Merge Reports First Quarter Financial Results
April 28 2015 - 7:01AM
Merge Healthcare Incorporated (Nasdaq:MRGE), a leading provider of
health information systems for medical imaging, interoperability,
and communication, today announced its financial and business
results for the first quarter of 2015.
"Merge achieved strong sales momentum in the first quarter of
the year in spite of a traditionally slow time of the year and the
acquisition of D.R. Systems, Inc. in the quarter. Exclusive of the
limited contribution from D.R. Systems, our healthcare segment
bookings increased 60% over the first quarter of 2014," said Justin
Dearborn, chief executive officer of Merge Healthcare. "Our sales
results were heavily influenced by increased traction in our large
hospital system installed base and a few large net new hospital
wins. Increased contract volume within our hospital market and
cross sell opportunities into our newly acquired D.R. Systems
installed base of more than 200 clients give us confidence that we
can exceed revenue of $248 million, which aligns with our current
covering analysts' 2015 average revenue estimates."
Financial Summary:
- GAAP net sales increased 7% to $54.4 million in the first
quarter of 2015 compared to $50.9 million in the first quarter of
2014;
- GAAP net income in the first quarter of 2015 was $17.7 million
compared to $0.3 million in the first quarter of 2014, primarily
due to $16.8 million of net benefits and costs associated with the
acquisition of D.R. Systems, the vast majority of which relates to
the release of $18.4 million of tax asset valuation reserves in
2015 which reflect additional value unlocked in the corporate tax
structure as a result of the acquisition;
- Adjusted net income increased 14% to $4.9 million (or $0.05 per
share) in the first quarter of 2015 compared to $4.3 million (or
$0.04 per share) in the first quarter of 2014;
- Adjusted EBITDA was $10.5 million in the first quarter of 2015
compared to $10.2 million in the first quarter of 2014; and
- Cash balance increased to $24.8 million as of March 31, 2015,
compared to $19.8 million, as of March 31, 2014, an increase of
25%, inclusive of the $13 million spent in February 2015 to acquire
D.R. Systems, Inc.
Business Highlights:
- Launched new business, iConnect® Network Services, to support
hospitals' and health systems' need to connect clinical
decision-making, economic outcomes, and patient populations through
online ordering, automated prior-authorization, and real-time
electronic distribution of exam results to referring healthcare
providers;
- Signed 14 enterprise-level imaging deals at a combination of
large hospitals and multi-site health systems in the first quarter
of 2015;
- Displaced competitive imaging products with Merge solutions at
a combination of more than 40 hospitals and health systems in the
first quarter of 2015; and
- Increased the number of active trials on eClinicalOS™ to 505 at
the end of the first quarter of 2015, or by 62%, compared to 311
active trials at the end of the first quarter of 2014. Increased
active customers on the platform to 125 as of the end of the first
quarter 2015, or 43%, compared to 87 customers at the end of the
first quarter 2014.
Quarter Results:
Results compared to the same quarter in the prior year on a GAAP
basis are as follows (in millions, except per share data):
|
Q1 2015 |
Q1 2014 |
Net sales |
$ 54.4 |
$ 50.9 |
Operating income |
3.8 |
4.4 |
Net income |
17.7 |
0.3 |
Net income per diluted share |
$ 0.11 |
$ 0.00 |
|
|
|
Cash balance at period end |
$ 24.8 |
$ 19.8 |
Non-GAAP results and other measures compared to the same quarter
in the prior year are as follows (in millions, except percentages
and per share data):
|
Q1 2015 |
Q1 2014 |
Non-GAAP results |
|
|
Adjusted net income |
$ 4.9 |
$ 4.3 |
Adjusted EBITDA |
10.5 |
10.2 |
Adjusted net income per diluted share |
$ 0.05 |
$ 0.04 |
|
|
|
Other measures |
|
|
Subscription, maintenance & EDI revenue
as % of net sales |
65.1% |
65.9% |
Days sales outstanding |
79 |
90 |
A reconciliation of GAAP net income to adjusted net income and
adjusted EBITDA is included after the financial information below.
See "Explanation of Non-GAAP Financial Measures" for
definitions of each of these non-GAAP measures and the reason
management believes that the adjustments made to arrive at the
non-GAAP financial measures provide useful information to
investors.
