Vital Images Announces 2010 Fourth Quarter and Full-Year Results

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| Source: Vital Images, Inc.

MINNEAPOLIS, Feb. 16, 2011 (GLOBE NEWSWIRE) -- Vital Images, Inc. (Nasdaq:VTAL), a leading provider of advanced visualization and analysis software, today reported financial results for the fourth quarter ended December 31, 2010. Fourth quarter revenue was $16.1 million, compared to $15.8 million for the fourth quarter of 2009. For full-year 2010, revenue was $59.7 million, compared to $58.2 million in 2009.

Fourth quarter net income was $1.2 million, or $0.09 per diluted share, compared to a net loss of $630,000, or $(0.04) per diluted share, for the fourth quarter of 2009. For full-year 2010, net loss was $966,000, or $(0.07) per diluted share, compared to a net loss of $21.3 million, or $(1.48) per diluted share, which included $18.1 million of non-cash charges representing $(1.27) per diluted share, in 2009.

Fourth quarter adjusted EBITDA (a non-GAAP measure) was $2.6 million, compared to $1.0 million for the fourth quarter of 2009. For full-year 2010, adjusted EBITDA was $5.7 million, compared to $4.3 million in 2009. 

As noted in Vital Images' 2010 third quarter financial results press release, Vital Images was awarded nine Qualifying Therapeutic Discovery Project (QTDP) grants from the U.S. government totaling $1.5 million based on Vital Images' research expenditures for certain therapeutic discovery projects. The QTDP grants were recognized as an offset to research and development expense in the fourth quarter of 2010.

The company's total cash and investments were $139.9 million as of December 31, 2010, compared to $137.9 million as of September 30, 2010.

"Vital Images is a stronger company than it was several years ago. We have transformed our technology and service teams, while remaining financially strong and investing for the long term," said Michael H. Carrel, Vital Images president and chief executive officer. "Because of our enterprise approach, diversification of revenue channels, and partner- and customer-focused strategies, we are well positioned to capitalize on medical imaging opportunities in radiology and adjacent specialties. Our development pipeline has many exciting products that will expand our potential customer base and serve our current customers. We are looking forward to a year of continued progress in 2011, on both the top and bottom lines."

Conference Call and Webcast

Vital Images will host a live webcast of its fourth quarter earnings conference call on Thursday, February 17, 2011 at 9 a.m. CT. To access this webcast, go to the Investors section of the company's Web site, www.vitalimages.com, and click on the webcast icon. An audio replay of the conference call will be available beginning at 1 p.m. CT on Thursday, February 17, 2011 through 5 p.m. CT on Thursday, March 3, 2011 by calling (888) 203-1112 and entering passcode 7802563. 

About Vital Images

Vital Images, Inc. is a leading provider of advanced visualization and analysis software for physicians and healthcare specialists. The company's software provides users productivity and communication tools to improve patient care that can be accessed throughout the enterprise anytime, anywhere via the Web. Established in 1988 and headquartered in Minneapolis, Vital Images also has offices in Europe and Asia. For more information, visit www.vitalimages.com. 

Vital Images® and Vitrea® are registered trademarks of Vital Images, Inc. Vital Images disclaims any proprietary interest in the marks and names of others. 

The Vital Images, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5843

Non-GAAP Information

To supplement the company's condensed consolidated financial statements presented on a GAAP basis, the company uses adjusted EBITDA (a non-GAAP measure), which excludes certain items presented under GAAP. The company uses adjusted EBITDA to develop budgets, to assess its operating performance, to increase comparability among different periods and to serve as a measurement for incentive compensation. The company uses adjusted EBITDA even though it is not probable that the financial impact of excluded amounts will be immaterial in the future. Additionally, amounts excluded from adjusted EBITDA are managed by and are the responsibility of the company's management. The company believes that adjusted EBITDA is useful to investors because it provides supplemental information that allows investors to review the company's results of operations from the same perspective as management and the company's board of directors. 

