 and 2023, respectively. Further details concerning the results of operations, as well as other matters, are available in Retractable’s Form 10-Q filed on May 15, 2024 with the U.S Securities and Exchange Commission.

Comparison of Three Months Ended March 31, 2024 and March 31, 2023

Domestic sales accounted for 87.4% and 49.3% of the revenues for the three months ended March 31, 2024 and 2023, respectively. Domestic revenues increased 22.5%. Domestic unit sales increased 18.3%. Domestic unit sales were 86.1% of total unit sales for the three months ended March 31, 2024. International revenues decreased approximately 82.8% predominately due to fewer international vaccination-related sales. Overall unit sales decreased 48.2%. There is uncertainty as to the timing of future international orders.

Cost of manufactured product decreased 31.4% principally due to decreased unit sales. Royalty expense decreased 15.6% due to the associated decrease in gross sales.

Operating expenses decreased 12.9% from the prior year. This is substantially due to a reduction of expense associated with the allowance for anticipated credit losses and a reduction of property tax expense as a result of newly enacted property tax exemption legislation relating to medical device property.

The loss from operations was nearly $3.0 million as compared to a loss of $2.7 million for the same period last year. The increased loss was due to lower gross profit for the current period, offset by a reduction in overall operating expenses.

The unrealized gain on debt and equity securities was $1.7 million due to the increased market values of those securities.

The provision for income taxes was $86 thousand for the first quarter of 2024 as compared to a provision for income taxes of $231 thousand for the first quarter of 2023.

ABOUT RETRACTABLE

Retractable manufactures and markets VanishPoint^® and Patient Safe^® safety medical products and the EasyPoint^® needle. The VanishPoint^® syringe, blood collection, and IV catheter products are designed to prevent needlestick injuries and product reuse by retracting the needle directly from the patient, effectively reducing exposure to the contaminated needle. Patient Safe^® syringes are uniquely designed to reduce the risk of bloodstream infections resulting from catheter hub contamination. The EasyPoint^® is a retractable needle that can be used with luer lock syringes, luer slip syringes, and prefilled syringes to give injections. The EasyPoint^® needle also can be used to aspirate fluids and for blood collection. Retractable's products are distributed by various specialty and general line distributors.

For more information on Retractable, visit its website at www.retractable.com.

Forward-looking statements in this press release are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and reflect Retractable's current views with respect to future events. Retractable believes that the expectations reflected in such forward-looking statements are accurate. However, Retractable cannot assure you that such expectations will materialize. Actual future performance could differ materially from such statements.

Factors that could cause or contribute to such differences include, but are not limited to: material changes in demand, potential tariffs, Retractable's ability to maintain liquidity; Retractable's maintenance of patent protection; Retractable's ability to maintain favorable third party manufacturing and supplier arrangements and relationships; foreign trade risk; Retractable's ability to access the market; production costs; the impact of larger market players in providing devices to the safety market; and other risks and uncertainties that are detailed from time to time in Retractable's periodic reports filed with the U.S. Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240515114256/en/

Retractable Technologies, Inc.

John W. Fort III, 888-806-2626 or 972-294-1010

Vice President, Chief Financial Officer, and Chief Accounting Officer

Source: Retractable Technologies, Inc.

FAQ

What were Retractable Technologies' net sales for Q1 2024?

Retractable Technologies reported net sales of $7.6 million for Q1 2024.

How did Retractable Technologies' operating loss change in Q1 2024?

The operating loss for Q1 2024 increased to $3.0 million from $2.7 million in Q1 2023.

Why did Retractable Technologies' international revenues decline in Q1 2024?

International revenues declined by 82.8% due to fewer COVID-19 vaccination-related sales in Q1 2024.

What percentage of products does Retractable Technologies source from China?

Retractable Technologies sourced over 90% of its products from China in Q1 2024.

What is the impact of the new 50% tariff on Retractable Technologies?

The new 50% tariff on syringes and needles, effective Q3 2024, poses a significant cost risk as most products are sourced from China.

How did domestic unit sales change for Retractable Technologies in Q1 2024?

Domestic unit sales increased by 18.3% in Q1 2024.

What contributed to the decrease in operating expenses for Retractable Technologies?

A significant reduction in property tax expense due to new legislation contributed to the 12.9% decrease in operating expenses.

What was the unrealized gain on investments for Retractable Technologies in Q1 2024?

The unrealized gain on investments was $1.7 million in Q1 2024.