Company Reports EPS of $0.05
Conference Call Today at 1:30 pm PT/4:30 ET
BOTHELL, WA - April 28, 2005 - Sonosite, Inc. (Nasdaq: SONO), the world leader in hand-carried ultrasound, today reported strong financial results for the first quarter ended March 31, 2005.
Worldwide revenue in the first quarter of 2005 grew 44% to $34.0 million compared with $23.5 million in the first quarter of 2004. The company achieved pre-tax income of $1.4 million in the first quarter of 2005 and reported net income in the first quarter of $725,000, or $0.05 per diluted share, compared with a loss of $1.4 million, or $0.10 per share, a year ago.
"The year is off to an exceptionally strong start," said Kevin M. Goodwin, Sonosite President and CEO. "The quarter's outstanding results were due to excellent execution in both US and International markets. During the second quarter we will be focused on the worldwide launch of the MicroMaxx„¢ system, our third generation of hand-carried ultrasound technology. We will be hosting events in the US, Canada, Europe and Asia to give physicians and sonographers a first hand look at this powerful yet lightweight system and we plan to begin customer shipments in mid-June."
Goodwin continued, "I believe that the MicroMaxx system represents a remarkable achievement. Through our expertise in digital ultrasound ASIC technology, we have quadrupled the system processing power to achieve image resolution comparable to systems weighing 30 to 40 times more and costing well over $100,000 without increasing system size or weight over our prior generation system. Backed by a precedent setting five year standard warranty, we believe we offer an unparalleled value proposition to our customers."
In the first quarter of 2005, the company's gross margin rose to 70.2% compared with 64.8% in the same quarter of 2004. Gross margin increased due to an improved product mix, increased manufacturing efficiencies and a reduced royalty rate from the prior year under the company's technology licensing agreement with our former parent.
Operating expenses in the first quarter grew 32% to $22.2 million compared with $16.9 million in the first quarter of 2004. The growth was primarily due to expenses associated with the growth in international distribution, marketing and R&D associated with the launch of the MicroMaxx system and higher legal expenses.
In the first quarter of 2005, US revenue grew 34% compared with the prior year's first quarter led by a particularly strong performance in enterprise markets. International revenue grew 54% in the first quarter of 2005 compared with the first quarter of 2004 driven by strong performance in Europe, Japan and Latin America. US revenue accounted for 47% of total company revenue in the first quarter of 2005 compared to 50% in the prior year's comparable quarter.
As of March 31, 2004, cash, cash equivalents and investments were $61.5 million compared to $64.1 million as of December 31, 2004. The decrease was due to an increase in inventory to support the new product launch, an increase in accounts receivable due to timing of sales occurring later in the quarter and a reduction in accrued expenses.
Company Outlook for Second Quarter and Remainder of 2005
For 2005, the company expects revenue to grow 28% to 29% with gross margins approaching 70% and operating expenses as a percentage of revenue of approximately 64%. Other income is expected to be level with the prior year. The company expects the effective tax rate for the year to be between 40% and 45%. The effective tax rate is higher that the statutory rate due to the fact that the company currently does not recognize any tax benefit for losses generated by its international subsidiaries. Due to the utilization of its net operating loss carry forwards, the company's tax expense is largely a non-cash expense.
For the second quarter, the company expects year-over-year revenue growth of approximately 30% and gross margin of approximately 70%. The company continues to expect approximately 50% of its total annual operating expenses to occur in the first half due to the impact of product launch costs concentrated in the second quarter. Due to launch costs for the MicroMaxx system, the company expects a loss in the second quarter of $0.12 to $0.15 per share. Since no tax benefit will be recorded for the international losses, the income tax expense in the second quarter is expected to be close to zero.
Conference Call Information
Sonosite will hold a conference call today at 1:30 pm PDT/4:30 pm EDT. The call will be broadcast live and can be accessed via the "Investors" Section of Sonosite's website at www.sonosite.com. A replay of the audio webcast will be available beginning April 28, 2005, 4:30 pm (PDT) until May 11, 2005, midnight (PDT) by dialing (719) 457-0820 or toll-free (888) 203-1112. The confirmation code - 7405545 - is required to access the replay.
About Sonosite
Sonosite, Inc. (www.sonosite.com) is the innovator and world leader in hand carried ultrasound, with an installed base of more than 20,000 systems. The company, headquartered near Seattle, Washington is represented by seven subsidiaries and a global distribution network in over 75 countries. Approximately half of its revenues are generated from international markets. 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. The company employs approximately 450 people worldwide.
Forward-looking Information and the Private Litigation Reform Act of 1995
Certain statements in this press release relating to the market acceptance of our products, possible future sales relating to expected orders, and 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 and are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions. Factors that could affect the rate and extent of market acceptance of our products, the receipt of expected orders, and our financial performance include our ability to successfully market and sell our new third generation technology, our ability to accurately forecast customer demand for our products, our ability to manufacture and ship our systems in a timely manner to meet customer demand, timely receipts of regulatory approvals to market and sell our products, the outcome of pending litigation and expenses associated with such litigation, the willingness of healthcare providers who do not currently use ultrasound to use ultrasound, the extent to which healthcare insurers reimburse providers for ultrasound procedures, regulatory changes in various national health care markets, constraints in government and public health spending, the ability of our distribution partners to market and sell our products, as well as other factors described under the heading, "Important Factors that May Affect Our Business, Our Results of Operations and Our Stock Price," included in our latest periodic report fil ed 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.