The method the company uses to produce non-GAAP measures is not in accordance with GAAP and may not be computed the same as similarly titled measures used by other companies. These non-GAAP results should not be considered in isolation or regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating the company's business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon the company's reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both the company's financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP measures.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. These statements involve risks and uncertainties which could cause results to differ materially from those projected, including but not limited to dependence on market growth, challenges associated with international expansion, the ability to predict product, customer and geographic sales mix, fluctuations in interest rates, regulatory approvals, the timely introduction, availability and acceptance of new products, the impact of competitive products and pricing, dependence on major customers, the ability to successfully manage operating costs, fluctuations in quarterly results, approval of products for reimbursement and the level of reimbursement, and other factors detailed from time to time in Vital Images' SEC reports, including its annual report on Form 10-K for the year ended December 31, 2009. Vital Images encourages you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release. As a result of these matters, changes in facts, assumptions not being realized or other circumstances, the company's actual results may differ materially from the expected results discussed in the forward-looking statements contained in this release. The forward-looking statements made in this release are made only as of the date of this release, and, except as may be required by law, the company undertakes no obligation to update them to reflect subsequent events or circumstances.

Vital Images, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) 
(Unaudited)
     
  For the Three Months Ended
December 31,
For the Year Ended
December 31,
  2010 2009 2010 2009
Revenue:        
License fees  $ 6,710  $ 6,583  $ 22,823  $ 22,766
Maintenance and services 8,372 8,511 34,102 33,717
Hardware 1,020 673 2,784 1,747
Total revenue 16,102 15,767 59,709 58,230
         
Cost of revenue:        
License fees 1,050 1,024 3,641 3,301
Maintenance and services 2,758 2,286 10,076 9,282
Hardware 840 625 2,561 1,622
Total cost of revenue 4,648 3,935 16,278 14,205
         
Gross profit 11,454 11,832 43,431 44,025
         
Operating expenses:        
Sales and marketing 6,039 6,452 21,551 22,579
Research and development 1,830 4,132 13,607 16,332
General and administrative 2,414 2,333 9,617 9,978
Asset impairment 3,147
Total operating expenses 10,283 12,917 44,775 52,036
         
Operating income (loss) 1,171 (1,085) (1,344) (8,011)
         
Interest income 136 131 529 1,091
Income (loss) before income taxes 1,307 (954) (815) (6,920)
Provision (benefit) for income taxes 89 (324) 151 14,332
Net income (loss)  $ 1,218 $ (630) $ (966) $ (21,252)
         
Net income (loss) per share – basic  $ 0.09  $ (0.04) $ (0.07) $ (1.48)
Net income (loss) per share – diluted  $ 0.09 $ (0.04) $ (0.07) $ (1.48)
         
Weighted average common shares outstanding – basic 14,001 14,254 14,250 14,315
Weighted average common shares outstanding – diluted 14,101 14,254 14,250 14,315
 
 
Vital Images, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
     
  December 31,
  2010 2009
Assets    
Current assets:    
Cash and cash equivalents  $ 87,697  $ 120,317
Marketable securities 46,519 9,673
Accounts receivable, net 14,089 12,196
Prepaid expenses and other current assets 3,579 2,686
Total current assets 151,884 144,872
Marketable securities 5,685 12,234
Property and equipment, net 3,849 5,485
Other intangible assets, net 22 382
Goodwill 9,089 9,089
Total assets  $ 170,529  $ 172,062
     
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable  $ 2,311  $ 2,588
Accrued compensation 2,827 3,574
Accrued royalties 892 812
Other current liabilities 2,223 1,364
Deferred revenue 16,409 15,500
Total current liabilities 24,662 23,838
Deferred revenue 1,085 1,033
Deferred rent 36 469
Total liabilities 25,783 25,340
     
Stockholders' equity:    
Preferred stock: $0.01 par value; 5,000 shares authorized; none issued or
outstanding
Common stock: $0.01 par value; 40,000 shares authorized; 14,034 issued and
outstanding as of December 31, 2010; and 14,330 shares issued and outstanding
as of December 31, 2009
140 143
Additional paid-in capital 167,071 168,058
Accumulated deficit (22,598) (21,632)
Accumulated other comprehensive income 133 153
Total stockholders' equity 144,746 146,722
Total liabilities and stockholders' equity  $ 170,529  $ 172,062
 
