INVESTOR PRESENTATION

J 2012June 2012

forward looking statement2

The matters discussed in this presentation may include forward-looking statements, which could involve a number of risks and uncertainties. When used in this presentation, the words “will,” “believes,” “intends,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those

d i i li d b h f d l ki E expressed in, or implied by, such forward-looking statements. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update such factors or to publicly announce the results of any of the forward looking statements Some of the products and/or any of the forward-looking statements. Some of the products and/or product features discussed in this presentation may be works in progress and not yet generally available for sale.

agenda3

about growth financialMERGEabout

STRATEGIESgrowth

VIEWfinancial

• Recent News

• Overview

• Solutions

• New Business Models

• Enterprise-Wide Imaging

• Historical Performance

• Q1 Results• Solutions

• Clients

• Q1 Highlights

• Cross Sell / Up Sell

• Data & Analytics

• Revenue Snapshot

• Financial Strengths

one company: two operating groups4

+ DNA+

5

why we’re changing

Healthcare is finally embracing cloud-based and subscription modelsProviders are asking to buy in this manner

Subscription Acceleration Subscription Acceleration 

g y

Enterprise‐Wide ImagingEnterprise‐Wide Imaging

Interoperability is driving requirements for enterprise-wide imaging strategiesImagingImaging

Consumers are getting more involved in their healthcare

g g gExploding storage requirements are necessitating action

Increasing ConsumerismIncreasing Consumerism

Consumers are getting more involved in their healthcareLast year 70 million Americans used a health station to monitor their wellness

The Emergence of Analytics & DataThe Emergence of Analytics & Data

Connecting consumers, providers, corporations and payers will require deep expertise in interoperability, data and analytics

what it will mean: transparency6

We can provide deeper insight to analysts, investors and customers

We will share financials by operating group

what it will mean: predictability7

Recurring revenue enables better financial visibility

Provides a host of usage metrics to demonstrate traction

what it will mean: profitability8

We will drive growth with new subscription models that will deliver higher margins

Subscription models align incentives for the long term

9Merge Healthcare solutions

Acute Solutions Ambulatory Solutions Partner Solutions

Departmental Specialty

EMRHIT OEM

Cross‐Platform

Rad OrthoRad Cardio Periop OBGYN Eye Care

Enterprise

Imaging

Interoperability

p yg g

Clinical Imaging

S i lt EHRSpecialty EHR

Toolkits & Device ConnectivityConnectivity

Patient Engagement

Merge DNA solutions10

Data & AnalyticsClinical TrialsConsumer & Retail

70 million Americans used health stations last

Subscription-basedpricing and delivery model

Connections to consumers, providers health stations last

year

500 million total

model

Launching new transformative

providers, corporations and payers

visits last year

Merge has 20,000 health stations the

platform in June of 2012 @ DIA

Solutions for EDC

Expertise in interoperability, data and analytics

$2-3M

health stations – the largest network in the nation

Solutions for EDC, EAS, CIMS, IVR / IWR

hospital

11our clients

1500 6 000 250 7of 10 20 000Hospitals

1,500Clinics &

Labs

6,000Partners

250Top Pharma Companies

7of 10Health

Stations

20,000

Including the Top 20 Hospitals on “America’s Best Hospital

75% of all worldwide modality vendors use

Top pharmaceutical companies use Merge to run

1/3 of all US Imaging Centers

50% of all digital

The largest network of health stations in the nation

annual market size

Best Hospital Honor Roll”

vendors use Merge in their systems

Merge to run clinical trials

50% of all digital Ortho Groups

2,000 Ophthalmology

i

the nation

Distribution and

70 million Americans used a health

Recently added

Solutions across all

sites Distribution and cloud partners

station last yearinternational relationship with Bayer

hospital types

12

Q1 highlights

highlightsCOMPANY

highlightsCLIENT

highlightsSOLUTION

• Q1 2012: Year over year growth of 14%*

highlights

• Advocate Healthcare: Enterprise Cardiology

highlights

• Accelerated adoption of b i ti d l

highlights

growth of 14%*

• 2010 – 2011: Revenue growth of 24% from $190M to $237M*

Enterprise Cardiology

• Mercy, Lutheran HealthCare : large iConnect wins

subscription model

• Merge Honeycomb Archive launched

• Non-recurring backlog increase of $5M from Q1’11

• Northwestern & Community selected Honeycomb

• Merge PACS 6.3 released

• Merge Hemo 9.0 released

• Year over year growth expected in 2012 –while converting to a recurring revenue model

