EX-99.1 2 ec8942ex991.htm EXHIBIT 99.1

Exhibit 99.1

Eclipsys Releases Financial Results for Quarter and Year Ended December 31, 2006

Company consolidates facilities, expands India Operations, announces fourth-quarter charges
and provides 2007 guidance

Boca Raton, FL — February 13, 2007 — Eclipsys Corporation® (NASDAQ: ECLP), The Outcomes Company®, today released results for the quarter and year ended December 31, 2006.

Fourth-Quarter and Year-End Results

Revenues for the quarter ended December 31, 2006 increased $10.8 million to $115.9 million, compared to revenues of $105.1 million for the quarter ended December 31, 2005. On a GAAP basis, the fourth-quarter 2006 net income was $3.9 million, or $0.08 per basic common share and $0.07 per diluted common share compared to a net income of $5.0 million, or $0.10 per common share on a basic and diluted basis in the fourth-quarter of 2005. Fourth-quarter 2006 earnings include $3.6 million of expense, or $0.07 per basic and diluted common share, associated with adopting Statement of Financial Accounting Standards 123R, Share-Based Payment (SFAS 123R), which requires the expensing of stock options. The fourth quarter results include a restructuring charge of approximately $6.1 million, or $0.12 per common share on a basic and diluted basis, consisting of approximately $2.5 million resulting from the excess office space consolidation, and approximately $3.6 million in severance costs, related to the termination of employment of certain management personnel. The office closures and employment terminations are expected to help the Company to finance planned increases in software research and development and client service investment, including the expansion of the Company’s operations in India. 

For the year ended December 31, 2006, revenues were $427.6 million.  On a GAAP basis, net income for the year was $2.1 million, or $0.04 per common share on a basic and diluted basis.

For comparative purposes, excluding the expense associated with SFAS 123R adoption and the restructuring charge, non-GAAP net income for the fourth-quarter 2006 was $13.7 million, or $0.26 per common share on a basic and diluted basis. On an annual basis, excluding the expense associated with SFAS 123R adoption, and the restructuring costs described above, as well as the previously announced restructuring charges recognized in the first-quarter and completed in the second-quarter 2006 of $7.2 million and $1.3 million, respectively, non-GAAP net income was $30.0 million, or $0.58 per basic common share and $0.57 per diluted common share. For year-over-year comparisons, it should be noted that SFAS 123R was first implemented for the quarter ended March 31, 2006, and prior periods do not include its effect.

The following table summarizes selected financial data:

 

 

In thousands, except per share data

 

 

 


 

 

 

Three months ended Dec. 31,

 

Year ended Dec. 31,

 

 

 


 


 

 

 

2006

 

2005

 

$ Change

 

2006

 

2005

 

$ Change

 

 

 



 



 



 



 



 



 

Revenues

 

$

115,933

 

$

105,120

 

$

10,813

 

$

427,613

 

$

383,271

 

$

44,342

 

Net income

 

 

3,923

 

 

5,033

 

 

(1,110

)

 

2,133

 

 

485

 

 

1,648

 

Earnings per common share, basic

 

$

0.08

 

$

0.10

 

$

(0.02

)

$

0.04

 

$

0.01

 

$

0.03

 

Earnings per common share, diluted

 

$

0.07

 

$

0.10

 

$

(0.03

)

$

0.04

 

$

0.01

 

$

0.03

 


 

 

Non-GAAP Results*
Three months ended Dec. 31,

 

Non-GAAP Results*
Year ended Dec. 31,

 

 

 


 


 

 

 

2006

 

2005

 

$ Change

 

2006

 

2005

 

$ Change

 

 

 



 



 



 



 



 



 

Revenues

 

$

115,933

 

$

105,120

 

$

10,813

 

$

427,613

 

$

383,271

 

$

44,342

 

Net income*

 

 

13,672

 

 

5,033

 

 

8,639

 

 

30,012

 

 

485

 

 

29,527

 

Earnings per common share, basic

 

$

0.26

 

$

0.10

 

$

0.16

 

$

0.58

 

$

0.01

 

$

0.57

 

Earnings per common share, diluted

 

$

0.26

 

$

0.10

 

$

0.16

 

$

0.57

 

$

0.01

 

$

0.56

 





*Three-month and full-year 2006 results exclude the effect of the implementation of SFAS 123R, adopted as of January 1, 2006.  Full-year results also exclude charges of $7.2 million in the first-quarter 2006 and $1.3 million in the second-quarter 2006 associated with a previously announced restructuring undertaken in the first-quarter and completed in the second-quarter to reduce costs and redirect spending into client related functions.  Also excluded are charges of $6.1 million associated with office closures and severance costs related to employment terminations that occurred in the fourth-quarter 2006.  A reconciliation of GAAP to non-GAAP results is included in the attached tables.

