First quarter revenue up 17% to $49.0 million; EPS of $0.09
BOTHELL, Wash., April 30 /PRNewswire-FirstCall/ -- Cardiac Science Corporation (NASDAQ:CSCX), a global leader in advanced cardiac diagnosis, resuscitation, rehabilitation, and informatics products, today announced strong results for the first quarter ended March 31, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080306/AQTH510LOGO) Revenue for the quarter was $49.0 million, an increase of 17% over the prior year period. This growth included increases in defibrillation sales of 27%, cardiac monitoring sales of 6% and service revenue of 16%.
Total international product sales grew 63% over the prior year's first quarter, driven by strong AED sales throughout Europe and Asia. Total domestic product sales remained constant, with domestic cardiac monitoring revenue up 6% over the prior year's first quarter, reflecting continuing growth after restructuring in 2007 to take advantage of all revenue opportunities in the market. The growth in domestic cardiac monitoring was offset by a slight decline in domestic AED sales, reflecting both the high comparable in the prior year and the inherent fluctuations that occasionally occur in that portion of the business. Service revenue was up 16%, reflecting both increased service billings and contracts in cardiac monitoring and increased AED related program management.
The Company reported net income of $2.1 million, or $0.09 per diluted share in the first quarter, compared to a net loss of $0.2 million, or $0.01 per share in the first quarter of 2007.
"We generated global growth across all three of our major product and service lines during the quarter," said John Hinson, president and chief executive officer. "Our overall revenue growth of 17% was achieved without any shipments of the GE hospital defibrillator and with a slight decline in our domestic AED revenues, illustrating the benefit of our multi-market approach. We were very pleased with our international sales growth, which increased in substantially all geographic areas, the continued strength of our cardiac monitoring business and the growth in our service revenue." First Quarter Financial Results First quarter revenue of $49.0 million represented an increase of 17% over the $41.7 million in revenue reported in the first quarter of 2007. First quarter gross margin was 49.4%, an increase over the gross margin from the first quarter of 2007 of 47.7%. This improvement is partially due to favorable product mix and also reflects the continuing success of our focused cost reduction and manufacturing efficiency initiatives over time.
Operating expenses in the first quarter of 2008 were $21.2 million, compared to $20.3 million for the first quarter of 2007, an increase of 4.4%. Prior year operating expenses included approximately $1.7 million in litigation related expenses. There were no similar expenses in the current period. The year to year increase in operating expenses is primarily related to sales commissions and other costs associated with the growth in revenue and increases in research and development expenses, representing investment in future products.
Operating income in the first quarter was $3.0 million, compared with an operating loss of $0.4 million last year.
Net income for the first quarter was $2.1 million, or $0.09 per diluted share. This compares to a loss of $0.2 million, or $(0.01) per share in the first quarter of last year. Excluding litigation related expenses in the first quarter of last year, pro forma net income would have been $0.9 million for that quarter, or $0.04 per diluted share. Current quarter results of $0.09 per share represent 125% growth over the pro forma result of $0.04 per share for the prior year period EBITDA was $4.8 million for the first quarter of 2008. Adjusted EBITDA, which excludes stock-based compensation expense and litigation and related expenses, was $5.3 million, or 11% of revenue, compared to $3.6 million, or 9% of revenue, for the first quarter of 2007.
The Company generated $2.5 million in cash from operating activities during the quarter and had $22.5 million in cash and short-term investments as of March 31, 2008.
Outlook
The Company reiterated its previous full year guidance for 2008. The Company continues to expect revenue growth for 2008 to be in a range around 10%, driven by growth in global AED revenues, meaningful revenue from the hospital defibrillator product, and continued strength in the cardiac monitoring line.
Net income, inclusive of an estimated income tax rate of 37%, is still expected to be in a range between $8 and $9 million, or between $0.34 and $0.39 per share. Adjusted EBITDA is expected to be in a range between 11% and 12% of revenue.
Michael Matysik, senior vice president and chief financial officer, stated, "The first quarter represents a strong start to the year for us. In light of all circumstances, including the delay in the release of the GE hospital defibrillator (which is currently expected in the second quarter) and some uncertainty in the broader U.S. economy, we are reiterating our earlier guidance at this time. While we acknowledge the potential for upside relating to the recent news regarding our competitor in the defibrillation market, we will revisit our full 2008 guidance after the second quarter and provide a further update at that time." Non-GAAP and Pro Forma Financial Information This news release contains a discussion of EBITDA, Adjusted EBITDA, and Pro Forma Net Income, which are non-GAAP financial measures provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The term "EBITDA" refers to a financial measure defined as earnings before net interest, income taxes, depreciation, and amortization. "Adjusted EBITDA" refers to EBITDA before stock-based compensation and litigation expense. Pro Forma Net Income refers to Net Income before litigation expenses and the related tax effect of these expenses. None of these measures are a substitute for measures determined in accordance with GAAP, and may not be comparable to the same measures as reported by other companies. EBITDA, Adjusted EBITDA, and Pro Forma Net Income are an integral part of the internal management reporting and planning process and are the primary measures used by management to evaluate the operating performance of the Company. The components of these measures include the key revenue and expense items for which operating managers are responsible and upon which their performance is evaluated. The Company also uses Adjusted EBITDA for planning purposes and in presentations to its board of directors. Reconciliations of net income, the most comparable GAAP measure, to EBITDA, Adjusted EBITDA and Pro Forma Net Income are contained in this press release.
