Aspect Medical Systems, Inc. Operating Results for Third Quarter Ended September 27, 2003.Business Editors NEWTON Newton, cities, United States Newton. 1 City (1990 pop. 16,700), seat of Harvey co., S central Kans., in an agricultural area; inc. 1872. , Mass.--(BUSINESS WIRE)--Oct. 21, 2003 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 ) Highlights of the Quarter -- Worldwide revenue increased 12% vs. Q3 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% vs. Q3 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 75.3% compared to 72.0% in Q3 2002 -- Net loss declined by 59% compared to the net loss in Q3 2002 -- Worldwide BIS module revenue increased by 166% compared to Q3 2002 Aspect Medical Systems, Inc. (NASDAQ: ASPM), reported today that revenue was $11.2 million for the third quarter of 2003, an increase of 12% over revenue of $10.0 million in the third quarter of 2002, and $32.0 million for the first nine months, an increase of 8% over revenue of $29.7 million in the first nine months of 2002. Net loss for the quarter decreased to $1.4 million, or $0.07 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, as compared to a net loss of $3.4 million, or $0.18 per share on 18.7 million basic and diluted shares outstanding in the third quarter of 2002. Net loss for the first nine months decreased to $5.7 million, or $0.29 per share on 19.4 million basic and diluted shares outstanding, as compared to a net loss of $11.8 million, or $0.65 per share on 18.1 million basic and diluted shares outstanding in the first nine months of 2002. "We are pleased with the 12% growth in worldwide revenue in the third quarter of 2003 over the comparable period last year," said Nassib Chamoun, president and chief executive officer. "Our revenue growth during the quarter reflects our progress in the transition from monitors 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 module placements, as more than 50% of our end-user (job) end-user - The person who uses a computer application, as opposed to those who developed or support it. The end-user may or may not know anything about computers, how they work, or what to do if something goes wrong. placements were OEM modules as compared to monitors. Also, we continued to make progress towards our goal of profitability. Improved gross margins and lower 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. resulting from our focus on cost control contributed to a $2 million reduction in our net loss. In addition, within the last several weeks we reached several critical milestones. The results of several prospective multi-center clinical trials to assess the incidence of surgical awareness, with recall, and to evaluate the ability of BIS monitoring to reduce the incidence of awareness, were made public and presented at the recent Annual Meeting of the American Society of Anesthesiologists The American Society of Anesthesiologists (ASA) is an association of physicians (primarily anesthesiologists) whose stated goal is to raise and maintain the standards of the medical practice of anesthesiology and improve the care of the patient. . Based on these studies, on October October: see month. 10th Aspect received 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. 510(k) clearance CLEARANCE, com. law. The name of a certificate given by the collector of a port, in which is stated the master or commander (naming him) of a ship or vessel named and described, bound for a port, named, and having on board goods described, has entered and cleared his ship or vessel for a new indication for use for BIS monitoring related to reducing the risk of intraoperative intraoperative /in·tra·op·er·a·tive/ (-op´er-ah-tiv?) occurring during a surgical operation. intraoperative occurring during a surgical operation. awareness with recall in adult patients undergoing general anesthesia Anesthesia, General Definition General anesthesia is the induction of a state of unconsciousness with the absence of pain sensation over the entire body, through the administration of anesthetic drugs. and sedation Sedation Definition Sedation is the act of calming by administration of a sedative. A sedative is a medication that commonly induces the nervous system to calm. Purpose The process of sedation has two primary intentions. . Over time, we believe that the findings from these studies will become important catalysts for accelerating the adoption of BIS monitoring." Revenue Analysis - (see attached consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenue data) Domestic revenue was $9.2 million for the third quarter and $25.8 million for the first nine months of 2003, an increase of 11% and 5%, respectively, as a result of higher revenue from sensors
International revenue was $2.0 million for the third quarter and $6.2 million for the first nine months of 2003, an increase of 18% and 23%, respectively, over comparable periods in the prior year, as a result of higher revenue from sensors and modules in both the three and nine month periods. The combination of a 4% increase in the sensor average unit price and a 31% increase in sensor unit volume, accounted for the 36% increase in sensor revenue in Q3 2003 from Q3 2002. The decrease in monitor revenue for the first nine months of 2003 as compared to the first nine months of 2002 resulted from a 28% decrease in unit volume as a result of the Company's 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 distributor's decision not to purchase monitors in the first nine months of 2003, pending approval of our latest generation XP technology by the Japanese Ministry of Health, Labor, and Welfare. Exclusive of Japan, monitor volume increased by 11% in the first nine months of 2003 as compared to the first nine months of 2002. Liquidity and Capital Resources At September September: see month. 