Aspect Medical Systems, Inc. Announces Operating Results for First Quarter.Business Editors/Health/Medical Writers NEWTON, Mass.--(BUSINESS WIRE)--April 16, 2003 Highlights of the Quarter -- Worldwide revenue increased 5 percent in Q1 2003 vs. Q1 2002 -- Worldwide sensor A device that measures or detects a real-world condition, such as motion, heat or light and converts the condition into an analog or digital representation. An optical sensor detects the intensity or brightness of light, or the intensity of red, green and blue for color systems. revenue increased 9 percent in Q1 2003 vs. Q1 2002 -- Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. percentage increased to 74.8 percent in Q1 2003 compared to 63.7 percent in Q1 2002 -- Net loss for Q1 2003 declined by 46 percent compared to the net loss in Q1 2002 -- Worldwide BIS module kit revenue increased by 113 percent in Q1 2003 compared to Q1 2002 -- Worldwide shipments of BIS monitors and modules to end-users increased by 30 percent in Q1 2003 compared to Q1 2002 Aspect Medical Systems, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ASPM ASPM Abnormal Spindle-Like Microcephaly Associated ASPM Asociación del Secretariado Profesional de Madrid (Spanish: Association of the Professional Secretaryship of Madrid) ASPM Armed Services Procurement Regulation Manual ), today reported results of operations for the first quarter ended March 29, 2003. First Quarter Financial Results For the first quarter ended March 29, 2003, revenue was $10.1 million, an increase of 5 percent over revenue of $9.7 million in the first quarter of 2002. The total increase in revenue reflects a 9 percent increase in revenue from the sale of sensors
The combination of a 4 percent increase in sensor unit volume and a 5 percent increase in the average unit price accounted for the 9 percent increase in sensor revenue from Q1 2002 to Q1 2003. The decrease in equipment revenue in the first quarter of 2003 was primarily the result of a 30 percent decrease in monitor revenue. The lower monitor revenue was primarily related to a 31 percent decrease in unit volume as 371 units were shipped in Q1 2003 as compared to 536 units in Q1 2002. The decrease in monitor unit volume was primarily related to a reduction of sales in Japan from 135 monitors in the first quarter of 2002 to none in the first quarter of 2003 as Nihon Kohden continued to delay additional monitor purchases pending Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and Ministry of Health, Labor and Welfare approval of the XP technology. Revenue from the sale of modules increased 113 percent in Q1 2003 as compared to Q1 2002. In Q1 2003, 552 module kits were shipped to OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and partners as compared to 358 module kits in Q1 2002, an increase of 54 percent. In addition, the average unit price for module kits increased 11 percent from Q1 2002 to Q1 2003. "We continue to be very pleased with the success of our OEM partners in the market. In the first quarter of 2003, we shipped 552 module kits to our OEM partners, a 54 percent increase from the first quarter of last year. Moreover, based on reports from our OEM partners, more than 500 BIS modules were installed by our OEM partners at end-users during the first quarter of 2003," said Nassib Chamoun, president and chief executive officer. "We also continued to make progress towards our goal of profitability. Aspect's gross profit margin in the quarter increased by 23 percent compared to Q1 2002 while operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. declined by 8 percent. This contributed significantly to reducing our net loss per share from $0.26 in Q1 2002 to $0.13 in Q1 2003." He continued, "I am also pleased to report that three large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. studies of the impact of BIS monitoring on the incidence of awareness have now been completed. The results of the first of the awareness studies, conducted in Sweden Sweden, Swed. Sverige, officially Kingdom of Sweden, constitutional monarchy (2005 est. pop. 9,002,000), 173,648 sq mi (449,750 sq km), N Europe, occupying the eastern part of the Scandinavian peninsula. , were presented in March at the IARS IARS International Anesthesia Research Society IARS Integrated Airborne Reconnaissance Strategy IARS Image Archive & Retrieval System IARS Improved Aerial Refueling System meeting in New Orleans New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded . The results of the others have been submitted for publication and should be publicly available later this year, along with additional studies that appear to corroborate To support or enhance the believability of a fact or assertion by the presentation of additional information that confirms the truthfulness of the item. The testimony of a witness is corroborated if subsequent evidence, such as a coroner's report or the testimony of other earlier research that examined the relationship between deep anesthesia anesthesia (ănĭsthē`zhə) [Gr.,=insensibility], loss of sensation, especially that of pain, induced by drugs, especially as a means of facilitating safe surgical procedures. , as measured by BIS, and post-operative mortality. I am optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that these studies will provide important additional evidence of the benefits of BIS