Aspect Medical Systems Reports Revenue Growth of 4% for the First Quarter of 2009

NORWOOD, Mass.--(Business Wire)--
Aspect Medical Systems, Inc. (NASDAQ: ASPM):

Highlights of Q1 2009 Compared with Q1 2008

* Sensor revenue increased 5% to $21.6 million
* Total revenue increased 4% to $25.3 million
* Installed base of monitor and module units grew 19% and exceeded 58,800
* GAAP loss from operations was $61,000 compared with a loss of $141,000 in Q1
2008, and non-GAAP income from operations was $1.5 million compared with $1.8
million in Q1 2008
* GAAP earnings per diluted share was $0.10 compared with a loss per share of
$0.01 in Q1 2008, and non-GAAP net income per diluted share was $0.16 in Q1 2009
compared with $0.06 per diluted share in Q1 2008
* Repurchased $7 million in face value of 2.5% convertible senior notes due 2014
at a discount, resulting in a $3 million gain and ending cash and investments of
$76 million and convertible notes outstanding of $58 million

Aspect Medical Systems, Inc. (NASDAQ: ASPM), reported today that revenue reached
$25.3 million for Q1 2009, a 4% increase from $24.4 million in Q1 2008.

With the adoption of Statement of Financial Accounting Standards No.123(R), or
"SFAS No.123R", as of January 1, 2006, Aspect began reporting non-GAAP financial
results that exclude the impact of stock-based compensation. See below under the
heading "Use of non-GAAP Financial Measures" for a discussion of the Company`s
use of such measures. The reconciliation of GAAP (U.S. generally accepted
accounting principles) to non-GAAP measures is contained in an attached table.

"We were very pleased with the improvement in our operating margins in Q1. We
substantially overachieved our goal for operating income in the quarter despite
a difficult economic environment and we remain confident we will be able to
continue to improve operating margins for the remainder of the year," said
Nassib Chamoun, President and CEO of Aspect.

"On the revenue side, while international sensor revenue growth remained
impressive at 17% compared with Q1 of last year, U.S. sensor revenue grew only
1% as hospitals continued to clamp down on spending. Despite this, we believe
our U.S. sales force expansion was the right decision. At a time when hospitals
are under significant financial pressure, our expanded sales force has helped us
to stay close to our customers, to protect our existing business, and to
encourage new customers to adopt. Moreover, as the findings from our ongoing
research assessing the impact of anesthetic management on patient outcomes
become public, and as new products are introduced, we expect that our expanded
U.S. sales force will be in a great position to leverage these developments."

Operating Results

Revenue increased by 4% in Q1 2009 as compared with Q1 2008. Revenue growth was
driven by a 5% growth in worldwide sensor revenue. U.S. sensor revenue increased
1% in Q1 2009 compared with Q1 2008 due to a 1% increase in units sold. U.S.
sensor pricing was up 1% in Q1 2009 as compared to Q1 2008 and was offset by a
1% reduction due to commissions to OEM partners related to sensor sales.
International sensor revenue increased 17% in Q1 2009 as compared with Q1 2008
due to a 19% increase in sensor unit volume. Worldwide equipment revenue
declined by 2% in Q1 2009 as compared to Q1 2008 due mostly to an 8% decline in
monitor and module unit sales.

Q1 2009 GAAP net income was $1.9 million, or $0.10 per diluted share, compared
with a loss of $235,000 or $0.01 per share in Q1 2008. Q1 2009 non-GAAP net
income was $3.0 million, or $0.16 per diluted share, compared with $1.1 million,
or $0.06 per diluted share in Q1 2008. Q1 2009 GAAP loss from operations was
$61,000, after the impact of stock-based compensation, and Q1 2009 non-GAAP
income from operations was $1.5 million compared with a Q1 2008 GAAP loss from
operations of $141,000 and a Q1 2008 non-GAAP income from operations of $1.8
million. GAAP and non-GAAP gross margins improved to 76.5% and 77.0%,
respectively, in Q1 2009 as compared with GAAP and non-GAAP gross margin of
73.4% and 73.9%, respectively, in Q1 2008. The increases in GAAP and non -GAAP
gross margin were primarily due to favorable manufacturing variances and Q1 2009
cost reductions. Q1 2009 GAAP and non-GAAP operating expenses increased by 7%
and 11%, respectively, compared with Q1 2008 due mainly to increases in sales
and marketing expenses as part of our sales force expansion and one-time charges
in general and administrative expenses to support shareholder matters. GAAP
operating expenses grew less than non-GAAP due to the Q1 2009 reduction in
stock-based compensation expense.

