Aug. 3, 2007

Sonic Innovations, Inc, has announced results for the second quarter 2007. Net sales from continuing operations for the second quarter 2007 of $30.4 million were up 16.4% over the $26.1 million for the second quarter of 2006. The auditory testing equipment division was sold in February 2007 and has been reflected as a discontinued operation.

 North American sales of $11.8 million in the second quarter 2007 increased 8.2% from 2006. European sales of $12.8 million in the second quarter 2007 increased 33.1% from the second quarter 2006. Rest-of-world sales of $5.8 million in the second quarter 2007 were up 3.9% from 2006.

 Gross profit was $19.4 million in the second quarter 2007, up 30.1% from the same period in 2006. Gross margin of 63.7% in the second quarter 2007 was up from the second quarter of 2006 level of 57.0% as a result of cost reductions in manufacturing, distribution activities, lower warranty costs and reduced returns.

 Selling, general and administrative expense increased from $12.4 million to $17.5 million due to the costs of distribution expansion, increased spending on new product launches, other marketing and selling initiatives, litigation costs and severance. Research and development expense from continuing operations in the second quarter 2007 of $2.2 million was up $0.1 million from $2.1 million in the prior year, primarily due to increased expenses relating to the development of our Velocity product line, which was released in July 2007.

 The principal 2006 product introduction and related marketing costs were incurred in the first quarter 2006 while the principal 2007 production introduction and related marketing costs were incurred in the second quarter 2007.  Therefore, income from continuing operations was $1.5 million lower in the second quarter than the prior year and $1.5 million higher in the first quarter. The loss from continuing operations for the quarter was $478,000, or $0.02 per share, compared to income of $982,000 in 2006. Year-to-date income before income taxes improved 214% over the prior year. Net income improved from a $1.3 million loss in the first six months of last year to a gain of $137,000 this year.

 Sam Westover, president and CEO, says, "We are pleased with our strong revenue growth and new product releases.  The expenses of these product releases are now behind us and we expect continuing revenue growth and improved profitability for the remainder of the year. I continue to be pleased with the significant gross margin improvement resulting from our cost reduction initiatives, new product introductions, distribution expansion, and pricing discipline."

 As of June 30, 2007, Sonic Innovations had cash and marketable securities of $22.4 million and a line of credit of $6.0 million.

 Source: PR Newswire