MediSolution Ltd.
TSX : MSH

MediSolution Ltd.

June 09, 2005 08:22 ET

MediSolution Announces Results For The Year

MONTREAL, QUEBEC--(CCNMatthews - June 9, 2005) -

Company reports a profit of $1.5 million in the fourth quarter

MediSolution Ltd. (TSX:MSH), a leading Canadian healthcare information technology company, today announced its results for the fourth quarter and the year ended March 31, 2005.

Fourth Quarter Highlights

For the quarter ended March 31, 2005, the Company reported an increase in profits to $1.5 million, or $0.01 per share, compared to a profit of $0.9 million, or $0.01 per share in the same period in 2004.

Despite a 6% decrease in revenue to $13.1 million from $14.0 million in the prior year, the Company reported a $0.4 million, or 16%, increase in EBITDA(1) to $2.7 million from $2.3 million reported in the prior year. The increase in EBITDA was attributed to a reduction in selling, general and administrative expenses through previously announced cost reduction initiatives, a reduction in the provision for doubtful accounts, and the inclusion of a $0.4 million gain on settlement of a lawsuit. These were partially offset by the inclusion of a restructuring charge of $0.5 million relating to the office consolidation plan.

New Contracts

During the quarter, order writing strengthened, as MediSolution signed a total of $4.6 million in new business, as compared to $4.1 in the prior year. Orders in the quarter included contracts with the following customers:

- The Quebec Ministry of Health and Social Services for additional development, installation of complimentary modules and professional services for the Blood Bank project;

- Healthcare Corporation of St. John's (Newfoundland) for MediTime®, an enterprise-wide staff scheduling solution; and

- Regie de l'assurance maladie du Quebec (RAMQ) for Virtuo™, a financial and materials management information system.

It is expected that the revenue on these contracts will be recognized over the next twelve to eighteen months.

Full Year Results

MediSolution ended the year with a net loss of $0.7 million, compared to a net loss of $0.9 million in the prior year. This year's loss included a $0.8 million restructuring charge related to the office consolidation plan. The improvement in the results is attributed to a small increase in gross margins, a reduction in selling, general and administrative expenses and lower interest expense. EBITDA(1) for the year was $4.4 million, compared to $5.1 million in the prior year. Excluding the $0.8 million restructuring charge, EBITDA was $5.2 million, the Company's highest EBITDA since 2001.

For the fiscal year ended March 31, 2005, revenue decreased by 5% to $47.7 million from $50.2 million in the prior year.

"MediSolution's results in 2005 were clearly impacted by the restructuring of the Quebec healthcare sector resulting in a 16% decrease in revenues in Quebec, our primary market." said Allan D. Lin, President and Chief Executive Officer. "Despite this temporary setback, the Company has adjusted its cost base to improve its future profitability and maintained its focus on developing and positioning our products for growth in both Quebec and our growth markets outside Quebec."

The Company continues to increase its presence outside of Quebec, where revenue increased by 4% in 2005, and sales orders increased by 45%.

On a segmented basis, revenue from:

- Resource Management Systems (RM) increased by $1.7 million to $26.7 million due to a $3.2 million increase in financial systems software revenue following the acquisition of CIO in April 2004. The increase was partly offset by a decrease in payroll processing revenues as the Fiscal 2004 revenues included large non recurring revenues from retroactive payroll processing for Quebec healthcare workers and a decrease in human resource software revenues.

- Healthcare Information Systems (HIS) decreased by $4.2 million to $20.9 million, driven principally by a $3.4 million decrease in revenues from the Company's Trace Line blood bank software, as the first two phases of the Quebec government contract to implement this software were winding down in Fiscal 2005. An additional phase valued at $1.1 million was sold in the fourth quarter of 2005 and will be deployed in Fiscal 2006. Laboratory systems revenues increased by $1.4 million primarily as a result of growth in sales in the United States.

Fiscal 2005 Initiatives and Highlights

During the year, MediSolution undertook a number of initiatives to increase value for shareholders and position the Company for profitability:

Strengthened our Market Position

Acquisition of the VIRTUO Product Line

On April 30, 2004, we completed the acquisition of CIO, the provider of VIRTUO, the integrated financial application for service industries. The acquisition allows MediSolution to eliminate royalty payments previously payable and provides MediSolution with cross selling opportunities to the VIRTUO customer base. The acquired business exceeded all financial targets established for the first year and anticipated synergies have been captured. The VIRTUO team was successfully integrated into our MPlex, non-healthcare division, and the acquisition has resulted in eight new contracts in Quebec and Ontario this year.
Marketing Alliance for Community Care Solutions

On February 7, 2005, MediSolution announced that it had formed a marketing alliance with in4tek, a leading supplier of community information systems in the United Kingdom and DeltaWare, an existing in4tek business partner. MediSolution expects this alliance will position the Company as the leading supplier of community care systems in the province of Alberta.

