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MOUNT LAUREL, N.J., Nov. 9 /PRNewswire-FirstCall/ MedQuist Inc., (Nasdaq: MEDQ) a leading provider of medical transcription services, and a leader in technology-enabled clinical documentation workflow, today announced unaudited operating results for its third quarter ended September 30, 2009.
The third quarter was the best quarter for sales orders in our recent history and we expect to start seeing the benefit of those orders in 2010. The sales success is attributable to our new sales and marketing programs that leverage all MedQuist products including, SpeechQ for Radiology, DocQvoice for capturing dictation, DocQscribe which incorporates an extensive range of features that optimize the transcription and editing process, DocQment Enterprise Platform with speech recognition for workflow management, coding services, and technology enabled clinical documentation services (transcription) which enable the efficient deployment of electronic health care record systems. Key service agreements signed during the quarter included Wellmont and Swedish American Health Systems.
Net income for the third quarter of 2009 was $9.7 million or $0.26 per diluted share compared to a loss of $5.8 million and $0.15 per diluted share in the prior comparable period year. This improvement was the result of multiple programs designed to increase productivity, and decrease cost of revenues.
Adjusted EBITDA (operating income (loss) excluding depreciation, amortization of intangible assets, and cost of legal proceedings and settlements, net) increased 66.4% to $13.2 million for the third quarter of 2009 compared to $7.9 million for the third quarter of 2008.
Net revenues declined $4.5 million or 5.5% to $76.8 million for the three months ended September 30, 2009 compared with $81.3 million for the prior year comparable period. Transcription volumes increased during the third quarter relative to the prior period, while average prices for transcription declined and the migration from legacy products reduced services revenues yielding this net result.
Cost of revenues decreased $4.5 million or 7.8% to $52.8 million for the three months ended September 30, 2009 compared with $57.2 million for the three months ended September 30, 2008.
Selling, general and administrative costs decreased $3.6 million or 31.0% to $7.9 million for the three months ended September 30, 2009 compared to $11.5 million for the three months ended September 30, 2008. The decrease was due primarily to a combination of work force reductions and cost reduction initiatives.
Research and development costs decreased $2.2 million or 47.5% to $2.4 million for the three months ended September 30, 2009 compared with $4.6 million for the three months ended September 30, 2008. The decrease was primarily due to lower compensation expense as a result of workforce reductions and an increase in capitalized software development costs.
Cost of legal proceedings and settlements, net, decreased $7.5 million to $1.3 million for the three months ended September 30, 2009 compared with $8.8 million for the three months ended September 30, 2008. This decrease in costs was due primarily to the DOJ settlement of $5.9 million and related legal fees of $1.6 million in 2008.
For the first nine months of 2009, net cash provided by operations was $33.0 million, an improvement of $36.9 million when compared to the prior year nine month period. At September 30, 2009, the company had cash of $15.7 million after investments of $6.3 million and the payment of a $49.9 million cash dividend to all shareholders on September 15, 2009.
For the nine months ended September 30, 2009, net revenues were $233.3 million, a decline of 5.7%, compared to the $247.5 million in net revenues realized in the prior year nine month period. The company's net income improved to $17.4 million compared to a net loss of $8.3 million for the nine months ended September 30, 2008. Adjusted EBITDA for the nine months ended September 30, 2009 improved by $19.6 million from $22.1 million for the nine months ended September 30, 2008 to $41.7 million for the nine months ended September 30, 2009.
In addition to the United States generally accepted accounting principles, or GAAP, results provided throughout this document, MedQuist has provided a non-GAAP financial measurement - Adjusted EBITDA. Management believes that the non-GAAP financial measure used to manage the business may provide users additional useful information. The table attached to this press release includes a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure and a description of why the non-GAAP financial measure is useful to investors.
This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as "projects," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "should," "would," "could," "will," "opportunity," "potential" or "may," variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are only predictions and, as such, are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. For a discussion of these risks, uncertainties and assumptions, any of which could cause our actual results to differ from those contained in the forward-looking statement, see the section of MedQuist's Annual Report on Form 10-K for the year ended December 31, 2008, entitled "Risk Factors" and discussions of potential risks and uncertainties in MedQuist's subsequent filings with the Securities and Exchange Commission.