• Lakeland & SimonMedpurchased subscription solutions

• New health station released

*Pro Forma

GROWTH STRATEGIES

Our approach for transparency, predictability and profitability

14

Merge growth strategies

Embrace accelerated adoption of subscription modelRelease Honeycomb ArchiveWill offer other solutions in subscription model

Embrace New ModelsEmbrace New Models

rere

Enterprise‐Wide ImagingEnterprise‐Wide Imaging

Interoperability is driving requirements for enterprise-wide imaging strategy Radiology & Cardiology: two largest imaging specialtiesHe

althcar

Healthcar

Cross Sell & UpsellCross Sell & Upsell

g gg g

Penetrate acute base with full solution suite

Radiology & Cardiology: two largest imaging specialties

Merge 

Merge 

Cross Sell & Upsell Client BaseCross Sell & Upsell Client Base Cross sell into acute base with iConnect solutions

Expand footprint in ambulatory base with full suite

AAMerge DNA

Merge DNA

Innovate in New MarketsInnovate in New Markets

New Clinical Trials platform launch at DIA in JuneCommenced distribution of redesigned health station

MM

15embrace new models

Embrace accelerated adoption of subscription modelRelease Honeycomb ArchiveSubscription or transaction based pricing model

Strategies

g

Developments

Emergence of Cloud Archive Growth Strong Traction Forecasted

1.5M+t di

14M+new studies

1,000 clients pre‐registered 

new studies

, p gfor Honeycomb Q1 2012Recent client wins 2014

Merge Honeycomb, iConnect Solution Suite, Merge EHR / PM for Ortho, Eye Care

Solutions

16Merge Honeycomb: our move to the cloud

a track record of innovation17

Introduced cloud-based hosted

Launched Merge Honeycomb to

Released Merge

solution with Amazon

yRadiology marketplace at RSNA

gHoneycomb Archive

2009 Oct 2011 Nov 2011 Feb 2012 March 2012

Announced Merge’s move to the cloud

Launched Merge Honeycomb to

with Honeycomb acute marketplace at HIMSS

17

18enterprise-wide imaging

Assist hospitals & health systems implement the two phases of an enterprise-wide imaging strategy Target Radiology & Cardiology: two largest imaging specialties

Strategies

Developments

Proven ROI 2 Phased Approach

Phase 1

Client Traction

Q2Q3

Q4

Phase 2

ROI of $2M to $4M 

Q1

4 13 10 15

per hospital2011

iConnect Suite, Merge PACS, Merge CardioSolutions

enterprise imaging: a two-phased approach19

Step One

Build an enterprise-wide

Step Two

Deploy the approach imaging strategy from the archive up

across departments

Begin with Radiology & Cardiology as those are th t ithe most image-intensive specialties

Extend to other departments over timedepartments over time

Annual hospital scan volume is 480,562,500 per year.

20cross sell & up sell clients

Penetrate acute base with full solution suiteCross sell into acute base with iConnect solutionsExpand footprint in ambulatory base with full suite

Strategies

Developments

M VNA i Acute Clients Ambulatory ClientsMore VNA images than anyone

< 10%+ + + 13B

have our complete solution suite

On average our hospital clients only own 1 of 6

+ + + 36%*16%*

clients only own 1 of 6 available Merge solutions #2 vendor Merge

iConnect Suite, Merge PACS, Merge CardioMerge RIS, Merge PACS, Merge Financials, Merge Documents

Solutions

* Market share

21Merge DNA: growth strategies

Accelerate Clinical Trials traction with new productsCommenced placement of redesigned health stationLaunch data and analytics offerings to marketplace

Strategies

Developments

Health Stations Launch Imaging in Clinical Trials

1,500 health stationsWorldwide deployment of Subscription eClinical1,500 health stations 

across 5 major retailersSubscription eClinical

Platform

Clinical Trials suite, health stations, Data and Analytics offeringsSolutions

22

total opportunity: $19B+ for 2012 – 2015

Merge DNA› Health Stations*› Clinical Trials

D t d A l ti

Merge DNA› Health Stations*› Clinical Trials

D t d A l ti

$5B$18B

$14B International marketplace› Enterprise Imaging

International marketplace› Enterprise Imaging

$1B

$16B

› Data and Analytics› Data and Analytics

$10B

$12B

$7 8BAcute marketplace - USS b i i B d S l i

Acute marketplace - USS b i i B d S l i

Enterprise ImagingEnterprise Imaging

$8B

$7.8B › Subscription Based Solutions› Enterprise Imaging› Departmental Solutions (Radiology, Cardiology, Anesthesia)