monitoring and help accelerate the adoption of our technology." Domestic revenue increased 1 percent in the first quarter of 2003 to $7.9 million from $7.8 million in the first quarter of 2002. Equipment revenue decreased 7 percent in the first quarter of 2003 compared to the first quarter of 2002. This was primarily a result of a 42 percent decrease in module revenue, which resulted from a 55 percent decrease in unit volume, from 110 units in Q1 2002 to 50 units in Q1 2003. Sensor revenue increased 4 percent in the first quarter of 2003 compared to the first quarter of 2002 driven by a 7 percent increase in the average unit price. International revenue increased by 19 percent compared to Q1 of 2002. Exclusive of Japan, total international revenue increased by 52 percent to $1.9 million from $1.2 million in Q1 2002. This increase was primarily the result of a 227 percent increase in module revenue and a 95 percent increase in sensor revenue. In Japan, revenue declined by 46 percent as Nihon Kohden continued to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. the purchase of additional BIS monitors pending approval of our latest generation XP technology by the Japanese Ministry of Health, Labor, and Welfare. Sensor revenue in Japan over the same period grew by 49 percent and 90 module kits were shipped in Q1 2003 as compared to none in Q1 2002. In the first quarter of 2003, gross profit margin percentage was 74.8 percent compared to 63.7 percent in the comparable period of 2002. The improvement in the gross margin percentage was related primarily to an increase in the percentage of total revenue resulting from the sale of sensors, a higher average unit price for sensors, a lower average unit cost on monitors, improved gross margin on ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. items, and a reduction in depreciation expense related to monitors used in the Equipment Placement program. Additionally, $154,000 of deferred revenue related to the strategic alliance with Boston Scientific The Boston Scientific Corporation (NYSE: BSX) (abbreviated BSC), is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a range of interventional medical specialties, including interventional cardiology, peripheral interventions, Corporation was recognized without any corresponding cost of revenue, increasing the gross profit margin percentage by 1.5 percent. Higher revenue and gross profit margin combined with reduced operating expenses had the effect of reducing the net loss to $2.5 million, or $0.13 per share on 19.4 million basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. shares outstanding in the first quarter of 2003, compared to a net loss of $4.7 million, or $0.26 per share on 17.8 million basic and diluted shares outstanding in the first quarter of 2002. Liquidity and Capital Resources At March 29, 2003, the Company had cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $33.0 million, stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of $34.4 million and total debt of $1.8 million. At December December: see month. 31, 2002, the Company had cash, cash equivalents and marketable securities of $36.9 million, stockholders' equity of $36.8 million and total debt of $1.9 million. Outlook for the Second Quarter Ending June June: see month. 28, 2003 The Company believes that revenue will fall within a range of $9.7 million to $10.7 million during the second quarter of 2003 and our net loss per share will be within a range of $0.13 and $0.17. Conference Call Set for 10AM ET Today Aspect will hold a conference call to discuss first quarter results and management's outlook for the second fiscal quarter of 2003 at 10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today, Wednesday Wednesday: see week. , April 16, 2003. The call can be accessed live by dialing 888-277-8636 or 973-582-2783, or access the webcast at http://www.aspectmedical.com on the Investor page or http://ccbn.com. It also will be available for replay from April 16, 2003, until April 23, 2003, by dialing 877-519-4471 or 973-341-3080, access code 3851626. The webcast replay will also be available on Aspect's website at http://www.aspectmedical.com on the news releases page under investor information. About the Company Aspect Medical Systems, Inc. (NASDAQ: ASPM) is a global market leader in brain monitoring technology. To date, the Company's Bispectral Index A Bispectral index (BIS) monitor is a modern neurophysiological monitoring device which continually analyses a patient's electroencephalograms during general anaesthesia to assess the level of consciousness during anaesthesia. (BIS) technology has been used to assess more than 6.5 million patients and has been the subject of approximately 1,200 published articles and abstracts. The worldwide installed base of monitors and BIS modules was approximately 17,100 at March 29, 2003. BIS technology is installed in approximately 29 percent of all domestic operating rooms operating room n. Abbr. OR A room equipped for performing surgical operations. . BIS is currently in use in more than 55 percent of the best hospitals with operating rooms in the U.S. (based on a U.S. News & World Report U.S. News & World Report Weekly newsmagazine published in Washington, D.C. U.S. News was founded in 1933 by David Lawrence (1888–1973) to cover important domestic events; he founded World Report