 
Vital Images, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
  For the Year Ended
December 31,
  2010 2009
Cash flows from operating activities:    
Net loss $ (966) $ (21,252)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization of property and equipment 3,259 4,843
Amortization of identified intangible assets 360 426
Loss on disposal of assets 111
Asset impairment 3,147
Provision for doubtful accounts (26) 279
Deferred income taxes 14,664
Amortization of discount and accretion of premium on marketable securities 96 238
Employee stock-based compensation 3,394 3,867
Amortization of deferred rent (413) (394)
Changes in operating assets and liabilities:    
Accounts receivable (1,867) 572
Prepaid expenses and other assets (893) (507)
Accounts payable (326) (936)
Accrued expenses and other liabilities 111 (329)
Deferred revenue 961 (2,355)
Net cash provided by operating activities 3,690 2,374
     
Cash flows from investing activities:    
Purchases of property and equipment (1,574) (2,335)
Purchases of marketable securities (40,063) (21,749)
Proceeds from maturities of marketable securities 9,650 36,752
Net cash (used in) provided by investing activities (31,987) 12,668
     
Cash flows from financing activities:    
Repurchases of common stock (6,521) (6,081)
Proceeds from sale of common stock under stock plans 2,392 1,650
Payment for options tendered (194)
Net cash used in financing activities (4,323) (4,431)
     
Net (decrease) increase in cash and cash equivalents (32,620) 10,611
Cash and cash equivalents, beginning of period 120,317 109,706
Cash and cash equivalents, end of period $ 87,697 $ 120,317
 
 
Vital Images, Inc.
Supplemental Financial Information
 
Revenue Summary (dollars in thousands):
     
  For the Three Months Ended
December 31,
For the Year Ended
December 31,
  2010 2009 2010 2009
Revenue:                
License fees  $ 6,710    $ 6,583    $ 22,823    $ 22,766  
Maintenance and services 8,372   8,511   34,102   33,717  
Hardware 1,020   673   2,784   1,747  
Total revenue  $ 16,102    $ 15,767    $ 59,709    $ 58,230  
                 
Revenue by channel and as a
percent of total revenue:
               
Direct and other distributors  $ 7,697 48%  $ 8,071 51%  $ 29,517 49%  $ 26,773 46%
Toshiba 8,405 52% 7,696 49% 30,192 51% 31,457 54%
Total revenue  $ 16,102 100%  $ 15,767 100%  $ 59,709 100%  $ 58,230 100%
                 
License fee revenue by channel and
as a percent of total license fee revenue:
               
Direct and other distributors  $ 1,733 26%  $ 1,860 28%  $ 5,903 26%  $ 4,493 20%
Toshiba 4,977 74% 4,723 72% 16,920 74% 18,273 80%
Total license fee revenue  $ 6,710 100%  $ 6,583 100%  $ 22,823 100%  $ 22,766 100%
                 
Maintenance and services revenue
by channel and as a percent of total
maintenance and services revenue:
               
Direct and other distributors  $ 5,421 65%  $ 5,747 68%  $ 21,649 63%  $ 21,085 63%
Toshiba 2,951 35% 2,764 32% 12,453 37% 12,632 37%
Total maintenance and services revenue  $ 8,372 100%  $ 8,511 100%  $ 34,102 100%  $ 33,717 100%
                 
Revenue by geography:                
United States  $ 10,045    $ 10,056    $ 39,622    $ 38,251  
Europe 3,489   3,282   10,998   10,881  
Asia and Pacific 1,965   1,445   6,178   4,867  
Other foreign 603   984   2,911   4,231  
Total revenue  $ 16,102    $ 15,767    $ 59,709    $ 58,230  
Export revenue as a percent of total revenue: 38%   36%   34%   34%  
 
 
Reconciliation from GAAP results to adjusted EBITDA (in thousands):
         
  For the Three Months Ended
December 31,
For the Year Ended
December 31,
  2010 2009 2010 2009
Adjusted EBITDA (in thousands):        
Operating income (loss)  $ 1,171  $ (1,085)  $ (1,344)  $ (8,011)
Equity-based compensation 631 941 3,394 3,867
Depreciation and amortization of property and equipment 721 1,096 3,259 4,843
Amortization of identified intangibles 90 90 360 426
Asset impairment 3,147
Adjusted EBITDA  $ 2,613  $ 1,042  $ 5,669  $ 4,272
At Vital Images:
Peter J. Goepfrich
Chief Financial Officer
(952) 487-9500
www.vitalimages.com

At Padilla Speer Beardsley:
Nancy A. Johnson, (612) 455-1745
Marian Briggs, (612) 455-1742
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