Operating Group Results:
Results (in millions) for our operating groups are as
follows:
|
Three Months
Ended March 31, 2015 |
|
Healthcare |
DNA |
Corporate/
Other |
Total |
Net sales: |
|
|
|
|
Software and other |
$ 13.1 |
$ 3.7 |
|
$ 16.8 |
Service |
7.2 |
2.3 |
|
9.5 |
Maintenance |
28.0 |
0.1 |
|
28.1 |
Total net sales |
48.3 |
6.1 |
|
54.4 |
Gross Margin |
28.2 |
4.0 |
|
32.2 |
Gross Margin % |
58.4% |
65.6% |
|
59.2% |
Expenses |
22.1 |
3.5 |
|
25.6 |
Segment income |
$ 6.1 |
$ 0.5 |
|
$ 6.6 |
Operating Margin % |
13% |
8% |
|
12% |
Net corporate/other expenses (1) |
|
|
$ 7.3 |
7.3 |
Income (loss) before income taxes |
|
|
|
(0.7) |
Adj. EBITDA reconciling adjustments |
5.4 |
0.6 |
5.2 |
11.2 |
Adjusted EBITDA |
$ 11.5 |
$ 1.1 |
$ (2.1) |
$ 10.5 |
Adjusted EBITDA % |
23.8% |
18.0% |
|
19.3% |
|
|
|
|
|
(1) Net corporate/other expenses
include public company costs, corporate administration costs,
acquisition-related expenses and net interest expense. |
|
|
Net Sales in the
Three Months Ended March 31, 2015 |
|
|
Healthcare |
DNA |
Total |
Revenue Source |
$ |
% |
$ |
% |
$ |
% |
Maintenance & EDI |
$ 28.0 |
58.0% |
$ 0.1 |
1.6% |
$ 28.1 |
51.7% |
Subscription |
1.3 |
2.7% |
6.0 |
98.4% |
7.3 |
13.4% |
Non-recurring |
19.0 |
39.3% |
-- |
0.0% |
19.0 |
34.9% |
Total |
$ 48.3 |
100.0% |
$ 6.1 |
100.0% |
$ 54.4 |
100.0% |
|
88.8% |
|
11.2% |
|
|
|
Explanation of Non-GAAP Financial Measures:
We report our financial results in accordance with U.S.
generally accepted accounting principles, or GAAP. This press
release includes certain non-GAAP financial measures to supplement
this GAAP information. Non-GAAP measures are not an alternative to
GAAP and may be different from and directly comparable with
non-GAAP measures used by other companies. A quantitative
reconciliation of GAAP net income available to common shareholders
to adjusted net income and adjusted EBITDA is included after the
financial information included in this press release.
Management believes that the presentation of non-GAAP results,
when shown in conjunction with corresponding GAAP measures,
provides useful information to it and investors regarding financial
and business trends related to results of operations, because
certain charges, costs and expenses reflect events that are not
essential to recurring business operations. In addition, management
believes these non-GAAP measures provide investors useful
information regarding the underlying performance of the
post-acquisition business operations when compared to the
pre-acquisition results of Merge and any significant acquired
company. Purchase accounting adjustments made in accordance
with GAAP can make it difficult to make meaningful comparisons of
the underlying operations of the business without considering the
non-GAAP adjustments that are provided and discussed herein.
Further, management believes that these non-GAAP measures improve
its and investors' ability to compare Merge's financial performance
with other companies in the technology industry. Management also
uses financial statements that exclude these charges, costs and
expenses for its internal budgets. While GAAP results are more
complete, these supplemental metrics are offered since, with
reconciliations to GAAP, they may provide greater insight into our
financial results. Management does not intend for the presentation
of these non-GAAP financial measures to be considered in isolation
or as a substitute for results prepared in accordance with
GAAP.
Additional information regarding the non-GAAP financial measures
presented herein is as follows:
- Subscription revenue is comprised of software, hardware and
professional services (including installation, training, etc.)
contracted with and payable by the customer over a number of
years. As such, the revenue from these transactions is
recognized ratably over an extended period of time. These
types of arrangements will include monthly payments (including
leases), SaaS and transaction-based clinical trial contracts,
renewable annual software agreements (with very high renew rate),
to specify a few contract methods, and may include minimum volume
or dollar commitments.
