US Revenue Up 17%
International Revenue Up 7%
VisualSonics Revenue Up 30%
Conference Call Webcast Live Today at 1:30 pm Pacific/4:30 pm Eastern
BOTHELL, WA - October 21, 2010 - Sonosite, Inc. (Nasdaq:SONO), the world leader and specialist in bedside and point-of-care ultrasound, today reported financial results for the third quarter and nine months ended September 30, 2010.
Revenue increased 28% in the third quarter to $68.5 million and increased 18% for the nine months of 2010 to $186.1 million, as compared to the prior year.
Revenue included $8.7 million for the third quarter and nine months from the recently acquired VisualSonics (VSI).
Excluding VSI, revenue in the third quarter was $59.8 million, an increase of 12% compared to the third quarter of 2009, and $177.4 million, an increase of 12% for the nine months just ended.
THIRD QUARTER HIGHLIGHTS:
- Sustained revenue improvement in the US hospital channel, which was up 13% for the quarter.
- Stabilization in Europe resulted in strengthening overall international sales.
- VisualSonics, a new acquisition, is off to a strong start and on track to meet projected six month revenue expectations; VSI revenues grew 30% organically in Q3.
- Stable pricing helped gross margins increase 1.2 percentage points in the quarter.
- Operating expense rationalization was implemented.
- Solid early market progress with the new Advanced Needle Visualization software upgrade.
EBIT and EBITDAS
Third quarter EBIT reflects non-recurring charges of $2.2 million, including charges related to acquisition and restructuring, and a revenue charge of $0.8 million.
Excluding these charges, third quarter EBIT was $7.3 million, or 11% of revenue, representing an increase of 50% compared to the prior year. Including these charges, EBIT for the third quarter was $5.1 million, or 7% of revenue.
Additionally, excluding non-recurring charges, third quarter EBITDAS was $11.9 million, up 55%.
Nine Months Results
For the first nine months of 2010, non-recurring charges were $4.7 million.
Excluding these charges, EBIT was $18.6 million or 10% of revenue, an increase of 86% compared to the prior year. Including these charges, EBIT was $13.9 million, or 7% of revenue, up 104% over the nine months of 2009.
Additionally, excluding non-recurring charges, EBITDAS for the first nine months was $28.7 million, up 54%.
For the nine months, cash flow from operations was $17.5 million compared to $8.9 million from the prior year, representing an increase of $8.6 million or 96% over the prior year.
Excluding non-recurring charges, EPS was $0.18 per share for the third quarter and $0.51 per share for the first nine months of 2010.
Including non-recurring charges, EPS was $0.07 per share for the third quarter, versus a loss of $0.01 per share in 2009. In the first nine months of 2010 EPS was $0.27 per share compared to $0.06 per share in the prior year's first nine months.
Over the first nine months of 2010, the weighted average of fully-diluted outstanding shares was 15.3 million compared to 17.7 million in the prior year. Over this period, the Company repurchased 4.2 million shares in the open market pursuant to its previously announced share repurchase program. At quarter end, fully-diluted shares were 14.1 million.
"We had a good quarter and made substantial overall progress on the business model as well as future strategy steps," said Kevin M. Goodwin, Sonosite's President and CEO. "We saw sustained revenue growth in the US hospital channel, and we are on track to meet our revenue expectations for VisualSonics. In addition, we saw an improvement internationally as sales increased somewhat faster for the quarter. We also implemented actions to reduce structural operating expenses to enable expansion of forward operating margins."
Mr. Goodwin continued, "We continued introducing our Advanced Needle Visualization upgrade, a new proprietary algorithm for improving needle visualization for steep and deep nerve blocks. This point-of-care advance has become a key differentiator for us across the point-of-care marketplace and is gaining strong worldwide success."
"We also recently formed a new strategic partnership with the National Basketball Association (NBA) to drive awareness among sports medicine providers of the benefits of ultrasound visualization. We see this initiative as a great opportunity to drive visibility in musculoskeletal medicine," said Mr. Goodwin.
The NBA's Chief of Medical Affairs, Dr. Jace Provo, commented, "Sonosite is a proven industry leader and their products will help NBA and NBA D-League teams diagnose and treat injuries in the best and easiest way possible. Our players are competing at the highest level, so it is a tremendous opportunity for our team doctors and athletic trainers to attend special seminars and learn about Sonosite's unique diagnostic ultrasound products for the overall benefit of our players and our game."
2010 FINANCIAL OUTLOOK
The company is maintaining its outlook and is providing the following guidance for the full year 2010, which now includes the impact of the VSI acquisition:
- Core business revenue growth of 10 - 12%. The inclusion of $17.0 million of estimated revenue from VSI will aid overall revenue growth to a projected 18-19%;
- reaffirmed gross margins in a range of 70-71%;
- reaffirmed core business EBIT margins of 11 - 13%. Including $7.0 million in transaction costs, amortization and stock compensation expenses from the VSI acquisition, we project EBIT margins of 8-9% with higher overall revenue;
- reaffirmed core business EBITDAS margins of 16 - 18%. We are projecting a positive contribution from VSI, and overall EBITDAS margins of 15-17%; and
- full-year effective tax rate of 36% compared to prior guidance of 40%.
This release includes discussions of EBIT, EBITDAS and EPS excluding certain 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 October 21 at 1:30 pm PT/4:30 pm ET. The call will be broadcast live and can be accessed via www.sonosite.com/company/investors. A replay of the audio webcast will be available beginning October 21, 2010, 5:30 pm PT and will be available until November 4, 2010, 9:59 pm PT by dialing (719) 457-0820 or toll-free (888) 203-1112. The confirmation code 7304277 is required to access the replay. The call will also be archived on Sonosite's website.
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.