27, 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 $31.4 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 $31.4 million and total debt of $1.4 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 Fourth Quarter Ending December 31, 2003 The Company believes that revenue will be within a range of $10.5 million to $11.5 million during the fourth quarter of 2003 and the net loss per share will be within a range of $0.09 and $0.13. Conference Call Set for 10AM ET Today Aspect will hold a conference call to discuss third quarter results and management's outlook for the fourth fiscal quarter of 2003 at 10:00 a.m. Eastern Time today, Tuesday Tuesday: see week. , October 21, 2003. The call can be accessed live by dialing 888-896-0863 or 973-935-8507, 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 October 21, 2003, until October 28, 2003, by dialing 877-519-4471 or 973-341-3080, access code 4236818. 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 7.5 million patients and has been the subject of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1,350 published articles and abstracts. BIS technology is installed in approximately 31 percent of all domestic operating rooms operating room n. Abbr. OR A room equipped for performing surgical operations. and is available in more than 160 countries. Aspect Medical Systems has OEM agreements with seven leading manufacturers of patient monitoring systems. 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and may involve risks and uncertainties, including statements with respect to the Company's expected results of operations for future periods, the worldwide market acceptance of the Company's products, 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 third-party 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. monitoring products approved by the FDA, and also faces competitive and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. 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 Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the fiscal quarter ended June June: see month. 28, 2003, 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
(In Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
----------------------- -----------------------
September September September September
27, 2003 28, 2002 27, 2003 28, 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unuadited)
Revenue $11,189 $9,995 $32,025 $29,733
Costs of revenue 2,761 2,803 8,027 9,345
----------- ----------- ----------- -----------
Gross profit margin 8,428 7,192 23,998 20,388
% of revenue 75.3% 72.0% 74.9% 68.6%
Operating expenses:
Research and development 1,626 1,886 5,370 5,849
Sales and marketing 6,286 6,981 18,528 21,295
General and
administrative 2,070 1,960 6,352 5,744
----------- ----------- ----------- -----------
Total operating
expenses 9,982 10,827 30,250 32,888
----------- ----------- ----------- -----------
Loss from operations (1,554) (3,635) (6,252) (12,500)
Interest income 215 290 702 918
Interest expense (48) (61) (156) (185)
----------- ----------- ----------- -----------
Net loss $(1,387) $(3,406) $(5,706) $(11,767)
=========== =========== =========== ===========
Net loss per share:
Basic and diluted $(0.07) $(0.18) $(0.29) $(0.65)
Shares used in
computing net loss per
share:
Basic and diluted 19,420.7 18,733.3 19,399.0 18,073.0
ASPECT MEDICAL SYSTEMS, INC.
CONSOLIDATED REVENUE DATA
(In Thousands Except Unit Amounts)
Three Months Ended Nine Months Ended
---------------------------- ---------------------------
September September September September
27, 28, % 27, 28, %
2003 2002 Change 2003 2002 Change
--------- --------- -------- ---------- ----------------
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
WORLDWIDE
Sensors $7,520 $6,883 9% $21,736 $19,741 10%
Monitors 1,741 1,601 9% 5,013 6,171 (19%)
Modules 1,056 397 166% 2,592 1,113 133%
Other
Equipment 872 1,114 (22%) 2,684 2,708 (1%)
--------- --------- ---------- ----------
Equipment 3,669 3,112 18% 10,289 9,992 3%
--------- --------- ---------- ----------
Total
Worldwide $11,189 $9,995 12% $32,025 $29,733 8%
========= ========= ========== ==========
DOMESTIC
Sensors $6,786 $6,344 7% $19,447 $18,364 6%
Monitors 1,392 1,171 19% 3,623 3,976 (9%)
Modules 242 19 NM 502 277 81%
Other
Equipment 800 791 1% 2,266 2,078 9%
--------- --------- ---------- ----------
Equipment 2,434 1,981 23% 6,391 6,331 1%
--------- --------- ---------- ----------
Total
Domestic $9,220 $8,325 11% $25,838 $24,695 5%
========= ========= ========== ==========
INTERNATIONAL
Sensors $734 $539 36% $2,289 $1,377 66%
Monitors 349 430 (19%) 1,390 2,195 (37%)
Modules 814 378 115% 2,090 836 150%
Other
Equipment 72 323 (78%) 418 630 (34%)
--------- --------- ---------- ----------
Equipment 1,235 1,131 9% 3,898 3,661 6%
--------- --------- ---------- ----------
Total
Inter-
national $1,969 $1,670 18% $6,187 $5,038 23%
========= ========= ========== ==========
CONSOLIDATED UNIT ANALYSIS
WORLDWIDE
Sensors 543,000 532,000 2% 1,609,000 1,530,000 5%
Monitors 342 339 1% 993 1,378 (28%)
Modules (a) 740 294 152% 1,758 827 113%
Installed Base(b) 18,652 15,457 21%
DOMESTIC
Sensors 459,000 468,000 (2%) 1,342,000 1,356,000 (1%)
Monitors 222 229 (3%) 575 800 (28%)
Modules (a) 202 24 742% 378 134 182%
Installed Base(b) 12,373 10,785 15%
INTERNATIONAL
Sensors 84,000 64,000 31% 267,000 174,000 53%
Monitors 120 110 9% 418 578 (28%)
Modules (a) 538 270 99% 1,380 693 99%
Installed Base(b) 6,279 4,672 34%
(a) Represents module shipments to OEM customers
(b) Includes end-user module placements by OEM customers
ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
September December
27, 2003 31, 2002
----------- -----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and marketable
securities $31,425 $36,865
Accounts receivable, net 5,321 4,666
Current portion of investment in sales-type
leases 1,818 1,859
Inventory, net 1,634 2,334
Other current assets 1,706 1,319
----------- -----------
Total current assets 41,904 47,043
Property and equipment, net 3,057 4,121
Long-term investment in sales-type leases 2,451 2,283
Other long-term assets 750 1,033
----------- -----------
Total assets $48,162 $54,480
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $756 $887
Accounts payable and accrued liabilities 8,614 8,374
Deferred revenue 954 1,048
----------- -----------
Total current liabilities 10,324 10,309
Long-term portion of deferred revenue 5,754 6,359
Long-term debt 675 1,015
Stockholders' equity 31,409 36,797
----------- -----------
Total liabilities and stockholders' equity $48,162 $54,480
=========== ===========
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