Increases Guidance
MILWAUKEE, Oct. 26 - Merge Technologies Incorporated, d.b.a. Merge Healthcare (Nasdaq: MRGE; TSX: MRG), today announced financial results for the quarter ended September 30, 2005. Revenue for the third quarter totaled a record $32.7 million, pre-tax cash earnings per share totaled $0.47, and GAAP earnings per share totaled $0.24. The Company's cash balance at the end of the quarter was $46.5 million and there were no outstanding draws on its unsecured bank line of credit.
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Third Quarter 2005 Highlights:
-- Delivered $32.7 million in revenues, $0.47 in pre-tax cash earnings per
share, and $0.24 of GAAP earnings per share
-- Realized gross margins of 79% and operating margins of 38%
-- Released Cedara PET/CT Workstation as a software plug-in application
available to OEM medical imaging companies and to healthcare
professionals as a diagnostic software workstation that can be
integrated into existing PACS and RIS/PACS solutions
-- Expanded the medical imaging software solutions available through our
eCommerce platform with the launch of I-Conference(TM), an easy-to-use
medical presentation software application, and Baby Explorer(TM), a 3D
fetal imaging application
-- Released the native JAVA version of our market leading DICOM toolkit,
continuing the Company's commitment to medical imaging industry
standards and expanding development toolkits and platforms for OEM
customers
-- Developed a new version of our market leading diagnostic workstation,
eFilm Workstation 2.1, which includes clinical application plug-in
modules for 3D/4D, virtual colonoscopy, calcium scoring, lung nodule
detection, and image stitching
-- Showcased several new and work-in-progress clinical applications in the
Oncology, Orthopedics and Mammography clinical specialties,
highlighting the Company's research and engineering efforts in
developing innovative software solutions for the clinical specialty
markets
-- Increased line of credit to $35 million to support Merge Healthcare's
future growth and strategic investments
Analysis of Results:
"I am pleased to report that we delivered strong financial, operational and organizational performance in our first full quarter subsequent to merging with Cedara Software Corp.," said Richard A. Linden, President and CEO. "These results represent the remarkable teamwork, effort, and dedication of our employees who have put forth the extra effort to merge and integrate our organizations while continuing to serve our customers, create innovative medical imaging software solutions, and sell our solutions to our target markets. We have been especially pleased with customer response to this merger, which has been overwhelmingly positive.
"In our first full quarter as a merged organization, we focused our merger and integration activities in four key areas: revenue and expense synergies, product innovation, and operations management," said Linden. "As a result of our efforts, we can point to the following accomplishments during the quarter:
-- Revenue Synergies - We introduced Cedara Software clinical applications
to the end-user healthcare market and to Merge eMed's RIS, PACS and
RIS/PACS customers. We also successfully cross-sold RIS and PACS
solutions to existing customers. Additionally, we capitalized on
opportunities within our existing OEM customer base by offering an
expanded portfolio of medical imaging technologies, development
platforms and products.
-- Expense Synergies - We are realizing annualized expense savings in
excess of $4.5 million due to a combination of expected public company
savings and the merging of certain corporate operational areas.
-- Product Innovation - Our Merge eMed product innovation team has worked
closely with our customers to develop the next generation product
roadmap for our RIS, PACS and RIS/PACS product lines, the results of
which will be shown at RSNA (Radiological Society of North America) in
late November. In addition, the team is engineering various clinical
application and advanced visualization software modules into our
RIS/PACS workflow solutions, further changing and enhancing the
traditional definition of RIS/PACS.
-- Operations - We merged several corporate functions and operational
areas, and acquired new telecommunications systems, help desk call
management systems and business and financial systems to support our
growth. Additionally, during the fourth quarter of 2005, we plan to
combine our two Toronto offices into a single location.
"Our strong results during the third quarter provide initial evidence of the operational and strategic benefits made possible by our recent merger with Cedara Software. We continue to be encouraged by key market trends that align with our initiatives to expand our portfolio of products to include clinical applications, and to pursue new healthcare markets beyond the traditional radiology setting. While important integration initiatives continue, and new challenges and opportunities lie ahead of us, we are confident that our strategy, market position and focus on operations will enable us to continue delivering value to our stakeholders: customers, employees and shareholders," said Linden.
Guidance:
The Company is increasing its guidance for 2005 due to strong financial and operational performance in the quarter ended September 30, 2005. Reported revenues for 2005 are expected to be in the range of $95 million to $98 million, up from the previous guidance of $90 million to $95 million. The Company is also increasing its 2005 pre-tax cash earnings per share guidance to a range of $1.60 - $1.70, up from $1.30 - $1.45, resulting in GAAP earnings per share excluding merger related costs of $0.80 - $0.85.
Merge Healthcare is a market leader in the development and delivery of medical imaging and information management software and services. With over twenty years of leadership in the medical imaging and healthcare information technology markets, Merge Healthcare provides innovative solutions for both OEM and the end-user healthcare markets. We custom engineer clinical and imaging applications and development tools that are on the forefront of medicine and its use of medical imaging for OEM and international customers. We develop innovative medical imaging software solutions that support end-to- end business and clinical workflow for radiology department and specialty practices, imaging centers and hospitals. Our innovative software solutions use leading-edge imaging software technologies that accelerate market delivery for our OEM customers, while our end-user solutions improve our customers' productivity and enhance the quality of patient care they provide. Merge common stock is traded on the NASDAQ stock exchange under ticker MRGE, and Merge equivalent exchangeable shares are traded on the Toronto Stock Exchange under the ticker MRG. For additional information, visit our website at http://www.merge.com .
