MOUNT LAUREL, N.J., May 12 /PRNewswire-FirstCall/ -- MedQuist Inc. , the largest Medical Transcription Service Organization (MTSO) in the world, on Friday, May 9th, filed its Form 10-Q quarterly report with the U.S. Securities and Exchange Commission for the quarter ended March 31, 2008.
Revenue for the first quarter of 2008 was $83.7M compared with $89.1M in the first quarter of 2007. The decrease in revenue of $5.4M or 6% from the prior year period was primarily due to customer losses experienced during the second half of 2007. The operating loss for the quarter increased to a loss of $5.4M compared to a loss of $3.3M in the first quarter of 2007. "Our first quarter results were negatively impacted by increased costs associated with governmental investigations and proceedings and the defense of civil litigation matters. Excluding the cost of the billing investigation and legal proceedings, net, which was $6.4M in the first quarter of 2008 and $1.7M in the first quarter of 2007, our operating profit improved to a profit of $1.0M in the first quarter of 2008 compared to an operating loss of $1.6M in the first quarter of 2007. This improvement reflects the savings from our restructuring efforts in late 2007, as well as, the benefits of our expanded use of speech recognition technology," said Howard Hoffmann, President and Chief Executive Officer.
Notable 1Q orders included the sale of our #1 rated SpeechQ for Radiology product to one of the largest multi-location hospital systems in the country and a new multi-year, multi-million dollar outsourcing services agreement with one of the country's largest IDNs.
Cost of revenue declined faster than revenue reflecting both the company's restructuring efforts and the expanded use of speech recognition technology. "At this point, we have over 40% of our volumes running through DocQspeech on our DocQment Enterprise Platform (DEP). We believe this important tool will help us continue to improve our margins over time," said Hoffmann.
Selling general and administrative expenses declined $1.6M or 11% to $13.1M in the first quarter of 2008 compared to $14.7M in the first quarter of 2007. This decline reflects the benefits of the restructuring actions taken by the company during the second half of 2007.
Research and development expense increased $.7M or 20% to $4.1M in the first quarter of 2008 compared to $3.4M in the first quarter of 2007. The R&D increase reflects additional cost related to investments in our industry- leading DEP technology.
Cost of Investigation and Legal Proceedings, net, increased to $6.4M in the first quarter of 2008 compared to $1.7M in the first quarter of 2007. In addition to legal expenses, the first quarter of 2008 included a charge of $1.5M related to the proposed settlement of all claims related to the consolidated medical transcriptionists' putative class action while the first quarter of 2007 included the benefit of $3.5M of insurance recoveries which were exhausted by the first quarter of 2008. These two items generated the increased cost of investigation and legal proceedings in the first quarter of 2008.
In addition to the United States generally accepting accounting principles, or GAAP, results provided throughout this document, MedQuist has provided non-GAAP financial measurements. Management believes that the non- GAAP financial measures used to manage the business may provide users additional useful information. The tables attached to this press release include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and a description of why the non- GAAP financial measures are useful to investors.
On or about April 21, 2008, MedQuist reached a tentative settlement of all claims related to the consolidated medical transcriptionists' putative class action lawsuit in exchange for payment by MedQuist of $1.5 million plus certain injunctive relief. The court has been notified of the tentative settlement and the lawsuit has been stayed while the parties continue to negotiate the settlement documentation. The tentative settlement contemplates notice to a settlement class consisting of all medical transcriptionists paid by the line for the period from November 29, 1998 through execution of the settlement agreement and is conditioned on final approval by the court.
Forward-Looking Statements
This report contains forward-looking statement that are based on current expectations, estimates, forecasts and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as "projects," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "should," "would," "could," "will," "opportunity," "potential" or "may," variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Exchange Act. These statements are only predictions and, as such, are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict, including, without limitation, the risk that a settlement is not ever reached in the consolidated medical transcriptionists' putative class action lawsuit. For a discussion of these risks, uncertainties and assumptions, any of which could cause our actual results to differ from those contained in the forward-looking statement, see the section of MedQuist's Annual Report on Form 10-K for the year ended December 31, 2007, entitled "Risk Factors" and discussions of potential risks and uncertainties in MedQuist's subsequent filings with the Securities and Exchange Commission.
Operating profit, excluding Cost of investigation and legal proceedings, is a financial measure not computed in accordance with United States generally accepted accounting principles, or GAAP. The Company believes that this non- GAAP measure, when presented in conjunction with comparable GAAP measures, is useful to both management and investors in analyzing the Company's ongoing business and operating performance. The Company believes that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view the Company's financial results in the way that management views financial results. Management believes Operating profit, excluding Cost of investigation and legal proceedings is useful as a supplemental measure of the Company's financial results because it removes costs not related to the Company's operating performance. Management believes that Operating profit, excluding Cost of investigation and legal proceedings should be considered in addition to, but not as a substitute for items presented in accordance with GAAP that are presented in this press release. A reconciliation of Operating profit, excluding Cost of investigation and legal proceedings to Operating profit is provided above.
CONTACT: Kathleen Donovan, Chief Financial Officer of MedQuist Inc.,
+1-856-206-4000
Web site: http://www.medquist.com/
