Fourth quarter profitability grows to $2.2 million or $0.15/share
Subsidiaries to open in Japan, Australia and Canada
BOTHELL, WA, February 12, 2004 - Sonosite, Inc. (Nasdaq: SONO), the leader in high performance, hand-carried ultrasound, today announced increased revenue, gross margin and net income for the fourth quarter ended December 31, 2003 as compared with the fourth quarter of 2002.
Revenue in the fourth quarter of 2003 grew to $27.3 million, a 9 percent increase over the fourth quarter of 2002. For the full year 2003, revenue increased 16 percent to $84.8 million compared with $73.0 million in 2002.
The Company reported that net income increased 158 percent to $2.2 million or $0.15 per share for the fourth quarter of 2003 compared with $0.9 million or $0.06 per share in the prior year quarter. For the full year 2003, Sonosite reported a net loss of $1.8 million or $0.12 per share versus a net loss of $7.7 million or $0.59 per share for 2002. As of December 31, 2003, cash, cash equivalents and investments totaled $61.0 million.
"Our fourth quarter performance highlighted the growing strength of our international operations and increasing sales ramp of our TITAN system, particularly in the United States," said Kevin M. Goodwin, Sonosite president and CEO. "TITAN, our next generation ultrasound system, introduced mid-year, continues to be well received in the marketplace and accounted for 45 percent of worldwide revenue in the quarter.
"The Company made significant progress in 2003 while we confronted some significant challenges in both our domestic and international markets," Goodwin said. "Our worldwide installed base now exceeds 14,000 systems. We have regained our momentum in Europe and I believe that we have established the foundation there for strong continued growth. In Japan, our efforts to establish a multi-partner approach to address this market remain on track and we already have orders for first quarter delivery. We have received Japanese government approval to sell the 180 series and TITAN systems and the iLook approval is in process. We are in the process of opening a Sonosite subsidiary to manage our business there."
"In the US, we started to see results in the quarter from our efforts to streamline the management structure for the visual procedures market," Goodwin said. "Importantly, overall productivity and profitability of the US sales force increased substantially during 2003 and we plan to begin a scaled expansion of this group in 2004 to increase the number of sales territories and to better capitalize on our many growth opportunities in this market."
The Company's gross margin grew to 64.6 percent in the fourth quarter compared with 60.3 percent in the fourth quarter of 2002 as a result of both higher TITAN sales as well as a larger proportion of revenue derived from direct operations. For the year, gross margin increased to 63.5 percent compared with 59.2 percent in 2002.
In the fourth quarter of 2003, US revenue accounted for 57 percent of sales and grew 5 percent as compared with the fourth quarter of 2002. As compared with the fourth quarter of 2002, international revenues grew 13 percent with Europe growing 42 percent. As expected, revenues in Japan declined by 58 percent in the quarter as compared with the fourth quarter of 2002. For the full year 2003, US revenue grew 23 percent and international revenue grew 6 percent. Excluding the impact from Japan, international revenue grew 34% in 2003 as compared with 2002.
The Company's total operating expenses grew 7 percent to $15.6 million in the fourth quarter of 2003 as compared with the fourth quarter of 2002 reflecting increased sales expenses associated with higher sales levels and international administrative costs as we expand these operations. For the full year, total operating expenses increased 10 percent to $57.0 million, or 67 percent of revenue, compared with $51.7 million, or 71 percent of revenue, for 2002.
Sonosite Expands Global Network
Sonosite also announced that it is opening direct subsidiaries in Tokyo, Japan; Sydney, Australia; and Toronto, Canada.
"Japan, Australia and Canada account for over $500 million in annual ultrasound expenditures," Goodwin said. "Their clinicians are sophisticated users of ultrasound and we believe that by establishing a direct marketing presence we will be able to better serve our customers there as well as accelerate our growth potential. We are also fortunate to have attracted highly respected and experienced ultrasound managers to head up our efforts in these countries."
Goodwin announced that Gregory J. Brand would serve as Managing Director, Sonosite Australasia Pty Limited and Drew M. D'Aguilar would serve as General Manager, Sonosite Canada Inc.
Brand joins Sonosite with over 23 years in the ultrasound industry. Most recently he served as managing director for Philips Medical Systems Australasia where he managed a full business line of medical technology products that included ultrasound, MRI, nuclear medicine, x-ray and patient monitoring. Prior to working with Philips, Brand was vice president of Asia Pacific for ATL Ultrasound.
D'Aguilar has worked in the ultrasound industry for over 17 years and joins Sonosite from ISM, Inc., where he was national sales manager for Canada for the ultrasound product line. He also served as a regional sales manager and country manager for Philips Medical Systems, Canada. Prior to Philips, he was employed by ATL Ultrasound and was general manager for the company's business in Canada.
Company Updates 2004 Guidance
As stated in the Company's press release on October 30, 2003, the Company is targeting to increase revenue in 2004 by approximately 25 percent and expects gross margin to be between 64 and 65 percent. The Company revised its operating expense guidance by increasing the estimated 2004 growth rate to approximately 15% to 17% to primarily reflect increased investment in international and domestic sales expansion and some accelerated research and development spending. Revenue and operating expenses are expected to trend in a similar quarterly pattern as in 2003.
Conference Call
Sonosite will host a conference call today to discuss its fourth quarter and full year financial results at 1:30 pm PST/4:30 pm EST. The call will be broadcast live via the "Investors" section of Sonosite's website as well as archived at: http://ir.sonosite.com/. A replay of the call will be available by dialing (719) 457-0820 or toll free (888) 203-1112. Replay access will be available beginning February 12, 2004, 4:30 pm (PST) until February 26, 2004, 12:00 midnight (PST). The confirmation code 461061 is required to access the replay.
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 eight subsidiaries and a global distribution netwok in over 75 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. The Company employs approximately 450 people worldwide.