BOTHELL, WA, October 30, 2003 - Sonosite, Inc. (Nasdaq: SONO), a leading point-of-care ultrasound company, today announced increased revenue and gross margins as well as a reduced loss for the third quarter and nine months ended September 30, 2003.
As the Company previously projected in a news release issued on October 13, 2003, Sonosite reported third quarter revenue of $20.2 million, an increase of 10 percent, compared with $18.5 million for the third quarter of 2002. For the nine months of 2003, revenue grew 20 percent to $57.5 million compared with $47.9 million for the same period in the prior year.
The Company reported a net loss of $0.2 million, or $0.01 per share, versus a net loss of $2.4 million, or $0.17 per share, for the third quarter of 2002. Earnings per share results were modestly better than projected due to a favorable foreign exchange rate gain. For the nine months, the Company's loss narrowed to $4.0 million, or $0.28 per share, versus a loss of $8.6 million, or $0.68 per share for the same period a year earlier. As of September 30, 2003, cash, cash equivalents and investments totaled $61.6 million.
Gross margins rose in the third quarter to 63.5 percent as compared with 59.5 percent for the comparable quarter of 2002. For the nine months of 2003, gross margins improved to 63.0 percent compared with 58.6 percent for the same period last year.
In the third quarter of 2003, U.S. revenue grew 22 percent and accounted for 67 percent of total sales, while revenue in Europe grew 27 percent, compared with the third quarter of 2002. As noted in the Company's announcement on October 13, sales of the newly introduced Titan system accounted for 30 percent of third quarter revenue. As expected, revenue in Japan continued to negatively impact yearly comparisons with a revenue decline in Japan of 87 percent in the third quarter while ROW (rest-of-world) revenue was level with the prior year quarter.
"As we communicated earlier this month, an estimated $1 million in U.S. government orders was delayed in the third quarter due to year-end budget constraints," said Kevin M. Goodwin, Sonosite President and CEO. "With the start of a new federal budget cycle, we have recaptured approximately half of the projected orders within the first month of the fourth quarter."
Mr. Goodwin continued, "We believe that we are entering the year's seasonally strongest quarter with good momentum. We are pleased with the market acceptance of our newly introduced Titan ultrasound system and are excited about the potential to broaden its footprint in U.S. and international markets with the added clinical capabilities offered by our 2.1 software release that is scheduled to begin shipping in December. We are seeing increasing evidence of acceptance and appreciation for the growing role of compact, point-of-care ultrasound in the delivery of cost-effective health care that we believe will offer us many growth opportunities as we move forward into 2004 and beyond."
New Executive Appointments Announced
The Company also announced the promotions of Bradley G. Garrett to the new position of Chief Operating Officer and David G. Willis to the new position of Vice President of Product and Channel Management. As COO, Mr. Garrett will oversee product strategy, research and development, product management, manufacturing and service. As the executive in charge of manufacturing at Sonosite since 2000, Mr. Garrett has played an instrumental role in successfully managing the Company's new product releases, ensuring product quality and reliability, and significantly increasing factory productivity.
Mr. Willis is a highly respected veteran in the industry and has held the position of Director of Product Marketing at Sonosite since 1999. Most recently, Mr. Willis was in charge of global product management for the successful Titan launch. In his new position, Mr. Willis will oversee a team of clinically skilled corporate marketing specialists aimed at accelerating sales execution.
"Both of these individuals bring a wealth of management and ultrasound experience and have already made major contributions to the Company," Mr. Goodwin said. "This new organizational structure is targeted at increasing product development alignment with the marketplace and accelerating product introductions and sales execution."
Guidance
The Company reiterated the guidance provided in its October 13 news release. Fourth quarter revenue is expected to grow approximately 30 percent over the third quarter of 2003. Gross margins should continue to increase to approximately 64 percent of revenues as compared with 60.3 percent in the fourth quarter of 2002. The Company expects to hold operating expenses approximately level with the prior year's fourth quarter.
For the full year of 2004, the Company's goal is to increase revenue by a minimum of 25 percent with gross margins of 64 to 65 percent. Operating expenses as a percentage of revenue should decline to approximately 58 to 60 percent.
Conference Call
Sonosite will host a conference call today to discuss its third quarter financial results at 1:30 p.m. (PST)/4:30 p.m. (EST). The call will be broadcast live via the "Investors" section of Sonosite's website: http://investor.sonosite.com/medialist.cfm. A replay of the call will be available by dialing (888) 203-1112 or toll-free (719) 457-0820. Replay access will be available from October 30, 2003 at 4:30 p.m. (PST) until November 10, 2003 at midnight (PST). The confirmation code 668962 is required for replay access.
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 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.