Reduced Costs and Improved Profitability

As part of our continuing efforts to streamline our cost structure and centralize our operations, on February 8, 2005 we announced a plan to consolidate our seven product development and software support groups into our existing offices in Toronto, Montreal and Quebec City. This consolidation will enable MediSolution to close support centers in London (Ontario), Edmonton and Phoenix. The plan is expected to be substantially completed by December 2005, and will result in reducing annual expenses by $2.5 million. A restructuring charge of $0.8 million was recorded in Fiscal 2005.

Developed Innovative Products

Business Intelligence Suite

During Fiscal 2005, MediSolution successfully deployed its business intelligence suite, MediVue™, to several sites in healthcare and non healthcare. MediVue has been integrated with our time scheduling and human resource software at the Scarborough Hospital in Ontario and has been deployed at Etablissement de sante d'Argenteuil in Quebec. The solution is also being deployed through our non healthcare division, Mplex solutions.

MediAccess®

MediSolution completed development of MediAccess in Fiscal 2005, an integrated product suite, for its Quebec RM healthcare customers. MediAccess was developed using customer feedback and enables the Company to remain competitive in the market for Quebec-based payroll customers. The product provides a front-end payroll business intelligence solution with improved data capture and enhanced HR capabilities. Scheduling modules and web self-service modules will be released in Fiscal 2006 to provide enhanced integrated solutions. To date, over $1.6 million was invested in MediAccess.

Subsequent event

Sale of Site Management Division

Effective May 1, 2005, MediSolution divested of its site management division to Microserv for cash proceeds of $0.25 million on closing plus additional contingent royalties of up to $0.4 million over the next four years. The site management business comprised the maintenance of computer equipment and related support services for five customers. The transaction included the transfer of 16 employees to Microserv along with the sale of the five contracts. This transaction is part of MediSolution's ongoing plan to refocus the organization on its core software and services while divesting of non-core businesses.

Outlook

In Fiscal 2006, MediSolution will focus on the execution of its growth strategy and delivering on our cost reduction initiatives. Also, our ever-increasing focus on improving our products and solutions will continue to address the needs of the markets in 2006 and in the years to follow. At a time when Canadian and US healthcare providers are stepping up their efforts to maximize operational efficiencies, lower costs and improve the delivery of healthcare services, we believe the Company is well positioned for profitable growth in a demanding market place.

Notice of Conference Call Web cast

MediSolution will be hosting a conference call to discuss the Company's year-end financial results and business initiatives on June 9, 2005 at 4:00 p.m. (EDT). To participate in the call, or listen to the taped rebroadcast, go to www.medisolution.com/investors/calendar.htm.

About MediSolution

MediSolution is a leading healthcare and public sector information technology company, providing software, solutions and services to customers across North America. More than 500 hospitals and other healthcare facilities as well close to 200 public sector or government related organizations rely on MediSolution's systems to maximize their operational efficiencies, lower their costs, and improve the delivery of services. MediSolution has two operating segments. The Resource Management Systems segment is comprised of administrative software solutions such as human resource management, staff scheduling, payroll processing and financial software. The Healthcare Information Systems segment is comprised of clinical solutions such as patient tracking, electronic patient health records, radiology and laboratory software for hospitals.

MediSolution is publicly traded (TSX:MSH), and has a staff of approximately 320 employees who operate from the Company's Montreal, Quebec headquarters and offices in Canada and the United States. For more information, visit www.medisolution.com.

Note: This press release contains "forward-looking statements". The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include general economic conditions, interest rates, availability of equity and debt financing and other risks detailed from time to time in the company's continuous disclosure documents. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

(1) The term "EBITDA" (earnings before interest expense, income taxes, depreciation of property and equipment and amortization of intangible assets) does not have a standardized meaning prescribed by Canadian Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other publicly traded companies. We use EBITDA amongst other measures, to assess the operating performance of our business.