At April 4, 2009, the Company had cash and investments of $76.2 million and debt
of $58.0 million, which consisted of 2.50% convertible senior notes due 2014. At
December 31, 2008, the Company had cash and investments of $83.5 million and
convertible notes outstanding of $65.0 million. The outstanding debt decreased
by $7.1 million during Q1 2009 due to the Company`s repurchases at an aggregate
repurchase price of $3.8 million.

Outlook for Q2 2009

The Company`s outlook for Q2 2009 is as follows:

* Revenue is expected to be within a range of $24.0 million to $25.5 million;
* GAAP net income per fully-diluted share is expected to be within a range of a
$0.01 loss per share to $0.01 income per share; and
* Non-GAAP net income per fully-diluted share is expected to be within a range
of $0.04 to $0.07.

All non-GAAP amounts are exclusive of stock-based compensation. See below under
the heading "Use of non-GAAP Financial Measures" for a discussion of the
Company`s use of such measures. See attached table for the reconciliation of
GAAP to non-GAAP items for Q1 2009 and guidance for Q2 2009.

Use of non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with GAAP,
this earnings release contains non-GAAP financial measures that exclude the
effects of share-based compensation and the requirements of Statement of
Financial Accounting Standards No. 123(R), or "SFAS No. 123R".

Stock-based compensation related to stock options, restricted stock and other
stock-based awards is excluded from the Company`s non-GAAP costs of revenue,
non-GAAP gross profit margin, non-GAAPgross profit margin percent, non-GAAP
product margin percent, non-GAAP total operating expenses (research and
development, sales and marketing and general and administrative), non-GAAP
income from operations, non-GAAP operating margin, non-GAAP income before income
taxes, non-GAAP income before income taxes per diluted share, non-GAAP income
tax expense, non-GAAP effective income tax rate, non-GAAP net income, and
non-GAAP diluted earnings per share:

Stock-based compensation expenses consist of expenses for stock options,
restricted stock and other stock-based awards under SFAS No.123R. The Company
excludes these stock-based compensation expenses and the related tax effects
from non-GAAP measures primarily because they are non-cash expenses, because of
the complexity and considerable judgment involved in calculating their values,
and because they have in the past and are expected in the future to be driven by
a different set of factors than other expenses in these categories.

• The manner in which management uses the non-GAAP financial measure to conduct
or evaluate its business:

The non-GAAP financial measures used by management and disclosed by the Company
exclude the income statement effects of all forms of share-based compensation.
Reconciliations of the GAAP to non-GAAP income statement financial measures for
the three months ended April 4, 2009 and March 29, 2008 and expected net income
per diluted share for Q2 2009 are set forth in the financial tables attached to
this earnings release and the reconciliations to those GAAP financial measures
should be carefully considered.

