SonoSite, Inc. (Nasdaq:SONO), the world leader and
specialist in hand-carried ultrasound for the point-of-care, today
reported financial results for the second quarter and first half
ended June 30, 2010.
REVENUE
Revenue increased 18% in the second quarter to $61.5 million and
13% for the first half of 2010 to $117.5 million, as compared to
the prior year comparable periods. These comparisons included
revenue of $3.8 million for the quarter and $7.0 million for the
first half of 2010 from CardioDynamics (CDIC), which was acquired
in the third quarter of 2009.
SECOND QUARTER HIGHLIGHTS:
- Revenue growth was led by
SonoSite’s US hospital channel, which was up 20%.
- Revenue from the international
business was impacted by a slowdown in Europe. The Company had
steady performances in several other international markets and was
up 2%. The International business sector profitability grew 7-8
times the “top line” growth rate, despite the slower revenue.
- Pricing discipline and an
improved product mix led to a 1.4 percentage point increase in
gross margins to 72% for the quarter.
- The Company had strong
performances across all four vertical clinical markets.
EBIT and EBITDAS
Second Quarter
Excluding charges of $2.5 million from the acquisition of
VisualSonics (VSI), which closed on June 30, 2010, second quarter
EBIT was $8.7 million, or 14% of revenue, representing an increase
of 145% compared to the prior year. Including charges for the
acquisition, EBIT for the second quarter was otherwise $6.1
million, or 10% of revenue.
First Half Results
For the first half of 2010, excluding acquisition charges, EBIT
was $11.3 million or 9.6% of revenue, an increase of 121% compared
to the prior year. Including acquisition charges, EBIT was
otherwise $8.8 million, or 7.5% of revenue, up 94% over the first
half of 2010.
Excluding acquisition charges, second quarter EBITDAS was $11.4
million, up 90% and $16.8 million, up 51% for the first half.
For the first half, cash flow from operations was $21.3 million
compared to $7.4 million from the prior year, representing an
increase of $13.9 million or 1.9 times the prior year.
EPS
Excluding acquisition charges, EPS was $0.29 per share for the
second quarter and $0.36 per share for the first half of 2010.
Including acquisition charges, EPS was $0.12 per share for the
second quarter, versus $0.02 per share in 2009 and $3.3 million
($0.20 per share), versus $1.3 million ($0.07 per share) in the
prior year’s first half.
Over the first half of 2010, the weighted average of
fully-diluted outstanding shares was 16.0 million compared to 17.6
million in the prior year. Over this period, 3.3 million shares
were purchased. At quarter end, fully-diluted shares were 15.1
million. Since quarter end, the Company has purchased an additional
475,000 shares and has approximately $30.0 million remaining in
Board-authorized “buyback” capital.
COMMENTARY
“The quarter was an excellent step forward for SonoSite as we
resumed strong revenue growth, and managed pricing and operating
expenses effectively,” said Kevin M. Goodwin, SonoSite President
and CEO. “We also were able to close the VSI acquisition by quarter
end. We finished with strong momentum, and a stable back log. We
will continue to focus on operating expense improvement as the year
goes on, alongside driving a larger revenue base with VSI.”
Mr. Goodwin continued, “We expect to operate the VSI subsidiary
in Toronto, Canada and will initiate plans to converge our
technologies beginning later this year, as well as initiatives to
further scale the pre-clinical business. We anticipate that VSI
will contribute approximately $17 million of revenues in the second
half with a positive operating contribution, excluding amortization
and stock compensation. We will also initiate actions on operating
synergies during the second half.”
2010 FINANCIAL OUTLOOK
The company updated guidance for the expected impact of the VSI
acquisition:
- Core business revenue growth of
10 – 12%. With the inclusion of $17.0 million of estimated revenue
from VSI, overall revenue growth is projected at 18-19%;
- increased gross margins to a range of
70-71%, up from previous guidance of 70%;
- reaffirmed Core business EBIT margins of
11 – 13%. With $7.0 million of transaction costs, amortization and
stock compensation expenses from the VSI acquisition, we project
EBIT margins of 8-9% on higher revenue;
- reaffirmed Core business EBITDAS margin
of 16 – 18%. Expect a positive contribution from VSI, and overall
EBITDAS margins of 15-17% and,
- full-year effective tax rate of
40% compared to previous guidance of 30%. The tax rate increase is
due to non-deductible transaction expenses from the VSI
acquisition.
Non-GAAP Measures
This release includes discussions of EBIT, EBITDAS and EPS
excluding acquisition related charges; these are non-GAAP financial
measures. SonoSite believes these measures are a useful complement
to results provided in accordance with GAAP. “EBITDAS” refers to
operating income (EBIT) before depreciation, amortization and
stock-based compensation.
Conference Call Information
SonoSite will hold a conference call on July 26 at 1:30 pm
PT/4:30 pm ET. The call will be broadcast live and can be accessed
via http://www.sonosite.com/company/investors.
A replay of the audio webcast will be available beginning July 26,
2010, 5:30 pm PT and will be available until August 9, 2010, 9:59
pm PT by dialing (719) 457-0820 or toll-free (888) 203-1112. The
confirmation code 2747293 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 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
VisualSonics will not yield the expected potential benefits, our
ability to manufacture, market and sell our newest products, our
ability to manage expenses, spending patterns in the hospital
market, healthcare reform, prolonged adverse conditions in the U.S.
or world economies or SonoSite’s industry 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.
