Merge Misses by a Penny, Margins Up - Analyst Blog
November 03 2011 - 11:15AM
Zacks
Merge Healthcare
(MRGE) reported adjusted EPS of 6 cents in the third quarter of
fiscal 2011, surpassing the prior-year quarter level of 4 cents but
missing the Zacks Consensus Estimate by a penny.
Solid growth across all the
company’s segments triggered a 33% year-over-year increase in total
revenue to $60.1 million in the quarter, almost in line with the
Zacks Consensus Estimate. The increased adoption of Meaningful Use
solutions coupled with growing demand for enterprise imaging
solutions were primarily responsible for the growth.
Merge derives revenues from three
sources – software and others, professional services, and
maintenance and EDI. The three segments registered annualized
growth of 55.1% to $20.1 million, 75.8% to $11.9 million and 10.2%
to $28.0 million, respectively, during the quarter. Recurring
revenues were nearly 57.5% of net sales during the quarter,
compared with 65% in the year-ago quarter.
Gross margin during the quarter
increased 600 basis points (bps) to 60.1% from 54.1% in the
year-ago quarter. The adjusted operating margin (excluding the
impact of certain one-time expenses) expanded 310 bps to 18.6%
during the quarter.
Merge exited the quarter with cash
(including restricted cash) of $44.6 million compared with $41.0
million at the end of fiscal 2010. Cash from core business
operations was $8.8 million compared with $8.0 million in the
year-ago quarter.
Outlook
Merge provided revenue guidance for
fiscal 2012. The company expects to report revenues in the range of
$288– $300 million. The Zacks Consensus Estimate of $268 million is
within the guidance range.
Merge’s growth prospect is highly
dependent on capital investments by hospitals for advanced imaging
solutions, which are in turn tied to the general economic
condition. The presence of many big players like General
Electric Co (GE) and McKesson Corporation
(MCK) has made the diagnostic imaging market highly competitive.
However, there is immense potential in the diagnostic imaging
market, especially with government’s emphasis on HIT and an ageing
population.
GENL ELECTRIC (GE): Free Stock Analysis Report
MCKESSON CORP (MCK): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis Report
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