Operating cash flows were $26.6 million for the year, compared to $14.5 million in 2005; this represents a $12.1 million improvement compared to 2005. Cash, cash equivalents and marketable securities were $130.8 million as of December 31, 2006, compared to $114.1 million as of December 31, 2005. Days sales outstanding (DSOs) were 72 days, an increase of 3 days from the prior year. Deferred revenue (including current and long-term) was $114.6 million as of December 31, 2006, compared to $124.7 million as of December 31, 2005.

“Eclipsys saw a marked increase in profitability in 2006, a result of our ability to sign significantly more new customers than in 2005, while also expanding our solution footprint at existing clients,” said R. Andrew Eckert, Eclipsys president and chief executive officer. “Additionally, we had a significant number of successful activations in 2006 including the first Sunrise Pharmacy implementations. This demonstrates we are executing on our commitment to client satisfaction and also provides us with a broader base of reference accounts. We have positive momentum heading into 2007 as we work to build on our reputation as the market leading provider of high-acuity care solutions and gain more market acceptance of our solutions that solve the challenges of ambulatory and other care venues.”

Continued Eckert, “Another important milestone in 2006 was the KLAS CPOE Digest 2006 showing that, for the fourth consecutive year, Eclipsys CPOE Solutions are used by more physicians than any other vendor. Physician adoption of CPOE is critical to the ability of healthcare organizations to improve patient-care, cost and satisfaction outcomes through a clinical information system, and our leadership position in this area demonstrates our commitment to delivering solutions that provide real value for our customers.

Guidance

The Company currently expects 2007 annual revenues to range from $470.0 million to $485.0 million.  The Company also expects 2007 earnings per share on a diluted basis to range from $0.74 to $0.84, excluding the impact of SFAS 123R.  Including SFAS 123R, EPS on a diluted basis is expected to range from $0.44 to $0.54.

Additional Announcements

Eclipsys issued a release today announcing that Nitin Deshpande, former president and chief executive officer for India Operations for BMC Software, an enterprise management software provider, will serve as president of Eclipsys India. For more information on this announcement, please view the release entitled, Eclipsys Names Nitin Deshpande President, Eclipsys Indiaon the Eclipsys Web site at www.eclipsys.com.



“Our India operations are an important element of our growth and client service strategy and should help us achieve increased profitability,” commented Eckert.  “We will continue to invest in our operations there to build world-class software development and client support capabilities.”

Company Initiated Stock Option Review

In light of the widespread public focus on stock option “backdating,” the Company, like many others, has voluntarily initiated a review of its stock option grants, focusing at this time primarily upon grants made in the 1998 – 2001 time frame.  At present, the Company review is not complete and no conclusions have been reached.  If the review results in a conclusion that past stock option grants were not appropriately accounted for, then commensurate adjustments may affect results of operations for the fourth quarter and year ended December 31, 2006 and/or for prior periods.

Investor Teleconference February 13

Eclipsys senior executives will discuss the results during an investor community teleconference scheduled for 5:00 p.m. Eastern time on Tuesday, February 13. Persons interested in participating in the teleconference should call (800) 230-1059 approximately 15 minutes before the conference is slated to begin. For listen-only mode, participants should 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 for 48 hours beginning approximately one hour after the completion of the call. 

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 for the three months and year ended December 31, 2006 to exclude the effect of the implementation of SFAS 123R, the charge incurred in the first and second quarters in connection with the restructuring undertaken to reduce costs and redirectspending into client related functions, and the fourth quarter charge associated with excess office space consolidation and management severance. 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. These charges and implementation of FAS 123R make comparison of the Company’s results with prior periods more difficult and investors have indicated that they consider this supplemental non-GAAP information useful in evaluating our results of operations and future prospects. The Company believes that the non-GAAP financial measures provided, when considered in conjunction with comparable GAAP financial measures, facilitate understanding and evaluation of the Company’s operating performance and future prospects, as well as comparisons of our results with our prior period results that did not include these charges and with results of other companies on a more consistent basis. Internally, the Company uses this non-GAAP information for forecasting and to help make management decisions, as an indicator of business performance, and to evaluate management’s effectivenessand help determine bonuses for management and others. The Company has provided reconciling information in the attachment to this release.

About Eclipsys

Eclipsys is a leading provider of advanced integrated information software, clinical content and professional services that help healthcare organizations across North America improve clinical, financial, operational and customer-satisfaction outcomes. For more information, see www.eclipsys.com or email info@eclipsys.com.



