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Press Releases ---------------------------------------------------------------- FOR IMMEDIATE RELEASE
IRIS REPORTS RECORD 3rd QUARTER Record High Margin Consumable Revenue and Improved Gross Profit Margins Result in 109% increase in Net Income CHATSWORTH, Calif., Nov. 1, 2007 - IRIS International, Inc. (NASDAQ GM: IRIS) today announced record revenue of $20.2 million for the third quarter ended September 30, 2007, a 12% increase over revenue of $18.0 million in the third quarter of 2006, and net income of $1.6 million for the quarter, a 109% increase over the prior year quarter as a result of record high margin Consumable and Service revenue and improved gross profit margins. "We are pleased with the solid revenue growth in the current quarter versus the prior year period, in what is historically our seasonally slowest period for instruments sales," stated César García, IRIS President and Chief Executive Officer. "In comparing the current third quarter performance to one year ago, it is important to note that the prior year period included one of the largest single orders in the Company's history with the shipment of 7 iQ®200 Analyzers to Laboratory Corporation of America. Revenues from high margin Consumables and Service in the current quarter were at record levels and we are very pleased with sequential revenue growth in our Consumables and Service category. The combination of a higher proportion of complete iQ®200 Systems in the U.S., higher Consumable and Service revenue, and higher volumes in our Sample Processing Division, helped us achieve 53% gross profit margins, our highest gross margin realization since 2003. We continue to have a solid pipeline of qualified sales prospects into the fourth quarter, traditionally our strongest period, and remain confident in our full-year guidance for 2007," Mr. García said. Instrument revenue in the current third quarter was essentially the same as the year ago period, while record Consumable and Service revenue increased 22% versus the third quarter of 2006. Sample Processing Division revenues increased 17% to $3.2 million, up from $2.8 million during the prior year quarter. Net income for the three months ended September 30, 2007, increased 109% to $1.6 million, or $0.09 per diluted share, including the effect of $266,000, or $0.01 per share, of FAS 123R expense, and $360,000, or $.01 per share, related to CFO transition and Finance department reorganization charges. This compares with net income of $774,000, or $0.04 per diluted share, after the effect of $238,000, or $0.01 per share of FAS 123R expense for the same period of 2006. Diluted average shares outstanding for the three months ended September 30, 2007, increased to 19.0 million shares from 18.6 million shares, a year ago. 2007 SECOND QUARTER HIGHLIGHTS:
IVD instrument revenue of $7.5 million for the third quarter of 2007, was approximately the same as the third quarter of 2006, and while there were 102 iQ®200 microscopy analyzers sold versus 108 in the prior year period, the current quarter included a significantly higher proportion of combined microscopy and chemistry systems sales in the U.S. Record IVD Consumables and Service revenues of $9.5 million for the third quarter of 2007 increased 22% when compared with IVD Consumables and Service revenues of $7.8 million in the third quarter of 2006. Sample Processing Business Unit (formerly StatSpin) revenue for the third quarter increased 17% over the third quarter of 2006. Overall gross profit margins improved to 53.2% during the third quarter compared with 45.2% in the 2006 quarter primarily as a result of strong higher gross margin consumable revenue, as well as a higher proportion of direct domestic instrument and consumable sales which carry higher margins than international sales through distributors, and higher capacity utilization at our manufacturing facilities. Instruments revenue represented 37% of the consolidated revenue in Q3-2007 vs. 42% in Q3-2006, as a result of the significant increase in Consumables and Service sales. Consumables and Service gross profit margins improved to 59% in spite of excess overhead resulting from the under-utilization of our strip manufacturing facility in Marburg, Germany and an expanded service infrastructure to better support the increased installed base of instruments. The strip manufacturing facility has been achieving better utilization and is expected to achieve breakeven with the release of the iChem®VELOCITY™ automated urine chemistry analyzer in 2008. Service profitability should continue to increase as more systems come off warranty. Operating expenses increased to $8.6 million in the third quarter of 2007 from $7.2 million in the third quarter 2006. Research and development expense for the third quarter of 2007 was $2.4 million, or 12% of revenue, versus $2.2 million, or 12% of revenue in the year-ago period. The level of R&D spending reflects our continued investment in the Iris Molecular Diagnostics subsidiary and the development of the Company's iChem®VELOCITY™ new automated urine chemistry analyzer. Marketing and selling expenses as a percentage of revenues increased to 18% for the third quarter of 2007 compared to 15% in the prior year quarter, resulting from an increase in our domestic sales force, increased GPO fees relating to higher domestic sales and consulting fees relating to the planned launch of the iChem®VELOCITY™ and NADIA™ PSA. General and administrative expenses in the third quarter of 2007 were $2.7 million, a $441,000 increase in comparison with the prior year quarter, primarily related to CFO transition and Finance department reorganization charges. Operating income for the third quarter 2007 was $2.1 million versus $1.0 million in the third quarter of 2006. Net income reflects a tax rate of 35%, during the current quarter, whereas in the prior year period the Company incurred income taxes reflecting a 37% tax rate. Income tax provisions for the current and year ago third quarter periods are substantially all non-cash items since the Company pays minimal income taxes as a result of net operating loss and tax credit carry-forwards (NOLs) that it continues to utilize. For the nine months ended September 30, 2007, IRIS had record revenue of $61.3 million, a 21% increase over revenue of $50.7 million for the first nine months of 2006. Net income for the nine months ended September 30, 2007, was $4.9 million, or $0.26 per diluted share, after the effect of $604,000, or $0.03 per share, of FAS 123R expense, net of tax. This compares with a net loss of $2.0 million, or $0.11 per diluted share, after the effect of $672,000, or $0.04 per share of FAS 123R expense, as well as non-recurring purchased in-process R&D charge related to the acquisition of Leucadia Technologies, Inc. totaling $5.2 million, or $0.29 per share, in the year-ago nine month period. Diluted average shares outstanding for the 2007 and 2006 nine-month periods were 19.0 million and 18.6 million, respectively. "We continue to make significant progress with our new product initiatives. Our iChem®VELOCITY™ program is on schedule for international shipments beginning in March 2008. We are building our production pilot units while our clinical equivalency studies are essentially complete and our FDA 510(k) application will be submitted shortly. Shipments of the Express 4 Centrifuge, a new Sample Processing product targeting the mid-range clinical chemistry market, were initiated today. Although our NADIA-PSA regulatory process has been progressing at a slower pace than anticipated, there have been no technological setbacks in our plans to bring this breakthrough technology to market. A proposed clinical protocol for a retrospective clinical study has been submitted to the FDA incorporating input from this agency and our regulatory consultants. The principal investigator has been contracted and the necessary retained patient samples have been identified and qualified and we will proceed with the study upon receiving concurrence from the FDA," Mr. García said. Company Outlook
Conference Call
THE COMPANY
SAFE HARBOR PROVISION
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