Merge Healthcare (MRGE) reported an adjusted EPS of 4 cents in the fourth quarter of fiscal 2010, consistent with the year-ago period, although missing the Zacks Consensus Estimate by a penny. For the full year, adjusted EPS came in at 10 cents, missing the Zacks Consensus Estimate by a penny. Adjusted EPS in the previous year was 22 cents.

Merge reported revenues of $46.2 million in the quarter, up 139.4% from $19.3 million in the year-ago period. Results for the reported quarter include sales of AMICAS, which was acquired in April 2010. However, adjusted revenue was $51.1 million, higher than the year-ago quarter’s adjusted revenue of $49.8 million.

The Zacks Consensus Estimate was $49 million. For fiscal 2010, adjusted revenue came in at $190.7 million, compared to $164.6 million in 2009. The Zacks Consensus Estimate was $152 million.

Merge derives revenues from three sources – software and others, professional services, and maintenance and EDI − which recorded an annualized growth of 78.6% to $13.5 million, 34% to $6.9 million and 295.3% to $25.7 million, respectively, during the quarter. Recurring revenues were greater than 65% of net sales during the quarter, unchanged from the year-ago quarter.

To strengthen its business, during the third quarter, Merge made some changes to its top management. The company had announced its new CEO, Jeffrey Surges, who was the president of sales at Allscripts Healthcare (MDRX), a Merge partner. Surges’ predecessor, Justin Dearborn, will be focusing on the company’s international business. For 2011, Merge reiterated its guidance of adjusted revenues of $235−$240 million.

The overall US health IT (HIT) market witnessed a dramatic change in February 2009 with the passing of the Health Information Technology for Economic and Clinical Health (HITECH) Act, as part of the American Recovery and Reinvestment Act (ARRA), an economic stimulus bill.

According to the HITECH Act, almost $20 billion will be spent on health care providers who can demonstrate by 2011 that they are using HIT applications in meaningful ways to reduce the overall healthcare costs. The incentives will be offered for a period of 4−5 years after which physicians will be penalized for not adopting proper measures.

 
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