EX-99.1 2 v092035_ex99-1.htm
Exhibit 99.1
 
 
Eclipsys Releases Financial Results for
Quarter Ended September 30, 2007

- Company Announces Decision to Exit Networking Services Business -

Atlanta, GA —November 1, 2007 — Eclipsys Corporation® (NASDAQ: ECLP), The Outcomes Company®, today released results for the quarter ended September 30, 2007.

Third-Quarter Results
Revenues for the quarter ended September 30, 2007, increased by 11.5 percent to $121.1 million, compared with revenues of $108.6 million for the quarter ended September 30, 2006. On a GAAP basis, the net income for the third-quarter of 2007 was $8.9 million, or $0.17 per share on a basic basis and $0.16 per share on a diluted basis, compared to net income of $5.6 million, or $0.11 per share on a basic and diluted basis in the third-quarter of 2006. This represents a $3.3 million or 58.9 percent increase in net income.

Net income for the third-quarter of 2007 included stock-based compensation expense of $2.7 million, as well as derivative litigation expenses related to the company’s voluntary stock option review which aggregated $200,000. Excluding these charges, the company’s non-GAAP net income was $11.8 million, or $0.22 per share on a basic and diluted basis. Net income for the third-quarter of 2006 included stock-based compensation expense of $2.7 million. Excluding this charge, the company’s third-quarter 2006 non-GAAP net income was $8.3 million, or $0.16 per share on a basic and diluted basis.

The company’s operating cash flows for the third-quarter of 2007 were $22.4 million, an increase of $12.2 million compared to the third quarter of 2006, and the company ended the quarter with $149.5 million in cash and marketable securities.

The following table summarizes (unaudited) select financial data:
 
 

 
1750 Clint Moore Road, Boca Raton, FL 33487 phone 561.322.4321 fax 561.322.4320  info@eclipsys.com

 
 

 

Eclipsys Releases Financial Results for Quarter Ended September 30, 2007
November 1, 2007
Page 2 of 4
  
   
In thousands, except per share data
 
           
   
Three months ended September 30,
 
Nine months ended September 30,
 
   
2007
 
2006
 
$ Change
 
% Change
 
2007
 
2006
 
$ Change
 
% Change
 
Revenues
 
$
121,080
 
$
108,566
 
$
12,514
   
11.5
%
$
353,129
 
$
311,854
 
$
41,275
   
13.2
%
Net income (loss)
   
8,864
   
5,577
   
3,287
   
58.9
%
 
16,959
   
(575
)
 
17,534
   
n/a
 
Earnings (loss) per common share, basic
 
$
0.17
 
$
0.11
 
$
0.06
   
54.5
%
$
0.32
   
($0.01
)
$
0.33
   
n/a
 
Earnings (loss) per common share, diluted
 
$
0.16
 
$
0.11
 
$
0.05
   
45.5
%
$
0.31
   
($0.01
)
$
0.32
   
n/a
 
                                                   
       
   
Non-GAAP Results*
 
Non-GAAP Results*
 
   
Three months ended September 30,
 
Nine months ended September 30,
 
   
2007
 
2006
 
$ Change
 
% Change
 
2007
 
2006
 
$ Change
 
% Change
 
Revenues
 
$
121,080
 
$
108,566
 
$
12,514
   
11.5
%
$
353,129
 
$
311,854
 
$
41,275
   
13.2
%
Net income*
   
11,751
   
8,298
   
3,453
   
41.6
%
 
27,550
   
16,200
   
11,350
   
70.1
%
Earnings per common share, basic*
 
$
0.22
 
$
0.16
 
$
0.06
   
37.5
%
$
0.52
 
$
0.32
 
$
0.20
   
62.5
%
Earnings per common share, diluted*
 
$
0.22
 
$
0.16
 
$
0.06
   
37.5
%
$
0.51
 
$
0.32
 
$
0.19
   
59.4
%
 
*A reconciliation of GAAP to non-GAAP results is included in the attached table.
 