- Non-recurring revenue is comprised of perpetual software
license sales and includes software, hardware and professional
services (including installation, training and consultative
engineering services).
- Adjusted net income consists of GAAP net income available to
common stockholders, adjusted to exclude (a) preferred stock
dividends (b) share-based compensation expense, (c) restructuring
and other costs, (d) one-time tax benefits related to acquisitions
(e) preferred stock accretion of dividend equivalents, (f)
acquisition-related amortization, (g) cost of acquisitions, (h)
acquisition-related sales adjustments, and (i) acquisition-related
cost of sales adjustments.
- Adjusted EBITDA adjusts GAAP net income available to common
stockholders for the items considered in adjusted net income as
well as (a) remaining depreciation and amortization, (b) net
interest expense, (c) income tax expense (benefit).
Management has excluded certain items from non-GAAP adjusted net
income because it believes (i) the amount of certain expenses in
any specific period may not directly correlate to the underlying
performance of business operations and (ii) the adjustment
facilitates comparisons of pre-acquisition results to
post-acquisition results. In addition, certain adjustments are
described in more detail below:
- Acquisition-related amortization expense is a non-cash expense
arising from the acquisition of intangible assets in connection
with significant acquisitions. Management excludes
acquisition-related amortization expense from non-GAAP adjusted net
income because it believes such expenses can vary significantly
between periods as a result of new acquisitions and full
amortization of previously acquired intangible assets.
- Share-based compensation expense is a non-cash expense arising
from the grant of stock awards to employees and is excluded from
non-GAAP adjusted net income because management believes such
expenses can vary significantly between periods as a result of the
timing of grants of new stock-based awards, including grants to new
employees resulting from acquisitions.
- Acquisition-related sales and costs of sales adjustments
reflect the fair value adjustment to deferred revenues acquired in
connection with significant acquisitions. The fair value of
deferred revenue represents an amount equivalent to the estimated
cost plus an appropriate profit margin to perform services-related
software and product support, which assumes a legal obligation to
do so, based on the deferred revenue balances as of the date the
acquisition was completed. Management adds back this deferred
revenue adjustment, net of related costs, for adjusted net income
and adjusted EBITDA because it believes the inclusion of this
amount directly correlates to the underlying performance of
operations and facilitates comparisons of pre-acquisition to
post-acquisition results.
- Fully diluted shares as used in our non-GAAP measures includes
(a) GAAP weighted shares outstanding, (2) GAAP incremental shares
from the assumed exercise of stock options and the assumed lapse of
restrictions on restricted stock awards and (3) preferred shares on
an if-converted basis adjusted for the period of time that the
preferred shares are outstanding. For the current period,
preferred shares were outstanding for 35 of the 90 days in the
quarter.
Notice of Conference Call:
Merge will host a conference call at 8:30 AM ET on Tuesday,
April 28, 2015. The call will address first quarter results and
will provide a business update on the company's market outlook and
strategies for 2015.
Participants may preregister for this teleconference at
http://emsp.intellor.com?p=419634&do=register&t=8.Upon
registration, a confirmation page will display dial-in numbers and
a unique PIN, and the participant will also receive an email
confirmation with this information.
A replay via the Internet or phone will be available after the
call at
http://www.merge.com/Company/Investors/Conference-Call-Info.aspx.
About Merge
Merge is a leading provider of innovative enterprise imaging,
interoperability and clinical systems that seek to advance
healthcare. Merge's enterprise and cloud-based technologies for
image intensive specialties provide access to any image, anywhere,
any time. Merge also provides clinical trials software with
end-to-end study support in a single platform and other intelligent
health data and analytics solutions. With solutions that have been
used by providers for more than 25 years, Merge is helping to
reduce costs, improve efficiencies and enhance the quality of
healthcare worldwide. For more information, visit merge.com and
follow us @MergeHealthcare.
Cautionary Notice Regarding Forward-Looking
Statements
The matters discussed in this press release may include
forward-looking statements, which could involve a number of risks
and uncertainties. When used in this press release, the words
"will," "believes," "intends," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements.
Actual results could differ materially from those expressed in, or
implied by, such forward-looking statements. The potential risks
and uncertainties include those risks and uncertainties included
under the captions "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended December 31, 2014,
which is on file with the SEC and are available on our investor
relations website at merge.com and on the SEC website at
www.sec.gov. Except as expressly required by the federal securities
laws, Merge undertakes no obligation to update such factors or to
publicly announce the results of any of the forward-looking
statements.