in 1945 to treat world news. The two magazines were merged in 1948. ranking) and is available in more than 160 countries. Aspect Medical Systems has OEM agreements with seven leading manufacturers of patient monitoring systems and partnerships with six of the largest group purchasing organizations A group purchasing organization is an entity that leverages the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. Many GPOs are funded by administrative fees that are actually paid by the vendors. in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Certain statements in this release are forward-looking and may involve risks and uncertainties, including statements with respect to the worldwide market acceptance of the Company's products, the Company's expected results of operations for future periods, the transition from monitors to modules and expectations with respect to purchases in Japan. There are a number of factors that could cause actual results to differ materially from those indicated by these forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . For example, the Company may not be able to achieve widespread market acceptance of its BIS monitoring technology or to compete with new products or alternative techniques that may be developed by others, including the third-party anesthesia monitoring product approved by the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. , and also faces competitive and regulatory risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc its ability to successfully develop and introduce enhancements and new products, including regulatory approval of its XP technology in Japan. In addition, the Company has limited sales and marketing experience both in the U.S. and internationally and if it is unable to develop and implement a successful sales and marketing strategy, including with respect to its own sales force, domestic and international distributors, original equipment manufacturers and other direct and indirect sales channels, it will not be able to generate meaningful product revenue. In addition, the Company's ability to become and remain profitable will depend upon its ability to promote frequent use of the BIS system so that sales of its BIS sensors increase. The Company will not be profitable if hospitals and anesthesia providers do not buy and use its BIS systems in sufficient quantities. Cases of surgical awareness during monitoring with the BIS system and significant product liability claims are among the factors that could limit market acceptance. There are other factors that could cause the Company's actual results to vary from its forward-looking statements, including without limitation those set forth under the heading "Factors Affecting Future Operating Results" in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission. In addition, the statements in this press release represent the Company's expectations and beliefs as of the date of this press release. The Company anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's expectations or beliefs as of any date subsequent to the date of this press release. For further information regarding Aspect Medical Systems, Inc., visit the Aspect Medical Systems, Inc. website at www.aspectmedical.com
ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
-------------------------
March 29, March 30,
2003 2002
------------ ------------
(Unaudited) (Unaudited)
Revenue $10,127,290 $9,686,566
Costs of revenue 2,549,460 3,517,536
------------ ------------
Gross profit margin 7,577,830 6,169,030
Gross profit margin percentage 74.8% 63.7%
Operating expenses:
Research and development 1,880,956 1,936,544
Sales and marketing 6,316,618 7,356,505
General and administrative 2,098,788 1,850,064
------------ ------------
Total operating expenses 10,296,362 11,143,113
------------ ------------
Loss from operations (2,718,532) (4,974,083)
Interest income 249,986 344,611
Interest expense (55,130) (70,046)
------------ ------------
Net loss $(2,523,676) $(4,699,518)
============ ============
Net loss per share:
Basic and diluted $(0.13) $(0.26)
Shares used in computing net loss per share:
Basic and diluted 19,380,916 17,815,859
ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 29, December 31,
2003 2002
------------ ------------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and marketable
securities $33,034,730 $36,865,333
Accounts receivable, net 5,406,182 4,666,098
Current portion of investment in
sales-type leases 1,842,593 1,859,237
Inventory, net 1,683,371 2,333,385
Other current assets 1,593,991 1,319,091
------------ ------------
Total current assets 43,560,867 47,043,144
Property and equipment, net 3,618,801 4,121,560
Long-term investment in sales-type leases 2,210,383 2,282,751
Other long-term assets 1,029,933 1,032,572
------------ ------------
Total assets $50,419,984 $54,480,027
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 853,012 887,538
Accounts payable and accrued liabilities 7,089,208 8,373,658
Deferred revenue 983,264 1,047,651
------------ ------------
Total current liabilities 8,925,484 10,308,847
Long-term portion of deferred revenue 6,149,301 6,359,210
Long-term debt 938,764 1,015,101
Stockholders' equity 34,406,435 36,796,869
------------ ------------
Total liabilities and stockholders'
equity $50,419,984 $54,480,027
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