The Company applied the modified prospective method of adoption of SFAS No.
123R, under which the effects of SFAS No. 123R are reflected in the Company`s
GAAP financial statement presentations for the three months ended April 4, 2009
and March 29, 2008. Gross profit, gross profit margin, product margin, costs of
revenue, total operating expenses (research and development, sales and
marketing, general and administrative), operating income, operating margin, net
income before taxes per share, net income and net income per share (referred to
as earnings per share, or EPS) are the primary financial measures management
uses for planning and forecasting future periods that are affected by
share-based compensation. Because management reviews these financial measures in
a manner calculated without taking into account the effects of SFAS No.123R,
these financial measures are treated as "non-GAAP financial measures" under
Securities and Exchange Commission rules. Management uses the non-GAAP financial
measures for internal managerial purposes, including as a means to compare
period-to-period results on a consolidated basis and as a means to evaluate the
Company`s results on a consolidated basis compared to those of other companies.
In addition, management uses certain of these measures when publicly providing
forward-looking statements on expectations regarding future consolidated
financial results. Management and the Board of Directors will continue to
compare the Company`s historical consolidated results of operations (revenue,
costs of revenue, gross profit margin, gross profit margin percent, product
margin percent, research and development expenses, sales and marketing expenses,
general and administrative expenses, total operating expenses, operating margin,
income before income taxes, income before income taxes per diluted share, income
tax expense, effective income tax rate, operating income as well as net income
(loss) and earnings per diluted share and (loss) per share), excluding
stock-based compensation, to financial information prepared on the same basis
during the Company`s budget and planning process, to assess the business, make
resource allocation decisions and to compare consolidated results to the
objectives identified for the Company. The Company`s budget and planning process
culminates with the preparation of a consolidated annual budget that includes
these non-GAAP financial measures. This budget, once finalized and approved,
serves as the basis for allocation of resources and management of operations.
While share-based compensation is a significant expense affecting the Company`s
results of operations, management excludes share-based compensation from the
Company`s consolidated budget and planning process to facilitate period to
period comparisons and to assess changes in gross margin, net income and
earnings per share targets in relation to changes in forecasted revenue.

Profit-dependent cash incentive pay to employees, including senior management,
also is calculated using formulae that incorporate the Company`s annual results
excluding share-based compensation expense.

• The economic substance behind management`s decision to use such non-GAAP
financial measures:

The Company discloses non-GAAP information to the public to enable investors to
more easily assess the Company`s performance on the same basis applied by
management and to ease comparison on both a GAAP and non-GAAP basis among other
companies that separately identify share-based compensation expenses. In
particular, the Company believes that it is useful to investors to understand
how the expenses and other adjustments associated with the application of SFAS
No. 123R are being reflected on the Company`s income statements.

• Why management believes the non-GAAP financial measure provides useful
information to investors:

Management believes that each of the non-GAAP measures reveals important
information about the economic model of the Company and the Company discusses
each of these items with the public on a regular basis on both a GAAP and
non-GAAP basis. The Company discloses this information to the public to enable
investors to more easily assess the Company`s past performance and estimate
future performance on the same basis applied by management and to ease
comparison on both a GAAP and non-GAAP basis among other companies that
separately identify share-based compensation expense. In particular, the Company
believes that it is useful to investors to understand how the expenses and other
adjustments associated with the application of SFAS No. 123R are being reflected
on the Company`s income statements.

• The material limitations associated with use of non-GAAP financial measure as
compared to the use of the most directly comparable GAAP financial measures:

The non-GAAP financial measures disclosed by the Company are not meant to be
considered superior to or a substitute for results of operations prepared in
accordance with GAAP. The non-GAAP financial measures disclosed by the Company
may be different from, and therefore may not be comparable to, similar measures
used by other companies.

Although these non-GAAP financial measures adjust expense, and diluted share
items to exclude the accounting treatment of share-based compensation, they
should not be viewed as a pro-forma presentation reflecting the elimination of
the underlying share-based compensation programs, as those programs are an
important element of the Company`s compensation structure and generally accepted
accounting principles indicate that all forms of share-based payments should be
valued and included as appropriate in results of operations.

• The manner in which management compensates for these limitations when using
non-GAAP financial measures:

Management takes into consideration the limitations in using non-GAAP financial
measures by evaluating the dilutive effect of the Company`s share-based
compensation arrangements on the Company`s basic and diluted earnings per share
calculations and by reviewing other quantitative and qualitative information
regarding the Company`s share-based compensation arrangements. Management also
uses these non-GAAP measures in conjunction with GAAP measures to assess the
impact of share-based compensation.

