06.07.2016 – 07:10

LifeWatch AG

EQS-Adhoc: LifeWatch AG: Q1 2016 Results and Strategy Update

EQS Group-Ad-hoc: LifeWatch AG / Key word(s): Quarter Results
LifeWatch AG: Q1 2016 Results and Strategy Update

06.07.2016 / 07:00
Release of an ad hoc announcement pursuant to Art. 53 KR.


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LifeWatch Announces Q1 2016 Results and Strategy Update


Zug/Switzerland, July 6, 2016 - LifeWatch AG (SIX Swiss Exchange: LIFE), a
leading developer and provider of medical solutions and remote diagnostic
monitoring services to the digital health market, today reported financial
results for the first three months of 2016 and provided an update on the
Company's revised strategy.

In the first quarter of 2016, revenues amounted to USD 28.4 million,
representing an increase of 12.3% compared to the first quarter of 2015. The
increase in revenues is attributable to above market revenue growth in the
Company's cardiac monitoring business in the United States.

The gross profit margin for the period improved to 56.2% or USD 15.95 million,
representing an improvement from the 53.3% margin recorded for the prior year's
period.

The operating loss for the first quarter amounted to USD -13.2 million as
compared to a profit (EBIT) for the prior year period of USD 2.1 million.
Operating results were negatively impacted by settlement and legal costs
associated with the two legal cases, Highmark and Qui Tam, announced on June 1,
2016 as well as other non-recurring expenditures. The operating loss in the
first quarter of 2016 was primarily attributable to the Qui Tam settlement of
USD 12.98 million.

Other operating costs were also moderately higher in the first quarter of 2016.
Research and development costs were USD 1.15 million, or 4.0% of revenue, as a
result of certain external costs in connection with the MCT 1-lead patch. Sales
and marketing costs increased to USD 5.86 million, or 20.6% of revenue, as
compared to the prior year period of USD 4.40 million, driven primarily by
higher sales commissions for performance above plan.

General and administrative costs increased to USD 9.0 million, or 31.7% of
revenue, compared to USD 5.96 million in Q1 2015. Higher G&A costs were
attributable to several factors including higher labor, legal and outside
service costs. There was also an increase in the provision for bad debt based on
the implementation of a more robust methodology. Investments in additional
quality assurance and quality control personnel and the utilization of external
quality/regulatory consultants along with increases in legal costs associated
with the aforementioned legal cases represented the majority of the increase in
G&A costs. EBITDA was a negative USD -11.0 million, compared to USD 3.7 million
in Q1 2015 and the net result was also negative at USD -10.1 million compared to
a Q1 2015 net income of USD 0.9 million.

It is important to note that no adjustment has been made to the Q1 2016 results
for the reduction in the Highmark settlement from approximately USD 21.6 million
(charged in financial year 2015) to USD 13 million. This adjustment of
approximately USD 8 million will follow in Q2 2016. As a result of this
situation, the first quarter results appear significantly worse than if both the
Qui Tam and Highmark settlements had been fully reflected.


Key figures (unaudited, USD millions):

                          Q1 2016 adjusted      Q1 2016 Q1 2015
                          for legal settlements

Revenues                  28.39                 28.39   25.27

Gross profit              15.95                 15.95   13.45

As % of revenues          56.18%                56.18%  53.23%

EBITDA / (LBITDA)         1.965                 -11.01  3.681

As % of revenues          6.92%                 NA      14.57%

EBIT / (LBIT)             -0.175                -13.15  2.12

As % of revenues          NA                    NA      8.39%

Net income (loss)         -1.84                 -10.09  0.91

As % of revenues          -6.48%                NA      3.60%

Earnings (loss) per share (0.14)                -0.75   0.07

Total fixed assets, net   17.75                 17.75   15.26

Total assets              78.48                 83.2    68.35

Total equity              24.11                 15.86   37.8

As % of total assets      30.72%                19.06%  55.30%

Net cash flow             -4.674                -4.674  -2.49

Employees                 617.5                 617.5   595
 
Lower EBITDA and negative earnings expected for the full year

Given the legal case settlements as well as the additional costs mentioned
above, LifeWatch is lowering its guidance for 2016. While still anticipating
double-digit revenue growth, management now expects a significantly lower
positive EBITDA margin, in the mid-single digit range, and a negative EBIT and
net income.

Update on Strategy and Product Development

LifeWatch plans to further enhance its position as a leading provider of remote
cardiac monitoring services in the United States by strengthening its existing
remote cardiac monitoring offering and leveraging its remote monitoring
expertise by expanding into certain international markets. In addition, it is
envisioned that the product offering will expand beyond cardiac monitoring with
a view towards monitoring of other co-morbidities such as stroke, blood pressure
and sleep apnea.

A key element of the strategy by which LifeWatch intends to achieve these
objectives includes transitioning into to a pure-play service provider.
Furthermore, LifeWatch believes that it can better ensure that its technology
platform remains state-of-the-art by outsourcing the development of products to
third party providers or by buying off-the-shelf technology. An internal
technology innovation team will lead this effort.

