SAINT PAUL, Minn., Jan. 7, 2015 /PRNewswire/ -- MGC Diagnostics Corporation (NASDAQ: MGCD), a global medical technology company, today reported financial results for the fourth quarter and fiscal year ended October 31, 2014.
- Total 2014 fourth quarter domestic equipment, supplies and accessories revenues decreased 11.8% to $5.4 million, compared to $6.1 million in the 2013 fourth quarter. Excluding the effect of revenue from competitive conversions in each period, domestic equipment and accessories revenue grew 19.5% in the fiscal 2014 fourth quarter, compared to the same quarter last year.
- Domestic service revenues increased 26.8% to $1.8 million, compared to $1.4 million for the same quarter last year. The Attachment Rate, which reflects the percentage of Extended Service Contracts that were sold during customer equipment purchases, was 31% for the fiscal 2014 fourth quarter, which is consistent with the same period last year.
- International equipment, supplies and accessories revenues grew 57.6% to $2.5 million, compared to $1.6 million for the fiscal 2013 fourth quarter, due primarily to the $1.3 million of MediSoft revenues. Excluding MediSoft revenues, international equipment, supplies and accessories revenues fell 25.9% due to lower sales in Latin America, Europe and the Middle East.
“Fiscal 2014 was an important transition year for MGC. The headwinds in our industry created by the Affordable Care Act (“ACA”) and the regulatory and tax environment have been well-documented, and had a profound effect on our business during 2014. Nevertheless, during fiscal 2014 and continuing into fiscal 2015, we initiated a number of actions that will enable MGC to achieve revenue growth in the present environment while delivering shareholder value,” said Todd M. Austin, chief executive officer. These actions, which are creating momentum as we head into fiscal 2015, include:
- Continuing our industry-leading approach to high-quality customer service by selling long-term service agreements. This tactic is ideally suited to today’s cautious capital purchase environment and will continue to contribute to strong service revenue growth;
- Realigning our expense infrastructure to comport with our projected revenue growth;
- Expanding our global capabilities by acquiring MediSoft, which provides us an efficient and effective platform for growth outside the U.S.;
- Capitalizing on the void of innovation in our industry by launching our new Ultima Series in early fiscal 2015, providing Medical Graphics with its next-generation portable, pulmonary diagnostic platform; and
- Streamlining and repositioning MediSoft’s best-in-class product line while leveraging its modern manufacturing facility and capabilities.”
Fiscal 2014 Fourth Quarter
- Gross margin for the quarter was 53.1% (56.6% for Medical Graphics only), compared to 57.8% in the fiscal 2013 fourth quarter. Gross margin for equipment, supplies and accessories was 49.4% for the quarter (53.1% for Medical Graphics only), compared to 55.6% for the prior year’s quarter. Gross margin for services was 69.4% for the fourth quarter, compared to 70.1% for the same period last year.
- Fourth quarter 2014 general and administrative expenses totaled $1.7 million, or 18% of revenue, compared to $1.2 million, or 13% of revenue in the comparable quarter last year. This increase is primarily due to MediSoft expenses of $270,000, acquisition expenses of $171,000 and workforce restructuring costs of $187,000.
- Sales and marketing expenses were $2.6 million, or 27% of revenue, down from $2.9 million, or 32% of revenue in the 2013 fourth quarter. This decrease is primarily due to lower selling expenses as a result of lower equipment sales, offset by MediSoft sales and marketing expenses of $480,000.
- Research and development expenses were $791,000, or 8% of revenue in the fiscal 2014 fourth quarter, up from $363,000, or 4% of revenue in last year’s fourth quarter. This increase is primarily due to MediSoft expenses of $129,000, new product development expenses of $161,000 and the absence of an expense credit under the State of Minnesota Credit for Increasing Research Activities, which the Company claimed during the fourth quarter of fiscal 2013 in the amount of $294,000.
“We remain dedicated to reengineering our existing products, developing new innovative products and forming strategic partnerships to more effectively address the void of new product releases that has existed in both the domestic and international market for the past decade,” continued Austin. “During fiscal 2014, we invested approximately 9% of total revenues into R&D projects to enhance and expand our product offerings. We will continue to appropriately allocate resources to keep our products and technologies on the leading edge of the market.”
Business Outlook
Austin concluded, “The combination of a strong selling team, a winning service model, focused expense management, R&D and new-product investment, improved international market exposure through MediSoft and key strategic partnerships, now enable us to deliver comprehensive cardiorespiratory products and services that significantly enhance our platform for success. Looking ahead, our prospects for revenue growth appear more positive based on industry reports and customer feedback indicating that capital equipment purchases are expected to pick up in the near term. Finally, based on our integration efforts to date, and feedback we have received from the markets that MediSoft serves, we expect that MediSoft will be accretive to our fiscal 2015 results. We are very confident in the future of MGC Diagnostics.”