Conference Call Scheduled for 10:00 a.m. ET Today

Aspect will hold a conference call to discuss the results of the first fiscal
quarter of 2009 and management's outlook for 2009 at 10:00 a.m. Eastern Time
today, Wednesday, April 29, 2009. The call can be accessed live by dialing
1-800-510-9836 (domestic), 1-617-614-3670 (international), access code 28127608
or via the webcast at http://www.aspectmedical.com on the Investor page, or
http://www.earnings.com. It also will be available for replay until May 7, 2009,
by dialing 1-888-286-8010 (domestic), or 1-617-801-6888 (international), access
code 21615328. The webcast replay will also be available on Aspect`s website at
http://www.aspectmedical.com on the investor page.

About the Company

Aspect Medical Systems, Inc. (NASDAQ: ASPM) is a global market leader in brain
monitoring technology. To date, the Company`s Bispectral Index (BIS) technology
has been used to assess approximately 32 million patients and has been the
subject of more than 3,100 published articles and abstracts. BIS technology is
installed in approximately 80 percent of hospitals listed in the July 2008 U.S.
News and World Report ranking of America`s Best Hospitals and in approximately
73 percent of all U.S. operating rooms. In the last twelve months BIS technology
was used in approximately 19 percent of all U.S. surgical procedures requiring
general anesthesia or deep sedation. Aspect Medical Systems has OEM agreements
with eight leading manufacturers of patient monitoring systems.

Safe Harbor Statement

Certain statements in this release are forward-looking within the meaning of the
Private Securities Litigation Reform Act of 1995 and may involve risks and
uncertainties, including without limitation statements with respect to the
potential benefits and expected outcomes of the Company`s sales force expansion
program, the Company`s positioning to grow its business and support its
customers, its ability to improve its operating margins in the remainder of
2009, its ability to leverage outcomes research findings and new product
initiatives, as well as its guidance with respect to total revenue, product
revenue and net income (loss) and net income per fully diluted share for 2009 on
both a GAAP and non-GAAP basis. There are a number of factors that could cause
actual results to differ materially from those indicated by these
forward-looking statements. For example, the Company may not be able to control
expenses or grow its sales force or successfully implement its sales and
marketing strategies. The Company may also not be able to achieve widespread
market acceptance of its BIS monitoring technology, or to compete with new
products or alternative techniques that may be developed by others, including
third-party anesthesia monitoring products approved by the FDA and currently
available for sale. The Company also faces competitive and regulatory risks
relating to its ability to successfully develop and introduce enhancements and
new products such as its recently-introduced BIS VISTA Bilateral, BIS VIEW, BIS
VISTA and BIS Bilateral sensor In addition, the Company`s ability to become and
remain profitable will depend upon its ability to promote frequent use of the
BIS system by hospitals and anesthesia providers so that sales of its BIS
sensors, BIS monitors and original equipment manufacturers products all
increase. Cases of awareness with recall during monitoring with the BIS system
and significant product liability claims are among the factors that could limit
market acceptance. The Company also faces operational and financial risks as a
result of adverse global economic conditions. The Company incurred substantial
indebtedness in connection with the issuance of convertible notes in June 2007
and a significant portion of its cash flows from operations may be dedicated to
interest and principal payments on such notes. There are other factors that
could cause the Company`s actual results to vary from its forward-looking
statements, including without limitation those set forth under the heading "Risk
Factors" in the Company`s Annual Report on Form 10-K for the year ended December
31, 2008.

In addition, the statements in this press release represent the Company`s
expectations and beliefs as of the date of this press release. The Company
anticipates that subsequent events and developments may cause these expectations
and beliefs to change. However, while the Company may elect to update these
forward-looking statements at some point in the future, it specifically
disclaims any obligation to do so. These forward-looking statements should not
be relied upon as representing the Company`s expectations or beliefs as of any
date subsequent to the date of this press release.