“Eclipsys continues to see positive results from the organizational changes we’ve introduced over the last 24 months. We are operating at a much higher level as a business, which is evidenced by increased cash flow, improved margins, and growth in EPS,” said R. Andrew Eckert, Eclipsys president and chief executive officer. “We continue to make progress by activating more clients on our ambulatory solutions, helping clients achieve outcome improvements and winning new clients such as Bronx-Lebanon Hospital Center Health System. Another significant accomplishment this quarter was the signing of SingHealth, as it gives us an anchor client to help grow our international business.”

Continued Eckert, “We exited our low-margin networking services business, which reflects our ongoing efforts to focus on core, higher-margin elements of our business. We also announced the move of our corporate headquarters to Atlanta, Georgia. By consolidating more of our operations in Atlanta, Eclipsys will be able to reduce overheard costs and better leverage our existing investment there, including our new Outcomes Strategy Center.”

Added Eckert, “In October, we held our annual Eclipsys User Network (EUN), where we had record attendance. We believe this year’s EUN will add to our business momentum.”
  
Guidance
The company expects 2007 annual revenues to range from $473 million to $476 million, slightly down from earlier guidance, due mainly to the company’s decision to exit the networking services business. 2007 EPS on a GAAP basis is expected to range from $0.47 to $0.51. Excluding stock-based compensation expenses, costs related to the company’s voluntary stock option review and related derivative litigation, and costs associated with the relocation of the company’s corporate headquarters, non-GAAP 2007 EPS is expected to range from $0.77 to $0.81.


 
 

 

Eclipsys Releases Financial Results for Quarter Ended September 30, 2007
November 1, 2007
Page 3 of 4
 
 
Investor Teleconference November 1
Eclipsys senior executives will discuss the results on a teleconference for investors scheduled for 8:30 a.m. Eastern time on November 1, 2007. Persons interested in participating in the teleconference should call (800) 398-9367 around 15 minutes before the conference is slated to begin. For listen-only mode, participants can go to www.eclipsys.com prior to the conference call to register and download the necessary audio software.  An audio replay will be available at www.eclipsys.com approximately 2 hours after the completion of the call on November 1.
  
Non-GAAP Measures
The financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). In addition to the GAAP results, the company has provided net income and earnings per share information on a non-GAAP basis: (i) for the three and nine month periods ended September 30, 2007 to exclude stock-based compensation expenses and costs related to the company’s voluntary stock option review and related derivative litigation; (ii) for the three month period ended September 30, 2006 to exclude stock-based compensation expenses; and (iii) for the nine month period ended September 30, 2006 to exclude stock-based compensation expenses and restructuring charges. These non-GAAP financial measures should not be considered a substitute for, or superior to, any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Internally, management uses this non-GAAP information for forecasting and to help make management decisions, as an indicator of business performance, and to evaluate management’s effectiveness and help determine bonuses for management and others. The economic substance of omitting non-cash stock-based compensation expense in presenting non-GAAP earnings derives from providing investors with consistent measures of performance both before and after including non-cash stock-based compensation charges. The economic substance of omitting the expenses related to the company’s voluntary stock option review and related derivative litigation and restructuring charges in presenting non-GAAP earnings derives from the fact that episodic charges of this kind make it more difficult to compare operating results of different periods, not all of which include such expenses and charges. The omission of non-cash stock-based compensation expense may mask an economic cost incurred by the company in connection with stock-based compensation, and the omission of the expenses related to the company’s voluntary stock option review and related derivative litigation and restructuring charges may mask actual and expected future cash expenditures associated with such matters. Management compensates for these limitations by using both the GAAP and non-GAAP measures. Management believes that the non-GAAP financial measures provided, when considered in conjunction with comparable GAAP financial measures, facilitate the understanding and evaluation of the company’s operating performance and future prospects, as well as comparisons of the company’s results with its prior period results that did not include these charges and with results of other companies on a more consistent basis. Omitting the stock-based compensation expense facilitates review by the majority of the company’s analysts, who model the company’s earnings excluding stock-based compensation charges. Omitting the 2007 expenses related to the company’s voluntary stock option review and related derivative litigation facilitates comparison between the 2006 and 2007 nine month periods, as no voluntary stock option review and related derivative litigation were recorded in the 2006 period. Omitting the 2006 restructuring charges facilitates comparison between the 2006 and 2007 nine month periods, as no restructuring charges were recorded in the 2007 period. The company has provided reconciling information in the attachment to this release.

