Merge Healthcare

Merge Healthcare wants your imaging department to share the health. The company develops image and information exchange management software, mainly for cardiology, ophthalmology, orthopedics, radiology, and clinical trials. Its products are available as traditional packaged software or hosted in the cloud. Its Merge iConnect suite lets users create information exchanges that enable sharing of diagnostic images and results within a facility and with other entities. The company also serves the business side of health care, offering software to manage revenue cycle, physician practices, imaging centers, and billing departments. It makes more than 90% of sales in the US.

Recurring revenue makes up 60% of Merge's business, with maintenance, which is usually on an annual renewal basis, being its primary component. The majority of non-recurring revenue comes from perpetual software licenses, license upgrades and renewals, hardware, and professional services. Professional services (nearly 20% of revenue) entail the company's clinical trial software-as-a-service offerings, installation, custom engineering, training, consulting, and project management. Besides health care facilities and similar providers, Merge also sells software to original equipment manufacturers.

The jump in sales for both 2010 and 2011 came largely from new products gained through acquisitions, but costs related to integrating those acquisitions and related restructuring had a big hand in keeping Merge from turning a profit in either year. In 2012 the company announced it was reviewing strategic alternatives, including a possible sale or merger.

Merge expects government incentives for health care providers significantly using electronic health records will help drive demand for its products. It also sees a significant opportunity for cross-selling, as few of its customers use more than one of its offerings; no customer, in fact, accounts for more than 5% of sales. The company pursues acquisitions as a way to expand its product offerings, enhance the capabilities of its systems, and build its portfolio of technology and supplement its own R&D.

Board member Michael Ferro, Jr., chairman and CEO of Chicago-based venture capital firm Merrick Ventures, holds just shy of 35% of the company's stock.