28 Apr Merge eFilm earnings jump precedes planned merger
Milwaukee — Merge eFilm, the Milwaukee-based medical imaging technology company officially known as Merge Technologies Inc., continued to build momentum leading into its proposed merger with Toronto-based Cedara and subsidiary eMed by posting net sales of just more than $10.5 million in first-quarter 2005.
That’s a 22 percent increase over first quarter 2004, after a 19 percent year-over-year jump in net sales in the fourth quarter of 2004.
Sales on the direct solutions side of Merge’s business were $7.5 million in the first quarter, again a 22 percent increase that nonetheless came in a bit below where the company wanted to be, according to CEO Richard Linden.
“While below our expectations for the quarter, I’m very pleased with the expansion of our customer base, consistent with our growth expectations,” Linden said during the company’s quarterly statement teleconference Thursday morning.
Merge specializes in radiology information system (RIS) and picture archiving and communications system (PACS) software for small- and medium-sized hospitals and clinics. The company sealed 18 new Fusion RIS/PACS contracts during the quarter, upping its customer base for RIS/PACS to well over 200. “I am especially pleased with the market’s acceptance of our business and clinical workflow skills,” Linden said.
If all goes well with shareholders at upcoming meetings May 24, Merge will be doing just that with Cedara and eMed, well-established competitors in the small- and medium-sized hospital market. The all-stock transaction would create a company with more than $100 million in combined revenues.
Linden noted that the three companies have begun “high-level integration planning activities” in preparation for the merger, which are mainly focused on near-term financial performance, product cross-selling and revenue growth opportunities.
“Above all our focus is to design integration plans, cross-selling actions, product enhancement and bundling initiatives to deliver on our commitment to enhance shareholder value, expand products and services for our customers and offer new opportunities for our employees,” Linden said at the teleconference. “During the first quarter and continuing here in the second quarter, we have made steady progress toward a successful shareholder vote and prompt integration plan execution following the closing of the merger.”
The past three months, the company also moved its corporate office, replaced its telecomm system that included an upgrade to its help desk and hired a new investor relations firm, all in anticipation of future growth. Linden noted that the company still plans to grow its revenues by 30 percent to 35 percent to $48 million to $50 million in 2005.
To Ronald Opel, an analyst for Moors and Cabot Capital Markets who has followed Merge since 1999, the prospects for the merger look good.
“I think as a combined entity they will be dominant player in the mid-market for imaging center and hospital diagnostic image automation,” said Opel, who has owned Merge stock for several years.
While Cedara’s primary focus is on developing special image analysis techniques for OEMs, Merge’s strength continues to be its sales of direct solutions to customers, such as its evolving line of RIS/PACS solutions.
“There is some overlap [in product offerings], but not much,” said Opel, who noted that Merge has successfully vetted and integrated several smaller acquisitions in the past and banks much of his faith in the health of this new combined company on Linden’s abilities.
“Rich Linden [is] one of best CEOs I’ve ever run across,” Opel said. “Linden is a guy that gets things done. He knows how to organize a company to get results and to monitor what is going on. [Cedara President and CEO] Abe Schwartz is very good as well. My sense [is] they are both dedicated toward getting this done successfully, so I’m high on their prospects.”