MGC Diagnostics Corporation Reports Fiscal 2016 Third Quarter Results

SAINT PAUL, Minn., Sept. 7, 2016 /PRNewswire/ -- MGC Diagnostics Corporation (NASDAQ: MGCD), a global medical technology company, today reported financial results for the third quarter ended July 31, 2016.

Third Quarter Fiscal 2016 Highlights:

• Third quarter 2016 revenue increased by 7% to $9.9 million, compared to $9.2 million in the prior year period.
• Operating income increased 88% to $794,000, compared to $423,000 in the prior year period.
• The Company reported net income of $260,000 for the 2016 third quarter, or $0.06 per diluted share, compared to net income of $3.4 million, or $0.80 per diluted share, in the prior year period. Third quarter 2015 net income included a one-time tax benefit of $3.1 million, or $0.73 per diluted share.
• Medical Graphics' revenue increased 9% to $8.6 million, compared to $7.8 million in the third quarter of fiscal 2015. Medisoft's revenue decreased 6% to $1.3 million from $1.4 million in the fiscal 2015 third quarter.
• Service revenue increased 3% to $1.72 million in the fiscal 2016 third quarter compared to $1.67 million in the prior year period.  Supplies revenue increased 9% to $1.8 million from $1.6 million in the prior year period.
• 2016 third quarter domestic equipment, supplies and accessories revenues, including Medisoft's U.S. revenue, increased 13% to $5.9 million, compared to $5.2 million in the 2015 third quarter.
• During the quarter, competitive account conversions totaled 16 accounts, or $1.4 million in revenue, compared to 14 accounts, or $612,000 in revenue, for the same quarter last year.
• Sales backlog of $1.66 million ($1.43 million for Medical Graphics and $230,000 for Medisoft) at the end of the quarter, compared to $2.35 million at the end of the fiscal 2015 third quarter.
• Operating expenses were $4.3 million in the third quarter, compared to $4.1 million in the prior year quarter.
• For the third quarter, Medical Graphics had operating income of $882,000 and Medisoft had an operating loss of $(88,000).

Todd Austin, chief executive officer of MGC Diagnostics, said, "Our operating performance during the third quarter was very solid. The domestic sales team generated double-digit growth from strong competitive conversion wins, resulting in competitive conversion revenue increasing 134% compared to last year's third quarter. We define 'competitive conversion' as our sale of a cardio-respiratory device that replaces a competitor's device in a hospital, clinic, physician's office or other setting.  We also achieved a number of key strategic initiatives during the quarter, including FDA 510(k) clearance for the Resmon PRO FOT device, retirement of our bank debt and the formation of our Scientific Advisory Committee. Our successful execution of these initiatives positions us to continue achieving consistent operating performance and delivering solid annual financial results."

"I am also pleased with the continued performance of our Medical Graphics team, as they achieved domestic equipment, supplies and accessories revenue growth of 12% compared to the third quarter last year. Year to date, we have converted 62 new customers from our direct competitors, generating $3.9 million in revenue compared to 37 wins and $1.4 million of revenue in last year's nine-month period. These conversions indicate that our products provide the right features and value proposition. We are pleased with the results of the first nine months and we are confident that we will finish the year strong."

Additional Fiscal 2016 Third Quarter Data:

• The Attachment Rate for domestic sales, which reflects the percentage of Extended Service Contracts that were sold during customer equipment purchases, was 21% for the fiscal 2016 third quarter, compared to 26% in the prior year quarter.
• Current and long-term deferred revenue at the end of the third quarter was $7.6 million, compared to $6.5 million for last year's third quarter.
• International equipment, supplies and accessories revenues decreased to $2.3 million, compared to $2.4 million for the fiscal 2015 third quarter.  Medical Graphics' international revenue increased to $1.11 million, compared to $1.07 million for last year's third quarter. Medisoft's international revenue decreased to $1.16 million for the quarter, compared to last year's third quarter of $1.28 million.
• Gross margin of 51.2% in the third quarter includes gross margin of 53.2% and 38.4% for Medical Graphics and Medisoft, compared to gross margin of 48.7% for last year's third quarter, which included gross margins of 50.3% and 39.9% for Medical Graphics and Medisoft, respectively.
• Gross margin for equipment, supplies and accessories was 46.9% for the quarter (48.5% for Medical Graphics and 38.4% for Medisoft), compared to 44.9% for the prior year's quarter (46.0% for Medical Graphics and 39.9% for Medisoft). Gross margin for services was 71.8% for the quarter, compared to 66.0% for the same period last year.
• Third quarter 2016 general and administrative expenses totaled $1.1 million, or 10.9% of revenue, compared to $1.2 million, or 13.2% of revenue in the comparable quarter last year. 
• Sales and marketing expenses were $2.5 million, or 24.9% of revenue, compared to $2.1 million, or 22.8% of revenue in the 2015 third quarter. This increase is primarily due to higher Medical Graphics sales and marketing expenses of $238,000 and higher Medisoft sales and marketing expenses of $113,000.
• Research and development expenses were $665,000, or 6.7% of revenue in the fiscal 2016 third quarter, compared to $694,000, or 7.5% of revenue in last year's third quarter. 
• As we reported in our Statement of Cash Flows, $412,000 of the $460,000 provision for taxes in the first nine months of 2016 is a non-cash expense from the effect of our deferred tax assets.  At July 31, 2016, we had remaining net deferred tax assets of $2.9 million.

Conference Call

The Company has scheduled a conference call for Wednesday, September 7, 2016 at 4:30 p.m. ET to discuss its financial results for the third quarter of fiscal year 2016.

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 10091838, through September 14, 2016.  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, France and Belgium, primarily 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.  These forward-looking statements are subject to a number of factors, risks and uncertainties, including those disclosed in our periodic filings with the SEC, that could cause actual performance, activities or plans after the date the statements are made to differ significantly from those indicated in the forward-looking statements. For a list of these factors¸ see the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward Looking Statements," in the Company's Form 10-K for the year ended October 31, 2015, and any updates in subsequent filings on Form 10-Q or Form 8-K under the Securities Exchange Act of 1934.

(Financial Tables to Follow)

SOURCE MGC Diagnostics Corporation

Related Links

http://www.mgcdiagnostics.com