› Subscription Based Solutions› Enterprise Imaging› Departmental Solutions (Radiology, Cardiology, Anesthesia)

$4B$4B

$6B

$5 4B

Ambulatory marketplace - US› Subscription Based Solutions

Ambulatory marketplace - US› Subscription Based Solutions

$0

$2B$5.4B › Imaging Centers

› EHR for Image-Intensive Specialties (Ortho, OB, Eye Care)› Imaging Centers› EHR for Image-Intensive Specialties (Ortho, OB, Eye Care)

*Source – the Kiosk Industry Group,

FINANCIAL REVIEW

year over year growth24

Pro forma revenue (in millions) Pro forma adjusted EBITDA (in millions)

$237 $250 

$300 

$350 

$60 $60 

$75 

$190 

$100

$150 

$200 

$$43 

$30 

$45 

$0 

$50 

$100 

2010A 2011A$0 

$15 

2010A 2011A2010A 2011A 2010A 2011A

pro forma P&L trends25

62.2%62%64%

> Gross Margin Expansion (as % of Revenue) > Sales & Marketing Investment (as % of Revenue)

16 4%20%

55.1%

52%54%56%58%60%62%

13.2%16.4%

5%

10%

15%

20%

50%52%

2010 2011

> R & D Synergies (as % of Revenue) > G & A Savings (as % of Revenue)

0%

2010 2011

14.7%13.8%

14%

15%13.5%14%

15%

10%

11%

12%

13%11.6%

10%

11%

12%

13%

2010 20112010 2011

pro forma year over year comparison26

($ in millions except for per share data) Q1 2012 Q1 2011 % change

Net sales $61.6 $54.0 14%

Adjusted net income $2.9 $2.3 26%j

Adjusted EBITDA $12.5 $13.2 (-5%)

Adj d i dil d h $ $Adjusted net income per diluted share $0.03 $0.03 -

Non-recurring backlog $47.4 $42.3 12%

Prior 4 Quarters revenue snapshot27

Revenue consists of perpetual software licenses, sale of hardware*, professional services and maintenance**

Non Recurring Revenue

› Includes perpetual software licenses, hardware and

Recurring Revenue

› Includes maintenance contracts***N R i

Non Recurring

42 5% Recurringhardware and professional services

contracts

› Subscription based offerings, DICOM toolkit and EDI

Recurring 57 5%

Non Recurring 42.5%

42.5% Recurring57.5%

57.5%

* Recognized upon delivery** Recognized over respective periods services are provided

*** Renewed annually

28

financial strengths

Top Line RevenueTop Line RevenueExpect continued growth on an annualized basis vs. 2011

Emphasis on recurring revenue

Recurring RevenueRecurring Revenue60 % of business under contract on quarterly basis

Subscription models will contribute in second half of 2012

p g

gg Subscription models will contribute in second half of 2012

Recurring will continue to growBacklog VisibilityBacklog Visibility New metrics on new models will provide more

transparency

Other AttributesOther Attributes New metrics and models to be shared on Merge DNA