Condensed Consolidated Statement of Cash Flows
The attached Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2006 has been restated in connection with the company’s restatement of its prior financial statements. For additional information regarding this prior restatement, please refer to Exhibit 99.1 in our Annual Report on Form 10-K for the year ended December 31, 2006, filed on May 23, 2007.

About Eclipsys
Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and access management software, clinical content and professional services that help healthcare organizations improve clinical, financial, operational and client satisfaction outcomes. For more information, see www.eclipsys.com or email info@eclipsys.com.


 
 

 

Eclipsys Releases Financial Results for Quarter Ended September 30, 2007
November 1, 2007
Page 4 of 4
 
 
Special Note
Statements in this news release or the investor call referenced herein concerning the company’s sales, marketing and operational initiatives; future financial results, operating performance, and development efforts; and the benefits provided by Eclipsys software and services are forward-looking statements and actual results may differ from those projected due to a variety of risks and uncertainties. Future performance expectations are predicated upon achievement of various sales and performance targets that may be difficult to meet. Sales may be slower than expected due to market conditions, competition, and other factors. Costs may be greater than anticipated due to the potential need to increase spending to ensure performance in accordance with commitments to clients and other factors. Software development may take longer and cost more than expected, and incorporation of anticipated features and functionality may be delayed, due to various factors including programming and integration challenges and resource constraints. The market is highly competitive. Implementation and customization of Eclipsys software is complex and time-consuming. Results depend upon a variety of factors and can vary by client. Each client’s circumstances are unique and may include unforeseen issues that make it more difficult than anticipated to implement or derive benefit from software, implementation or consulting services. The success and timeliness of the company’s services will depend at least in part upon client involvement, which can be difficult to control. Eclipsys is required to meet specified performance standards, and clients can terminate contracts, assess penalties or reduce contract scope under certain circumstances. More information about company risks is available in recent Form 10-K and other filings made by Eclipsys from time to time with the Securities and Exchange Commission. Special attention is directed to the portions of those documents entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Eclipsys 
Jason Cigarran
Director of Investor and Media Relations
(561) 322-4355
jason.cigarran@eclipsys.com
Robert J. Colletti
Chief Financial Officer
(561) 322-4655
investor.relations@eclipsys.com


 
 

 


ECLIPSYS CORPORATION AND SUBSIDIARIES
 
Condensed Consolidated Statements of Operations (Unaudited)
 
(in thousands, except per share amounts)
 
   
   
Three Months Ended
 
Nine Months Ended
 
   
Sept 30,
 
Sept 30,
 
   
2007
 
2006
 
2007
 
2006
 
                   
Revenues:
                         
Systems and services
 
$
117,530
 
$
104,266
 
$
340,979
 
$
298,417
 
Hardware
   
3,550
   
4,300
   
12,150
   
13,437
 
Total revenues
   
121,080
   
108,566
   
353,129
   
311,854
 
-
                     
-
 
Costs and expenses:
                     
-
 
Cost of systems and services
   
65,671
   
60,938
   
197,372
   
175,532
 
Cost of hardware
   
2,685
   
3,489
   
9,449
   
10,991
 
Sales and marketing
   
17,980
   
16,208
   
54,152
   
46,949
 
Research and development
   
14,182
   
13,094
   
42,389
   
44,076
 
General and administrative
   
8,339
   
6,753
   
23,942
   
18,593
 
Depreciation and amortization
   
4,710
   
3,885
   
13,281
   
11,581
 
Restructuring charge
   
-
   
-
   
-
   
8,547
 
Total costs and expenses
   
113,567
   
104,367
   
340,585
   
316,269
 
-
                     
-
 
Income (loss) from operations before interest and taxes
   
7,513
   
4,199
   
12,544
   
(4,415
)
Interest income, net
   
1,814
   
1,378
   
4,916
   
3,840
 
                           
Income (loss) before taxes
   
9,327
   
5,577
   
17,460
   
(575
)
Provision for income taxes
   
463
   
-
   
501
   
-
 
Net income (loss)
 
