News
MTS Medication Technologies, Inc.
ST. PETERSBURG, FL - August 8, 2007 - MTS Medication Technologies, Inc. (AMEX:MPP), an international provider of medication compliance packaging systems, today announced its financial results for its fiscal first quarter ended June 30, 2007.
Net Sales for the first quarter increased 29% to $14.8 million from $11.5 million in the prior year’s first quarter. Net income available to common stockholders was $533,000, or $.08 per diluted common share, compared with $381,000, or $0.06 per diluted common share, in the prior year’s first quarter. Net sales associated with our consumables and prepack machines in the U.S. long-term care market increased approximately 15%. Net sales of OnDemand® machines increased 200%, and net sales through our European operations increased 41%.
Gross margin for the first quarter was 36.9% compared with 37.4% in the prior year’s first quarter. The decrease in gross profit margin percentage resulted primarily from increases in factory overhead costs. Also, the proportion of revenue associated with OnDemand and prepak machines in the first quarter of this year was higher than the proportion of revenue associated with these machines in the first quarter of last year. The gross margin realized on machines is generally lower than the gross margin we realize on our consumable products.
SG&A expenses for the first quarter were $3,822,000, or 25.8% of revenue, compared with $2,963,000, or 25.7% of revenue, in the prior year’s first quarter. The increase in SG&A expenses was primarily due to increased costs associated with installation and support of OnDemand machines, higher selling costs, costs associated with employee severance and recruiting fees, costs associated with our German operations and increased research and development expenses related to the OnDemand Express IITM machines and the CentraFillTM automation project.
Operating profit for the first quarter was $1,044,000, or 7.0% of net sales, compared with $775,000, or 6.7% of net sales, in the prior year’s first quarter.
Todd E. Siegel, President and Chief Executive Officer, said, “We are pleased with the continued growth in our core business, as well as the ongoing progress of our OnDemand product line. We sold four AccuFlexTM machines in our first quarter along with one Multi-Med and one fully automated Express ITM system. Research efforts related to the CentraFill are progressing, and the results are impressive. We have completed our Express II research and development, and this new version of OnDemand was delivered to our largest customer, Omnicare in August. The system is expected to be accepted some time in the second quarter or early in the third quarter.”
Siegel added, “As we discussed in our fourth quarter conference call, MTS is now engaging in some significant and challenging opportunities in the retail pharmacy and nutritional supplement markets. We also expect our MedTimesTM product and international operations to play important roles in our growth. We believe these initiatives will change the complexion of the Company while still leveraging our experience and infrastructure. The potential for each of these opportunities is significant. MedTimes as an example, represents a total market opportunity of an estimated $840 million in the U.S. and approximately $400 million in the U.K., while we believe the retail market could generate sales of close to $1 billion in machines and result in $1 billion in annual recurring sales of consumable products in the U.S. and Europe.”
“As we have previously stated, incurring expenses to develop new products and markets is necessary. However, our management team believes in the value of our opportunities and understands the urgency to meet our goals. Although our first quarter results were affected by some higher than normal expenses, they represent investments in exciting opportunities that we believe will ultimately benefit our financial results..”
Highlighted below are the Company’s achievements and status of key goals for the first quarter of fiscal year 2008.
§ Completed the development of OnDemand Express II and obtained pre-shipment acceptance from Omnicare by demonstrating the expected functionality and production throughput of this highly automated and sophisticated equipment. The system is currently installed and training is underway.
§ Revisited the AccuFlex systems in the field and upgraded robotic software to improve productivity and reduce robot faults.
§ Completed development of the production prototype of the OnDemand CentraFill system for introduction at the National Association of Drug Stores tradeshow in August 2007. We are currently in contract discussions with several large specialty and retail pharmacies for both pilot projects and general release versions of our Multi-Med system.
§ Successfully completed our pilot test in the nutritional supplement market leading to a marketing agreement with Douglas Labs, a highly regarded nutritional supplement manufacturer.
§ Completed a substantial portion of the MedTimes interface to expand MedTimes further in our beta nursing home site. We expect full rollout to the nursing home by early third quarter, which we believe will lead to a measurable demonstration of valuable cost savings.
§ Continued organic sales growth in international markets of approximately 24%. Our overall growth of 41% includes the first full quarter of Consilio, our recent German acquisition.
§ Grew core consumable products and prepack machine sales by 15% over the previous year’s first quarter.
§ Received the first contract for OnDemand Multi-Med in the U.K. Installation is anticipated in the third quarter of this fiscal year.
Siegel concluded, “Our commitment to the long-term strategy of entering new markets such as retail pharmacy and nutritional supplements, the introduction of the MedTimes product and our continued emphasis on European expansion remains a key focus. Although this strategy may have some short-term impact on our operating margins, we believe the benefits will continue to materialize this fiscal year and provide exciting growth next year and in the years ahead.”
Fiscal 2008 Outlook
As a result of the above opportunities and corresponding challenges, we now believe that our fiscal 2008 revenue will range between $60 million and $63 million. Based upon these revenue expectations, we expect our fully diluted earnings per share to be in the range of $0.45 to $0.50.
Notice of Conference Call
Management of the Company will host a conference call Thursday, August 9, 2007 at 8:30 A.M. EDT. To access the conference call, please telephone 888-459-5609 and enter 9086206 for the conference ID number. A digital replay will be available and may be accessed by visiting the Company’s web site at www.mts-mt.com.
About the Company
Founded in 1984, MTS Medication Technologies (www.mts-mt.com) is an international provider of medication compliance packaging systems designed to improve medication dispensing and administration. MTS manufactures automated packaging machines and related consumables for prescription medications and nutritional supplements. The Company serves approximately 8,000 pharmacies worldwide.