Conference Call Information Cardiac Science will conduct a conference call for 4:30 p.m. Eastern Standard Time today to discuss the Company's financial results for the first quarter. The call will be hosted by John Hinson, chief executive officer, and Mike Matysik, senior vice president and chief financial officer.
To access the conference call, please dial 800.257.3401. International participants can call 303.262.2125. The call will also be web cast live at http://www.cardiacscience.com/. An audio replay of the call will be available for 7 days following the call at (800) 405-2236 for U.S. callers or 303.590.3000 for those calling outside the U.S. The password required to access the replay is 11113278#. An audio archive will be available at http://www.cardiacscience.com/ for 90 days following the call.
About Cardiac Science Corporation Cardiac Science develops, manufactures, and markets a family of advanced diagnostic and therapeutic cardiology devices and systems, including automated external defibrillators (AEDs), electrocardiograph devices (ECGs), cardiac stress systems and treadmills, Holter monitoring systems, hospital defibrillators, cardiac rehabilitation telemetry systems, and cardiology data management systems (informatics) that connect with hospital information (HIS), electronic medical record (EMR), and other information systems. The Company sells a variety of related products and consumables, and provides a portfolio of training, maintenance, and support services. Cardiac Science, the successor to the cardiac businesses that established the trusted Burdick(R), HeartCentrix(R), Powerheart(R), and Quinton(R) brands, is headquartered in Bothell, Washington. With customers in more than 100 countries worldwide, the company has operations in North America, Europe, and Asia. For information, call 425.402.2000 or visit http://www.cardiacscience.com/.
Forward Looking Statements This press release contains forward-looking statements. The word "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Forward looking statements in this press release include, but are not limited to, those relating to Cardiac Science Corporation's future revenue, earnings, earnings per share, cash flow, gross margins, Adjusted EBITDA, its ability to expand its distribution partnerships and revenue derived from them, product releases and revenue derived from them and possible acquisitions. These are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary significantly from the results expressed or implied in such statements. Factors that could cause or contribute to such varying results and other risks are more fully described in the Annual Report on Form 10-K filed by Cardiac Science Corporation for the year ended December 31, 2007. Cardiac Science Corporation undertakes no duty or obligation to update the information provided herein.
Company Contact Investor Contact
Mike Matysik EVC Group, Inc. Cardiac Science Corporation Douglas Sherk/Jenifer Kirtland
Sr. Vice President and CFO (415) 896-6820
(425) 402-2009 Media Contact
Christopher Gale
EVC Group, Inc. (646) 201-5431
(203) 570-4681
(Tables to Follow) Cardiac Science Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except share and per share amounts) Three Months Ended March 31,
2008 2007
$ % $ % Revenues:
Cardiac monitoring products $17,722 36.2% $16,653 40.0%
Defibrillation products 26,617 54.4% 21,038 50.5%
Total product revenues 44,339 90.6% 37,691 90.5%
Service 4,620 9.4% 3,979 9.5%
Total revenues 48,959 100.0% 41,670 100.0% Cost of Revenues:
Products 21,532 48.6% 18,837 50.0%
Service 3,229 69.9% 2,953 74.2%
Total cost of revenues 24,761 50.6% 21,790 52.3% Gross Profit:
Products 22,807 51.4% 18,854 50.0%
Service 1,391 30.1% 1,026 25.8%
Gross profit 24,198 49.4% 19,880 47.7% Operating Expenses:
Research and development 3,863 7.9% 2,982 7.2%
Sales and marketing 12,189 24.9% 11,108 26.7%
General and administrative 5,125 10.5% 4,512 10.8%
Litigation and related
expenses - 0.0% 1,688 4.1%
Total operating expenses 21,177 43.3% 20,290 48.7% Operating income (loss) 3,021 6.2% (410) -1.0% Other Income:
Interest income, net 115 0.2% 22 0.1%
Other income, net 211 0.4% 125 0.3% Total other income 326 0.7% 147 0.4% Income (loss) before income tax
benefit (expense) and minority
interests 3,347 6.8% (263) -0.6%
Income tax benefit (expense) (1,240) -2.5% 75 0.2% Income (loss) before minority
interest 2,107 4.3% (188) -0.5%
