SHL Telemedicine Reports First Quarter 2015 Financial Results

Business Review

Germany

In Germany, SHL continued to strengthen its position as the leading provider of telehealth services. In March, SHL announced the acquisition of GPH (Gesellschaft f?r Patientenhilfe), based in Munich, for a cash purchase price of € 7.6 million. GPH’s nationwide German telemedicine program Cordiva currently cares for about 10,000 chronic heart failure patients in daily regular care. GPH has AOK Bayern and AOK North East amongst its major clients. GPH is expected to contribute annual revenues of USD 9.0 to 10.0 million and be accretive, already in 2015. GPH's assets and liabilities are consolidated as of March 31, 2015 with its results of operation consolidated from April 1, 2015.

In March, the Company initiated the unification of its telemedicine monitoring centers so that the Dusseldorf monitoring center will be absorbed in Munich. As such, a provision in the amount of USD 0.4 million was recognized and is presented as restructuring expenses. The unification is expected to deliver savings starting 2016.

Israel

SHL's Israeli business showed a 5% revenue increase quarter over quarter driven by enhanced sales. SHL's loyal subscriber base continues to show high satisfaction rates from the personal consumer services and health insurers continue to increase adoption of SHL's service offerings among chronically ill patients.

U.S and APAC

The international expansion of SHL is progressing. In March, SHL signed a distribution agreement for the smartheart^TM device with USCI Holdings, Inc., of Japan with a target of buying at least 1,000 smarthearts^TM until the end of 2016. USCI’s focus will be on the physicians and the professional market, goal is to build credibility for the smartheart in the Japanese healthcare community.

In May, SHL signed an international distribution agreement for smartheart™ with FUJIFILM SonoSite, Inc. FUJIFILM SonoSite will distribute the smartheart™ to its professional healthcare customers in the US, Japan and Germany, using its point-of-care ultrasound solutions.

Financial Highlights

Exchange rates had again a significant impact on SHL’s presented financial results. Compared to the first quarter 2014, the USD significantly appreciated against the Israeli Shekel (NIS) and the EUR. Thus, SHL’s revenues, which are presented in USD, are lower than in the previous quarters, with a corresponding decline in expenses – a purely translational effect.

SHL reached an agreement with a past customer in Germany for a payment of Euro 4.2 million with respect to a debt for services it has rendered and were not paid for. As a result the Company reversed an accrual for doubtful debt in the amount of USD 1.1 million, lowering G&A expenses and recorded additional revenues in the amount of USD 0.7 million. The payment of EUR 4.2 million was received in Q2.

Revenues for the first quarter amounted to USD 9.5 million compared with USD 10.6 million in the first quarter of 2014, a decrease of 10.4%. At constant exchange rates* revenues were USD 11.1 million, up 4.7%.

Gross profit for the quarter amounted to USD 5.6 million (58.9% of revenues) compared with USD 6.0 million (56.6% of revenues) in the first quarter of 2014.

EBITDA for the quarter amounted to USD 2.6 million (27.4% of revenues) with EBIT for the quarter amounting to USD 1.3 million (13.7% of revenues) compared with EBITDA of USD 2.0 million (18.9% of revenues) and EBIT of USD 0.4 million (3.8% of revenues) in the first quarter of 2014.

Net income for the quarter amounted to USD 1.4 million (USD 0.14 per share) compared with USD 0.0 million in Q1 2014.

Cash used in operations in the quarter was USD 0.6 million compared to cash used in operations of USD 2.4 million in Q1 2014. During the quarter SHL acquired GPH for a cash consideration of Euro 7.6 million. The consideration paid less cash at hand in GPH amounted to USD 6.1 million. As a result SHL's cash, cash equivalents and marketable securities decreased and amounted to USD 9.1 million at 31 March 2015.

Balance Sheet. SHL's assets at 31 March 2015 totalled USD 91.4 million with shareholders' equity amounting to USD 59.3 million (65% of balance sheet) compared to assets of USD 92.1 million with shareholders' equity amounting to USD 61.4 million at 31 December 2014. The decrease in the reported shareholders' equity and total assets is mainly attributable to the appreciation of the USD against the NIS and the Euro resulting in a corresponding decrease of the foreign currency translation reserve in the equity section in the amount of USD 3.6 million.

SHL Telemedicine – consolidated key figures – Q1 15

* Constant currency - In order to enable meaningful comparison between the 2015 and 2014 results, 2015 results are also presented at constant currency exchange rates. These are calculated by translating the 2015 results using the average 2014 exchange rates instead of the current period exchange rates.

Revenues by geographic distribution – Q1 15