Financial Highlights
- Total consideration of $130 million, consisting of $77.2
million in cash and 4.1 million shares of common stock
- Positions the Company for stronger future revenue growth and
enhanced margins, while achieving meaningful cost synergies
- Projected to increase the Company's annualized Adjusted EBITDA
run-rate approximately $20 million by year end 2012
- Expected to be modestly accretive to Adjusted Net Income per
diluted share in the second half of 2011
Strategic Highlights
- Existing products provide for tighter EHR integration leading
to increased physician adoption and Meaningful Use
- Technology pipeline enables new growth opportunities associated
with clinical analytics and revenue cycle management
- Leverages core transcription business and provides further
differentiation within the HCIT market
- Enables opportunities for greater penetration of the in-house
transcription market segment
Operational Highlights
- Provides ownership of speech and Natural Language Understanding
technologies
- Facilitates consolidation to a single speech recognition
platform
- Accelerates M*Modal's technology roadmap
- Provides a broader product offering to local and regional
transcription partners
- Leverages M*Modal's cloud-based services to enhance gross
margins
MedQuist Holdings Inc. (Nasdaq:MEDH), a leading provider of
integrated clinical documentation solutions for the U.S. healthcare
system, announced the signing of a definitive agreement to acquire
M*Modal and its advanced Speech Understanding™ technology for total
consideration of $130 million. The transaction is subject to
customary closing conditions, including review under the
Hart-Scott-Rodino Act, and is expected to close prior to the end of
the third quarter of 2011.
M*Modal's current annualized revenue run rate of $24 million
(which includes amounts billed to MedQuist Holdings) is derived
from its proprietary cloud-based software solutions that enable
healthcare providers to easily convert speech into structured
clinical information. This improves physician efficiency, enhances
the integration of the physician narrative into electronic health
records (EHR), and contributes to the analysis of clinical
information for quality and reimbursement requirements.
Vern Davenport, MedQuist Holding's newly appointed Chairman and
Chief Executive Officer, noted, "This transaction combines
MedQuist's strengths of capturing the physician narrative, our
large customer base, global presence and deep domain expertise in
healthcare with the innovations of M*Modal's currently available
technologies and strong product roadmap. Their scalable cloud-based
solutions, Speech Understanding™ platform, strong technology
pipeline and a large team of speech and language scientists and
engineers complement MedQuist's clinical workflow solutions."
Michael Finke, Chief Executive Officer of M*Modal, added, "Given
the outstanding strategic fit between us, we are positioned to
create a whole new level of clinical documentation workflow and
analytics solutions that address some of the healthcare industry's
most pressing issues. This merger gives M*Modal the immediate
resources and access to customers required to accelerate and extend
our technology development efforts."
MedQuist and M*Modal provide advanced speech understanding
technologies and services that seamlessly capture the physician
narrative, according to Davenport. "We have an opportunity to
jointly become a more visible, strategic technology enabler of
healthcare organizations as they strive to successfully adopt
electronic health records, navigate the move to a value-based
healthcare system and derive critical quality and outcomes data
from the structured clinical intelligence we create," he said.
The purchase price, which is subject to customary working
capital and cash adjustments, is comprised of $48.4 million in cash
paid at closing, $28.8 million in installments paid in cash over
the next three years and 4.1 million shares of MedQuist Holdings
common stock currently valued at $52.8 million, based on $12.76 per
share using the average closing price over the trailing 10 trading
days ending immediately prior to the date of signing the definitive
agreement. The Company will fund the cash component of the purchase
price from available cash. Additionally, the Company expects to
incur fees and expenses, including additional restructuring and
integration costs associated with this transaction, of
approximately $13 million. The Company also expects to accelerate
the amortization of approximately $12 million of certain prepaid
licensing fees.
The Company obtained consents from the majority of both its
senior and subordinated lenders to exclude this acquisition from
the appropriate acquisition-related covenants. The Company's
subordinated lenders have agreed to certain additional
modifications; principally, reducing the amounts due under existing
make-whole provisions, if such debt is exchanged prior to maturity,
increasing allowable leverage limits, uncapping the future use of
common shares allowed to be used for acquisition and increasing
annual amounts available for dividends and stock repurchases up to
$25 million, plus available excess cash, as defined.
The Company intends to provide more detailed integration,
organizational and branding plans at closing and any updates
necessary to its previously issued performance goals for 2011 when
it reports second quarter results in mid-August.
Investor Conference Call and Web Simulcast
MedQuist Holdings will host a conference call on July 12, 2011,
at 8:00 a.m. CT to discuss the transaction. The number to call for
the interactive teleconference is (212) 231-2903. A replay of the
conference call will be available through Tuesday, July 19, 2011,
by dialing (402) 977-9140 and entering the confirmation number,
21531191.
