NetWolves Acquisition Boosts Vasomedical’s Q2 Revenue

It certainly didn’t take long for NetWolves Inc. to make a lasting first impression on its new corporate family.

Within weeks of its $18 million acquisition in late May, the Tampa, Fla.-based tech firm was contributing to the bottom line of its parent company, Vasomedical Inc., a Westbury, N.Y., entity that manufactures and sells medical devices and markets diagnostic imaging products.

Vasomedical’s second-quarter revenue increased $3 million, or 38 percent year-over-year, to $10.9 million compared with $7.9 million in the same period last year. The increase primarily was due to the influx of $2.8 million in revenue from NetWolves operations, bigwigs said.

The company’s Sales Representation segment revenue increased 5 percent to $7 million due mostly to increased commission rates, while revenue from the Equipment segment plummeted 16 percent to $1 million due to lower revenues from Vasomedical’s Enhanced External Counter Pulsation therapy business.

Gross profit for Q2 2015 (ended June 30) increased 34 percent to $7.3 million compared with $5.5 million in the second quarter of 2014. Executives attributed the increase to $1.2 million of gross profit in the information technology segment from the NetWolves acquisition and a $700,000 spike in Sales Representation revenue, arising from higher commission rates, though the gains partially were offset by lower gross profit in the equipment segment.

“We are pleased to report continued growth at Vasomedical in the second quarter of 2015, during which our total revenue grew to $10.9 million, a $3 million increase from the same quarter a year ago. The growth was primarily due to the inclusion of one month of operations of NetWolves, which we acquired at the end of May 2015. Our existing operations also saw a year-over-year growth of 2.1 percent and 3.5 percent during the 3-month and 6-month periods ended June 30, 2015, respectively,” Vasomedical President/CEO Jun Ma said. “As a result, we recorded a net income of $191,000 for the second quarter of 2015, compared to a net loss of $176,000 for the same period in 2014. We are confident that, based on our current expectations, we are on track to be profitable for the year 2015.”

Selling, general and administrative (SG&A) expenses for the second quarter was $7 million, or 64 percent of revenues, compared with $5.5 million, or 70 percent of revenues for the same period last year. NetWolves was responsible for the added SG&A expenditures, but the spending spike partially was offset by lower costs in Vasomedical’s Equipment and Sales Representation segments.

The company recouped its $200,000 loss in Q2 2014 net income with a matching gain in the second quarter of this year, thanks to an increase in gross profit and fewer SG&A costs in the Sales Representation segment and lower overall expenses in the Equipment segment.

While it is proving itself a worthy investment, the NetWolves purchase came at a cost: At the year’s midpoint, Vasomedical had net cash and cash equivalents of $2.9 million—$6.2 million less than it had in its coffers the previous June 30.

“We are very excited about the newly acquired NetWolves, as, again, the second quarter financial results reflected only one month of activity from its operations,” Ma added. “However, the impact of NetWolves operations to our revenue and profitability is beyond just the consolidation of its current operations. We believe the synergies it brings to our healthcare IT unit are more significant: While the integration enhances our healthcare IT value added resale business, we will also see more growth opportunities for NetWolves managed network services among healthcare customers.”