Record Revenues and
Operating Profits Highlight Financial Performance; Merger Integration
Planning Launched; 2005 Guidance Reaffirmed
Milwaukee, WI, April 28, 2005 – Merge Technologies Incorporated, d.b.a.
Merge eFilm, (NASDAQ: MRGE), today announced the financial results for the
quarter ended March 31, 2005. Net sales for the quarter ended March 31,
2005, were $10,501,000, an increase of 22% over net sales of $8,637,000 in
the quarter ended March 31, 2004. Gross margin in the quarter ended March
31, 2005, was 67%, compared to 63% in the quarter ended March 31, 2004.
The Company’s operating margin, defined as operating income divided by net
sales, was 30% in the quarter ended March 31, 2005, compared to 25% in the
quarter ended March 31, 2004.
In the quarter ended March 31, 2005, operating income was $3,147,000, an
increase of 47%, compared to $2,141,000 in the quarter ended March 31,
2004. Income tax expense in the quarter ended March 31, 2005 was $1,128,
000, reflecting a 35% effective rate, compared to $839,000, a 38% effective
rate, in the quarter ended March 31, 2004. In the quarter ended March 31,
2005, net income was $2,096,000, generating diluted EPS of $0.15, compared
to $1,354,000 of net income and diluted EPS of $0.10 in the quarter ended
March 31, 2004.
Earnings per share before amortization and transaction related costs for
the quarter ended March 31, 2005, were $0.20, compared to $0.14 for the
quarter ended March 31, 2004.
The Company believes that the earnings before amortization and depreciation
and transaction related costs are a meaningful indicator of the Company’s
core operating performance. It is used by management in evaluating such
performance and in planning for future periods. 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 (see
attached PDF document.)
In the quarter ended March 31, 2005, the Company generated approximately
$2.5 million in cash flow from operations. The Company’s cash balance at
the end of the quarter was $22.6 million and there were no outstanding
draws on its $15 million unsecured bank line of credit.
Analysis of Results:
“I’m pleased to report to our shareholders that we have successfully
balanced our efforts to deliver strong financial performance this quarter
while simultaneously planning the integration of our pending merger with
Cedara Software Corp. and its subsidiary, eMed Technologies Corporation,”
said Richard A. Linden, President and CEO. “In the first quarter, we added
to our direct sales capabilities and expanded our relationship with large
national imaging center chains, increased our eCommerce strategies and
strengthened our FUSION RIS/PACS™ product portfolio by offering enhanced
financial and clinical applications. Simultaneously, we began the
important process of merger integration, and strengthened our capabilities
to scale with our future growth as we prepare the new company for post-
merger success. These efforts, along with our operational discipline, form
the foundation for reaffirming our pre-merger 2005 guidance.
“We continue to see accelerating interest from our target market for a
comprehensive workflow solution from a single, trusted healthcare software
solutions provider. In response to this trend, we are continuously
enhancing our North American distribution strategy through a combination of
adding direct sales staff, expanding national VAR partnerships and forming
new business development relationships. In the first quarter, we
successfully added direct sales staff and now have 25 employees focused on
direct sales activities. We continued our focus on building long-term
partnerships with national imaging center chains. Radiologix, an imaging
center corporation with 76 centers, is utilizing our RIS/PACS solution as a
key strategy to accelerate their workflow. Radiologix successfully
implemented FUSION RIS/PACS in its Northeast region, and will next focus on
moving toward full digital workflow in its San Francisco region. We
realized further market share gains in the RIS/PACS market by adding 18 new
FUSION customers, bringing our total FUSION RIS, PACS or RIS/PACS customer
base to 213 customers across 425 healthcare facilities. We developed an
inside sales strategy in the first quarter designed to enhance the workflow
of our current customer base by identifying add-on software module
opportunities and RIS/PACS version upgrades that will enhance their
workflow. This strategy will become increasingly important as we expand
both our installed base of RIS, PACS and RIS/PACS solutions and the
additional portfolio of solutions, add-on software modules and clinical
software applications that can be cross sold to these customers. The
leadership and operational tactics deployed three quarters ago in our
OEM/VAR group continue to yield strong results. We continue to see
strength and diversity in our OEM/VAR business, including the development
of our European VARs that resell our FUSION PACS solution.
