2009 Financial Guidance
Looking ahead for the full year 2009, the company expects total revenue to be in the range of $130 million to $133 million, representing annual growth of 5% to 8%. The company expects 2009 diluted earnings per share to be in the range of $0.36 to $0.40. The company expects the majority of its 2009 revenue and earnings to be weighted towards the second half of the year due to typical business cycles and the ramp up of new product launches.
Gross profit for the first quarter of 2009 was $11.6 million, versus $14.6 million in the first quarter of 2008. As a percentage of sales, gross margin decreased to 47.1% versus 58.1% in the prior year period. As the company previously guided, gross margin was negatively impacted by the continued investment in the roll out of the new no-code products in the retail and mail service channels. Gross margin was also impacted by lower pricing in the mail service and distribution channels.
Selling, general and administrative expenses were $12.1 million for the first quarter of 2009, compared with $11.9 million in the first quarter of 2008. First quarter 2009 selling, general and administrative included $0.4 million of severance and other expenses related to the company’s chief executive officer transition.
Research and development expenses were $1.9 million for the first quarter of 2009, versus $2.4 million in the first quarter of 2008. The decrease in research and development is primarily due to lower new product development costs following the launch of the TRUE2go and TRUEresult systems.
Operating loss for the first quarter of 2009 was $2.4 million, versus operating income of $0.4 million for the first quarter of 2008.
In March 2009, the company received 510(k) clearance from the US Food and Drug Administration (FDA) for TRUEbalance, the company’s new low cost, no-coding meter. TRUEbalance broadens the company’s no-code product portfolio to meet the specific needs of certain segments of the market. In addition, the TRUEbalance blood glucose monitoring system allows the company to further leverage its established manufacturing infrastructure. The company expects launching TRUEbalance in the second quarter of 2009.
As outlined earlier, the company continues to be in discussions with the FDA regarding the risk of inaccurate blood glucose readings in GDH-PQQ systems for certain groups of patients who are undergoing maltose based therapies. In late March, the company provided the FDA with a plan to further mitigate this risk with its TRUEtest strips, which utilize this enzyme. The company has scheduled a meeting in May to discuss its plan with the FDA.
Joseph Capper, president and chief executive officer of Home Diagnostics said, Our first quarter results are slightly better than our guidance. While we are not satisfied with our current results, we are weathering the economic downturn substantially better than several of the larger branded companies in the industry, who reported double digit revenue declines in the first quarter. We view this as an indicator of the strength of our value offering, especially given the challenging economic environment, which we believe is driving patients to lower cost alternatives. Home Diagnostics is the clear leader in the value segment of the blood glucose monitoring market, positioning us well to expand our market share. We are encouraged by the rapid patient adoption of our new no-coding meters and our capacity expansion is well underway to meet this growing demand.
