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Merge Technologies, Inc. (MRGE)
Q1 2010 Earnings Call
May 6, 2010 8:30 am ET
Julie Pekarek - Head of IR
Justin Dearborn - CEO
Steve Oreskovich - CFO
Paul Merrild - SVP of Marketing and Business Development
Eric Martinuzzi - Craig-Hallum Capital
Corey Tobin - William Blair & Company
Eric Coldwell - Robert W. Baird & Co.
Akshay Madhavan - Redwood Capital
» Accuray Incorporated F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
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This call will begin with Steve's discussion of our financial results from the last quarter. Due to the recent completion of our AMICAS acquisition, Steve will also discuss certain financial data regarding each of the respective companies in the first quarter of 2010. Justin will follow Steve with an overview of our business progress over the past quarter and will also provide a detailed discussion of the acquisition of AMICAS.
Before we get started, please consider that our comments today may contain forward-looking statements under the Private Securities Litigation Reform Act of 1995 and not historical facts. Our actual results may differ. Various critical factors that could affect our future results are set forth in our recent SEC filings and press releases. The company undertakes no obligation to update or revise any forward-looking statements.
In addition, we may refer today to non-GAAP financial measures. These measures are supplemental to our GAAP financial measures and should not be viewed as an alternative to them. For greater information regarding these metrics, please see the related discussion in our earnings release.
With that, I will turn the call over to Steve.
Thank you, Julie. Good morning everyone and thank you for joining us. As Julie mentioned, I will review our financial results for the first quarter of 2010 and compare the results to both the fourth quarter and the first quarter of 2009. I will also review certain first quarter 2010 financial information for AMICAS.
As Julie mentioned, I will provide some non-GAAP information that we currently use internally to manage our business, including recurring revenue as a percentage of total revenue, non-recurring revenue backlog, and adjusted EBITDA.
A detailed reconciliation of GAAP net income to adjusted EBITDA is located in the tables at the back of the earnings release that we issued last night, a copy of which can be obtained from the Investors section of our website at www.merge.com.
In addition, I will focus my comparative remarks primarily on the fourth quarter of 2009 as such period includes a full quarter's activity from our two 2009 significant acquisitions.
Before I begin, I would like to welcome our bondholders as well as the preferred and common stockholders who have recently invested in the company through the respective placements about one week ago. We are grateful to both, as the funds you provided helped us bring to market a leading provider of medical imaging software solutions in North America with significant cross-selling opportunities and further scale to increase our international distribution channels.
Net sales for the first quarter of 2010 totaled $20 million, which grew 4% from the $19.3 million in the fourth quarter and 30% from $15.3 million in the first quarter of 2009.
Net sales for the first quarter include in excess of 60% from recurring revenue, which is consistent with the fourth quarter of 2009.
Non-GAAP net sales, which considers the purchase accounting impact to GAAP revenue was $20.3 million for the first quarter.
Based upon the information we received, GAAP net sales for AMICAS for the first quarter was $29.4 million, of which 65% was recurring revenue and the non-GAAP net sales amount was $30 million. We are pleased with the continued strength of the recurring revenue base of both companies.
We are also happy with the backlog of consigned customer orders, which will produce non-recurring revenue in future quarters. Our non-recurring revenue backlog as of March 31st increased to $8.9 million. The non-recurring revenue backlog for AMICAS as of March 31st was $35.3 million, resulting in $44.2 million on a combined basis.
Our gross margin increased to 68% in the first quarter compared to 66% in the fourth quarter, primarily as a result of an increase in the mix of software and other sales as a percentage of overall sales.
Both operating and net income in the first quarter were significantly impacted by $5.9 million worth of acquisition-related expenses incurred primarily as a part of the AMICAS acquisition.
The most notable of these is the payment of $4.3 million, which represents our half of a breakup fee paid to a former suitor for the company. As a result of such costs, we had a GAAP operating loss of $3.2 million in the first quarter of 2010, compared to operating income of $1.5 million in the fourth quarter of 2009. Excluding the acquisition-related costs in both periods, operating income for the first quarter would have been $2.8 million, compared to $1.7 million in the fourth quarter.
In the first quarter, there was a GAAP net loss of $3.2 million or $0.04 per diluted share compared to the fourth quarter net loss of $2.1 million or $0.03 per diluted share. Please recall that the net loss in the fourth quarter of 2009 includes a charge of $3.3 million as a result of the early retirement of prior debt.