“We expanded our eCommerce capabilities to further our extensive reach into
the medical imaging sector, offering a broader suite of software
applications over the web. In addition, we enhanced the product feature
set and pricing strategies for eFilm Workstation™, the most widely used
desktop medical diagnostic software in the world, increasing new sales and
renewal rates. These strategies continue to deliver growing revenues and
sales leads as our market leading position in desktop medical imaging
software drives customers to our full PACS and RIS/PACS solutions when they
are ready to convert to a fully digital workflow solution.
“In the first quarter, our product innovation group released new software
that continues to deliver on our promise to accelerate our customers’
productivity. We strengthened the capabilities of our core FUSION RIS/PACS
software by releasing a new version that provides advanced business
workflow capabilities, including accounts receivable, collections and cash
management, which improve our customers’ financial performance. Following
the closing of our AccuImage acquisition in January we focused on two key
initiatives – the integration of AccuImage advanced visualization software
capabilities into our RIS/PACS product suite and the sale of AccuImage
software applications to our OEM market. We also began selling AccuImage
software applications to FUSION PACS customers, and the Company is in the
process of integrating the AccuImage Advanced Visualization features into
the FUSION PACS and RIS/PACS workflow. We have also made steady progress
on integrating AccuImage software into eFilm Workstation that will allow us
to deliver value-add products to our thousands of eFilm Workstation
customers via our eCommerce channel.
“During the first quarter we strengthened the areas of our business that
must scale to support the growth and operational activities of the company.
We moved our corporate offices to a new location and focused on the design
and acquisition of business systems that will allow us to better manage
information and provide operational metrics to guide our business. Call
center management, financial and operational workflow and human resource
information systems are among the systems that will allow us more
efficiently manage our growing company. During the quarter, we also
focused on enhancing our professional services, creating a new
implementation and service delivery model designed to better serve our
customers and be more responsive to RIS/PACS implementations and service
requests. We also added new leadership to the professional service group
by hiring an executive to lead our growing implementation team responsible
for deploying our FUSION RIS, PACS and RIS/PACS solutions. And finally,
reflective of our size, complexity and market capitalization, we engaged an
investor relations firm to communicate our value and strategy to the
investment community.
“We believe we are making good progress toward planning the merger of
Cedara, eMed and Merge eFilm. We anticipate the merger to close within
several days following successful shareholder votes at the Merge eFilm and
Cedara shareholder meetings, which will be held on May 24, 2005. The
senior leadership of the companies has begun planning the integration of
the three organizations in order to achieve post-closing revenue and
operational goals. Additionally, cross-company integration teams are being
formed to focus on a number of key success initiatives, including go-to-
market strategies for the expanded direct and OEM sales teams, product
roadmap integration and human resources/organizational development. Above
all, we will remain focused on delivering enhanced value to our customers,
shareholders and employees by ensuring both near-term and long-term
execution of our business plan. While recognizing that our shareholders
will exercise their right to vote on this merger on May 24th, we remain
very focused on our planning activities realizing the importance of
executing our business plan immediately after the closing of the merger.
“In summary, I am pleased with our customers’ reception to our pending
merger with Cedara and eMed and the expanded products and services we can
bring to them. Operationally, we produced strong financial results while
making progress on important service and business growth infrastructure.
Furthermore, we enhanced our products to redefine the definition and value
proposition of RIS/PACS through the seamless integration of advanced
visualization and clinical applications into our product suite,” said
Linden.
Guidance:
The Company reaffirms its 2005 guidance to grow revenues 30% to 35% year
over year to a range of $48 million to $50 million. The Company expects
earnings per share before amortization and transaction related costs of
$0.88 to $0.95. The Company also reaffirms its GAAP reported diluted EPS
of $0.68 to $0.75, which incorporates an estimated effective tax rate of
approximately 30% to 35% for the year
