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MERGE EFILM
ANNOUNCES RECORD REVENUES AND EARNINGS
FOR THIRD QUARTER 2003 - Revenues grow
43%; Strategic acquisition of RIS Logic
delivers sales synergies
Milwaukee, WI, October 30, 2003 - Merge
Technologies Incorporated (NASDAQ: MRGE),
d.b.a. Merge eFilm, today announced financial
results for the quarter and nine months
ended September 30, 2003.
Revenues for the quarter ended September
30, 2003 were $7,619,000, an increase
of 43% over revenues of $5,322,000 for
the quarter ended September 30, 2002.
Revenues were $20,170,000 for the nine
months ended September 30, 2003, an increase
of 44% over revenues of $14,040,000 for
the nine months ended September 30, 2002.
Net income for the quarter ended September
30, 2003, was $1,625,000, an increase
of 55% over net income of $1,046,000 for
the quarter ended September 30, 2002.
Fully diluted EPS was $0.12 for the quarter
ended September 30, 2003 compared to fully
diluted EPS of $0.09 for the quarter ended
September 30, 2002.
Net income for the nine months ended September
30, 2003 was 4,342,000, an increase of
85% over net income of $2,350,000 for
the nine months ended September 30, 2002.
Fully diluted EPS was $0.35 for the nine
months ended September 30, 2003 compared
to fully diluted EPS of $0.22 for the
nine months ended September 30, 2002.
Gross margins increased to 66% for the
quarter ended September 30, 2003, compared
to 61% for the quarter ended September
30, 2002. Gross margins for the nine months
ended September 30, 2003 increased to
69% compared to 61% for the nine months
ended September 30, 2002. The Company's
operating margin, defined as operating
income divided by net sales, increased
to 23% in the quarter ended September
30, 2003, compared to 20% in the quarter
ended September 30, 2002. Operating margin
for the nine months ended September 30,
2003 increased to 26%, compared to 17%
for the nine months ended September 30,
2002. Cash at September 30, 2003 increased
245% to $15,238,000 from $4,411,000 at
December 31, 2002, due to strong cash
flow from operations and monies raised
in a private placement in the third quarter.
The financial results include approximately
2 ½ months of the operations of
RIS Logic. Included in the balance sheet
is a new line item, "billings in
excess of revenues - contracts in progress",
which represents future revenue to the
Company. This line item is the result
of the Company's determination that the
services associated with certain Radiology
Information System ("RIS") sales
are essential to our customer, resulting
in the Company recognizing both the service
fees and software license fees for these
sales on a percentage-complete basis.
As a result, the Company's aggregate deferred
revenue increased 143% to $4,592,000 from
$1,892,000 as the result of the Company's
continued growth in new RIS and PACS software
solution customers.
ANALYSIS OF RESULTS:
"I am pleased to report that the
strategic initiatives we launched in the
third quarter have delivered on expectations,"
said Richard A. Linden, President and
CEO. "Specifically, the RIS Logic
acquisition has strengthened our product
portfolio to include a full RIS/PACS solution,
enhanced our target market positioning
and accelerated the effectiveness of our
operations. The results are positive financial
performance, confirmed alignment with
market trends, growing market share, expanding
sales pipeline and demonstrable RIS/PACS
product innovation, all of which further
reinforced our belief that we are well
positioned for continued growth and financial
success.
"I am proud of our organization's
ability to stay focused on operational
excellence, bringing the best of Merge eFilm and RIS Logic together with a focus
on delivering enhanced value to both our
target market customers and our shareholders.
Our financial performance this quarter
benefited from a combined sales force
that increased our U.S. territory coverage
and the RIS Logic brand awareness that
helped accelerate RIS/PACS lead generation.
These results confirm the strategic importance
of adding the RIS component to our product
portfolio through the acquisition of an
established RIS market leader.
"We have refined our product development,
sales and marketing strategies based upon
the convergence of several important market
trends. The shortage of radiologists and
radiology technologists is approaching
20% in 2003, and at the same time there
has been a 15% growth in the number of
imaging centers, and a 16% increase in
average imaging center volume. Hospitals
are experiencing similar challenges in
radiology growth statistics and workforce
shortages. Our product innovation roadmap,
marketing and sales strategies are focused
on the integration of business and clinical
workflow for the purpose of accelerating
productivity for a specific target market
- imaging centers and small to medium
sized hospitals. Our strategy and RIS/PACS
product and professional service offerings
are aligned to address these market trends.
