For the third quarter, Merge posted a net loss of $4.1 million, up from a $3.8 million loss in the third quarter of 2012, but down significantly from the $28.1 million loss posted during the second quarter of this year. For this latest period, the net loss per share was $0.04, same as the year-ago period, but down from the $0.30 per share loss of the previous quarter.
Merge, which provides software systems for medical imaging and related records, as well as healthcare data analytics software, last year began switching to a subscription sales model instead of selling nonrecurring software licenses. For the quarter ended Sept. 30, 16.5% of Merge's revenue was from subscription sales, with subscription backlog having grown nearly 76% year to date.
Using excess cash generated from improved cash collections, which was up 66% for the just-ended quarter compared with the same period of 2012, Merge voluntarily repaid $6 million of its debt principal. According to a release, Dearborn expects voluntary repayments to continue, which should assist in further lowering the company's interest.
Though Moody's Investors Service downgraded Merge's debt at the end of the second quarter and labeled its outlook as stable, Dearborn views the company as well-positioned for 2014, thanks to strategies and services for ICD-10 and meaningful use of electronic health records.
The upbeat perspective comes on the heels of the August resignations of Jeffrey Surges, former board member and CEO, and Michael Ferro Jr., former chairman and company director. At that time, Ferro called the second-quarter financial results “disappointing,” but suggested he would continue to look at ways to increase company shareholder value, including the possibility of taking the company private.
According to its most recent filings with the Securities and Exchange Commission, Merge has approximately 93.7 million shares of common stock outstanding. Ferro and his investment company, Merrick Venture Management Holdings, own just over 28% of those shares.
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