EDAP TMS S.A. Reports 2006 Second Quarter Results
EDAP TMS S.A. Reports 2006 Second Quarter Results
HIFU Utilization Increasing as Company Accelerates Its Growth Program
Company Adding Resources to Launch RPP Centers More Quickly
Lyon, France, August 8, 2006 – EDAP TMS S.A. (Nasdaq: EDAP), today reported results for the second quarter and first half ended June 30, 2006. Growth in the company's HIFU revenue per procedure (RPP) business continues strongly as the company executes its strategy to roll out additional marketing and sales programs to accelerate growth in its HIFU business. Total consolidated revenues increased slightly in the first half with ongoing growth in recurring RPP and services revenues per the company's transition plan offset by lower average prices in equipment sales mix during the period.
"We again see strong improvement in the first half compared to the prior year with a major step up in RPP treatments clearly under way," said Hugues de Bantel, CEO of EDAP. "We are now launching the immediately demanded sales and marketing additions needed by our current centers and those coming aboard presently to make EDAP grow at even better RPP treatment rates than the 69% we are reporting today."
Highlights:
- The Company's RPP business is now proven successful in major European markets increasing 69% year over year in the first half to 517 treatments. The company continues to add treatments at recently launched centers as well as adding centers at increasing rates. The new marketing investments are planned to increase treatment rates further, especially in RPP centers, and increase new center launches.
- EDAP secured additional funds to add to its marketing capability as part of a 30-month program to expand both the number of sites offering Ablatherm-HIFU on either an RPP or sold unit basis as well as increasing the number of patients seeking treatment by HIFU in key European markets.
- The company is now accelerating growth with added marketing and sales resources being directed toward both physicians and patients. These include increased sales staff, dedicated third-party marketing support in major countries, support of patient advocacy groups and prostate cancer charities, ongoing clinical activity and direct marketing to patients seeking treatment information for prostate cancer. EDAP has already launched these strategies in selected locations and confirmed the resulting increased Ablatherm-HIFU activity.
- The company recently announced strong growth in key markets including Germany where the company has launched a dedicated subsidiary due to the size of that market and is adding its third mobile Ablatherm-HIFU unit to address accelerating demand growth. The two mobile units already in Germany treated 310 patients in the first half, an increase of 103% year to year.
- The company's results in the first half reflecting the sale of four Ablatherm-HIFU units at lower average prices than the prior year period have been made up by RPP treatments but complicated total revenue growth comparison. Gross margin has improved from cost controls, mix and RPP utilization in the period demonstrating the strength of the company's multimodal sales model and successful focus on growth in the RPP component of the business.
Commented de Bantel: "We believe that the European market is now open for EDAP to aggressively market the Ablatherm-HIFU device to both doctors and patients as a mainstream therapeutic choice for the first time since its inception. We have recorded solid growth rates in RPP treatments and centers to date, but believe the opportunity is here today to immediately begin the necessary increase in sales and marketing capabilities to further increase the current market demand. We have proven both the RPP business and the response from these enhanced marketing strategies in the past months. This allows the company to move to a recurring business, which has successfully replaced revenues previously dependent on unpredictable equipment sales. We believe the steps undertaken now will enable the company to report meaningful progress."
EDAP: TRANSITION TOWARDS RPP BUSINESS CONFIRMED
For the first half of 2006, the HIFU division recorded a 9% growth in its revenue driven by significant increases in RPP and services revenues, offsetting decreased selling price mix in equipment related to two site conversions from long term commitments to sales while the other two sales were priced in normal ranges. The shift is part of a company plan minimizing dependence on large unit sales in favor of recurring revenue streams at higher margins as the company adds scale. The company expects the RPP business growth to continue accelerating compared to 2005 with the addition of new marketing initiatives being launched at present and in the coming months. RPP revenues grew strong as a percentage of total HIFU revenues at 37%.
HIFU Gross Margin improved to 56% from 48% in the first half from the increased margin contribution of RPP and a 59% increase in Ablatherm-HIFU services revenues as a result of the increase in HIFU installed base. Operating loss increased 14% in the first half due to increased activity in sales and marketing per the company's plan to invest ahead of accelerated growth, which will fund future marketing additions out of cash flows.