MedQuist Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Unaudited
Three months ended Nine months ended
September 30, September 30,
- -
2009 2008 2009 2008
Net revenues $76,836 $81,287 $233,251 $247,466
- -
Operating costs and expenses:
Cost of revenues 52,768 57,235 157,993 176,508
Selling, general
and administrative 7,930 11,496 25,819 36,446
Research and development 2,439 4,648 7,235 12,502
Depreciation 2,197 2,977 7,418 8,901
Amortization of
intangible assets 1,518 1,411 4,533 4,145
Cost of legal
proceedings and
settlements, net 1,382 8,833 13,440 17,908
Restructuring charges 481 (37) 481 (82)
- - - -
Total operating
costs and expenses 68,715 86,563 216,919 256,328
- -
Operating income (loss) 8,121 (5,276) 16,332 (8,862)
Equity in income of
affiliated company 2,154 159 2,582 200
Other income - - - 438
Interest income (expense), net (29) 418 36 2,601
- - -
Income (loss) before
income taxes 10,246 (4,699) 18,950 (5,623)
Income tax provision 542 1,063 1,556 2,721
- - - -
Net income (loss) $9,704 $(5,762) $17,394 $(8,344)
====== ======= ======= =======
Net income (loss) per share:
Basic $0.26 $(0.15) $0.46 $(0.22)
- -
Diluted $0.26 $(0.15) $0.46 $(0.22)
- -
Weighted average shares
outstanding:
Basic 37,556 37,554 37,556 37,547
Diluted 37,560 37,554 37,556 37,547
MedQuist Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
Unaudited
September 30, December 31,
2009 2008
Assets
Current assets:
Cash and cash equivalents $15,677 $39,918
Accounts receivable, net of allowance of
$3,927 and $4,802, respectively 43,352 50,374
Income tax receivable 204 154
Other current assets 4,849 8,053
- -
Total current assets 64,082 98,499
Property and equipment, net 11,860 15,785
Goodwill 40,763 40,545
Other intangible assets, net 37,357 39,877
Deferred income taxes 1,298 1,204
Other assets 10,430 6,295
-
Total assets $165,790 $202,205
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $6,549 $7,487
Accrued expenses 8,799 11,994
Accrued compensation 14,192 11,204
Customer accommodation 11,634 12,055
Deferred income taxes 652 651
Deferred revenue 11,679 15,630
Total current liabilities 53,505 59,021
Deferred income taxes 1,458 799
Other non-current liabilities 2,322 2,033
- -
Commitments and contingencies
Shareholders' equity:
Common stock - no par value; authorized
60,000 shares; shares issued and
outstanding, 37,556 and 37,556
respectively 237,800 237,907
Accumulated deficit (131,751) (99,198)
Accumulated other comprehensive income 2,456 1,643
- -
Total shareholders' equity 108,505 140,352
- -
Total liabilities and shareholders'
equity $165,790 $202,205
======== ========
MedQuist Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
Nine months ended
September 30,
-
2009 2008
Operating activities:
Net income (loss) $17,394 $(8,344)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating
activities:
Depreciation and amortization 11,951 13,046
Equity in income of affiliated company (2,582) (200)
Deferred income taxes 662 2,425
Stock option expense 144 1,361
Provision for doubtful accounts 230 2,065
Loss on disposal of property and equipment 27 47
Changes in operating assets and liabilities:
Accounts receivable 6,847 (1,917)
Income tax receivable (50) 184
Other current assets 3,467 (1,437)
Other non-current assets (34) 117
Accounts payable (351) (4,393)
Accrued expenses (3,427) (984)
Accrued compensation 2,959 (53)
Customer accommodation (317) (5,651)
Deferred revenue (4,107) (57)
Other non-current liabilities 168 (92)
- -
Net cash provided by (used in) operating
activities $32,981 $(3,883)
- -
Investing activities:
Purchase of property and equipment (3,603) (5,015)
Capitalized software (1,846) (2,712)
Proceeds from sale of investments - 692
Investment in affiliated company (852) -
-
Net cash used in investing activities (6,301) (7,035)
Financing activities:
Dividends paid (49,949) (103,279)
Debt issuance costs (1,171) -
Proceeds from exercise of stock options - 68
Net cash used in financing activities (51,120) (103,211)
-
Effect of exchange rate changes 199 (156)
-
Net decrease in cash and cash equivalents (24,241) (114,285)
-
Cash and cash equivalents - beginning of
period 39,918 161,582
-
Cash and cash equivalents - end of period $15,677 $47,297
======= =======
Supplemental cash flow information:
Cash paid for income taxes $241 $249
Accommodation payments paid with credits $103 $659
MedQuist Inc. and Subsidiaries
Reconciliation of GAAP financial measures to the non-GAAP measures
Adjusted EBITDA
(In thousands)
Unaudited
Three months Nine months
ended ended
September 30, September 30,
- -
2009 2008 2009 2008
GAAP operating income (loss) $8,121 $(5,276) $16,332 $(8,862)
Add: Depreciation 2,197 2,977 7,418 8,901
Add: Amortization of intangible assets 1,518 1,411 4,533 4,145
Add: Cost of legal proceedings and
settlements, net 1,382 8,833 13,440 17,908
- - -
Adjusted EBITDA $13,218 $7,945 $41,723 $22,092
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Adjusted EBITDA is a non-GAAP financial measure. The Company believes that this non-GAAP measure, when presented in conjunction with comparable GAAP measures, is useful to both management and investors in analyzing the Company's ongoing business and operating performance. The Company believes that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view the Company's financial results in the way that management views financial results. Management believes Adjusted EBITDA is useful as supplemental measure of the Company's financial results because it removes costs not related to the Company's operating performance. Management believes that Adjusted EBITDA should be considered in addition to, but not as a substitute for items presented in accordance with GAAP that are presented in this press release.
SOURCE MedQuist Inc.
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