Merge Investor Presentation August 4 Final · • Age-related macular degeneration ... Q2 2013 Q3...
Transcript of Merge Investor Presentation August 4 Final · • Age-related macular degeneration ... Q2 2013 Q3...
Forward Looking Statement
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The matters discussed in this presentation may include forward-looking statements, which
could involve a number of risks and uncertainties. When used in this presentation, the
words “will,” “believes,” “intends,” “anticipates,” “expects” and similar expressions are
intended to identify forward-looking statements. Actual results could differ materially from
those expressed in, or implied by, such forward looking statements. Except as expressly
required by the federal securities laws, the Company undertakes no obligation to update
such factors or to publicly announce the results of any of the forward-looking statements.
See the Company’s most recent earnings press release for explanation of non-GAAP
financial measures used in this presentation as well as reconciliation from GAAP to
non-GAAP metrics. Some of the products and/or product features discussed in this
presentation may be works in progress and not yet generally available for sale.
Why Merge Matters
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images are
growingyou need to do
more with less
regulationsare pervasive
consolidationis happening
{ ARCHIVE • ACCESS • DIAGNOSE }
{ EDUCATE • EXECUTE • ADAPT }
{ AUTOMATE • ADOPT • INTEGRATE }
{ CONNECT • CENTRALIZE • EVOLVE }
Our Solutions Portfolio
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Imaging & Interoperability
Cardiology Clinical Trials
Radiology
Interoperability
Cloud Archive
Eye Care
Orthopedics
Cardiology
Hemodynamics
EDC
CTMS
Merge KLAS Special Report
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Built directly on valuable
customer feedback
A report card of how well
we are delivering on
customer requirements
Merge KLAS Report – Overall Performance
1. Customers Buying In• Enterprise imaging strategy
• Image enabling the EMR
• Focus and transparency
2. Footprint Expanding• Clients plan to expand imaging suite
• Clients plan to stay at rate above
market average
• Clients looking into adding
interoperability and cardiology
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We Are the Leader in Interoperability
1010
iConnectiConnectiConnectiConnectEnterprise Clinical Platform
iConnectiConnectiConnectiConnectEnterprise Archive
2013 Frost & Sullivan Product Leadership Award,
Medical Imaging Interoperability Solutions Market
2013 IHS VNA Global Market Leader
2013 IHS VNA Market Leader, Americas
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We’ve Made Enterprise Imaging Real
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Chicago, IL
{ iConnect Access & Enterprise Archive, Merge PACS,Merge Cardio & Hemo }
Findlay, OH
{ iConnect Access & Enterprise Archive, Merge PACS,Merge Cardio & Hemo }
San Diego, CA
{ iConnect Access, Enterprise Archive & Outpatient Radiology }
{ iConnect Access and Enterprise Archive }
Lawton, OK
What Are the Key Drivers?
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Referral GrowthIncrease referring
physician loyalty and
expand business
Cost Savings Save time and money by
eliminating excess HL7
interfaces
Meaningful UseHelp community
physicians meet the imaging
requirement & attest
The Imaging Marketplace
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Each year in
the USA,
800M+ studies
are done;
372M are
outpatient
Meaningful Use
now makes
interoperability
mandatory
EHR adoption
among referring
physicians is
nearing 60%
12%of every visit
800Million studies
60%EHR Adoption
MU2Mandates
12% of every
PCP visit in the
USA results in an
imaging order
(44 Million)
Merge Can Help with Referral Leakage!
• Average employed physician group refers more
than 20% of potential revenue out-of-network
• While most organizations are (rightly focused) on
building stronger physician relationships to curb
leakage, they fail to realize that breakdowns in
referral coordination drive 40% of leakage
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$20M Average annual
revenue leaked,
300-bed hospital with
100 employed
physicians
Sources: The Advisory Board and referralMD
EDUCATE
in-network providers
about their referral
patterns
QUANTIFY & TRACK
patient retention
with web-based
solutions
IDENTIFY
the right markets &
providers to build
clinical networks
HOW TO IMPROVE REFERRAL LEAKAGE
The Referral Challenge for Imaging
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Ph
ysic
ian
Imaging center
Hospital
imaging center
Reports
Orders
Images
More Referrals = More
How Do Providers Prevent Referral Leakage?!