Minority interests (53) -0.1% 22 0.1%
Net income (loss) $2,054 4.2% $(166) -0.4% Net income (loss) per share -
basic $0.09 $(0.01)
Net income (loss) per share -
diluted $0.09 $(0.01)
Weighted average shares
outstanding - basic 22,795,693 22,611,743
Weighted average shares
outstanding - diluted 23,312,933 22,611,743 Cardiac Science Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands) March 31, 2008 December 31, 2007 ASSETS
Current Assets:
Cash and cash equivalents $22,490 $20,159
Short-term investments - 350
Accounts receivable, net 32,440 29,439
Inventories 22,409 21,794
Deferred income taxes, net 9,590 9,558
Prepaid expenses and other current
assets 3,070 2,509
Total current assets 89,999 83,809 Other assets 124 125
Machinery and equipment, net of
accumulated depreciation 4,870 5,056
Deferred income taxes, net 29,120 30,288
Intangible assets, net of
accumulated amortization 34,064 35,053
Investment in unconsolidated
entities 634 727
Goodwill 107,613 107,613
Total assets $266,424 $262,671 LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $14,413 $12,792
Accrued liabilities 9,634 11,075
Warranty liability 3,447 3,211
Deferred revenue 8,811 8,141
Total current liabilities 36,305 35,219 Other liabilities - 54 Total liabilities 36,305 35,273 Minority interests 180 127 Shareholders' Equity 229,939 227,271 Total liabilities and
shareholders' equity $266,424 $262,671 Cardiac Science Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three Months Ended
March 31,
2008 2007 Operating Activities:
Net income (loss) $2,054 $(166) Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization 1,609 1,606
Deferred income taxes 1,170 (75)
Stock-based compensation 558 613
Minority interests 53 (22)
(Gain) Loss on disposal of machinery
and equipment - 3 Changes in operating assets and
liabilities, net of business
acquired:
Accounts receivable, net (3,001) (258)
Inventories (608) (607)
Prepaid expenses and other assets (563) (584)
Accounts payable 1,621 2,183
Accrued liabilities (1,339) (638)
Warranty liability 236 76
Deferred revenue 670 135
Net cash provided by operating
activities 2,460 2,266
Investing Activities:
Purchases of short-term investments - (149)
Maturities of short-term investments 350 547
Purchases of machinery and equipment (434) (328)
Payments related to the purchase of Cardiac
Science, Inc. (156) (270)
Net cash used in investing
activities (240) (200)
Financing Activities:
Proceeds from exercise of stock options and
issuance of shares under employee purchase
plan 173 214
Minimum tax withholding on restricted stock
awards (62) (8)
Net cash provided by financing
activities 111 206 Net change in cash and cash equivalents 2,331 2,272
Cash and cash equivalents, beginning of
period 20,159 9,819
Cash and cash equivalents, end of period $22,490 $12,091 Cardiac Science Corporation and Subsidiaries
Reconciliation of GAAP Results to Non-GAAP Results (unaudited)
(in thousands) Reconciliation of Net Income
(Loss) to Adjusted EBITDA Three Months Three Months
Ended Ended
March 31, 2008 March 31, 2007
% of % of
revenue revenue
Net income (loss) $2,054 4.2% $(166) -0.4%
Depreciation and amortization 1,609 3.3% 1,606 3.9%
Interest income (115) -0.2% (22) -0.1%
Income tax (benefit) expense 1,240 2.5% (75) -0.2%
EBITDA 4,788 9.8% 1,343 3.2% Stock-based compensation 558 1.1% 613 1.5%
Litigation and related expenses - 0.0% 1,688 4.1% Adjusted EBITDA $5,346 10.9% $3,644 8.7% Reconciliation of Net Income (Loss) to Pro
Forma Net Income Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007
% of % of
revenue revenue
Net income (loss) $2,054 4.2% $(166) -0.4%
Litigation and related expenses - 0.0% 1,688 4.1%
Tax effect - 0.0% (602) -1.4% Pro forma net income $2,054 4.2% $920 2.2% Weighted average shares
outstanding - diluted 23,312,933 22,611,743 Net income (loss) per share -
diluted $0.09 $0.04
CSCX-E http://www.newscom.com/cgi-bin/prnh/20080306/AQTH510LOGO http://photoarchive.ap.org/ DATASOURCE: Cardiac Science Corporation CONTACT: Mike Matysik, Sr. Vice President and CFO of Cardiac Science Corporation, +1-425-402-2009; or Investors, Douglas Sherk, or Jenifer Kirtland, both of EVC Group, Inc., +1-415-896-6820, for Cardiac Science Corporation; or Media, Christopher Gale of EVC Group, Inc., +1-646-201-5431, +1-203-570-4681, , for Cardiac Science Corporation Web site: http://www.cardiacscience.com/
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