For further information regarding Aspect Medical Systems, Inc.,

visit the Aspect Medical Systems, Inc. website at www.aspectmedical.com.

ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts and Percentages)

Three Months Ended
April 4, March 29,
2009 2008
(Unaudited) (Unaudited)

Revenue $ 25,300 $ 24,428
Costs of revenue 5,937 6,486
Gross profit 19,363 17,942

% of revenue 76.5 % 73.4 %

Operating expenses:
Research and development 4,015 3,939
Sales and marketing 10,828 10,202
General and administrative 4,581 3,942
Total operating expenses 19,424 18,083

Loss from operations (61 ) (141 )

Other income (expense):
Interest income 450 1,278
Interest expense (467 ) (948 )
Other income 3,069 -
Income before income taxes 2,991 189

Income tax provision 1,137 424
Net income (loss) $ 1,854 $ (235 )

Net income (loss) per share:
Basic $ 0.11 $ (0.01 )
Diluted $ 0.10(A ) $ (0.01 )

Shares used in computing net income (loss) per
share:
Basic 17,377 17,148
Diluted 20,632 17,148

(A) Includes adjustment of net income for the after tax effect of interest and
amortization expense related to the convertible notes as the note conversion is
dilutive in the respective period

ASPECT MEDICAL SYSTEMS, INC.
CONSOLIDATED REVENUE DATA
(In Thousands, Except Unit Amounts and Percentages)

Three Months Ended
April 4, March 29, %
2009 2008 Change
(Unaudited) (Unaudited)
REVENUE
WORLDWIDE
Sensors $ 21,581 $ 20,636 5 %

Monitors 1,898 2,097 (9 %)
Modules 1,013 981 3 %
Other Equipment 808 714 13 %
Equipment 3,719 3,792 (2 %)
Total Worldwide $ 25,300 $ 24,428 4 %

U.S.
Sensors $ 15,951 $ 15,815 1 %

Monitors 542 634 (15 %)
Modules 123 223 (45 %)
Other Equipment 479 391 23 %
Equipment 1,144 1,248 (8 %)
Total U.S. $ 17,095 $ 17,063 0 %

INTERNATIONAL
Sensors $ 5,630 $ 4,821 17 %

Monitors 1,356 1,463 (7 %)
Modules 890 758 17 %
Other Equipment 329 323 2 %
Equipment 2,575 2,544 1 %
Total International $ 8,205 $ 7,365 11 %

UNITS
WORLDWIDE
Sensors 1,598,000 1,486,000 8 %
Monitors 732 718 2 %
Modules (a) 1,362 1,560 (13 %)
Installed Base (b) 58,882 49,295 19 %

U.S.
Sensors 971,000 961,000 1 %
Monitors 205 180 14 %
Modules (a) 125 205 (39 %)
Installed Base (b) 32,431 28,532 14 %

INTERNATIONAL
Sensors 627,000 525,000 19 %
Monitors 527 538 (2 %)
Modules (a) 1,237 1,355 (9 %)
Installed Base (b) 26,451 20,763 27 %

(a) Represents module shipments to OEM customers
(b) Includes end-user module placements by OEM customers

ASPECT MEDICAL SYSTEMS, INC.
UNAUDITED RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Per Share Amounts and Percentages)

Three Months Ended
April 4, March 29,
2009 2008

GAAP costs of revenue $ 5,937 $ 6,486
Stock-based compensation expense (110 ) (119 )
Non-GAAP costs of revenue $ 5,827 $ 6,367

GAAP gross profit margin $ 19,363 $ 17,942
Stock-based compensation expense 110 119
Non-GAAP gross profit margin $ 19,473 $ 18,061

GAAP gross margin percent 76.5 % 73.4 %
Stock-based compensation expense 0.5 % 0.5 %
Non-GAAP gross margin percent 77.0 % 73.9 %

