SonoSite, Inc., a Bothell, WA, U.S.-based maker of ultrasound devices, released financial results for the second quarter and 6 months ended June 30, 2003. The company reported U.S. $20.1 million in revenue and 62.8-percent gross margins with a net loss of $1.3 million, or $0.09 per share.
Worldwide revenues were below the company's previously stated estimates due to market challenges in Germany and Japan, as well as sales execution issues in France and Spain, SonoSite said.
For the quarter, SonoSite reported revenues of $20.1 million, an increase of 21 percent, compared to $16.6 million reported for the second quarter of 2002. The revenues included the initial sales of the new TITAN system, which began shipping in mid-June. For the 6 months, revenues were $37.3 million compared to $29.4 million for the first half of 2002, an increase of 27 percent. The company's revenue mix for the quarter was approximately 66 percent domestic and 34 percent international.
For the quarter and year-to-date, gross margins were 62.8 percent as compared to 58.2 percent for the comparable quarter and 58.1 percent for the 6 months of the prior year. The increase is due to the growth in higher margin sales by SonoSite sales representatives.
The company reported a quarterly net loss of $1.3 million, or $0.09 per share, versus a net loss of $2.5 million, or $0.20 per share, for the comparable quarter a year earlier. For the 6 months, SonoSite's loss narrowed to $3.9 million, or $0.27 per share, versus a loss of $6.2 million, or $0.51 per share, for the first half of 2002. As of June 30, 2003, cash and cash equivalents plus investment securities totaled $64.1 million.
In the U.S., quarterly revenues rose 33 percent over year-earlier results. Sales productivity in the U.S., measured by revenue per sales representative, increased by 55 percent compared with the prior year comparable quarter. This increase reflects continued progress in sales representative performance in the U.S., the positive response to the new TITAN system, and continued strength in sales of the 180PLUS system. The results also reflect market expansion in the new Visual Procedures division, which is using a lower-cost, higher-service sales model to sell to the vascular access market.
Quarterly revenues in Europe increased 48 percent over the second quarter of 2002 but were below the company's expectations. The major factor affecting revenue was the implementation of a new healthcare reimbursement system in Germany. These changes caused hospital administrators to delay capital equipment purchases. Revenues in France and Spain were not as strong as expected due to sales force execution issues and logistical challenges related to the TITAN system launch.
In Japan, SonoSite's quarterly and year-to-date revenues declined 89 percent as a result of issues with its partner, Olympus. The Olympus organization has undergone significant organizational changes in response to issues in its core business, endoscopy. This has affected Olympus' ability to provide sufficient sales and marketing focus on SonoSite's products. SonoSite is working on additional distribution arrangements which management hopes to complete by year-end.
"Despite challenges in our international markets, we made substantial progress in the second quarter with the launch of the TITAN system," said Kevin M. Goodwin, president and CEO. "We were encouraged by the positive response to our new TITAN system, which accounted for 24 percent of worldwide revenues. In addition, we were also pleased with improved U.S. sales productivity, the continued success of the 180PLUS platform and the solid growth from our new Visual Procedures group. However, we recognize that Germany and Japan present two challenges which we hope will be resolved in the second half."
"While maintaining our expectation for full-year profitability in 2003, we are reducing our revenue guidance for the year," Mr. Goodwin said. "We are refraining from forecasting revenue in Japan until visibility in that market improves. In Germany, while we expect improvement, we remain cautious due to regulatory uncertainty. We expect France and Spain to be on target for the rest of the year. For the third quarter, we are targeting revenues in the range of $21 million to $24 million, with gross margins between 63 percent and 64 percent. For the year, we now expect revenues to come in at the low end of our previous guidance of $90 million to $110 million, with margins of approximately 64 percent. We expect spending to decline in the second half with a targeted spend of $27 million to $27.5 million."
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