LifeWatch will continue to be focused on providing outpatient services and will
aim to increase the demand for its remote cardiac monitoring solutions,
penetrate new markets by either replicating its existing business model or by
developing new service offerings via local partnerships and actively pursue
synergistic strategic acquisitions.

In the context of its strategy review, LifeWatch decided that it will
discontinue the internal development and related costs associated with its vital
signs patch ("VSP"), a non-invasive sensor worn on a patient's chest for the
monitoring of various vital signs. As a consequence of this strategy change,
LifeWatch will endeavor to identify a potential buyer for the technology.

LifeWatch has taken a strategic decision to launch its service in Turkey with
its ACT product and only introduce the MCT 1-lead patch later. This will cause a
slight delay in the launch resulting in only minimal revenues in Turkey in 2016.
Furthermore, additional funding will also be required. This is currently being
discussed with the JV partner.

The cooperation agreement to integrate Vital Connect's patch solution into
LifeWatch's product portfolio was unsuccessful and therefore was terminated as
of June 30, 2016.

Capital Increase

Following the shareholders' resolution of April 15, 2016 to conduct an ordinary
capital increase with subscription rights, the Board of Directors decided on
July 5, 2016 to issue 4,994,019 new registered shares with a nominal value of
CHF 1.30 each. The subscription price per new registered share amounts to CHF
9.00. AEVIS VICTORIA SA has committed to purchase at the subscription price any
and all new shares remaining unsubscribed by the existing shareholders.

About LifeWatch AG

LifeWatch AG, headquartered in Zug and listed on SIX Swiss Exchange (LIFE),
Switzerland, is a leading healthcare technology and solution company,
specializing in advanced digital health systems and wireless remote diagnostic
patient monitoring services. LifeWatch's services provide physicians with
critical information to determine appropriate treatment and thereby improve
patient outcomes. LifeWatch AG has operative subsidiaries in the United States,
in Switzerland and in Israel, and is the parent company of LifeWatch Services
Inc., and LifeWatch Technologies, Ltd. LifeWatch Services, Inc. is a leading
U.S.-based provider of cardiac monitoring services. LifeWatch Technologies Ltd.,
based in Israel, is a leading developer and manufacturer of telemedicine
products. For additional information, please visitwww.lifewatch.com.

Sign up for customized e-mail alerts and documentation requests at
http://www.irlifewatch.com/websites/lifewatch_ir/English/9510/alert-service.html

This press release includes forward-looking statements. All statements other
than statements of historical facts contained in this press release, including
statements regarding future results of operations and financial position, the
business strategy, and plans and objectives for future operations, are
forward-looking statements. The words "believe," "may," "will," "estimate,"
"continue," "anticipate," "intend," "expect" and similar expressions are
intended to identify forward-looking statements. LifeWatch AG has based these
forward-looking statements largely on current expectations and projections about
future events and financial trends that it believes may affect the financial
condition, results of operations, business strategy, short-term and long-term
business operations and objectives, and financial needs. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions. In
light of these risks, uncertainties and assumptions, the forward-looking events
and circumstances described may not occur and actual results could differ
materially and adversely from those anticipated or implied in the
forward-looking statements. All forward-looking statements are based only on
data available to LifeWatch AG at the time of the issue of this press release.
LifeWatch AG does not undertake any obligation to update any forward-looking
statements contained in this press release as a result of new information,
future events or otherwise.

THIS PRESS RELEASE IS NOT BEING ISSUED IN THE UNITED STATES OF AMERICA AND MUST
NOT BE DISTRIBUTED TO UNITED STATES PERSONS OR PUBLICATIONS WITH A GENERAL
CIRCULATION IN THE UNITED STATES. THIS PRESS RELEASE DOES NOT CONSTITUTE AN
OFFER OF SECURITIES OF LIFEWATCH AG OR ANY OF ITS SUBSIDIARIES FOR SALE IN THE
UNITED STATES, OR AN INVITATION TO SUBSCRIBE FOR OR PURCHASE ANY SECURITIES OF
LIFEWATCH AG OR ITS SUBSIDIARIES IN THE UNITED STATES. IN ADDITION, THE
SECURITIES OF LIFEWATCH AG AND ITS SUBSIDIARIES HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR DELIVERED
WITHIN THE UNITED STATES OR TO U.S. PERSONS ABSENT FROM REGISTRATION UNDER OR AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE UNITED STATES
SECURITIES LAWS.

End of ad hoc announcement
Additional features:


Document:http://n.eqs.com/c/fncls.ssp?u=DAKLWUWKDA
Document title: LifeWatch Announces Q1 2016 Results and Strategy Update

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06.07.2016 News transmitted by Tensid EQS AG. www.eqs.com

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Language: English

Company:  LifeWatch AG

          Baarerstrasse 139

          6300  Zug

          Switzerland

Phone:    +41 41 728 67 78

Internet: www.lifewatch.com

ISIN:     CH0012815459

Valor:    811189

Listed:   Regulated Unofficial Market in Berlin, Stuttgart; Open Market in
Frankfurt ; SIX


End of News EQS Group News Service
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