Attached files
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| 8-K - FORM 8-K - MModal Inc. | d8k.htm |
 1
Transaction Highlights
July 12, 2011
Exhibit 99.1 |
 2
Safe Harbor Language
Forward-Looking Statements
Information
provided
and
statements
contained
in
this
conference
call
that
are
not
purely
historical, such as statements regarding the timing and impact of MedQuist’s potential
acquisition of M*Modal, are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of
1995. Such forward-looking statements only speak as of the date of this
conference call and MedQuist Holdings Inc. assumes no obligation to update
the information included in this conference call. Statements made in this conference
call that are forward-looking in nature may involve risks and uncertainties.
Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees of future performance and are subject to
certain risks, uncertainties and assumptions that are difficult to predict,
including, without limitation, specific factors discussed herein and in other
communications
and
public
filings
made
by
MedQuist
Holdings
Inc.
(including
filings
by
MedQuist
Holdings
Inc.
with
the
SEC).
Although
MedQuist
Holdings
believes
that
the
expectations reflected in such forward-looking statements are reasonable as of
the date made, expectations may prove to have been materially different from
the results expressed or implied by such forward-looking statements.
Unless otherwise required by law, MedQuist Holdings
also
disclaims
any
obligation
to
update
its
view
of
any
such
risks
or
uncertainties
or
to announce publicly the result of any revisions to the forward-looking
statements made in this conference call. |
 3
Agenda
M*Modal transaction overview and strategic discussion
Vern Davenport, Chairman and Chief Executive Officer
Transaction financial implications and related filings
Tony James, Chief Financial Officer
Q&A |
 4
M*Modal Overview
Speech Understanding™
integrated into workflows of leading information
systems
Outstanding customer network built over decade with longstanding
relationships
Platform
flexibility
permits
solutions
tailored
to
needs
of
each
partner
Creates essential foundation for delivering comprehensive meaningful
information across systems
Software as a Service (SaaS) business model
More than 150,000 U.S. physicians using M*Modal solutions
Developer and owner of all technologies to transform narrative into clinical
intelligence
Over 30 patents and patent applications around fact extraction, adaptive NLP,
reconciliation of health information, learning from user behavior, and
speech processing in the cloud
140+ patent licenses in speech recognition and understanding
|
 5
Combination of Market Leaders
Strong patent and technology
portfolio
Scalable cloud-based services
Recurring SaaS revenue model
Prestigious customer base
Ecosystem of business partners
Large team of speech & language
scientists and software engineers
Highly innovative and agile
Serving 2,400+ hospitals, clinics, and
physician practices throughout the
U.S., Canada, Australia and the UK
Extensive customer-facing capability
Strong end-to-end workflow
Proven EHR integration
Deep domain expertise in healthcare
High customer retention
Financial stability |
 6
Transaction Benefits
Ownership of speech and Natural Language Understanding technologies
Facilitates consolidation to a single speech recognition platform
Accelerates M*Modal’s technology roadmap
Broader product offering to local and regional transcription partners
Leverages M*Modal’s cloud-based services to enhance gross margins
Operational
Existing products provide for tighter EHR integration
Technology pipeline enables new growth opportunities
Leverages core transcription business
Further differentiation within the HCIT market
Enables opportunities for greater penetration of the in-house transcription
market segment
Strategic
Financial
Total consideration of $130 million
Stronger future revenue growth, enhanced margins and meaningful cost synergies
Projected increase of Company’s annualized Adjusted EBITDA
run-rate Approximately $20 million by year end 2012
Expected to be modestly accretive to Adjusted Net Income per diluted share in the
second half of 2011 |
 7
Transaction Summary
$101.2M of consideration at closing
$48.4M cash / $52.8M stock
4.1 million shares valued at $12.76/share on trailing 10-day
average closing price
Subject to typical working capital and cash adjustments
$28.8M in installments paid over 3 years
Financing cash consideration from available cash
Amended credit agreements to improve senior and subordinated
lender covenants
Expected closing by the end of Q3 2011, subject to
HSR review |
 8
Financial Profile
Recurring revenue model provides excellent visibility
Current revenue run rate of $24 million, including
amounts billed to MedQuist
Experiencing rapid revenue growth: 57% in 2010
Attractive gross margins support ongoing technology
investment
Strong operating profit margins: over 30% in 2010 |
 9
Compelling Financial Rationale
Modest accretion to Adjusted Net
Income per share for 2011*
Expect approximately $20M
annualized Adjusted EBITDA run
rate by year end 2012
Attractive Adjusted EBITDA
multiple for a technology
transaction
Restructuring and integration
costs associated with the
transaction of approximately $10M
Restructuring costs associated
with exits of Chairman and
President/CEO of approximately
$3M
Termination of existing LTIP plan
and replacement with restricted
stock plan of 698K shares
Acceleration of amortization of
certain prepaid licensing fees of
approximately $12M
Projected Contribution
Related 8K Filing
* Based on expected 58 million diluted shares |
 10
Expanded Growth Opportunity
Create additional value for existing customers
Enhance value proposition to further penetrate
in-house transcription market segment
Integrated offering is expected to increase MedQuist
win-rates for new customers
New products and services available as a result of
new company
Enter new market segments such as financial,
analytics and payer |
 11
Non-GAAP Financial Definitions
Non-GAAP Financial Measures
We
have
provided
the
Company's
Adjusted
EBITDA,
a
non-GAAP
financial
measure,
on
a
forward-looking
basis
in
this
document.
We are unable to present a quantitative reconciliation of this forward-looking
non-GAAP financial measures to the most directly comparable
forward-looking GAAP financial measure because management cannot predict, with sufficient
reliability,
contingencies relating to potential changes in tax valuation allowances, potential
changes to customer accommodation accruals, potential restructuring impacts,
contingencies related to past and future acquisitions, and changes in
fair
values
of
our
derivative
instruments,
all
of
which
are
difficult
to
estimate
primarily
due
to
dependencies
on
future
events.
Adjusted EBITDA
Adjusted
EBITDA,
a
non-GAAP
financial
measure,
is
defined
by
the
Company
as
Net
Income
excluding
taxes,
interest,
equity in income of an affiliated company, depreciation, amortization, cost of
legal proceedings and settlements, acquisition related charges,
restructuring charges, stock compensation, amortization of certain prepaid licensing fees and certain non-
recurring accrual reversals.
Adjusted Net Income
Adjusted Net Income, a non-GAAP financial measure, is defined by the Company as
Adjusted EBITDA less depreciation, amortization expense for capitalized
intangible assets (excluding acquired intangibles), less interest expense (net of non-
cash interest), and less current tax provision. We measure Adjusted Net Income
based on diluted shares outstanding (see below). Management believes that
utilization of Adjusted Net Income is an important non-GAAP financial measure of our
normalized operating results.
Diluted Shares Outstanding
For
purposes
of
evaluating
our
results
on
per-share
metrics,
many
of
our
computations
utilize
proforma
diluted
share
computations. Our measure of proforma diluted shares include our Basic and
Diluted share computations utilized for GAAP purposes, plus the impacts of
minority interest shares outstanding, shares to be issued to another minority shareholder,
restricted inducement shares to be granted to certain of M*Modal’s continuing
employees, restricted shares issued to the Company’s
Chairman
and
Chief
Executive
Offer
and
restricted
stock
awards
associated
with
the
termination
of
MedQuist
Inc.’s long-term incentive plan. |
 12
Q & A |