Conference Call Webcast Live Today at 1:30 pm Pacific/4:30 pm Eastern
BOTHELL, WA - October 27, 2009 - Sonosite, Inc. (Nasdaq:SONO), the world leader and specialist in hand-carried ultrasound for the point-of-care, today reported financial results for the third quarter and nine months ended September 30, 2009.
REVENUE
Revenue in the third quarter of 2009 was $53.6 million, a decrease of 13% compared to the third quarter of 2008. For the nine months of 2009, revenue was $157.7 million, a decrease of 9% compared to the nine months of 2008. Overall revenue included $3.0 million for the quarter and nine months just ended from the recently acquired CardioDynamics International Corporation (CDIC). Excluding CDIC, revenue in the third quarter was $50.6 million, a decrease of 18% compared to the third quarter of 2008, and $154.7 million for the nine months just ended. Foreign exchange had zero effect on third quarter revenue, but had a negative impact of $6.7 million or 4% for the nine months just ended.
OPERATING INCOME AND CASH FLOW
Overall, “reported” third quarter operating income was $2.3 million, including charges from CDIC of $3.1 million related to operating results as well as acquisition and integration. Operating income in the third quarter excluding CDIC was $5.4 million, a 10.7% operating margin versus a $3.0 million or 5.6% operating margin in the second quarter 2009.
Cash Flow
Operating cash flow was $1.6 million for the quarter and $8.9 million for the nine months of 2009, as compared to $13.0 million and $18.0 million for the comparable periods of 2008. Operating cash flow reflects the decline in operating income and the $3.1 million impact of the CDIC acquisition.
Net income
For the third quarter of 2009, the Company recorded a net loss of $0.2 million or $0.01 per share, compared to a net income of $3.7 million or $0.21 per share in 2008. For the nine months of 2009, net income was $1.0 million or $0.06 per share compared to $5.3 million or $0.30 per share, all of which include $3.1 million in charges related to the CDIC acquisition.
COMMENTARY
“While revenue remained sluggish, gross margins and expense management improved, resulting in a better than forecasted operating margins of 10.7% in our core businesses, excluding CDIC,” said Kevin M. Goodwin, Sonosite President and CEO. “The revenue environment remains tight, US revenue levels continued stabilizing and we experienced a few order delays in our international business. Importantly, pricing and expense management have continued to improve, resulting in steadily increasing operating margin performance.” “We also recently concluded an agreement with General Electric to settle our patent disputes,” Mr. Goodwin stated. “As a part of the settlement, both companies agreed to invest in an important new education and clinical research foundation, which the companies will co-fund, and which will contribute to the long-term market adoption of best practices in point-of-care ultrasound.” “Our 2009 outlook remains unchanged,” Mr. Goodwin said. “Going forward, we intend to continuously improve our operating margins and cash flow while preparing and positioning ourselves for the resumption of revenue growth. We have numerous growth initiatives in place, alongside a strengthening handle on pricing and expense control. We are targeting operating margins of 11 - 13% for 2010. These targets assume zero to low revenue growth rates. If we realize greater growth rates, our operating margins will be structured to improve further. These projections exclude $3.3 million of expected amortization for intangibles related to the CDIC acquisition.” As of September 30, 2009, the company held $248 million in cash and investments and had outstanding senior convertible notes of $120 million. The Company used $16.2 million for the CDIC acquisition including re-payment of their debt.
2009 FINANCIAL OUTLOOK
The Company has updated its outlook to include the impact of the CDIC acquisition:
- revenues in the range of $225 - $230 million,
- gross margins are expected to be level with 2008, and
- operating income in the range of $10 - $11 million inclusive of negative $8 million in charges from the CDIC acquisition.
NON-GAAP MEASURES
This release includes a discussion of management measures that are non-GAAP. We believe it is useful for investors to understand the comparison of operating results in 2009 versus 2008 by eliminating the impact of the CDIC related charges using non-GAAP measures.
Conference Call Information
Sonosite will hold a conference call on October 27th at 1:30 pm PT/4:30 pm ET. The call will be broadcast live and can be accessed via https://www.sonosite.com/company/investors. A replay of the audio webcast will be available beginning October 27, 2009, 5:30 pm PT and will be available until November 10, 2009, 9:59 pm PT by dialing (719) 457-0820 or toll-free (888) 203-1112. The confirmation code 1942151 is required to access the replay. The call will also be archived on Sonosite’s website.
About Sonosite Sonosite, Inc. (www.sonosite.com) is the innovator and world leader in hand-carried ultrasound. Headquartered near Seattle, the company is represented by ten subsidiaries and a global distribution network in over 100 countries. Sonosite’s small, lightweight systems are expanding the use of ultrasound across the clinical spectrum by cost-effectively bringing high performance ultrasound to the point of patient care.
Forward-looking Information and the Private Litigation Reform Act of 1995 Certain statements in this press release relating to our future financial position and operating results are “forward-looking statements” for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the opinions and estimates of our management at the time the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those expected or implied by the forward-looking statements. These statements are not guaranties of future performance, are based on potentially inaccurate assumptions and are subject to known and unknown risks and uncertainties, including, without limitation, the risk that the acquisition of CardioDynamics will not yield the expected potential benefits, our ability to manufacture, market and sell our newest products, spending patterns in the hospital market, healthcare reform and the other factors contained in Item 1A. “Risk Factors” section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. We caution readers not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. We undertake no obligation to publicly revise any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.