HIFU Marketing, sales and clinical expenses increased 53% from EUR 1.1 million in first half 2005 to EUR 1.8 million, in 2006, in line with the Company's stated goals and increased marketing in the field and at major urology conferences. These expenses include the creation of a new HIFU website as well as a significantly larger presence at the European Association of Urology meeting. This included a major Ablatherm-HIFU symposium by EDAP attracting record interest in HIFU and confirming EDAP's global leadership position in clinical data, outcomes and technology.
EDAP - HIFU Division: Euros 000's
Year Revenues Gross Margin % Operating Income (Loss)
-------- -------- -------------- -----------------------
Q2 2005 1,841 47% (192)
Q2 2006 1,961 56% (215)
YTD 2005 3,601 48% (187)
YTD 2006 3,911 56% (214)
The company continues to observe strong growth responses in markets with reimbursement and launched an additional 21 centers counting now 117 trained sites and more than 10,000 treatments to date. Some centers in reimbursed markets are already growing toward a near-term utilization target of 20% of the site's localized prostate cancer cases. The company intends to support additional RPP launches, especially in reimbursed markets, at a more rapid pace by increasing its ability to convert urologists to Ablatherm-HIFU users. Additionally, the company will support these sites with dedicated marketing initiatives to assist the centers in attracting patients. Launches in nonreimbursed markets directed toward private pay patients continue to do well. This is based on the attractiveness of Ablatherm-HIFU treatment to patients desiring to avoid more invasive methods. EDAP continues to work for additional reimbursement approvals, both public and private, in several markets including France and the United Kingdom based on not only the attractive treatment profile of Ablatherm-HIFU, but also its ability to offer medical cost benefits by lowering side effects and hospital requirements while offering efficacy rates rivaling traditional options.
"Moving forward we believe EDAP will achieve an increase in the pace at which we grow both new centers and total patient treatments, especially in the RPP portion of the business," said de Bantel. "We intend to increase our marketing and education programs using the new dedicated funds with a planned return on these investments. We are also adding the needed sales staff to further increase growth in the end markets in Europe, which will allow EDAP to more rapidly launch new centers and surround them with dedicated marketing support to drive patient traffic more rapidly. We have confirmed the success of the Ablatherm-HIFU as a medical device and as a business model in the clinic, and can offer these providers a nearly capital free and risk free way to begin offering this therapy. We intend to accelerate this trend to the greatest extent possible over the next 30 months beginning immediately."
TMS: STEADY SALES
The UDS division continued steady strength and predictable revenue with 21 lithotripters sold in the first half of 2006 compared to 16 in 2005. Revenue increased by 2% primarily due to changes in sales mix. Gross margins improved slightly to 31% due to ongoing cost management. There is a strong backlog of 9 equipments ordered to date for the third quarter.
TMS - UDS Division : Euros 000's
Year Revenues Gross Margin % Operating Income (Loss)
-------- -------- -------------- -----------------------
Q2 2005 3,802 30% 54
Q2 2006 3,981 29% (104)
YTD 2005 7,722 30% 86
YTD 2006 7,844 31% (110)
UDS Division slightly increased its marketing and development expenses in line with an ongoing development project causing short term operating losses but intended to provide added future opportunities. The project and its result will be announced at a future date. The TMS division continues to cover a substantial portion of the EDAP operational overhead and provide significant reach in the urology market for both lithotripsy and HIFU. The company intends the division to return to positive operating income.
CORPORATE: CASH FLOWS IN LINE WITH STRATEGY
EDAP-TMS losses increased according to the company's stated plans to increase spending in marketing as well as support resources to accelerate these plans. Corporate expenses grew slightly including listing, investor and compliance fees. During the second quarter, the company's cash used was EUR 960,000, primarily due to increases in sales and marketing expenses of EUR 390,000 and an increase in accounts payable working capital of EUR 540,000. Net cash used in the first six months of 2006 was EUR 1.7 million reflecting principally an increase in sales and marketing expenses of EUR 690,000, an increase in R&D and clinical studies expenses of EUR 290,000, a decrease in G&A of EUR 150,000 and an increase in accounts payable working capital of EUR 650,000. The company also used cash for a net amount of EUR 300,000 to finance investment of medical equipment produced by the company, primarily to develop the RPP activity
The company believes increased working capital investments will return to cash at future points to be reinvested for additional growth support as it has demonstrated in prior periods with increases for similar activities.
