Turning a Profit

Originally Published MX July/August 2006

COVER STORY

Over its more than 20-year history, Aspect Medical Systems Inc. (Newton, MA) has seen its share of financial ups and downs. But since turning the corner into profitability in the third quarter of 2004, the company has continued to report exceptional revenue and earnings growth each quarter.

In 2005, the company reported total revenues of $77 million, a 39% increase over the $55.6 million reported in 2004. Net income for 2005 was $8.5 million compared to $303,000 in 2004. The company ended 2005 with cash, cash equivalents, and marketable securities of $61.3 million and had no debt.

For the first quarter of 2006, Aspect Medical reported total revenue of $21.9 million, an increase of 28% over the year-ago period. Net income increased from $1.1 million in the first quarter of 2005 to $1.9 million in the first quarter of 2006, despite the inclusion of a $1.6 million stock-based compensation expense.

In addition to product revenue increases, the company has seen a payoff from its network of strategic alliances, notably with Boston Scientific Corp. In 2004, the company attributed $662,000 in revenue to this alliance. That figure increased more than five-fold to $3.5 million in 2005 as the company expanded its alliance with Boston Scientific. Aspect also has partnerships in place with GE Healthcare, Datex-Ohmeda, Philips Medical, Spacelabs Medical, Dräger Medical, Datascope, Nihon-Kohden, and Dixtal. Combined, these original equipment manufacturers sell approximately 90% of all patient monitoring equipment in operating rooms and intensive care units globally, Aspect reports.

In the first quarter of 2006, revenue from strategic alliances was $1.4 million, compared to $156,000 in the year-ago period. In addition to revenue growth associated with alliances, the company has also seen a notable rise in revenue from international markets. The company reported international revenue of $18.6 million in 2005, a 56% increase over 2004.

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