SAINT PAUL, Minn., March 7, 2017 /PRNewswire/ -- MGC Diagnostics Corporation (NASDAQ: MGCD), a global medical technology company, today reported financial results for the first quarter ended January 31, 2017.
First Quarter 2017 Overview:
- First quarter fiscal 2017 revenue decreased by 6% to $8.7 million, compared to $9.3 million in the prior year period.
- Fiscal 2017 first quarter consolidated, domestic equipment, supplies and accessories revenues were $4.6 million, compared to $5.3 million in the fiscal 2016 first quarter, a decrease of 14%. This was due in part to the strength of fiscal 2016 fourth quarter domestic revenue and the seasonality of our business, but primarily the result of deferred orders totaling approximately $625,000.
- International equipment, supplies and accessories revenues increased 10% to $2.3 million for the quarter, compared to $2.1 million for the fiscal 2016 first quarter.
- The Attachment Rate for domestic sales, which reflects the percentage of Extended Service Contracts that were sold during customer equipment purchases, was 29% for the fiscal 2017 first quarter, compared to 29% in the prior year quarter.
- Current and long-term deferred revenue at the end of the first quarter increased 22% to $8.1 million, compared to $6.7 million at the end of last year’s first quarter.
- Operating loss for the fiscal 2017 first quarter was $(63,000), compared to operating income of $233,000 in the prior year period.
- Net loss was $(240,000), or $(0.06) per diluted share for the fiscal 2017 first quarter, compared to a net loss of $(4,000), or $0.00 per diluted share, in the fiscal 2016 first quarter.
Todd Austin, chief executive officer of MGC Diagnostics, said, “Our lower domestic sales for the fiscal 2017 first quarter were not unexpected considering the record domestic sales performance we achieved during our fiscal 2016 fourth quarter and the normal seasonality of our domestic business in the first fiscal quarter, which is historically the weakest quarter of the year. Our 2017 first quarter results were also affected by approximately $625,000 in orders we expected would close during the quarter, but were temporarily deferred. The good news is that our domestic sales pipeline is very robust and we remain confident that we will recover this shortfall over the remainder of fiscal 2017. We are very encouraged by the 9% revenue increase in our international business, due to a 26% growth in Medisoft’s international revenue. The strategies we implemented to improve Medisoft’s direct sales in France and Belgium have so far been successful. For the 2017 first quarter, Medisoft revenues from these two markets increased 54% from $383,000 in the fiscal 2016 first quarter to $589,000 in the fiscal 2017 first quarter. We hope to build on this international momentum, and coupled with the opportunities we see in our domestic business, we expect fiscal 2017 to be a strong year.
“Despite our domestic quarterly revenue shortfall, we see a number of opportunities and believe we will achieve year-over-year revenue growth. Our domestic sales pipeline is very robust, which we believe will lead to solid growth for fiscal 2017. The Company’s financial foundation continues to be strong with a cash and working capital position of approximately $4.7 million and $8.5 million after the special dividend and no long-term debt. We look forward to reporting firm operational and financial performance during the remainder of fiscal 2017.”
Additional First Quarter Data (Note: Medisoft revenues of $141,000 and cost of revenues of $71,000 for the fiscal 2016 first quarter have been reclassified as service revenues and cost of service revenues):
- During the quarter, competitive account conversions totaled 16 accounts, or $593,000 in revenue, compared to 20 accounts, or $1.2 million in revenue, for the same quarter last year.
- Service revenue was unchanged at $1.85 million in the fiscal 2017 first quarter compared to $1.85 million in the prior year period.
- Supplies revenue increased 2% to $1.74 million for the quarter from $1.70 million in the prior year period.
- Gross margin of 50.7% in the first quarter includes gross margin of 52.5% and 45.9% for domestic and international, compared to gross margin of 52.7% for last year’s first quarter, which included gross margin of 56.2% and 42.0% for domestic and international, respectively.
- Gross margin for equipment, supplies and accessories was 46.0% for the quarter (46.1% for domestic and 45.7% for international), compared to 48.7% for the prior year’s quarter (51.5% for domestic and 41.5% for international). Gross margin for services was 68.3% for the quarter (69.7% for domestic and 49.9% for international), compared to 69.0% for the same period last year (70.6% for domestic and 49.4% for international).
- Sales backlog was $1.7 million at the end of the quarter, compared to $1.9 million at the end of the fiscal 2016 first quarter.
- Operating expenses were $4.5 million in the first quarter, compared to $4.6 million in the prior year quarter.
- First quarter 2017 general and administrative expenses totaled $1.5 million, or 17.5% of revenue, compared to $1.4 million, or 15.3% of revenue in the comparable quarter last year.
- Sales and marketing expenses were $2.3 million for the quarter, or 26.7% of revenue, compared to $2.5 million, or 27.0% of revenue in the fiscal 2016 first quarter.
- Research and development expenses were $590,000 for the quarter, or 6.8% of revenue, compared to $673,000, or 7.3% of revenue in last year’s first quarter.
Conference Call
The Company has scheduled a conference call for Tuesday, March 7, 2017 at 4:30 p.m. ET to discuss its financial results for the first quarter ended January 31, 2017.
Participants can dial (844) 861-5496 or (412) 317-6578 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 10102288, through March 14, 2017. A webcast replay of the conference call will be accessible on the Company’s website at www.mgcdiagnostics.com for 90 days.
Special Cash Dividend
On January 25, 2017, the Board of Directors of MGC Diagnostics announced a special cash dividend of $0.70 per share on its outstanding common stock. The cash dividend, which totaled approximately $3.1 million, was paid on February 24, 2017 to all shareholders of record as of February 10, 2017.
Review of Strategic Options
As previously announced on January 25, 2017, the Board of Directors of MGC Diagnostics initiated a strategic review of the Company’s businesses and assets to explore opportunities for enhancing value for shareholders. A Special Committee consisting of Board Chairman Mark Sheffert, Vice Chairman Terry Bunge and director Hank Struik will oversee this process. The Special Committee has retained Minneapolis-based investment banking firm Craig-Hallum Capital Group LLC, to advise it in this process. The Board expects this to be a thorough process and will report its findings and conclusions at the completion of the review.
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