A live broadcast of MedQuist Holdings' conference call will
be available online at the Company's website,
www.medquistholdings.com, under Investor Relations or
http://www.videonewswire.com/event.asp?id=80865 on July 12, 2011,
beginning at 8:00 a.m. CT. The online replay will follow
shortly after the call and continue for one year.
About MedQuist
MedQuist is a leading provider of medical transcription services
and a leader in technology-enabled clinical documentation workflow.
MedQuist's enterprise solutions – including mobile voice capture
devices, speech recognition, Web-based workflow platforms and a
global network of medical editors – help healthcare facilities
improve patient care, increase physician satisfaction, and lower
operational costs. For more information, please visit
www.medquist.com.
About M*Modal
M*Modal, a leader in advanced Speech and Natural Language
Understanding technology, transforms narrative medical
documentation into structured, encoded information to create
meaningful, valuable clinical intelligence that can be shared,
analyzed, and used to inform collaborative care. More than 800
healthcare organizations nationwide utilize M*Modal's solutions to
re-define the role of clinical narrative in improving and promoting
quality of care, clinical efficiency, financial performance, and
EHR adoption. For more information, please visit
www.mmodal.com.
Forward-Looking Statements
Information provided and statements contained in this press
release that are not purely historical, such as
statements regarding the timing and impact of MedQuist's potential
acquisition of M*Modal, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E
of the Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements only
speak as of the date of this press release and MedQuist Holdings
Inc. assumes no obligation to update the information included in
this press release. Statements made in this press release that are
forward-looking in nature may involve risks and uncertainties.
Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees of future performance and are subject
to certain risks, uncertainties and assumptions that are difficult
to predict, including, without limitation, specific factors
discussed herein and in other releases and public filings made by
MedQuist Holdings Inc. (including filings by MedQuist Holdings Inc.
with the SEC). Although MedQuist Holdings believes that the
expectations reflected in such forward-looking statements are
reasonable as of the date made, expectations may prove to have been
materially different from the results expressed or implied by such
forward-looking statements. Unless otherwise required by law,
MedQuist Holdings also disclaims any obligation to update its view
of any such risks or uncertainties or to announce publicly the
result of any revisions to the forward-looking statements made in
this press release.
Non-GAAP Financial Measures
We have provided the Company's Adjusted EBITDA,
a non-GAAP financial measures, on a forward-looking basis in
this document. We are unable to present a quantitative
reconciliation of this forward-looking non-GAAP financial measures
to the most directly comparable forward-looking GAAP financial
measures because management cannot predict, with sufficient
reliability, contingencies relating to potential changes in
tax valuation allowances, potential changes to customer
accommodation accruals, potential restructuring impacts,
contingencies related to past and future acquisitions, and changes
in fair values of our derivative instruments, all of which are
difficult to estimate primarily due to dependencies on future
events.
Adjusted EBITDA
Adjusted EBITDA, a non-GAAP financial measure, is defined by the
Company as Net Income excluding taxes, interest, equity in
income of an affiliated company, depreciation, amortization, cost
of legal proceedings and settlements, acquisition related charges,
restructuring charges, stock compensation, amortization of certain
prepaid licensing fees and certain non-recurring accrual
reversals.
Adjusted Net Income
Adjusted Net Income, a non-GAAP financial measure, is defined by
the Company as Adjusted EBITDA less depreciation, amortization
expense for capitalized intangible assets (excluding acquired
intangibles), less interest expense (net of non-cash interest), and
less current tax provision. We measure Adjusted Net Income based on
diluted shares outstanding (see below). Management believes that
utilization of Adjusted Net Income is an important non-GAAP
financial measure of our normalized operating results.
Diluted Shares Outstanding
For purposes of evaluating our results on per-share metrics,
many of our computations utilize proforma diluted share
computations. Our measure of proforma diluted shares include
our Basic and Diluted share computations utilized for GAAP
purposes, plus the impacts of minority interest shares outstanding,
shares to be issued to another minority shareholder, restricted
inducement shares to be granted to certain of M*Modal's continuing
employees, restricted shares issued to the Company's Chairman and
Chief Executive Offer and restricted stock awards associated with
the termination of MedQuist Inc.'s long-term incentive plan.
CONTACT: MedQuist Investors:
Tony James
Chief Financial Officer
tjames@medquist.com
(615) 261-1509
Tripp Sullivan
Corporate Communications, Inc.
tripp.sullivan@cci-ir.com
(615) 324-7335
MedQuist Media:
Thomas Mitchell
Director of Marketing
tmitchell@medquist.com
(615) 798-6630
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