MERGE HEALTHCARE
INCORPORATED AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
(unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2015 |
2014 |
Current assets: |
|
|
Cash (including restricted cash) |
$ 24,784 |
$ 42,531 |
Accounts receivable, net |
47,877 |
51,300 |
Inventory |
6,483 |
5,686 |
Prepaid expenses |
5,551 |
3,690 |
Deferred income taxes |
564 |
1,131 |
Other current assets |
8,746 |
11,110 |
Total current assets |
94,005 |
115,448 |
|
|
|
Property and equipment, net |
5,193 |
4,079 |
Purchased and developed software, net |
42,248 |
14,585 |
Other intangible assets, net |
34,706 |
17,956 |
Goodwill |
267,263 |
214,374 |
Deferred income taxes |
5,211 |
5,396 |
Other assets |
2,502 |
2,499 |
Total assets |
$ 451,128 |
$ 374,337 |
|
|
|
Current liabilities: |
|
|
Accounts payable |
$ 20,972 |
$ 21,072 |
Current maturities of long-term debt |
11,750 |
11,750 |
Accrued wages |
6,795 |
11,169 |
Restructuring accrual |
1,165 |
-- |
Other current liabilities |
3,502 |
4,996 |
Deferred revenue |
63,206 |
53,184 |
Total current liabilities |
107,390 |
102,171 |
|
|
|
Long-term debt, less current maturities, net
of unamortized discount |
210,352 |
213,676 |
Deferred income taxes |
3,769 |
4,025 |
Deferred revenue |
503 |
1,091 |
Income taxes payable |
1,114 |
1,109 |
Other liabilities |
1,757 |
1,664 |
Total liabilities |
324,885 |
323,736 |
|
|
|
Series A convertible preferred
stock |
50,000 |
-- |
|
|
|
Total Merge shareholders' equity |
68,728 |
50,115 |
Noncontrolling interest |
7,515 |
486 |
Total shareholders' equity |
76,243 |
50,601 |
Total liabilities and shareholders'
equity |
$ 451,128 |
$ 374,337 |
|
|
MERGE HEALTHCARE
INCORPORATED AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
for share and per share data) |
(unaudited) |
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2015 |
2014 |
Net sales |
|
|
Software and other |
$ 16,802 |
$ 15,083 |
Professional services |
9,484 |
10,489 |
Maintenance and EDI |
28,117 |
25,331 |
Total net sales |
54,403 |
50,903 |
Cost of sales |
|
|
Software and other |
6,182 |
6,101 |
Professional services |
6,764 |
6,347 |
Maintenance and EDI |
7,800 |
6,963 |
Depreciation and amortization |
1,481 |
1,595 |
Total cost of sales |
22,227 |
21,006 |
Gross margin |
32,176 |
29,897 |
Operating costs and expenses: |
|
|
Sales and marketing |
8,978 |
8,007 |
Product research and development |
8,228 |
7,580 |
General and administrative |
7,512 |
7,360 |
Acquisition-related expenses |
351 |
26 |
Restructuring and other expenses |
1,178 |
-- |
Depreciation and amortization |
2,099 |
2,482 |
Total operating costs and expenses |
28,346 |
25,455 |
Operating income |
3,830 |
4,442 |
Other expense, net |
(4,526) |
(4,136) |
Income (loss) before income taxes |
(696) |
306 |
Income tax benefit |
(18,391) |
(19) |
Net income |
17,695 |
325 |
Less: noncontrolling interest's
share |
(76) |
2 |
Net income attributable to Merge |
17,771 |
323 |
Less: preferred stock dividends and dividend
equivalents related to accretion |
5,328 |
-- |
Net income available to common
shareholders |
$ 12,443 |
$ 323 |
|
|
|
Net income per share - basic |
$ 0.11 |
$ 0.00 |
Weighted average number of common shares
outstanding - basic |
96,616,916 |
94,656,786 |
|
|
|
Net income per share - diluted |
$ 0.11 |
$ 0.00 |
Weighted average number of common shares
outstanding - diluted |
96,616,916 |
95,996,566 |
|
|
MERGE HEALTHCARE
INCORPORATED AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
