SonoSite Inc. (SONO)
Q2 2010 Earnings Call Transcript
July 26, 2010 4:30 pm ET
Kevin Goodwin – President and CEO
Mike Schuh – VP and CFO
Tycho Peterson – JPMorgan
Charley Jones – Barrington Research
Alan Robinson – Royal Bank of Canada
Good day everyone and welcome to the SonoSite second quarter results conference call. Please note today’s call is being recorded.
At this time, for opening remarks and introductions, I will now turn the conference over to Mr. Kevin Goodwin. Please go ahead, sir.
Thank you, operator, and good afternoon everyone on the call. This is Kevin Goodwin, CEO of SonoSite; along with me today is Mike Schuh, our CFO.
This conference call contains certain projections and forward-looking statements regarding future events or future financial performance of the company. And except for the historical information discussed during the conference call, the statements made today contain forward-looking statements that involve substantial risks and uncertainties.
Actual results could differ materially because of factors listed in the management discussion and analysis section of the company’s 2009 Form 10-K, and in other filings and reports with the SEC. We do not undertake any duty to publicly update any forward-looking statements.
So with this mind, I’m going to cover today the second quarter 2010 and then our first half of 2010 financial results. I’ll then move on to talk a little bit more about the reminder of 2010 and on to 2011 just a little bit.
I’ll start off with revenue for the second quarter; revenue came in at $61.5 million up a solid 18% versus 2009. Our primary care channel which was acquired last year in Q3, recoded $3.8 million of that revenue. Our core business revenue was up 10% representing our best core growth rate in six quarters. Changes in currency had no impact on Q2.
Looking a little deeper into the revenue performance compared to last year’s Q2, our US hospital revenue was up 20%. Our US enterprise was level. Our primary care group was up 19% sequentially versus Q1 and the ultrasound portion of those revenues were up very impressively and finally our MSK revenues more than doubled.
International revenue was up 2%. We were impacted from a slow down in Europe and we saw strong performances throughout all of other international markets in excellent mid-teens profitability improvement in our international business.
Moving over to the first half, revenue was $117.5 million up 13% from the prior year. Our primary care channel was about $7 million of that total revenue. Our core revenue was up 6%. US hospital revenue was up 17% in the first half, US enterprise revenue was down 37% in the first half as expected. International was up 5% in the first half as expected and for the first half changes in currency had a positive impact of 2%.
Gross margin came in at a record of 72.1% up 140 basis points for the quarter and up 230 basis points over the first half. Gross margins improve from pricing discipline and an improved product mix.
I’m going to now move over to operating expenses, so operating expenses for the second quarter, OpEx came in at $38.2 million, up 12% but this included $2.5 million of charges related to the acquisition of VisualSonics. If you exclude the VisualSonics charges as well as last year’s CardioDynamics acquisition charges, our core OpEx was $32.5 million down 4%.
In the first half, OpEx was $75.2 million, up 11% once again including $2.5 million of acquisition charges. Excluding acquisition charges for both VisualSonics and CardioDynamics, our core OpEx was $65.4 million down 3%. Changes in currency had an unfavorable impact of 1%.
I’m going to move over now to EBIT and EBITDA for the second quarter. Excluding acquisition related charges, EBIT was $8.7 million or 14% or revenue, an increase of 145% compared to the prior year. Again excluding acquisition related charges, EBITDAS was $11.4 million, an increase of 90%.
I’m going to move over now to the first half. Again, excluding acquisition related charges, EBIT increased to 121% to $11.3 million. Again excluding charges EBITDAS increase 51% to $16.8 million. Cash flow from operation was $21.3 million versus $7.4 million in this year’s first half approximately $1.33 a share, using 16 million shares weighted over the half.
Now, moving over to net income and EPS. For the quarter, excluding acquisition related charges, net income was $4.4 million or $0.29 a share versus $0.02 a share last year. With the acquisition charges included, net income was $1.9 million or $0.12 a share, a 6x-improvement over last year.
Now for the first half, excluding acquisition charges, net income was $5.8 million or $0.36 a share versus $1.3 million or $0.07 a share last year, a 5x increase. With the acquisition charges included, net income was $3.3 million or $0.20 per share versus $1.3 million or $0.07 per share in the last year. A portion of the acquisition expense was not tax deductible by the way.
Moving over to cash flow. For the first half, cash flow from operations was $21.3 million compared to $7.4 million last year, an increase of just under $14 million. In the first half, the company used $98.9 million of cash to repurchase 3.3 million shares of our stock. Since quarter-end, the company has also purchased an additional 475,000 shares and has approximately $30 million remaining in Board-authorized buyback capital.