$
8,864
 
$
5,577
 
$
16,959
 
$
(575
)
                           
Income (loss) per common share:
                         
Basic income (loss) per common share
 
$
0.17
 
$
0.11
 
$
0.32
 
$
(0.01
)
Diluted income (loss) per common share
 
$
0.16
 
$
0.11
 
$
0.31
 
$
(0.01
)
                           
                           
Weighted average shares outstanding:
                         
Basic
   
53,100
   
51,712
   
52,594
   
51,312
 
Diluted
   
54,380
   
52,767
   
53,843
   
51,312
 


 
 

 


Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
 
   
September 30,
 
December 31,
 
   
2007
 
2006
 
Assets
             
Current assets:
             
Cash
 
$
24,512
 
$
41,264
 
Marketable securities
   
124,975
   
89,549
 
Accounts receivable, net of allowance for doubtful accounts of $3,945 and $3,907, respectively
   
99,148
   
93,821
 
Inventory
   
226
   
1,076
 
Prepaid expenses
   
29,529
   
22,947
 
Other current assets
   
955
   
1,026
 
 Total current assets
   
279,345
   
249,683
 
               
Property and equipment, net
   
46,489
   
45,806
 
Capitalized software development costs, net
   
35,741
   
32,302
 
Acquired technology, net
   
732
   
1,224
 
Intangible assets, net
   
2,473
   
3,307
 
Deferred tax asset
   
3,751
   
3,661
 
Goodwill
   
15,012
   
12,281
 
Other assets
   
14,875
   
15,014
 
 Total assets
 
$
398,418
 
$
363,278
 
               
Liabilities and Stockholders’ Equity
             
Current liabilities:
             
Deferred revenue
 
$
98,852
 
$
103,298
 
Accounts payable
   
13,025
   
19,444
 
Accrued compensation costs
   
22,035
   
12,997
 
Deferred tax liability
   
3,847
   
3,699
 
Other current liabilities
   
18,831
   
20,648
 
 Total current liabilities
   
156,590
   
160,086
 
               
Deferred revenue
   
10,194
   
11,289
 
Other long-term liabilities
   
2,482
   
1,247
 
 Total liabilities
   
169,266
   
172,622
 
               
Stockholders’ equity:
             
 Total stockholders’ equity
   
229,152
   
190,656
 
 Total liabilities and stockholders’ equity
 
$
398,418
 
$
363,278
 


 
 

 


ECLIPSYS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
   
Nine Months Ended September 30,
 
   
2007
 
2006
 
       
As restated
 
Operating activities:
             
Net income (loss)
 
$
16,959
 
$
(575
)
Adjustments to reconcile net income (loss) to net cash
             
provided by (used in) operating activities:
             
Depreciation and amortization
   
27,390
   
27,856
 
Provision for bad debt
   
1,378
   
1,568
 
Stock compensation expense
   
8,261
   
9,390
 
Gain on sale of investments
   
16
   
-
 
Deferred provision for income taxes
   
329
   
-
 
Changes in operating assets and liabilities:
             
Increase in accounts receivable
   
(5,008
)
 
(4,147
)
Increase in prepaid expenses and other current assets
   
(6,197
)
 
(4,927
)
Decrease in inventory
   
849
   
479
 
Decrease in other assets
   
337
   
1,592
 
Decrease in deferred revenue
   
(6,287
)
 
(11,235
)
Increase in accrued compensation
   
9,663
   
364
 
Decrease in accounts payable and other current liabilities
   
(9,658
)
 
