BOTHELL, Wash., Feb. 28 /PRNewswire-FirstCall/ -- Cardiac Science Corporation , a global leader in advanced cardiac diagnosis, resuscitation, rehabilitation, and informatics products, today announced record results for the fourth quarter and full year ended December 31, 2007.
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Revenue for the quarter was $50.4 million, an increase of 29% over the prior year period. The growth reflected an increase in defibrillation and cardiac monitoring sales of 48% and 16%, respectively. Domestic automated external defibrillator (AED) sales grew 30% from the prior year's fourth quarter, while international AED sales rose 68% for the quarter, driven by strong growth throughout Europe and Asia. The Company reported net income of $2.4 million, or $0.10 per diluted share in the fourth quarter, compared to a small net loss of $35,000, or $0.00 per share in the fourth quarter of 2006.
For the full year 2007, revenue totaled $182.1 million, an increase of 17% compared to revenue of $155.4 million for 2006. The Company reported net income of $8.5 million for the year, or $0.37 per diluted share. Net income for the year included a non-cash benefit and related cash expenses associated with litigation that was settled in 2007. Excluding these litigation-related items, pro forma net income would have been $7.1 million, or $0.31 per diluted share.
Fourth Quarter Financial Results
Fourth quarter revenue of $50.4 million represented an increase of 29% from the $39.0 million in revenue reported in the fourth quarter of 2006. Fourth quarter gross margin was 48.8%, an increase over the gross margin from the fourth quarter of 2006 of 46.7%, driven by favorable product mix and manufacturing efficiencies in the current period.
Operating expenses in the fourth quarter of 2007 were $20.6 million, compared to $19.1 million for the fourth quarter of 2006, an increase of 8%. Prior year operating expenses included approximately $0.6 million in litigation related expenses. There were no comparable 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 significant growth in revenue.
EBITDA was $5.7 million for the fourth quarter of 2007. Adjusted EBITDA, which excludes stock-based compensation expense, was $6.1 million, or 12% of revenue. The Company generated $4.1 million in cash from operating activities during the quarter and had $20.5 million in cash and short-term investments as of December 31, 2007.
Fiscal 2007 Financial Results
For 2007, the Company generated revenue of $182.1 million, compared with $155.4 million in 2006, an increase of 17%.
Gross margin for 2007 was 48.5% compared to 47.1% for the prior year. The increase in gross margin was the result of favorable product mix and manufacturing efficiencies in the current year.
The Company reported net income of $8.5 million for the year, or $0.37 per diluted share. Net income for the year included a non-cash benefit and cash expenses relating to litigation that was settled in 2007. Excluding these litigation-related items, pro forma net income would have been $7.1 million, or $0.31 per diluted share.
The Company generated $13.3 million in cash from operations for the full year, despite spending $3.8 million on litigation that was ultimately settled in 2007.
Outlook
"Our focus in 2008 will reflect an emphasis on the growth areas for the next few years," explained John Hinson, president and CEO. "These areas include commercial and medical AEDs, hospital defibrillation, international cardiac monitoring, AED program management, and connectivity solutions. We intend to expand our AED distribution globally and to increase investment in product development to help achieve our growth potential. In addition, with a strong balance sheet, growing cash reserves and no debt, we expect to accelerate efforts to seek acquisition opportunities, particularly those which can leverage our existing service and distribution capabilities," he continued.
The Company expects revenue growth for 2008 to be in a range around 10%, driven by continued growth in global AED revenues, meaningful revenue from the hospital defibrillator product and modest improvement in the cardiac monitoring line.
For 2008, gross margin is expected to be in a range between 47% and 49%, depending on several factors, including product pricing, the mix of sales through different distribution channels, and the timing of the impact of planned productivity increases and cost reductions.
The Company expects to increase its investment in research and development in 2008, increasing related expenses to between 7.5% and 8% of revenue. Other operating expenses are expected to grow in 2008 also, but at rates generally less than the rate of revenue growth, which would result in increased operating income in 2008.
The Company expects net income, inclusive of an estimated income tax rate of 37%, to be in a range between $8 and $9 million, or between $0.34 and $0.39 per share, representing earnings growth of 13% to 27%. 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, "A number of factors may affect our actual results relative to the ranges we've provided. These include GE's level of success in selling our new hospital defibrillator, the tempo and results of our continued effort to revitalize our cardiac monitoring line and our ability to continue to capture share of the international AED market as it rapidly evolves." Mr. Matysik added, "Our revenue guidance also includes continued growth in our domestic AED sales, muted somewhat by the possible impact of Physio's return to the market. To the extent that their return is later than we expect or that the impact is less significant than we expect, there may be upside to our guidance."
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, merger related expenses, and litigation expense. Pro Forma Net Income refers to Net Income before litigation expenses, licensing income and litigation settlement and the related tax effect of these items. None of these measures are a substitute for measures determined in accordance with GAAP, and may not be comparable to as 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's operations. 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 fourth 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 (866) 250-2351. International participants can call (303) 262-2131. The call will also be webcast live on the web 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 11109221#. 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, 2006. Cardiac Science Corporation undertakes no duty or obligation to update the information provided herein.
cgale@evcgroup.com
CONTACT: Mike Matysik, Sr. Vice President and CFO of Cardiac Science
Corporation, +1-425-402-2009; or Investors, Douglas Sherk or Jenifer
Kirtland, +1-415-896-6820, or Media, Christopher Gale, +1-201-646-5431, or
+1-203-570-4681, cgale@evcgroup.com, all of EVC Group, Inc., for Cardiac
Science Corporation
Web site: http://www.cardiacscience.com/