"Our combined company is now positioned
as one of the leading single-vendor RIS/PACS
providers focused primarily on the image
and information management needs of imaging
centers and small to medium-sized hospitals.
The marketplace reaction to the RIS Logic
acquisition was immediate and positive,
as evidenced by our ability to convert
RIS/PACS leads to new contracts in the
third quarter. We added eighteen new PACS
or RIS customers in this quarter. In addition,
we added two new RIS/PACS accounts, both
of which recognized the unique value proposition
in having a single vendor for integrated,
end-to-end automation of their clinical
and business workflow. We now have over
100 customers utilizing a combination
of RIS or PACS software modules. Additionally,
marketplace interest in our eFilm Workstation
continues to be strong as we are approaching
40,000 downloads of this most widely used
desktop diagnostic imaging software in
the world. These milestones in our sales
efforts, along with the accelerating strength
of our pipeline through add-on sales to
existing customers and new RIS/PACS opportunities,
reinforces our contention that our target
market needs a reliable, experienced single-solution
provider for RIS/PACS software and professional
services.
"We made steady progress on the integration
of our product innovation effort. We anticipate
our first integrated product, FUSION RIS/PACS,
to debut at the RSNA (Radiological Society
of North America) tradeshow in December.
FUSION RIS/PACS is an integrated workflow
management system that provides our customers
with a single-vendor solution for their
end-to-end business needs, a distinctive
advantage in their optimization of revenues
and cash flow. We also recently released
new versions of our eFilm Workstation
and FUSION PACS solutions to current customers.
These products, which offer enhanced clinical
and technical performance, will also make
their public debut at RSNA in December.
Finally, we continue to make progress
enhancing the productivity of our RIS
and PACS solutions with the integration
of embedded dictation and speech recognition.
This functionality has been released for
use with the RIS solution, and is in clinical
trials with the PACS solution, with an
expected release in early 2004.
"Finally, the continued strengthening
of our balance sheet supports both our
operating plans and strategic growth initiatives.
Specifically, we successfully raised $8
million in cash through a private placement,
generated record positive operating cash
flow for the quarter, significantly increased
our aggregate deferred revenue balances
representing future revenues to the Company
and remain debt-free.
GUIDANCE:
The Company anticipates market conditions
will support the continued growth of its
RIS/PACS software product and professional
service offerings. The Company's strong
year-to-date performance, accelerating
pipeline of RIS/PACS opportunities and
recognition of certain RIS software sales
revenues on a percentage-complete basis,
positions the Company to refine its guidance
within the previously stated range. Revenues
in 2003 are expected to be $29 million,
with year-over-year growth over 40%. The
Company expects fully diluted EPS on an
after-tax basis to be $0.49. Further,
the Company anticipates aggregate deferred
revenues will continue to grow, representing
future software licensing and service
revenues. The Company also reaffirms its
guidance that the RIS Logic acquisition
will be accretive in 2004 and beyond.
Click
Here for Q3-2003 Financials
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Attn: Beth Frost-Johnson
Merge Healthcare
6737 West Washington St.
Suite 2250
Milwaukee, WI 53214
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| 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 “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, the forward-looking statements based on a number of factors, including, but not limited to, the uncertainty created by, the adverse impact on relationships with customers, potential customers, suppliers and investors potentially resulting from, and other risks associated with, the changes in the Company’s senior management; costs, risks and effects of the investigation by the Audit Committee of the Board of Directors; the impact of the restatement of financial statements of the Company and other actions that may be taken or required as a result of such restatement; the Company's inability to timely file reports with the Securities and Exchange Commission; risks associated with the Company's inability to meet the requirements of The NASDAQ Stock Market for continued listing, including possible delisting; costs, risks and effects of legal proceedings and investigations, including the informal, non-public inquiry being conducted by the Securities and Exchange Commission and class action, derivative, and other lawsuits; 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, 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 the Company’s filings with the Securities and Exchange Commission. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason.
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