OUTLOOK
Hugues de Bantel, CEO of EDAP TMS, commented: "EDAP made significant progress in the last six months transitioning into a company ready to grow in recurring RPP revenues. We are already showing clear signs of this growth even with some short-term fluctuation in our units sales pricing which has somewhat hidden the RPP growth effects during this period of increased ramp up in RPP marketing. The existing treatment growth rates show the opportunity available for Ablatherm-HIFU in European markets. This is a 30-months program, allowing for the progressive ramp up time necessary for RPP to achieve success.
"We are presently rolling out programs to bring more urologists online with Ablatherm-HIFU therapy including more key thought leaders in major European centers. These efforts include clinicals, symposia and training workshops designed to help doctors achieve full confidence in HIFU as a well documented and proven solution for nonsurgical localized prostate cancer patients those suffering from failure following radiation therapy. We are also adding education initiatives aimed to patients seeking noninvasive therapy options with low side effects, no radiation and high success rates. We believe that Ablatherm-HIFU can be the leading option for patients seeking these qualities. Online, patient advocates and the media will be important elements in helping patients not only find out about HIFU, but arrange a consultation with a doctor familiar with the therapy and able to advise the patient of the best options for meeting his treatment needs in terms of both efficacy and quality of life."
Conference Call and Webcast
The company will host a conference call to discuss the results and answer questions from investors on Wednesday, August 9, 2006, at 12:00 noon Eastern Time, 6:00 p.m. Paris Time. Investors may join the call live by dialing (866) 200-5830 with passcode 697355# within the United States or +1 (732) 694-1588 from international locations and requesting the EDAP TMS 2006 Second Quarter Conference Call. Investors may also listen to the live call online at www.edap-tms.com.
Investors unable to join the call can access a playback of the conference call by telephone or online. To access the replay, please dial (866) 206-0173 or +1 (732) 694-1571 and using access code 181722# beginning four hours after the end of the call until August 16, 2006, or visit the company's Web site at www.edap-tms.com.
About EDAP TMS S.A.
EDAP TMS S.A. develops and markets Ablatherm, the most advanced and clinically proven choice for High Intensity Focused Ultrasound (HIFU) treatment of localized prostate cancer. HIFU treatment is shown to be a minimally invasive and effective treatment option with a low occurrence of side effects. Ablatherm-HIFU is generally recommended for patients with localized prostate cancer (stages T1-T2) who are not candidates for surgery or who prefer an alternative option, or for patients who failed radiotherapy treatment. The company is also developing this technology for the potential treatment of certain other types of tumors. EDAP TMS S.A. also produces and commercializes medical equipment for treatment of urinary tract stones using Extra-corporeal Shockwave Lithotripsy (ESWL).
For more information on the Company, contact Halliburton Investor Relations at (972) 458-8000, the Corporate Investor Relations Dept at +33 (0)4 78 26 40 46 or see the Company's Web sites at http://www.edap-tms.com and http://www.hifu-planet.com.
EDAP TMS S.A. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars, except per share data)
Three Months Ended: Three Months Ended:
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Euros Euros $US $US
Net sales
of medical equipment 2,144 2,236 2,732 2,786
Net sales of RPPs 741 474 944 590
Net sales of spare parts,
supplies and services 2,219 2,238 2,828 2,787
NET SALES 5,104 4,948 6,504 6,163
Other revenues 64 4 82 5
TOTAL REVENUES 5,168 4,952 6,586 6,168
Cost of sales (2,956) (2,946) (3,767) (3,670)
GROSS PROFIT 2,212 2,006 2,819 2,498
Research & development expenses (628) (479) (801) (597)
Selling and marketing expenses (1,482) (1,004) (1,889) (1,250)
G & A expenses (894) (1,075) (1,139) (1,339)
Total operating expenses (3,004) (2,558) (3,829) (3,186)
OPERATING PROFIT (LOSS) (792) (552) (1,010) (688)
Interest (expense) income, net 21 21 27 26
Currency exchange gains (loss), net (103) 139 (131) 174
Other income (loss), net 4 (7) 5 (9)
INCOME (LOSS) BEFORE TAXES
AND MINORITY INTEREST (870) (399) (1,109) (497)
Income tax (expense) credit 20 1 26 2
NET INCOME (LOSS) (850) (398) (1,083) (495)
Earning per share - Basic (0.11) (0.05) (0.14) (0.06)
Average number of shares used
in computation of EPS 7,837,831 7,781,731 7,837,831 7,781,731
Earning per share - Diluted (0.11) (0.05) (0.14) (0.06)
Average number of shares used
in computation of EPS 8,576,387 8,344,368 8,576,387 8,344,368
NOTE: Translated for convenience of the reader to U.S. dollars at the 2006 average three months noon buying rate of 1 Euro = 1.2745 USD, and 2005 average three months noon buying rate of 1 Euro = 1.2455 USD.
