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% favorable impact on second
quarter results and a 3% favorable 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 favorably
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
recognized Memorial Hermann Health System, in Houston, Texas for
outstanding leadership in patient safety using SonoSite’s bedside
ultrasound and customized 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
recognized patient safety forum in the United States).
- VisualSonics introduced the world’s
first ultrasound-guided photoacoustic imaging system, which
combines optical imaging 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
favorable 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 visualization 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’ imaging system. This fusion of
‘optical imaging,’ 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 and can be accessed
via http://www.sonosite.com/company/investors. 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 harbor 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.
SonoSite, Inc. Selected Financial Information
Condensed Consolidated Statements of
Operations (in thousands except per share data) (unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2011 2010 2011 2010
Revenue $ 72,713 $ 61,549 $ 143,794 $ 117,526 Cost of revenue
21,479 17,195 42,606
33,475 Gross margin 51,234 44,354 101,188 84,051
Operating expenses: Research and development 10,646 7,211
20,091 14,808 Sales, general and administrative 38,635
30,996 75,111 60,425
Total operating expenses 49,281 38,207 95,202 75,233
Operating income 1,953 6,147 5,986 8,818 Other loss,
net (3,114 ) (2,438 ) (5,476 ) (4,699 )
(Loss) income before income taxes (1,161 ) 3,709 510 4,119
Income tax (benefit) provision (72 ) 1,834
595 861 Net (loss) income
$ (1,089 ) $ 1,875 $ (85 ) $ 3,258 Net (loss)
income per share: Basic $ (0.08 ) $ 0.13 $ (0.01 ) $ 0.21
Diluted $ (0.08 ) $ 0.12 $ (0.01 ) $ 0.20
Weighted average common and potential common shares
outstanding: Basic 13,844 14,601
13,727 15,438 Diluted 13,844
15,100 13,727 15,950
Reconciliation of
Non-GAAP Measures - EBITDA and EBITDAS:
Operating income (EBIT) $ 1,953 $ 6,147 $ 5,986 $ 8,818
Depreciation and amortization 2,642 1,611
5,230 3,290 EBITDA 4,595 7,758 11,216
12,108 Stock-based compensation 1,774 1,200
3,813 2,208 EBITDAS $ 6,368 $
8,958 $ 15,029 $ 14,317
Condensed Consolidated Balance Sheets (in thousands)
(unaudited)
As of June 30, 2011 December
31, 2010 ASSETS Current Assets Cash and cash equivalents
$ 81,536 $ 78,690 Accounts receivable, net 77,759 81,516
Inventories 45,152 37,126 Deferred tax assets, current 8,977 7,801
Prepaid expenses and other current assets 14,555
12,384 Total current assets 227,979 217,517
Property and equipment, net 9,393 9,133 Deferred tax assets, net
3,245 4,373 Investment in affiliate 8,000 8,000 Goodwill 40,107
37,786 Identifiable intangible assets, net 44,811 47,423 Other
assets 4,772 4,823 Total assets $
338,307 $ 329,055
LIABILITIES AND
SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $
12,885 $ 10,597 Accrued expenses 26,141 32,535 Deferred revenue
6,478 6,042 Total current
liabilities 45,504 49,174 Long-term debt, net 99,735 97,379
Deferred tax liability, net 2,600 1,811 Deferred revenue 14,215
15,236 Other non-current liabilities, net 12,714
12,565 Total liabilities $ 174,768 $
176,165 Commitments and contingencies
Shareholders' Equity: Common stock and additional paid-in capital
307,232 299,005 Accumulated deficit (149,059 ) (148,975 )
Accumulated other comprehensive income 5,366
2,860 Total shareholders' equity 163,539
152,890 Total liabilities and shareholders' equity $
338,307 $ 329,055
Condensed
Consolidated Statements of Cash Flow (in thousands) (unaudited)
Six Months Ended June 30, 2011 2010
Operating activities: Net (loss) income $ (85 ) $ 3,258
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation and amortization 5,284 3,344
Stock-based compensation 3,813 2,208 Deferred income tax provision
(50 ) (1,739 ) Amortization of debt discount and debt issuance
costs 2,539 2,402 Excess tax benefit from stock-based compensation
(1,123 ) (532 ) Other 494 (401 ) Changes in operating assets and
liabilities: Changes in working capital (9,237 ) 12,774
Net cash provided by operating activities 1,635
21,314 Investing activities: Purchases of investment
securities - (79,921 ) Proceeds from the sales/maturities of
investment securities - 89,298 Purchases of property and equipment
(1,821 ) (1,428 ) Investment in affiliate - (4,000 ) Purchase of
VisualSonics, Inc., net of cash acquired - (61,217 )
Net cash used in by investing activities (1,821 ) (57,268 )
Financing activities: Excess tax benefit from exercise
stock-based awards 1,123 532 Minimum tax withholding on stock-based
awards (803 ) (692 ) Stock repurchases including transaction costs
- (97,715 ) Payment of contingent purchase consideration for
LumenVu, Inc. (300 ) (425 ) Proceeds from exercise of stock-based
awards 4,431 3,271 Repayment of long-term debt (14 ) (8,838
) Net cash provided by (used in) financing activities 4,437
(103,867 ) Effect of exchange rate changes on cash and cash
equivalents (1,405 ) 1,233 Net change
in cash and cash equivalents 2,846 (138,588 ) Cash and cash
equivalents at beginning of year 78,690
183,065 Cash and cash equivalents at end of year $ 81,536
$ 44,477 Supplemental disclosure of cash flow
information: Cash paid for income taxes $ 2,180 $ 1,502
Cash paid for interest $ 2,160 $ 2,317
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