(10,482
)
Increase (decrease) in other long-term liabilities
   
1,076
   
(1,108
)
 Total adjustments
   
22,149
   
9,350
 
 Net cash provided by operating activities
   
39,108
   
8,775
 
Investing activities:
             
Purchases of property and equipment
   
(13,065
)
 
(10,174
)
Purchase of marketable securities
   
(79,704
)
 
(72,452
)
Proceeds from sales of marketable securities
   
44,273
   
20,950
 
Capitalized software development costs
   
(15,278
)
 
(9,429
)
Change in restricted cash balance
   
(1,969
)
 
-
 
Cash paid for acquisitions
   
(1,153
)
 
(4,002
)
 Net cash used in investing activities
   
(66,896
)
 
(75,107
)
Financing activities:
             
Proceeds from stock options exercised
   
10,333
   
23,181
 
Proceeds from issuance of common stock in employee stock purchase plan
   
-
   
732
 
 Net cash provided by financing activities
   
10,333
   
23,913
 
               
Effect of exchange rates on cash and cash equivalents
   
703
   
4
 
Net decrease in cash and cash equivalents
   
(16,752
)
 
(42,415
)
Cash and cash equivalents — beginning of period
   
41,264
   
76,693
 
Cash and cash equivalents — end of period
 
$
24,512
 
$
34,278
 


 
 

 


ECLIPSYS CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Pro Forma Results
(in thousands, except per share amounts)
 

 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2007
 
2006
 
2007
 
2006
 
 
             
 
 
GAAP net earnings (loss)
 
$
8,864
 
$
5,577
 
$
16,959
 
$
(575
)
 
                       
Add back:
                       
Share-based compensation expense1
   
2,714
   
2,721
   
8,261
   
8,228
 
Restructuring charge2
   
-
   
-
   
-
   
8,547
 
Stock option review3
   
173
   
-
   
2,330
   
-
 
 
   
   
   
     
   
    
   
    
 
Non-GAAP net income
 
$
11,751
 
$
8,298
 
$
27,550
 
$
16,200
 
 
                       
 
                       
GAAP basic earnings (loss) per share
 
$
0.17
 
$
0.11
 
$
0.32
 
$
(0.01
)
 
                       
Add back:
                       
Share-based compensation expense1
   
0.05
   
0.05
   
0.16
   
0.16
 
Restructuring charge2
   
-
   
-
   
-
   
0.17
 
Stock option review3
   
-
   
-
   
0.04
   
-
 
 
   
    
   
    
   
    
   
    
 
Non-GAAP basic earnings per share
 
$
0.22
 
$
0.16
 
$
0.52
 
$
0.32
 
 
                       
GAAP diluted earnings (loss) per share
 
$
0.16
 
$
0.11
 
$
0.31
 
$
(0.01
)
 
                       
Add back:
                       
Share-based compensation expense1
   
0.05
   
0.05
   
0.15
   
0.16
 
Restructuring charge2
   
-
   
-
   
-
   
0.17
 
Stock option review3
   
-
   
-
   
0.04
   
-
 
 
   
    
   
    
   
    
   
    
 
Non-GAAP diluted earnings per share
 
$
0.22
 
$
0.16
 
$
0.51
 
$
0.32
 

 
(1) Relates to share- based compensation expense and is allocated as follows:
                 
   
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
   
2007
 
2006
 
2007
 
2006
 
                   
Cost of systems & services
 
$
1,158
 
$
714
 
$
3,333
 
$
2,383
 
Sales and marketing
   
698
   
860
   
2,378
   
2,548
 
Research and development
   
500
   
498
   
1,602
   
1,349
 
General and administrative
   
358
   
649
   
948
   
1,948
 
Total stock-based compensation expense
 
$
2,714
 
$
2,721
 
$
8,261
 
$
8,228
 
                           
(2) This charge is associated with severance costs related to employment terminations that occurred in the first and second quarters of 2006.
                 
(3) This charge was incurred as a result of the voluntary stock option review completed in the second quarter of 2007 and primarily relates to legal and accounting fees, plus subsequent derivative litigation expenses related to such review.