GAAP research and development expenses $ 4,015 $ 3,939
Stock-based compensation expense (409 ) (469 )
Non-GAAP research and development expenses $ 3,606 $ 3,470

GAAP sales and marketing expenses $ 10,828 $ 10,202
Stock-based compensation expense (480 ) (676 )
Non-GAAP sales and marketing expenses $ 10,348 $ 9,526

GAAP general and administrative expenses $ 4,581 $ 3,942
Stock-based compensation expense (519 ) (678 )
Non-GAAP general and administrative expenses $ 4,062 $ 3,264

GAAP total operating expenses $ 19,424 $ 18,083
Stock-based compensation expense (1,408 ) (1,823 )
Non-GAAP total operating expenses $ 18,016 $ 16,260

GAAP loss from operations $ (61 ) $ (141 )
Stock-based compensation expense 1,518 1,942
Non-GAAP income from operations $ 1,457 $ 1,801

ASPECT MEDICAL SYSTEMS, INC.
UNAUDITED RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES (CONT.)
(In Thousands, Except Per Share Amounts and Percentages)
Three Months Ended
April 4, March 29,
2009 2008

GAAP operating margin (0.2 %) (0.6 %)
Stock-based compensation expense 6.0 % 8.0 %
Non-GAAP operating margin 5.8 % 7.4 %

GAAP income before income tax $ 2,991 $ 189
Stock-based compensation expense 1,518 1,942
Non-GAAP income before income tax $ 4,509 $ 2,131

GAAP income before income tax per diluted share $ 0.17(A ) $ 0.01
Stock-based compensation expense 0.07 0.11
Non-GAAP income before income tax per diluted share $ 0.24(A ) $ 0.12

GAAP income tax expense $ 1,137 $ 424
Stock-based compensation expense 340 597
Non-GAAP income tax expense $ 1,477 $ 1,021

GAAP effective income tax rate 38 % 224 %
Stock-based compensation expense (5 %) (176 %)
Non-GAAP effective income tax rate 33 % 48 %

GAAP net income (loss) $ 1,854 $ (235 )
Stock-based compensation expense 1,178 1,345
Non-GAAP net income $ 3,032 $ 1,110

GAAP diluted income per share and loss per share $ 0.10(A ) $ (0.01 )
Stock-based compensation expense 0.06 0.07
Non-GAAP diluted income per share $ 0.16(A ) $ 0.06

(A) Includes adjustment of net income for the after tax effect of interest and
amortization expense related to the convertible notes as the note conversion is
dilutive in the respective period

Guidance for Q2 2009

GAAP net (loss) income per diluted share ($0.01) - $0.01
Stock-based compensation expense $0.03 - $0.08
Non-GAAP net income per diluted share $0.04 - $0.07

ASPECT MEDICAL SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

April 4, December 31,
2009 2008
(Unaudited) (Unaudited)

ASSETS
Current assets:
Cash and investments (A) $ 74,065 $ 78,051
Accounts receivable, net 14,004 13,193
Inventory, net 8,500 7,796
Deferred tax assets 4,729 4,729
Other current assets 4,043 3,962
Total current assets 105,341 107,731

Property and equipment, net 8,197 8,319
Long-term investments (A) 2,090 5,400
Deferred financing fees 1,575 1,852
Long-term deferred tax assets 11,132 12,090
Other assets 1,277 1,582
Total assets $ 129,612 $ 136,974

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 12,161 $ 15,443
Other current liabilities 169 307
Total current liabilities 12,330 15,750

Other long-term liabilities 173 194
Long-term debt 57,950 65,000
Stockholders' equity 59,159 56,030
Total liabilities and stockholders' equity $ 129,612 $ 136,974

(A) Investments with maturities beyond twelve months
are included in long-term investments.

Aspect Medical Systems, Inc.
J. Neal Armstrong, 617-559-7162
VP, CFO
or
Emily Anderson, 617-559-7032
Media Inquiries

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