EDAP TMS S.A. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars, except per share data)
Six Months Ended: Six Months Ended:
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Euros Euros $US $US
Net sales of medical equipment 4,459 4,935 5,533 6,301
Net sales of RPPs 1,425 846 1,768 1,080
Net sales of spare parts,
supplies and services 4,404 4,243 5,466 5,417
NET SALES 10,288 10,024 12,767 12,798
Other revenues 79 54 98 68
TOTAL REVENUES 10,367 10,078 12,865 12,866
Cost of sales (5,869) (6,008) (7,283) (7,670)
GROSS PROFIT 4,498 4,070 5,582 5,196
Research & development expenses (1,223) (930) (1,518) (1,187)
Selling and marketing expenses (2,572) (1,881) (3,192) (2,402)
G & A expenses (1,979) (2,134) (2,455) (2,725)
Total operating expenses (5,774) (4,945) (7,165) (6,314)
OPERATING PROFIT (LOSS) (1,276) (875) (1,583) (1,118)
Interest (expense) income, net 35 28 43 36
Currency exchange gains (loss), net (176) 307 (219) 392
Other income (loss), net 1 2 1 3
INCOME (LOSS) BEFORE TAXES
AND MINORITY INTEREST (1,416) (538) (1,758) (687)
Income tax (expense) credit (57) --- (70) ---
NET INCOME (LOSS) (1,473) (538) (1,828) (687)
Earning per share - Basic (0.19) (0.07) (0.23) (0.09)
Average number of shares used
incomputation of EPS 7,837,831 7,781,731 7,837,831 7,781,731
Earning per share - Diluted (0.19) (0.07) (0.23) (0.09)
Average number of shares used
incomputation of EPS 8,599,346 8,344,368 8,599,346 8,344,368
NOTE: Translated for convenience of the reader to U.S. dollars at the 2006 average six months noon buying rate of 1 Euro = 1.2410 USD, and 2005 average six months noon buying rate of 1 Euro = 1.2767 USD.
EDAP TMS S.A. CONSOLIDATED BALANCE SHEETS HIGHLIGHTS
(UNAUDITED)
(Amounts in thousands of Euro's and U.S. Dollars)
June 30, March 31, June 30, March 31,
2006 2006 2006 2006
Euros Euros $US $US
Cash, cash equivalents
and short term investments 6,635 7,591 8,479 9,214
Total current assets 22,216 22,346 28,390 27,126
Total current liabilities 10,822 10,174 13,829 12,351
Shareholders' Equity 16,057 16,871 20,519 20,480
NOTE: Translated for convenience of the reader to U.S. dollars at the noon buying rate of 1 Euro = 1.2779 USD, on June 30, 2006 and at the noon buying rate of 1 Euro = 1.2139 USD, on March 31, 2006. EDAP TMS S.A. CONDENSED STATEMENTS OF OPERATIONS BY DIVISION SIX MONTHS ENDED JUNE 30, 2006 (Amounts in thousands of Euro's )
EDAP S.A. TMS S.A. Total
HIFU UDS EDAP TMS Consolida- After
Division Division HQ tion Consolida-
Impact tion
Net sales of medical devices 1,286 3,793 --- (620) 4,459
Net sales of RPPs 1,425 --- --- --- 1,425
Net sales of spare parts,
supplies & services 1,136 4,036 --- (768) 4,404
Other revenues 64 15 --- --- 79
TOTAL REVENUES 3,911 7,844 --- (1,388) 10,367
GROSS PROFIT 2,191 2,407 --- (100) 4,498
Research & Development (658) (565) --- --- (1,223)
Selling and Marketing (1,418) (1,154) --- --- (2,572)
Total G&A plus depreciation (329) (798) (852) --- (1,979)
OPERATING PROFIT (LOSS) (214) (110) (852) (100) (1,276)