SAINT PAUL, Minn., June 1, 2017 /PRNewswire/ --
Strong Quarterly Revenue; Total international revenues increased 16%
MGC Diagnostics Corporation (NASDAQ: MGCD), a global medical technology company, today reported financial results for the second quarter ended April 30, 2017.
Second Quarter 2017 Overview:
- Second quarter fiscal 2017 revenue increased by 4% to $9.8 million, compared to $9.4 million in the prior year period.
- Fiscal 2017 second quarter consolidated, domestic equipment, supplies and accessories revenues were $5.4 million, comparable to the $5.4 million in the fiscal 2016 second quarter.
- International equipment, supplies and accessories revenues increased 19% to $2.6 million for the quarter, compared to $2.2 million for the fiscal 2016 second quarter.
- Supplies revenue increased 11.3% to $2.1 million for the quarter from $1.9 million in the prior year period.
- Sales backlog was $1.97 million at the end of the quarter, compared to $1.86 million at the end of the fiscal 2016 second quarter.
- Current and long-term deferred revenue at the end of the second quarter increased 13% to $8.0 million, compared to $7.1 million at the end of last year’s second quarter.
- Recurring revenue, consisting of services and supplies, for the second quarter increased 4.3% to $3.9 million and represents 40.0% of total revenue, compared to $3.8 million, or 39.9% of total revenue in the prior year period.
- Operating income for the fiscal 2017 second quarter was $39,000, compared to operating loss of $(197,000) in the prior year period.
- Net loss was $(26,000), or $(0.01) per diluted share for the fiscal 2017 second quarter, compared to net income of $45,000, or $0.01 per diluted share, in the fiscal 2016 second quarter.
Todd Austin, chief executive officer of MGC Diagnostics, said, “I am pleased with our 2017 second quarter revenue results, as we achieved strong sales of $9.8 million with international sales increasing 16% for the quarter. We continue to successfully drive international sales growth with our strategic decision to increase our direct sales activities in France, Belgium and the UK. Our strong second quarter revenue does not reflect any of the $625,000 in orders we referred to as delayed in our 2017 first quarter press release and conference call discussion. We are working with our strategic partners to ensure we receive these delayed orders by our fiscal year-end.
We remain highly focused on our strategic growth initiatives and providing our customers with state-of-the-art respiratory diagnostic products and industry-leading service. We achieved 18 competitive conversions in the quarter, generating $1.0 million in revenue; with average revenue per conversion totaling approximately $56,000. In the fiscal 2016 second quarter, 31 competitive conversions generated revenue of $1.3 million, with average revenue per conversion totaling slightly under $42,000.
We are pleased with the 35% increase in average conversion revenue. Our sales team is aggressively delivering new business leads with strong quoting activity. As a result, we have developed a solid backlog of approximately $2 million heading into the 2017 third quarter giving us confidence for a solid second half of fiscal 2017.
As discussed in more detail below, during the second quarter, we announced an important clinical study with our partner Restech Srl to evaluate the diagnostic accuracy of the forced oscillation technique (“FOT”) to detect lung function abnormalities. We have completed the clinical study protocol and have submitted it to the FDA for its review; upon receiving FDA feedback, we will begin to enroll patients. We believe this clinical study will demonstrate that the Resmon PRO FULL is a valuable device to diagnose and manage COPD and asthma.
Mr. Austin, concluded, “The Company’s financial foundation continues to be strong with an April 20, 2017 cash and working capital position of approximately $5.0 million and $8.7 million, after payment of the $3.1 million special dividend, and no long-term debt. Looking forward, we see a number of opportunities and believe we will achieve solid year-over-year revenue growth for fiscal 2017.”
Additional Second Quarter Data (Note: Medisoft revenues of $147,000 and cost of revenues of $73,000 for the fiscal 2016 second quarter and Medisoft revenues of $288,000 and cost of revenues of $149,000 for the fiscal 2016 first six months have been reclassified as service revenues and cost of service revenues to conform with their presentation in the fiscal 2017 periods):
- Service revenue was $1.84 million in the fiscal 2017 second quarter, down 3% compared to $1.89 million in the prior year period.
- The Attachment Rate for domestic sales, which reflects the percentage of Extended Service Contracts that were sold during customer equipment purchases, was 20% for the fiscal 2017 second quarter, compared to 34% in the prior year quarter.
- Gross margin of 50.6% in the second quarter includes gross margin of 54.1% and 41.0% for domestic and international, compared to gross margin of 54.2% for last year’s second quarter, which included gross margin of 57.2% and 45.0% for domestic and international, respectively.
- Gross margin for equipment, supplies and accessories was 47.0% for the quarter (50.0% for domestic and 40.6% for international), compared to 51.3% for the prior year’s quarter (54.0% for domestic and 44.6% for international).
- Gross margin for services was 66.1% for the quarter (67.0% for domestic and 50.0% for international), compared to 65.8% for the same period last year (67.1% for domestic and 50.3% for international).
- Operating expenses decreased 7% to $4.9 million in the second quarter, compared to $5.3 million in the prior year quarter. Fiscal 2016 second quarter operating expenses included litigation settlement costs of $670,000 related to a settlement agreement completed in June 2016, that were included within general and administrative expenses;
- Second quarter 2017 general and administrative expenses totaled $1.7 million, or 17.4% of revenue, compared to $2.0 million, or 21.6% of revenue in the comparable quarter last year.
- Sales and marketing expenses were $2.4 million for the quarter, or 24.9% of revenue, compared to $2.5 million, or 26.9% of revenue in the fiscal 2016 second quarter.
- Research and development expenses were $733,000 for the quarter, or 7.5% of revenue, compared to $678,000, or 7.2% of revenue in last year’s second quarter.
Clinical Study to Evaluate the Diagnostic Accuracy of the Forced Oscillatory Technique to Detect Lung Function Abnormalities
On April 20, 2017, the Company announced a clinical study collaboration with Restech Srl to evaluate the diagnostic accuracy of the forced oscillation technique (“FOT”) to detect lung function abnormalities. We expect worldwide enrollment to begin in the calendar-year 2017 third quarter, and include subjects ranging from age three to adult. We expect the study to conclude during the third or fourth quarter of calendar 2018. MGC Diagnostics will sponsor the study and Restech Srl will conduct the study. We expect our total investment for the clinical study will not exceed $500,000. The Company contribution will include a series of payments to Restech aligned to project milestones, including a 87,000 payment that was made in the fiscal 2017 first quarter.
The study is designed to compare the diagnostic accuracy of the RESMON PRO FULL to the diagnostic accuracy of spirometry to detect a lung function anomaly (obstructive or restrictive respiratory disease) in a prospective and consecutive cohort of subjects obtaining pulmonary function tests (“PFT”) in PFT labs. As a secondary objective, we aim to compare the diagnostic accuracy of at least one, or a combination, of the parameters provided by the Resmon PRO FULL to the diagnostic accuracy of spirometry to detect a significant response to a bronchodilator.
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