MGC Diagnostics Corporation
NASDAQ: MGCD
Corporate Presentation March 2016
www.mgcdiagnostics.com
2
[ SAFE HARBOR STATEMENT ]
From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, MGC Diagnostics Corporation may make forward−looking statements concerning possible or anticipated future financial performance, business activities or plans that include the words “believes,” “expects,” “anticipates,” “intends” or similar expressions. For these forward−looking statements, the Company claims the protection of the safe harbor for forward−looking statements contained in federal securities laws. These forward−looking statements are subject to a number of factors, risks and uncertainties, including those disclosed in our periodic filings with the SEC, that could cause actual performance, activities or plans after the date the statements are made to differ significantly from those indicated in the forward−looking statements. For a list of these factors¸ see the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements,“ in the Company’s Form 10-K for the year ended October 31, 2015, and any updates in subsequent filings on Form 10-Q or Form 8-K under the Securities Exchange Act of 1934.
3
[ OUR IDENTITY] MGC Diagnostics Corporation is a global medical technology
company dedicated to CardioRespiratory health solutions.
Conducting business through its wholly owned subsidiaries Medical Graphics
Corporation (St. Paul, MN) and Medisoft SA (Sorinnes, Belgium)
Direct Management in Asia-Pacific, Latin America and Western Europe
165 EMPLOYEES
60+
GLOBAL
MGC BUSINESS
PARTNERS
10+
MEDISOFT
BUSINESS
PARTNERS
50+
MGC
DISTRIBUTION
MARKETS
30+
MEDISOFT
DISTRIBUTION
MARKETS
MGC DIAGNOSTICS MEDISOFT
4
[ OUR HISTORY]
WHY?
5
[ WHAT WE DO AND WHY] MGC Diagnostics designs, markets and sells non-invasive CardioRespiratory diagnostic
capital equipment, accessories, supplies and services to healthcare providers specializing in COPD, asthma, and CardioRespiratory disease management.
According to the World Health Organization and the American Journal of Respiratory Care:
65 MILLION CASES
OF COPD
+30% IN NEXT
10 YEARS
65 million people have COPD, accounting for
5% of all deaths globally increasing by >30% in
the next 10 years to become the 3rd leading
cause of death worldwide*
300 MILLION CASES OF
ASTHMA
+33% BY 2025
300 million people have
asthma, projected to
increase to 400 million
by 2025 - asthma is the
most common disease in
children*
*WHO Burden of Chronic Respiratory Diseases 2015
The prevalence of COPD varies for a low of
3.9% of the population of MN to a high of 9.3%
of the population of KY. COPD is the only
major cause of death whose incidence is
increasing.
6
[ WHAT WE DO AND WHY] o ASTHMA-COPD OVERLAP SYNDROME (ACOS):
is characterized by persistent airflow limitation with several features usually associated with asthma and several features usually associated with COPD.
** American Journal of Respiratory Critical Care
*WHO Burden of Chronic Respiratory Diseases 2015
15-25% of patients with
COPD and asthma will
have overlapping disease**
15-25% PATIENTS HAVE
COPD AND
ASTHMA
Patients with severe asthma
are 32 times more likely to
develop COPD than those
with mild asthma*
32x
Lung function testing is essential for the assessment of patients with suspected
chronic disease of the airways. It must be performed at either the initial or a
subsequent visit, if possible before and after a trial of treatment.
Prevalence of ACOS is
between 15 and 25% in an
adult population with severe
COPD or uncontrolled asthma
15-25% PREVALENCE OF
ACOS
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[ CARDIORESPIRATORY DIAGNOSTIC MARKET] EXECUTIVE SUMMARY
o Large and growing patient population with undiagnosed chronic disease
o Technology developments in diagnostic procedures that will optimize usage
• Simplified technology
• Centralized data
• Patient-friendly
o Emerging device-based therapeutic options which will require discrete patient selection, hence, more
discrete diagnosis
o The result may be increased annual growth and turnover rates in cardio-respiratory diagnostic products
o Including Pulmonary Function, Gas Exchange and Spirometry and Respiratory-Pharma Clinical Trials
Health Research International #042-1-US-0810 *
Current diagnostic technologies are
adequate to diagnose major diseases,
however, existing products are
underutilized*
The market is mature with a long
product replacement lifecycle of
7-10 years.
