mgc diagnostics corporation...corporate presentation march 2016 2 [safe harbor statement] from time...

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

7

[ 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*

8

[ 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)


• 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)


• 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)

10

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 )

12

[ 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


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


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


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%


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


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


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%


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


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%


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


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%


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


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

mgc diagnostics corporation...corporate presentation march 2016 2 [safe harbor statement] from time...

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