Full Year Highlights:
- Total year fiscal 2014 revenues were $30.0 million, compared to $31.6 million in fiscal 2013.
- Fiscal 2014 domestic equipment, supplies and accessories revenues decreased 14.8% to $17.3 million, compared to $20.3 million for fiscal 2013. Fiscal 2014 domestic equipment and accessories revenues include only 48 competitive conversions ($2.9 million), compared to 102 competitive conversions ($6.3 million) during fiscal 2013. Excluding the effect of revenue from competitive conversions in each period, domestic equipment and accessories revenue generated from existing customers grew 4.5% in fiscal 2014, compared to fiscal 2013.
- Domestic service revenues increased 24.3% to $6.4 million, compared to $5.1 million for fiscal 2013. The Attachment Rate, which reflects the percentage of Extended Service Contracts added at the point of sale to customer equipment purchases, was 32% for fiscal 2014, which is up from 27% in fiscal 2013.
- International equipment, supplies and accessories revenues grew 2.6% to $6.3 million, compared to $6.2 million for fiscal 2013. Excluding MediSoft’s fiscal 2014 revenue of $1.3 million, international equipment, supplies and accessories revenues fell 18.8% due to lower sales in Latin America and Canada.
- Gross margin was 55.0% (56.1% for Medical Graphics only), compared to 56.0% for fiscal 2013. Gross margin for equipment, supplies and accessories was 51.6% (52.9% for Medical Graphics only), compared to 53.1% for fiscal 2013. Gross margin for services was 67.7%, compared to 70.5% for fiscal 2013.
- Operating expenses were $17.3 million, compared to $16.3 million for fiscal 2013. Operating expenses for Medical Graphics and MediSoft were $16.3 million and $948,000, respectively, for fiscal 2014. During fiscal 2014, Medical Graphics incurred one-time expenses related to the acquisition of MediSoft ($1.1 million) and workforce restructuring costs ($212,000).
- Operating loss was ($767,000), compared to operating income of $1.4 million for fiscal 2013. Medical Graphics and MediSoft had operating losses of ($229,000) and ($538,000), respectively, for fiscal 2014.
- Net loss was ($1.1 million) or $(0.26) per share, compared to net income of $1.4 million, or $0.34 per share for fiscal 2013. Medical Graphics and MediSoft incurred net losses of ($652,000) and ($448,000), respectively, for fiscal 2014.
Net Operating Loss Carry Forward
At October 31, 2014, the Company, through its Medical Graphics subsidiary, had federal net operating loss carryforwards of approximately $13.0 million, not subject to IRC annual limitations on use. These loss carryforwards will expire in years 2018 through 2034. Net operating loss carryforwards from the Company’s international tax jurisdictions were approximately $3.0 million. These loss carryforwards do not expire.
Conference Call
The Company has scheduled a conference call for Wednesday, January 7, 2015 at 4:30 p.m. ET to discuss its financial results for the fourth quarter and fiscal year 2014.
Participants can dial (877) 317-6789 or (412) 317-6789 to access the conference call, or listen via a live Internet webcast on the Company’s website at www.mgcdiagnostics.com. A replay of the conference call will be available by dialing (877) 344-7529 or (412) 317-0088, confirmation code 10057214, through January 12, 2015. A webcast replay of the conference call will be accessible on the Company’s website at www.mgcdiagnostics.com for 90 days.
About MGC Diagnostics
MGC Diagnostics Corporation (NASDAQ: MGCD), is a global medical technology company dedicated to cardiorespiratory health solutions. The Company, through its Medical Graphics Corporation and MediSoft SA subsidiaries, develops, manufactures and markets non-invasive diagnostic systems. This portfolio of products provides solutions for disease detection, integrated care, and wellness across the spectrum of cardiorespiratory healthcare. The Company’s products are sold internationally through distributors and in the United States through a direct sales force targeting heart and lung specialists located in hospitals, university-based medical centers, medical clinics, physicians’ offices, pharmaceutical companies, medical device manufacturers, and clinical research organizations (CROs). For more information about MGC Diagnostics, visit www.mgcdiagnostics.com.
Cautionary Statement Regarding Forward Looking Statements
From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, MGC Diagnostics Corporation may make forward-looking statements concerning possible or anticipated future financial performance, business activities or plans that include the words “believes,” “expects,” “anticipates,” “intends” or similar expressions. For these forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in federal securities laws.
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