Developments expected to stimulate future growth*
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[ WHY MEDISOFT] ESTABLISH DIRECT GLOBAL OPERATIONS
Increased Global Footprint
o MGC Diagnostic products are price and feature
restrained in many international markets
o Medisoft provides the Company a diverse product platform to achieve synergies and growth worldwide
Diagnostic Equipment Sales
2015
2016
2017
2018
2019
CAGR
Domestic $148 $154 $160 $166 $173
International $178 $185 $192 $200 $208
Total Available Market
$326 $339 $352 $366 $381 4%
44% BD/Apax
MGCD 22%
10% nSpire
24% Other
Domestic
63% BD/Apax
6% Cosmed
4% Medisoft
3% MGCD
24% Other
International
Health Research International #042-1-US-0810 9
[ WHY MEDISOFT]
o 5 Product Categories
• PFT, BodyBox, Spirometry, Gas Exchange, Metabolic
o 10 Products
• PFT (2), Bodybox (2), Spirometry (1), Gas Exchange (3), Metabolic (2)
o 6 Product Categories
• PFT, BodyBox, Spirometry, Gas Exchange, Metabolic, Sleep Dx
o 20 Products
• PFT (3), BodyBox (4), Spirometry (5), Gas Exchange (4), Metabolic (2), Sleep Dx (2)
o 9 Product Categories
• PFT, BodyBox, Spirometry, Mechanics, Gas Exchange, Metabolic, eNO, ECG, Treadmill
o 27 Products
• PFT (4), BodyBox (3), Spirometry (5), Mechanics (3), Gas Exchange (3), Metabolic (3), eNO (2), ECG (1), Treadmill (3)
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MGC DIAGNOSTICS
COMPETITOR
MEDISOFT
[ WHY MEDISOFT] ENHANCED PRODUCT AND INTELLECTUAL PROPERTY PORTFOLIO
11
[ PERFORMANCE] FISCAL YEAR 2015 RESULTS
+24.9%
RECORD REVENUE Full year revenue increased 24.9% to $37.5 million in fiscal 2015 compared to $30.0 million in fiscal 2014.
+11.6%
DOMESTIC GROWTH Our Medical Graphics subsidiary led the way with revenue growth in the U.S. of 11.6% to 32.0 million - the best since fiscal year 2007
+13.2%
INTERNATIONAL GROWTH international revenue grew 13.2% to $5.7 million, driven by stronger sales in Europe and the Asia/Pacific region.
OTHER HIGHLIGHTS
o Operating Income $1.6M vs. ($811,000)
o Net Income $4.0M , or $0.94 per diluted share vs. ($1.2M), or ($0.28) per diluted share
o EBITDA $2.6M vs. ($209,000)
o Backlog $2.6M vs. $1.9M
o Deferred Revenue $6.8M (current & long-term)
o 32% Attachment Rate for MGC domestic units sold
o 28% of equipment revenue came from new products
o Renewed Global Visibility
• International revenue increased 68% (full year of Medisoft) • Contributes 28% of total
Revenue • Pacific-Medico Partnership
– Japanese Market
o 66 Competitive Conversions
o 35% Recurring Revenue
o EU and Emerging Market Expansion, Adjacent Market, Differentiating Technology and Services
Sales by Geography (Fiscal 2015)
72%
(27.0 M)
28%
10.5 M
Domestic International
o MGC Diagnostics Corporation (NADAQ: MGCD) is a global medical technology company dedicated to CardioRespiratory Health Solution
o Operating in a capital equipment and recurring revenue model
o Significant recurring revenue model
65% 17%
18%
Equipment and Accessories Supplies Service
Revenue Breakdown (Fiscal 2015 )
67% 16%
18%
Equipment and Accessories Supplies Service
Revenue Breakdown (Q4 Fiscal 2015 )
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[ COMPANY OVERVIEW]
$23,419
$26,840 $27,002 $27,158
$31,640 $30,032
$37,467 $37,775
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 TTM as of01/31/16
Rev
en
ue
(in
th
ou
san
ds
US
$)
13
$8.9M Q115
$9.3M Q116
[ REVENUE]
$3,294
$4,050
$4,962
$5,626 $5,722
$6,085 $6,135
$6,688
$6,717
$6,607 $6,651 $6,754
$6,715
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
(in
th
ou
san
ds
US
$)
14
(in
th
ou
san
ds
US
$)
$530 $541
$709
$504
$371
$542
$1,200
$1,900 $1,900
$2,100
$2,300
$2,600
$1,900
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
[ BACKLOG]
[ DEFERRED REVENUE]
Equipment and Accessories Revenue
$4.3
$4.9 $4.9
$6.0
$3.5
$4.3
$3.4
$6.2
$5.8 $5.5
$5.9
$7.0
$6.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Rev
enu
e (
in m
illio
ns
US
$)
15
[ EQUIPMENT AND ACCESSORIES REVENUE]
DRIVE NEW DEVICE REVENUE
o Accelerate replacement of legacy
MGC systems o Drive sales through Group
Purchasing Organizations (GPO)
o Take market share from competition
o Refresh existing products and add new, innovative products
o Focus on opportunistic international markets
MANAGEMENT INITIATIVES:
16
[ COMPETITIVE CONVERSIONS]
Competitive Conversions Revenue
$1,130
$1,832
$1,302
$2,017
$662
$849
$620
$729
$425 $470
$617
$1,611
$1,139
$0.0
$500,000.0
$1,000,000.0
$1,500,000.0
$2,000,000.0
$2,500,000.0
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Rev
en
ue
(in
mill
ion
s U
S $
)
o Expand market share by converting competitive accounts by leveraging