Increased visibility on new opportunities within Merge DNA

APPENDIX

explanation of non-GAAP financial measures30

Merge Healthcare reports its financial results in accordance with generally accepted accounting principles, or GAAP. This press release includes certain non-GAAP financial measures to supplement its GAAP information. Non-GAAP measures are not an alternative to GAAP and may be different from non-GAAP measures used by other companies. A quantitative reconciliation of GAAP net income a ailable to common shareholders to adj sted net income and adj sted EBITDA is reconciliation of GAAP net income available to common shareholders to adjusted net income and adjusted EBITDA is included after the financial information included in this press release. Management believes that the presentation of non-GAAP results, when shown in conjunction with corresponding GAAP measures, provides useful information to it and investors regarding financial and business trends related to results of operations, because certain charges, costs and expenses reflect events that are not essential to recurring business operations In addition management believes these non-GAAP measures provide investors useful information regarding operations. In addition, management believes these non GAAP measures provide investors useful information regarding the underlying performance of the post-acquisition business operations when compared to the pre-acquisition results of Merge and any significant acquired company. Purchase accounting adjustments made in accordance with GAAP can make it difficult to make meaningful comparisons of the underlying operations of the business without considering the non-GAAP adjustments that are provided and discussed herein. Further, management believes that these non-GAAP measures improve its and investors’ ability to compare Merge’s financial performance with other companies in the technology industry. Management also uses financial statements that exclude these charges, costs and expenses for its internal budgets. While GAAP results are more complete, these supplemental metrics are offered since, with reconciliations to GAAP, they may provide greater insight into our financial results. Management does not intend the presentation of these non-GAAP financial measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP.Additi l i f ti di th GAAP fi i l t d i f llAdditional information regarding the non-GAAP financial measures presented is as follows:Pro forma revenue consists of GAAP revenue as reported, adjusted to reflect the acquisition of AMICAS as if it had occurred at the beginning of the respective periods presented and to add back the acquisition related sales adjustment (for all significant acquisitions) booked for GAAP purposes.

explanation of non-GAAP financial measures cont.31

Recurring revenue is generated from agreements that generally contain a stated annual amount and which we have a high likelihood of renewing each year. More specifically, this includes revenue generated from our DICOM toolkit and eFilm Workstation® product lines, long-term contracts associated with our Sales as a Service (SaaS) related offerings, and EDI and maintenance contracts across the entire b sinessand maintenance contracts across the entire business.Non-recurring revenue backlog represents revenue that we anticipate recognizing in future periods from signed customer contracts as of the end of the period presented. Non-recurring revenue is comprised of all other sources of revenue not included as recurring revenue, primarily from perpetual software licenses, hardware and professional services (including installation, training and consultative engineering services). Adjusted net income consists of GAAP net income available to common stockholders adjusted to reflect the acquisition of Adjusted net income consists of GAAP net income available to common stockholders, adjusted to reflect the acquisition of AMICAS as if it had occurred at the beginning of the respective period presented and, to the extent such items occurred in the periods presented, excludes (a) one-time preferred stock deemed dividend at issuance date, (b) one time income tax benefit, (c) impairment of investments, (d) sale of non-core patents, (e) acquisition-related costs, (f) restructuring and othercosts, (g) stock-based compensation expense, (h) acquisition-related amortization, and (i) acquisition-related cost of sales adjustments and adds back (j) the acquisition-related sales adjustments. j j jAdjusted EBITDA adjusts GAAP net income available to common stockholders for the items considered in adjusted net income as well as (a) remaining depreciation and amortization, (b) net interest expense, (c) non-cash preferred stock dividends and (d) income tax expense (benefit).Cash from core business operations reconciles the cash generated from such operations to the change in GAAP cash balance for the period by reflecting payments of liabilities associated with our acquisitions, payments of acquisition related fees, interest payments and other payments and receipts of cash not generated by the core business operations.

explanation of non-GAAP financial measures cont.32

Management has excluded certain items from non-GAAP adjusted net income because it believes (i) the amount of certain expenses in any specific period may not directly correlate to the underlying performance of business operations and (ii) the adjustment facilitates comparisons of pre-acquisition results to post-acquisition results. In addition, the following adj stments are described in more detail belo :adjustments are described in more detail below:Acquisition-related amortization expense is a non-cash expense arising from the acquisition of intangible assets in connection with significant acquisitions. Management excludes acquisition-related amortization expense from non-GAAP net income because it believes such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets.Stock-based compensation expense is a non-cash expense arising from the grant of stock awards to employees and is Stock-based compensation expense is a non-cash expense arising from the grant of stock awards to employees and is excluded from non-GAAP net income because management believes such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants to new employees resulting from acquisitions. Acquisition related sales and costs of sales adjustments reflect the fair value adjustment to deferred revenues acquired in connection with significant acquisitions. The fair value of deferred revenue represents an amount equivalent to the g q p qestimated cost plus an appropriate profit margin to perform services-related software and product support, which assumes a legal obligation to do so, based on the deferred revenue balances as of the date the acquisition of a significant company was completed. Management adds back this deferred revenue adjustment, net of related costs, for non-GAAP revenue and non-GAAP net income because it believes the inclusion of this amount directly correlates to the underlying performance of operations and facilitates comparisons of pre-acquisition to post-acquisition results.