Merge's reported third-quarter 2014 adjusted earnings per share of
$0.04, rebounding from the $0.01 earned in the year-ago quarter.
Although, pro forma revenues declined 6.1% to $54.2 million, the
top line steered ahead of the Zacks Consensus Estimate of $53
million. A dismal performance over the past few quarters and
falsification of the company's subscription backlog in its
eClinical business continued to raise negative sentiments. Notably,
the growth prospects of the company are highly dependent on the
capital investment environment at hospitals and reimbursement
rates. Yet, we cannot overlook the consistent contract wins and
bookings growth. Moreover, the transition to subscription-based
model gained traction. The huge market opportunity for its iConnect
and eClinical platforms is also encouraging. Evidently, Merge has
several positive catalysts to drive growth. Accordingly, we
reiterate the stock at Neutral.
Merge Healthcare (MRGE), based in Milwaukee, WI develops
healthcare information software solutions to create improved
comprehensive electronic record of the patients and deliver related
services. The company has expanded through several acquisitions,
the most notable one being that of image and information management
solutions provider, AMICAS, in Apr 2010.
Merge provides enterprise imaging solutions for radiology,
cardiology, orthopedics and eye care, a range of products for
clinical trials, financial and pre-surgical management software and
applications. For more than 25 years, healthcare providers, vendors
and researchers across the world have used Merge products to
improve patient care.
Merge currently operates through two groups Merge Healthcare and
Merge DNA (Data & Analytics). Merge Healthcare (holding 85% of
the company's traditional businesses) includes clinical solutions
that serve the needs of hospitals, health systems, ambulatory
settings and payers. Merge DNA on the other hand (consisting of the
rest) includes consumer health stations, clinical trial software
and other consumer-focused solutions. These two new operating
groups focus on two primary end users - providers and
Subscription Based Model: Merge primarily generates revenues
from the sale of software (including upgrades), hardware,
professional services and maintenance and Electronic Data
Interchange (EDI) services. Traditionally, majority of the
company's revenues were earlier generated through perpetual license
agreements under which the software, hardware and professional
services were also the source of non-recurring revenue and related
backlog. However, of late, the company perceived a change in
customers' buying habits with increased demand for
subscription-based arrangements for huge multi-location groups, as
well as single doctor practices. As a result, Merge, in the second
quarter of 2012, announced a shift in its operations to
Since inception in 1987, Merge has been a leader in transforming
film-based radiology images into digital ones in order to
facilitate distribution and diagnostic interpretation. The company
provides a wide range of products and services to its
The company's products range from standards-based development
toolkits to fully integrated clinical applications. Its solutions
optimize processes for healthcare organizations, ranging in size
from single-doctor practices to health systems, sponsors of
clinical trials, medical device industry, healthcare commerce
system and for the consumers of healthcare products and services.
These solutions are used by more than 1,500 hospitals, 6,000
clinics and labs, 250 healthcare equipment manufacturers and 80% of
the top pharmaceutical companies. The product portfolio consists of
Picture Archiving and Communication Systems (PACS), Clinical
Information Systems (CIS), Revenue Cycle Management, Software
Development Toolkits, Technologies and Platforms, Hosted Software
Solutions for Clinical Trial Data Management and most importantly
the Image Interoperability Platform iConnect.
iConnect is an interoperability and connectivity platform. It
offers hospitals, imaging centers, integrated delivery networks and
health information exchanges, the ability to create information
exchanges within their environments and with other entities. It
also provides access to imaging and diagnostic data across
disparate sites, geographies, specialties and providers. iConnect
solution is available in various packages iConnect Share (for the
sharing of images), iConnect Kiosk (for front office automation)
and iConnect Exchange (as a full interoperability solution).
Merge Healthcare Incorporated (MRGE): Read the Full
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