MediSolution Ltd.
Consolidated Balance Sheets (Unaudited)

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As at March 31 (in thousands of dollars) 2005 2004
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ASSETS

Current Assets
Cash $ 192 $ 598
Accounts receivable and accrued revenue 25,957 19,418
Inventory 861 871
Sundry deposits and prepaid expenses 1,443 849
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28,453 21,736

Property and equipment 1,806 1,888
Intangible assets 9,175 7,029
Goodwill 8,611 7,329
Future income taxes -- 842
Other assets -- 699
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$ 48,045 $ 39,523
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LIABILITIES

Current Liabilities
Short-term loans $ 5,271 $ 1,656
Accounts payable and accrued liabilities 11,910 13,211
Deferred revenue 21,914 17,125
Current portion of obligations under capital
leases 113 121
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39,208 32,113

Future income taxes 154 --
Obligations under capital leases -- 113
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39,362 32,226
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SHAREHOLDERS' EQUITY 8,683 7,297

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$ 48,045 $ 39,523
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MediSolution Ltd.
Consolidated Statements of Operations (Unaudited)
(in thousands of dollars, except per share amounts)
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Three Months Ended Twelve Months Ended
March 31, March 31, March 31, March 31,
2005 2004 2005 2004


REVENUE
System sales $ 4,974 $ 6,238 $ 16,331 $ 20,986
Support and
processing 8,150 7,783 31,343 29,246
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13,124 14,021 47,674 50,232
Cost of revenue 6,669 6,773 26,816 28,461
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Gross profit 6,455 7,248 20,858 21,771
Sales and
marketing expenses 2,035 2,604 8,860 9,847
Software
development expenses 548 398 2,192 1,529
General and
administrative
expenses 628 1,914 4,599 5,325
Restructuring charges 545 -- 845 --
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Earnings before
the under noted items: 2,699 2,332 4,362 5,070

Depreciation of
property and equipment 206 192 785 805
Amortization of
intangible assets 886 1,118 4,123 4,280
Interest expense 121 78 249 872
Loss on disposal
of assets -- 3 -- 16
Loss (gain) on
foreign exchange (61) 16 (98) (3)
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Net earnings (loss) $ 1,547 $ 925 $ (697) $ (900)
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Net earnings
(loss) per share
- basic and
fully diluted 0.01 0.01 -- (0.01)
Weighted average
number of common
shares
outstanding 157,323,772 153,255,066 157,007,240 124,750,202
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MediSolution Ltd.
Consolidated Statements of Deficit (Unaudited)
(in thousands of dollars)

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Three Months Ended Twelve Months Ended
March 31, March 31, March 31, March 31,
2005 2004 2005 2004
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Deficit, beginning
of period $ (2,080) $ (64,813) $ (63,860) $ (61,375)
Deficit applied to
stated capital -- -- 64,000 --
Net earnings (loss) 1,547 925 (697) (900)
Conversion of loan
due to a shareholder -- -- -- (1,613)
Interest on share
purchase financing 8 28 32 28
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Deficit, end of year $ (525) $ (63,860) $ (525) $ (63,860)
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MediSolution Ltd.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands of dollars)

Twelve Months Ended
March 31, March 31,
2005 2004
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INFLOW (OUTFLOW) RELATED TO THE FOLLOWING ACTIVITIES

Operating
Net loss $ (697) $ (900)
Items not affecting cash:
Depreciation of property and equipment 785 805
Amortization of intangible assets 4,123 4,280
Stock options compensation 508 386
Loss on disposal of assets -- 16
Non-cash portion of restructuring charges 526 --
Changes in non-cash operating working
capital items (3,759) (1,648)
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1,486 2,939
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Investing
Business acquisition, net of cash acquired (1,980) --
Proceeds from disposal of assets -- 11
Additions to intangible assets (3,044) (2,390)
Additions to property and equipment (419) (586)
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(5,443) (2,965)
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Financing
Repayment under capital leases (121) (139)
Repayment under long-term liabilities -- (551)
Issuance of common shares, net of share
issue costs 25 6
Interest on share purchase financing 32 28
Increase in short-term loans 3,615 1,193
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3,551 537
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Increase (decrease) in cash and cash
equivalents (406) 511

Cash, beginning of year 598 87
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Cash, end of year $ 192 $ 598
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Supplemental cash flow information

Interest paid $ 216 $ 852
Issuance of shares for business acquisition $ 1,518 $ --
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Contact Information

  • MediSolution Ltd.
    Allan D. Lin
    President and Chief Executive Officer
    514-850-5040
    www.medisolution.com