Clients Work With Many Referring Physicians
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Imaging Center /
Hospital System
Allscripts
Cerner
Epic
eClinical
Works
athena
NexGen
And They Work with Many Different EHRsHow will providers connect all disparate EHRs to imaging data & studies?
Referring Physicians
$$$$
HL7 Interfaces Are Costly to Build & Maintain
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EMR
PACS Archive
Imaging Center
Report includes
link to see image
in PACS archive
Costs to Deploy and Maintain HL7 Interfaces
• $20K‒$30K implementation fees
• PER bi-directional interface PER
referring physician practice
• 3‒6 month wait time PER interface
Sample Client
• 20 community EHR interfaces
• 20 corresponding RIS interfaces
• 80,000 annual studies
TCO over five years = $2.7M
For a facility with…
20 community EHR interfaces
20 related RIS interfaces
80,000 annual studies
Local Geographic Market Reality
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Agfa
Siemens
McKesson
Philips
GE
Merge
Epic
Epic
Cerner
Greenway
Greenway
Allscripts
Allscripts
� Multiple Imaging Centers
Multiple Referring Practices �
� Multiple PACS Systems
Multiple EMR Vendors �
iConnect® Network Momentum
• Signed 7 net new
customers in Q2 ─
total of 29 contracted
(to date)
• Collected first dollar of
revenue
• Started work on the next
big release for electronic
referral order delivery –
coming in Q3
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~10% of Total Ambulatory Radiology Base!
Hospital Feedback
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“We’ve worked with Merge for several years, so it was an easy
choice to implement Merge’s VNA and iConnect Network for a
comprehensive, enterprise-wide imaging strategy…
Despite having an HIE in place, we needed a single solution that
handles imaging as it becomes more important to healthcare as
a whole. With iConnect Network, we’ll meet MU2 requirements
for the exchange of images and, most importantly,
enable better access to imaging for physicians in order to
provide the best care for our patients.”
Dave Holland, CIO, Southern Illinois Healthcare
Referring Physician Feedback
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“iConnect Network gives us a competitive advantage for both our providers and patients. Since we are a part
of an ACO and are patient centered medical home certified,
iConnect Network is a true example of
a solution that integrates with our EHR, achieves
information exchange and helps our health center be more
efficient by automating time-consuming processes.
This ultimately enables us to improve treatment times,
reimbursements and patient care, as well as meet core
regulatory requirements.”
Luis Velasco, CIO, Marana Health Center
What Problems Are We Solving?
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diabetes, AMD, glaucoma, ALZ are
Increasing globally
institutions need
More Revenue with Volume
countries & socialized medicine need
Less Cost with More ServiceNo Complete Solutions
just band-aids
{ 382M DIABETICS WORLD WIDE – GROWS ~6% ANNUALLY }
{ DETECT DISEASE – TREAT EARLY – REDUCES COSTS }
{ DETECT DISEASE & INCREASE BILLABLE PROCEDURES }
{ NEED HARDWARE, SOFTWARE, CLOUD, ANALYTICS, ENGAGEMENT }
What is iConnect® Retinal Screening?
• An interoperable, end-to-end, subscription-
based offering for population health
• Leverages existing Merge solutions to simply
process of screening patients and deliver
information back to physicians
• Providers are able to capture images through
an automated camera, reducing the need for
specialty staff training
• We are targeting our large Eye Care
customer base
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References:
• Economic Costs of Diabetes in the U.S. in 2012, American Diabetes Association,
http://www.diabetes.org/advocacy/news-events/cost-of-diabetes.html.
• 2013 International Diabetes Federation Diabetes Atlas, 6th Edition.
http://www.idf.org/sites/default/files/EN_6E_Atlas_Full_0.pdf.
How Does iConnect® Retinal Screening Work?
• Primary providers capture images and
upload to iConnect Cloud Archive (formerly know as Merge Honeycomb®)
• Client owned reading center interpret
images in Merge Eye Care PACS™
• Image reports route directly to
iConnect Network
• iConnect Network delivers image
reports to disparate providers’ EHRs
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Disparate Sites
The Complete
iConnect
Retinal Screening
Solution
The Value of iConnect Retinal Screening
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Institutions & Governments
Linked sites
Disparate sites
• Every ACO and payer is focused
on diabetic care management
and this complements their
strategy
• Eye care has a real play in hospital
and government markets
• Another international / OEM
solution for partners
• Increase potential market & sales
• Increase revenue from iConnect
Cloud Archive
Patients
Patients
What Is the Total Market Opportunity?