o Ultima Series Redesign
o Information Technology Offerings
o Best in Class Support
MANAGEMENT INITIATIVES:
MARKET SHARE BY CONVERSIONS
$1.2 $1.2 $1.3
$1.4 $1.3
$1.6 $1.6
$1.8 $1.7 $1.7 $1.7
$1.8 $1.7
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Service Revenues
70.3% 70.8% 70.9% 70.1% 67.3% 66.4% 67.4% 69.4%
73.1% 70.8% 66.0%
69.3% 70.6%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Service Gross Margins
Rev
enu
e (
in m
illio
ns
US
$)
17
[ SERVICE AND REVENUE MARGINS]
o Pre-paid service agreement margins significantly outperform time and material agreements and provide greater margin consistency
o Service contract Attachment Rate has grown from 6% in FY12 to 32% in FY15
MANAGEMENT INITIATIVES:
INCREASE SERVICE CONTRACTS
$1.5 $1.5
$1.7 $1.7
$1.5 $1.5 $1.6
$1.7
$1.5 $1.5 $1.6
$1.7
$1.5
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Supplies Revenue
68.7% 69.1% 67.9% 67.5% 68.5% 67.8% 69.0% 68.8% 67.2% 66.9% 68.0% 67.0% 65.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Supplies Gross Margin
Rev
enu
e (
in m
illio
ns
US
$)
18
[ SUPPLIES REVENUE AND MARGINS]
INCREASE SUPPLY USAGE: RECURRING REVENUE
o Leverage new and existing distribution partners world-wide
o Internal sales focus on customers that have historically purchased few supplies from us
MANAGEMENT INITIATIVES:
59.9%
52.3%
46.9% 48.2%
60.1%
51.4%
68.0%
53.6% 53.4%
48.4%
44.1% 44.0%
50.2%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Operating Expenses (as a % of Revenue)
19
[ OPERATING EXPENSE INITIATIVES]
o Operating expenses are in alignment with our current growth plan
o Operating expense leverage will occur as we grow future revenues
MANAGEMENT INITIATIVES:
54.5% 55.7%
55.4% 57.8% 56.5% 55.8% 55.7% 53.1%
54.5%
50.7% 48.7%
52.4% 52.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16
Gross Margins
20
[ GROSS MARGINS]
o Grow equipment revenue to
leverage our fixed production costs o Grow higher margin recurring
revenues (supplies and service)
o Streamline manufacturing processes to lower production costs
o Value engineer our products to lower costs and maintain quality
MANAGEMENT INITIATIVES:
INCREASE GROSS MARGINS
$(1,593)
$(849)
$(152) $(1)
$1,357
$(1,100)
$3,976
$4,513
$(2,000)
$(1,000)
$-
$1,000
$2,000
$3,000
$4,000
$5,000
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY2014 FY2015 TTM as of01/31/16
Net
Inco
me
/ (
Loss
) in
th
ou
san
ds
US
$
21
[ NET INCOME/LOSS]
1/31/14 10/31/14* 10/31/15 1/31/16
Cash and equivalents $11.1M $5.7M $6.6M $6.6M
Total assets $24.9M $32.3M $35.6M $35.4M
Total liabilities $9.2M $16.8M $15.7M $15.3M
Net working capital $15.1M $9.8M $11.4M $11.5M
Bank debt -- $3.8M $3.0M $2.8M
Shareholders equity $15.7M $15.5M $19.9M $20.1M
Shares outstanding 4.1M 4.2M 4.3M 4.3M
22
[ BALANCE SHEET HIGHLIGHTS]
o Record Fiscal 2015 Financial Results o Increased Global Opportunity – Acquired Medisoft August 2014 o Recurring services/supplies revenues allow for greater predictability
of revenue streams o Key Growth Drivers
• Aging Population • Global Market Opportunities • Conversion of Legacy Equipment • Conversion of Competitive Accounts
o Best-in-class customer base, products and service o Strong product offerings in significant addressable markets o Strong balance sheet with $6.6 million in cash o Success to date in gaining market share from competitors
23
[ INVESTMENT HIGHLIGHTS]
24
[ LONG RANGE PLAN]
PLAN: Identify target
hospitals for our
products and services
PLAN: Transform
MGCD into a company
that can grow on a
consistent basis year
over year
PLAN: Control the
average selling prices
of our products by
lowering the cost of a
number of our current
products by
reconfiguring the
feature sets
PLAN: Identify and
utilize external
partnerships to
assess, design, and
develop new products
while maintaining
MGCD’s proprietary
technology expertise
PLAN: Align all
employees with the
goals and objectives of
the Company and
where people are
empowered to
contribute to the
success of the
company
PLAN: Increase the
number of
shareholders by
aggressively
communicating its
long-range vision to
the broader Wall Street
investment community
In recent months the Board of Directors and the Company’s management team have initiated a new Long-Term Strategic Plan focusing on process improvements throughout the enterprise to generate consistent growth and profitability in the coming years. We have a strong transformational vision of how we want MGC Diagnostics to develop and operate in the coming years. Our plan is built around six key initiatives:
MGC Diagnostics Corporation
NASDAQ: MGCD
Corporate Presentation February 2016
www.mgcdiagnostics.com