Except for the historical information herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. When used in this press release, the words: guidance, believes, intends, anticipates, expects, and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements based on a number of factors, including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, ability to integrate acquisitions, unexpected outcomes to any pending or future litigation, changing economic conditions, credit and payment risks associated with end-user sales, dependence on major customers, dependence on key personnel, and other risk factors detailed in filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (A)
(in thousands)
September 30, December 31,
2005 2004
(unaudited)
Current assets:
Cash $46,465 $28,067
Accounts receivable, net 34,251 11,100
Inventory 1,838 1,082
Deferred tax benefit 3,023 3,076
Other current assets 4,945 1,912
Total current assets 90,522 45,237
Property and equipment, net 3,758 1,497
Purchased and developed software, net 22,633 9,751
Acquired intangibles, net 12,359 1,183
Goodwill 348,575 21,167
Other 2,350 108
Total assets $480,197 $78,943
Current liabilities:
Accounts payable $6,071 $2,020
Other accrued liabilities 10,329 2,616
Deferred revenue 12,129 8,678
Total current liabilities 28,529 13,314
Deferred tax liability and other 2,268 2,062
Total liabilities 30,797 15,376
Shareholders' equity 449,400 63,567
Total liabilities and shareholders' equity $480,197 $78,943
(A) The condensed consolidated balance sheets should be read in
conjunction with the Company's Annual Report on Form 10-K for fiscal
2004 and its Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2005, expected to be filed on or prior to
November 9, 2005.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A)
(in thousands, except share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net sales:
Software and other $ 24,744 $6,280 $ 45,608 $ 18,549
Services and maintenance 7,979 3,027 16,389 8,302
Total net sales 32,723 9,307 61,997 26,851
Cost of sales:
Software and other 2,144 964 5,199 3,040
Services and maintenance 3,451 1,490 7,564 4,525
Amortization 1,211 754 3,897 2,034
Total cost of sales 6,806 3,208 16,660 9,599
Gross margin 25,917 6,099 45,337 17,252
Operating costs and expenses:
Sales and marketing 4,252 1,683 8,787 5,088
Product research and
development 3,513 559 5,914 1,464
General and administrative 4,392 1,258 9,832 3,194
Acquired in-process research
and development 57 - 13,046 -
Restructuring and other
expenses 160 - 749 -
Depreciation and
amortization 990 202 2,282 587
Total operating costs
and expenses 13,364 3,702 40,610 10,333
Operating income 12,553 2,397 4,727 6,919
Total other income, net 160 92 324 252
Income before taxes 12,713 2,489 5,051 7,171
Income tax expense 4,596 252 6,715 2,083
Net income (loss) $8,117 $2,237 $(1,664) $5,088
Net income (loss) per
share - basic $0.25 $ 0.17 $(0.08) $0.39
Weighted average number of
common shares outstanding
- basic 32,491,717 13,039,123 21,722,210 12,964,960
Net income (loss) per
share - diluted $0.24 $ 0.16 $(0.08) $0.37
Weighted average number
of common shares
outstanding - diluted 34,271,312 13,748,894 21,722,210 13,773,599
(A) These condensed consolidated statements of operations should be read
in conjunction with the Company's Annual Report on Form 10-K for
fiscal 2004 and its Quarterly Report on Form 10-Q for the nine months
ended September 30, 2005, expected to be filed on or prior to
November 9, 2005.
Key Financial Metrics and Non-GAAP Reconciliation
The Company believes that earnings before amortization and depreciation,
merger transaction related costs and income taxes ("pre-tax cash
earnings") are a meaningful indicator of the Company's core operating
performance. This non-GAAP financial measure should be viewed as
supplemental to, and not as an alternative for, the Company's GAAP
financial measures and is reconciled as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 % 2005 2004 %
(in thousands, except per share data)
The Company's Key
Financial Results
Reported On GAAP
Basis:
Net sales 32,723 9,307 252% 61,997 26,851 131%
Gross margin 79% 66% 73% 64%
Operating income 12,553 2,397 424% 4,727 6,919 -32%
Operating margin 38% 26% 8% 26%
Net income (loss) 8,117 2,237 263% (1,664) 5,088
Earnings (loss) per
share - diluted $0.24 $0.16 50% $(0.08) $0.37
Weighted average
shares of common
stock outstanding
- diluted 34,271 13,749 21,722 13,774
GAAP to Non-GAAP
Reconciliation
GAAP net income
(loss) $8,117 $2,237 263% $(1,664) $5,088
Income tax 4,596 252 6,715 2,083
GAAP income before
tax 12,713 2,489 411% 5,051 7,171 -30%
Amortization and
depreciation 2,201 956 6,179 2,621
Restructuring,
transaction
expense and
purchase
accounting related
costs 1,230 - 15,827 -
Non GAAP pre-tax
cash earnings 16,144 3,445 369% 7,057 9,792 176%
Non GAAP pre-tax
cash earnings per
share - diluted $0.47 $0.25 88% $1.18 $0.71 66%
Weighted average
shares of common
stock outstanding
- diluted 34,271 13,749 22,924 13,774
