EQS-Adhoc

LifeWatch AG: First half-year 2016 financial results

EQS Group-Ad-hoc: LifeWatch AG / Key word(s): Half Year Results
LifeWatch AG: First half-year 2016 financial results

18.08.2016 / 07:00
Release of an ad hoc announcement pursuant to Art. 53 KR.


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LifeWatch reports first half-year 2016 financial results


Revenue growth of 8.6% to USD 57.0 million - negative EBIT and EBITDA
principally caused by one-time charges

Zug/Switzerland - LifeWatch AG (SIX Swiss Exchange: LIFE), a leading
developer and provider of medical solutions and remote diagnostic
monitoring services in the digital health market, reports continued revenue
growth during the first half of 2016.

Overall revenues during the first six months amounted to USD 57 million, an
increase of 8.6%, whereas monitoring service revenue in the US grew by 10%
compared to the prior year. Revenue grew less strongly in Q2 compared to
Q1, which had shown revenue growth of 12.3%.

Significant one-time costs negatively impact profitability

The gross profit margin in the first half of 2016 was 49.1% as compared to
52.8% a year earlier. The reduction in margin is attributable to the write-
off of capitalized software development costs and inventory for the Vital
Signs Patch (VSP) project as well as other obsolete inventory. Without
these one-time write-offs, the gross margin would have been 55.5%.

Research and development expenses increased to 4.7% of revenues in H1 2016
(H1 2015: 3.8%) mainly due to lower capitalization of software development
costs. However, without capitalization, R&D expenses would represent 5.8%
of revenues (H1 2015: 5.7%). Sales and marketing expenses increased to
19.5% of revenue in H1 2016 (H1 2015: 18.0%). The increase is attributed to
higher sales commission payments associated primarily with the increased
revenue. General and Administrative (G&A) expenses in H1 2016 were 31.7% of
revenue (H1 2015: 23.8%). G&A was negatively impacted by two one-time items
(see table below), which contributed to the increase of USD 5.5 million in
this category.

Other increases in G&A include costs related to a bonus scheme for all
employees, higher labor costs, recruitment fees for several new senior
staff members, new website design, FDA consultant costs, upgrade of global
interconnectivity and the implementation of a new disaster recovery system.

The provision to pay the Qui Tam settlement, once the anticipated approvals
by the government are received, and the reduction in the Highmark
settlement, together with a recovery from the Pharmalife case are included