SonoSite, Inc.
Selected Financial Information
Condensed Consolidated Statements of Income (in thousands
except per share data) (unaudited) Three Months Ended Six Months
Ended June 30, June 30, 2010 2009
2010 2009 Revenue $ 61,549 $
52,285 $ 117,526 $ 104,090 Cost of revenue 17,195
15,299 33,475 32,012
Gross margin 44,354 36,986 84,051 72,078 Gross margin percentage
72.1 % 70.7 % 71.5 % 69.2 % Operating expenses: Research and
development 7,211 7,375 14,808 15,072 Sales, general and
administrative 30,996 27,584 60,425 53,387 Licensing income and
litigation settlement - (924 ) -
(924 ) Total operating expenses 38,207 34,035 75,233 67,535
Operating income (EBIT) 6,147 2,951 8,818 4,543 Other
loss, net (2,438 ) (2,269 ) (4,700 )
(2,473 ) Income before income taxes 3,710 682 4,119 2,070
Income tax provision 1,834 257
861 782 . . Net income $ 1,875 $
425 $ 3,257 $ 1,288 Net income
per share: Basic $ 0.13 $ 0.02 $ 0.21 $ 0.08
Diluted $ 0.12 $ 0.02 $ 0.20 $ 0.07
Weighted average common and potential common shares
outstanding: Basic 14,601 17,219
15,438 17,150 Diluted 15,100
17,619 15,950 17,567
Reconciliation of Non-GAAP Measures: Operating
income (EBIT) $ 6,147 $ 2,951 $ 8,818 $ 4,543 Adjustments
for EBIT:
Acquisition costs
2,515 579 2,515
579 Non-GAAP Adjusted EBIT $ 8,662 $ 3,530 $ 11,333 $
5,122 Adjustments for EBITDAS: Depreciation and amortization
1,611 1,071 3,344 2,109 Stock-based compensation 1,200
1,450 2,208 3,943
Non-GAAP Adjusted EBITDAS $ 11,473 $ 6,051 $
16,885 $ 11,174
Condensed
Consolidated Balance Sheets (in thousands) (unaudited) June 30,
December 31, 2010 2009 Cash and
cash equivalents $ 44,476 $ 183,065 Short-term investment
securities 65,372 74,682 Accounts receivable, net 64,180 71,347
Inventories 35,380 32,216 Deferred tax asset, current 7,482 7,350
Prepaid expenses and other current assets 9,538
12,034 Total current assets 226,428 380,694
Property and equipment, net 9,742 9,160 Investment in Carticept
4,000 - Deferred tax asset, net 682 775 Intangible assets, net
91,545 27,920 Other assets 4,451 4,425
Total assets $ 336,848 $ 422,974 Accounts
payable $
13,154
$ 6,175 Accrued expenses 23,975 25,923 Deferred revenue
5,575 5,504 Total current liabilities 42,704
37,602 Long-term debt, net 95,081 92,905 Deferred tax
liability, net 4,710 5,083 Deferred revenue 16,414 18,081 Other
non-current liabilities 16,012 14,873
Total liabilities 174,921 168,544 Shareholders'
equity: Common stock and additional paid-in capital 292,630 287,537
Accumulated deficit (129,806 ) (32,753 ) Accumulated other
comprehensive income (loss) (897 ) (354 ) Total
shareholders' equity 161,927 254,430
Total liabilities and shareholders' equity $ 336,848 $
422,974
Condensed Consolidated Statements
of Cash Flow (in thousands) (unaudited) Six Months Ended June
30, 2010 2009 Operating activities: Net
income $ 3,257 $ 1,288 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 3,344 2,109 Stock-based compensation 2,208 3,943
Deferred income tax provision (1,739 ) 863 Amortization of debt
discount, debt issuance costs 2,001 2,559 Non-cash gain on
litigation settlement - (924 ) Gain on convertible debt repurchase
- (1,339 ) Other adjustments (532 ) 199 Changes in working capital
12,774 (1,324 ) Net cash provided by operating
activities 21,313 7,374 Investing activities: Purchase of
investment securities, net 9,377 1,057 Purchases of property and
equipment (1,428 ) (1,810 ) Investment in Carticept (4,000 ) -
Purchase of VisualSonic, Inc, net of cash acquired (61,217 ) -
Payment of LumenVu contingent consideration (425 ) - Earn-out
consideration associated with SonoMetric acquisition -
(387 ) Net cash used in investing activities (57,693
) (1,140 ) Financing activities: Excess tax benefit from
exercise of stock-based compensation 532 - Repurchase of
convertible senior notes - (20,416 ) Repayment of VisualSonics Inc.
long-term debt (8,838 ) - Stock repurchase including transaction
costs (97,715 ) - Minimum tax withholdings on stock-based awards
(692 ) (852 ) Proceeds from exercise of stock-based awards
3,271 1,385 Net cash used in financing
activities (103,442 ) (19,883 ) Effect of exchange rate
changes on cash and cash equivalents 1,233
(1,743 ) Net change in cash and cash equivalents (138,589 )
(15,392 ) Cash and cash equivalents at beginning of period
183,065 209,258 Cash and cash equivalents at
end of period $ 44,476 $ 193,866
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