Conference Call Webcast Live Today at 1:30 pm Pacific/4:30 pm Eastern
BOTHELL, WA – July 25, 2011 – Sonosite, Inc. (Nasdaq:SONO), the world leader and specialist in bedside and point-of-care ultrasound, today reported financial results for the second quarter ended June 30, 2011.
REVENUE
Revenue for the second quarter of 2011 was $72.7 million, an increase of 18% compared to $61.5 million in the second quarter of 2010.
Revenue for the first half of 2011 was $143.8 million compared to $117.5 million in 2010, an increase of 22%.
Revenue from VisualSonics (VSI), Inc. was $8.3 million for the quarter, up 7%. Revenues were $16.5 million for the first half of 2011, up 5%.
Foreign exchange contributed to a 4% favourable impact on second quarter results and a 3% favourable impact on the first half of 2011.
Revenues were also negatively impacted in the second quarter by a series of delayed orders between $4.0-$5.0 million.
SECOND QUARTER, FIRST HALF, AND MARKETING MILESTONES
- Sustained revenue growth in North America, up 17% for the first half. Second quarter revenues were up 8%, and impacted by order delays.
- US Hospital revenues increased by 15% for the first half, and 8% for the second quarter.
- International business increased by 3% in the first half and 5% for the quarter. Results were favourably impacted by growth in developing markets and currency.
- Emerging market growth in China and India for the first half was 36% and 18% respectively; growth in the second quarter was 33% for each country.
- Gross margins were stable, 70.4% for the first half, and 70.5% in the second quarter.
- The company initiated a new marketing campaign focused on patient safety and cost control, which recognised Memorial Hermann Health System, in Houston, Texas for outstanding leadership in patient safety using Sonosite’s bedside ultrasound and customised training scheme.
- Important new evidence on cost and safety benefits from bedside ultrasound use were presented at the National Patient Safety Congress in Washington D.C. (the most recognised patient safety forum in the United States).
- VisualSonics introduced the world’s first ultrasound-guided photoacoustic imageing system, which combines optical imageing with high-frequency ultrasound. The Vevo® LAZR system, introduced in March 2011, is designed for pre-clinical cancer research.
EBITDAS, EBITDA and OPERATING INCOME (EBIT)
Second Quarter:
EBITDAS was $6.4 million, 9% of revenue, down 29% over the prior year, and in-line with company guidance related to the start-up of the company’s three-year plan driven “strategic” initiatives.
These new strategic initiatives also impacted EBITDA, and EBIT. EBITDA was $4.6 million, 6% of revenue, a decrease of 41% over the prior year, and EBIT was $2.0 million, 3% of revenue, and down 68% from prior year.
First Half Results
EBITDAS was $15.0 million, 10% of revenue and an increase of 5% over the prior year.
EBITDA was $11.2 million, 8% of revenue, and a decrease of 7% over the prior year.
EBIT was $6.0 million, 4% of revenue, and a decrease of 32% compared to the prior year first half.
EPS
EPS was ($0.08) per share for the second quarter of 2011 versus net income of $0.12 per share in 2010 and was ($0.01) per share for the half versus net income of $0.20 per share in the prior year. Additionally, the prior year’s first half EPS included $1.2 million, or $0.08 per share, in discrete tax benefits related to a favourable resolution of uncertain tax positions. The reduction in year-over-year results was driven by the initiation of the company’s three- year strategic plan in the second quarter.
COMMENTARY
“We had a good quarter although slightly below our internal forecast,” said Kevin M. Goodwin, Sonosite’s President and CEO. “For the first half, we had strong and positive momentum achieving revenue growth of 22%. In the second quarter, we had expectations of an additional $4.0-$5.0 million in revenue, which ended up as rolled-over orders; we also had an expected sequential decline in our typically ‘lumpy’ government business. We anticipate though a strong second half, which will be punctuated with a new product release and the expected return of momentum in our government business.”
Mr. Goodwin continued, “During the quarter, we also announced two key senior management appointments; Jack Sparacio, Chief Operating Officer, and Matthew Damron, Chief Marketing Officer. Both are experienced veterans and are solid new additions. Jack will focus on the continuous pursuit of operating margin gains, while Matt will be the key player in stepping-up our marketing execution globally.”
Marketing Investment Begins:
“Midway through the second quarter, we started a series of new demand generation initiatives; early results have been positive and ‘above trend.’ While still early, these results initially validate our decision to invest in these strategic marketing campaigns.”
Core Business:
“We continue to see strong fundamentals and customer alignment for point-of-care visualisation with healthcare reform minded providers from around the USA. We are progressing strongly with a robust new product rollout scheme which will begin this fall,” said Mr. Goodwin.
VisualSonics: Breakout technology
“We also announced in the quarter that VisualSonics launched its new Vevo® LAZR ‘Photoacoustics’ imageing system. This fusion of ‘optical imageing,’ with ultra high-frequency ultrasound, is believed to be a significant breakthrough for pre-clinical cancer research and potentially cancer therapy management in the future.”
“We are highly encouraged by early market insights gained from leading scientists and researchers from around the world, and will now pursue FDA approval for clinical applications with photoacoustics. We see photoacoustics as a major addition to our technology and opportunity portfolio, it will fuel an aggressive pursuit of pre-clinical cancer research markets worldwide in the next two years in our VisualSonics division,” said Mr. Goodwin.
Non-GAAP Measures
This release includes discussions of EBITDA and EBITDAS; these are non-GAAP financial measures. Sonosite believes these measures are a useful complement to results provided in accordance with GAAP. “EBITDA” refers to operating income (EBIT) before depreciation and amortization. “EBITDAS” refers to operating income (EBIT) before depreciation, amortization and stock-based compensation.
Conference Call Information
Sonosite will hold a conference call on July 25th at 1:30 pm PT/4:30 pm ET. The call will be broadcast live. A replay of the audio webcast will be available beginning July 25th at 5:30 pm PT and will be available until August 8th at 9:59 pm PT by dialing (719) 457-0820 or toll-free (888) 203-1112. The confirmation code 1770051 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 bedside and point-of-care ultrasound and an industry leader in ultra high-frequency micro-ultrasound technology and impedance cardiography equipment. Headquartered near Seattle, the company is represented by fourteen 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 are “forward-looking statements” for the purposes of the safe harbour provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to our future financial condition and results of operations and statements regarding planned product launches and the potential market opportunity for these products. 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 we do not achieve the financial results that we expect, the risk we are unable to launch our new products as and when expected, the risk that our existing and new products do not achieve market success 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.