Merge Healthcare Incorporated
) reported net loss of 7 cents per share in the first quarter of
2013, worse than the year-ago net loss of 2 cents per share.
Considering stock-based compensation and interest expense as
regular expense for the company, adjusted loss per share in first
quarter was 3 cents, a huge disappointment when compared to the
year-ago adjusted earnings of 3 cents per share. Higher costs
leading to margin pressure and higher share count worsened the
loss at Merge.
Total revenues edged up 4.3% year over year to $63.6 million.
On a pro forma basis, sales inched up 3.9% to $64 million, in
line with the Zacks Consensus Estimate. The company noted that
its subscription-based pricing model, which was launched in the
first quarter of 2012, generated 15% of total revenue in the
first quarter with 16% rise in subscription backlog in the
Quarter in Detail
Merge inked 11 fresh iConnect contracts with well-regarded
healthcare systems in the U.S. On the other hand, the company's
Merge HoneyComb solutions gained traction with 7 new
Merge primarily derives revenues from three segments -
software and others (37.1% of total sales in the quarter),
professional services (19%), and maintenance and EDI (43.9%).
Barring maintenance and EDI, which recorded year-over-year growth
of 3.1% to $27.9 million, the software and other business, and
professional services registered decline of 3.5% to $23.6 million
and 28.7% to $12.1 million, respectively, in the quarter.
Total cost (excluding depreciation and amortization) increased
14.2% year over year to $28.2 million. First-quarter adjusted
gross margin declined a massive 360 basis points (bps) from the
year-ago quarter to 58.5%.
Sales and marketing expenses in the quarter were down 5.1% (to
$10.4 million) while product research and development expenses
jumped 12.3% (to $8.5 million) on a year-over-year basis. General
and administrative expenses dipped 17.6% year over year (to $7.1
million). As a result, adjusted operating expenses declined 4.2%
year over year to $26 million. Consequently, the company's
adjusted operating margin expanded 10 bps to 17.7% in the
Merge exited the quarter with cash (including restricted cash)
of $44.5 million, compared with $35.9 million at the end of
Merge continues to depend on the hospital capital expenditure
environment and reimbursement rates for advanced medical imaging.
Thus, the demand for the company's solutions is highly dependent
on the macroeconomic environment in the U.S.
Nonetheless, Merge serves a lucrative market with
multi-million dollar opportunities for its offerings. Meanwhile,
client wins and bookings growth is also encouraging. Recent
findings also demonstrate immense growth potential in the U.S.
and overseas market for the company.
Currently, the stock carries a Zacks Rank #2 (Buy). Other
healthcare Zacks Rank #2 stocks that warrant a look are
Intuitive Surgical Inc.
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MERGE HEALTHCAR (MRGE): Free Stock Analysis
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