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The U.S. is 10% of the global market opportunity$166M U.S. market opportunity**
* Estimate of fee over a five-year time horizon. / ** Includes additional revenue from iConnect Cloud Archive and iConnect Network. / *** 2013 International Diabetes Federation.
The market will continue to growdiabetes population increases each year and many regions will double by 2035***
Today, diabetes alone, is a $764M* global opportunity
What’s Next for iConnect Retinal Screening?
• Currently undergoing a pilot
program launch with Ontario
Telemedicine Network
• First phase offers diabetic
retinopathy screening
• Future stages of solution will include
screenings for:• Glaucoma
• Age-related macular degeneration
• Other serious neurological diseases
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What is Merge eClinical OS?
• Perfect mix of features & services
• Pay-as-you-go…what you use, when
• Manage user accounts, privileges,
options and training requirements
• Study build, support, training and
certification services on-demand
• Cost transparency with step-by-step, self-
service quoting & decision-support tools
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eCOS is the Right-Size the Solution for Any Study!
eCOS Momentum37
30%Increase in active
subjects in Q2
27%Increase in platform
users in Q2
25%Increase in clinical
sites in Q2
71 Go Lives in Q2-2014…More Live Studies Than Ever!
Where We’ve Been
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PACS for image intensive specialties
Clinical data and workflow tools
Firsts in enterprise imaging & interoperability
Our Client Base
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1/3 of all U.S.
imaging centers
30% + of all
ortho groups
1,000 +
ophthalmology
sites
75% of all
worldwide
modality vendors
Top
pharmaceutical
companies &
CRO’s have used
Merge to run
clinical trials
1,500hospitals
6,000clinics
250partners
9 of 10top pharma
Including
many
hospitals on
“America’s
Best Hospital
Honor Roll”
Financial Improvements in Past Year
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• iConnect Network, iConnect Cloud
Archive, iConnect Retinal Screening
and Merge eClinical OS
• Over 150 clinical trials went live on
eCOS in 1st half 2014
• Launched iConnect Retinal Screening
• Subscription backlog growth
of 12% YoY as of Q2 2014
• Strong cash generation leading to
cash balance of ~$24M and a 27%
decrease YoY in DSO to 88 days in Q2
• Refinancing of credit facility replaced
previous debt covenants with more
appropriate measures – which don’t
start until Q1 of 2015
• Maintained higher than industry
average spend of over 14% of our
revenue on R&D in 1st half 2014
Revenue & AEBITDA GrowthQuarterly
• Delivered a sequential quarterly
increase in revenue of 6%
• Excluding non-cash debt refinancing
cost in Q2, delivered another quarter of
increasing net income
• Grew adjusted EBITDA to 21% (40%
increase over Q2 2013)
• Adjusted net income increased to
$0.05 per share, compared to $0.01
in Q2 2013
Continued Innovations for Subscription
Offerings
Stabilized While
Investing
27.9 27.5 26.0 25.5 25.8
9.7 9.5 8.4 8.2 9.0
20.0 20.7 19.4
17.4 19.3
$57.6 $57.7
$53.8$51.1
$54.1
59.3%
56.9%
60.2%
61.9%
59.3%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Maintenance Subscription Non Recurring Gross Margin %
Revenue and Adjusted EBITDA Trend
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Gross Margin %
(net of D&A)
$8.5
$7.2
$8.9
$10.2$11.2
$10.6
$15.3$14.5
$13.5
$8.3
14.8%
12.5%
16.5%
20.0%20.8%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
$0
$5
$10
$15
$20
$25
$30
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
Adjusted EBITDA
Cash generated by business operations
Adjusted EBITDA %
Adjusted
EBITDA %
Why Stability Matters
Financial stability allows us to continue to invest
in research, development and innovation
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• In 2014, we are spending over 14% of our revenue on R&D
• We continue to spend more than most organizations in our sector
• Our investments continue to pay off by industry recognitions
Why Focus Matters
Our priorities are in tact
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• Industry is changing and our investments allow our clients to adapt
• Merge is changing but continues to focus on our core solutions
• Our teams that build, support, service our solutions are stable