Three Months
Ended |
|
|
March
31, |
|
|
2015 |
2014 |
Cash flows from operating
activities: |
|
|
|
Net income |
|
$ 17,695 |
$ 325 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
3,580 |
4,077 |
Share-based compensation |
|
1,265 |
1,530 |
Amortization of debt issuance costs &
discount |
|
222 |
492 |
Provision for doubtful accounts
receivable and allowances, net of recoveries |
|
290 |
525 |
Deferred income taxes |
|
(18,320) |
279 |
Net change in assets and liabilities |
|
(3,981) |
2,620 |
Net cash provided by operating
activities |
|
751 |
9,848 |
Cash flows from investing
activities: |
|
|
|
Cash paid for acquisitions, net of cash
acquired |
|
(63,059) |
-- |
Purchases of property, equipment and
leasehold improvements |
|
(1,248) |
(333) |
Purchased technology and capitalized software
development |
|
(393) |
(766) |
Change in restricted cash |
|
23 |
160 |
Net cash used in investing activities |
|
(64,677) |
(939) |
Cash flows from financing
activities: |
|
|
|
Proceeds from issuance of preferred
stock |
|
50,000 |
-- |
Stock issuance cost paid |
|
(288) |
-- |
Preferred stock dividends |
|
(413) |
-- |
Principal payments on term loans |
|
(2,938) |
(8,592) |
Waiver and amendment costs paid |
|
(573) |
-- |
Principal payments on capital leases |
|
(140) |
(167) |
Proceeds from exercise of stock options and
employee stock purchase plan |
|
578 |
51 |
Net cash provided by (used in) financing
activities |
|
46,226 |
(8,708) |
Effect of exchange rate changes on cash |
|
(24) |
-- |
Net (decrease) increase in cash and cash
equivalents |
|
(17,724) |
201 |
Cash and cash equivalents, beginning of
period (net of restricted cash) |
(1) |
42,322 |
19,337 |
Cash and cash equivalents, end of period (net
of restricted cash) |
(2) |
$ 24,598 |
$ 19,538 |
|
|
|
|
(1) Restricted cash of $209
and $392 as of December 31, 2014 and 2013, respectively. |
(2) Restricted cash of $186
and $232 as of March 31, 2015 and 2014, respectively. |
|
|
MERGE HEALTHCARE
INCORPORATED AND SUBSIDIARIES |
RECONCILIATION OF NET
INCOME AVAILABLE TO COMMON SHAREHOLDERS TO ADJUSTED
EBITDA |
(in thousands, except
for share and per share data) |
(unaudited) |
|
|
|
|
Three Months
Ended |
|
March
31, |
|
2015 |
2014 |
Net income available to common shareholders
of Merge |
$ 12,443 |
$ 323 |
Preferred stock dividend |
413 |
-- |
Share-based compensation expense |
1,265 |
1,530 |
Restructuring and other |
1,178 |
-- |
Items associated with significant
acquisitions: |
|
|
Tax benefits |
(18,393) |
-- |
Preferred stock accretion of dividend
equivalents |
4,915 |
-- |
Amortization of significant
intangibles |
2,185 |
2,247 |
Costs of acquisitions |
351 |
26 |
Sales adjustments |
632 |
162 |
Cost of sales adjustments |
(120) |
(25) |
Adjusted net income |
4,869 |
4,263 |
Depreciation and amortization |
1,395 |
1,830 |
Net interest expense |
4,258 |
4,161 |
Income tax expense (benefit) |
2 |
(19) |
Adjusted EBITDA |
$ 10,524 |
$ 10,235 |
|
|
|
Adjusted net income per share - diluted |
$ 0.05 |
$ 0.04 |
|
|
|
Non-GAAP fully diluted share count (1) |
104,083,899 |
95,996,566 |
|
|
|
(1) Includes convertible
preferred stock on an if-converted basis for the period
outstanding |
CONTACT: Media Contact:
Michael Klozotsky
Vice President, Corporate Marketing
312.946.2535
Michael.Klozotsky@merge.com
Mirage Energy (PK) (USOTC:MRGE)
Historical Stock Chart
From May 2024 to Jun 2024
Mirage Energy (PK) (USOTC:MRGE)
Historical Stock Chart
From Jun 2023 to Jun 2024