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, 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

Robert J. Colletti

Director, Media Relations (media)

Chief Financial Officer (investors)

(561) 322-4355

(561) 322-4655

jason.cigarran@eclipsys.com

investor.relations@eclipsys.com




ECLIPSYS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 



 



 



 



 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and services

 

$

111,278

 

$

100,818

 

$

409,521

 

$

370,309

 

Hardware

 

 

4,655

 

 

4,302

 

 

18,092

 

 

12,962

 

 

 



 



 



 



 

Total revenues

 

 

115,933

 

 

105,120

 

 

427,613

 

 

383,271

 

 

 



 



 



 



 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of systems and services

 

 

63,265

 

 

59,477

 

 

240,338

 

 

225,080

 

Cost of hardware

 

 

3,601

 

 

3,823

 

 

14,592

 

 

11,055

 

Sales and marketing

 

 

16,232

 

 

17,004

 

 

62,998

 

 

64,140

 

Research and development

 

 

13,767

 

 

12,512

 

 

58,191

 

 

51,789

 

General and administrative

 

 

6,335

 

 

4,484

 

 

24,296

 

 

19,191

 

Depreciation and amortization

 

 

4,155

 

 

3,769

 

 

15,736

 

 

14,659

 

Restructuring charge

 

 

6,123

 

 

—  

 

 

14,670

 

 

—  

 

 

 



 



 



 



 

Total costs and expenses

 

 

113,478

 

 

101,069

 

 

430,821

 

 

385,914

 

 

 



 



 



 



 

Income (loss) from operations before interest and taxes

 

 

2,455

 

 

4,051

 

 

(3,208

)

 

(2,643

)

Interest income, net

 

 

1,506

 

 

982

 

 

5,379

 

 

3,128

 

 

 



 



 



 



 

Income before taxes

 

 

3,961

 

 

5,033

 

 

2,171

 

 

485

 

Provision for income taxes

 

 

38

 

 

—  

 

 

38

 

 

—  

 

 

 



 



 



 



 

Net income

 

$

3,923

 

$

5,033

 

$

2,133

 

$

485

 

 

 



 



 



 



 

Income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share

 

$

0.08

 

$

0.10

 

$

0.04

 

$

0.01

 

 

 



 



 



 



 

Diluted income per common share

 

$

0.07

 

$

0.10

 

$

0.04

 

$

0.01

 

 

 



 



 



 



 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

51,926

 

 

48,604

 

 

51,467

 

 

47,947

 

 

 



 



 



 



 

Diluted

 

 

53,439

 

 

51,408

 

 

53,052

 

 

50,644

 

 

 



 



 



 



 




ECLIPSYS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

 

 

December 31,
2006

 

December 31,
2005

 

 

 



 



 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,264

 

$

76,693

 

Marketable securities

 

 

89,549

 

 

37,455

 

Accounts receivable, net of allowance for doubtful accounts of $3,907 and $5,676, at December 31, 2006 and 2005, respectively

 

 

93,821

 

 

80,833

 

Inventory

 

 

1,076

 

 

2,289

 

Prepaid expenses

 

 

22,947

 

 

17,909

 

Other current assets

 

 

1,026

 

 

2,184

 

 

 



 



 

Total current assets

 

 

249,683

 

 

217,363

 

Property and equipment, net

 

 

45,806

 

 

40,500

 

Capitalized software development costs, net

 

 

32,302

 

 

35,690

 

Acquired technology, net

 

 

1,224

 

 

584

 

Intangibles assets, net

 

 

3,307

 

 

2,940

 

Deferred tax asset

 

 

3,692

 

 

4,124

 

Goodwill

 

 

12,281

 

 

6,624

 

Other assets

 

 

15,014

 

 

20,964

 

 

 



 



 

Total assets

 

$

363,309

 

$

328,789

 

 

 



 



 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Deferred revenue

 

$

103,298

 

$

107,960

 

Accounts payable

 

 

19,879

 

 

26,103

 

Accrued compensation costs

 

 

12,556

 

 

15,974

 

Deferred tax liability

 

 

3,730

 

 

4,124

 

Other current liabilities

 

 

20,000

 

 

10,413

 

 

 



 



 

Total current liabilities

 

 

159,463

 

 

164,574

 

Deferred revenue

 

 

11,289

 

 

16,772

 

Other long-term liabilities

 

 

1,248

 

 

1,252

 

 

 



 



 

Total liabilities

 

 

172,000

 

 

182,598

 

Stockholders’ equity:

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

191,309

 

 

146,191

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

363,309

 

$

328,789

 

 

 



 



 




ECLIPSYS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

 

 

Year Ended December 31,

 

 

 


 

 

 

2006

 

2005

 

 

 



 



 

Operating activities:

 

 

 

 

 

 

 

Net income

 

$

2,133

 

$

485

 

 

 



 



 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

36,977

 

 

32,472

 

Provision for bad debt

 

 

1,457

 

 

3,011

 

Provision for income taxes

 

 

38

 

 

—  

 

Stock compensation expense

 

 

16,054

 

 

2,353

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(14,489

)

 

(18,966

)

Increase in prepaid expenses and other current assets

 

 

(3,781

)

 

(4,507

)

(Increase) / Decrease in inventory

 

 

1,213

 

 

(645

)

(Increase) / Decrease in other assets

 

 

2,625

 

 

(9,283

)

Increase / (Decrease) in deferred revenue

 

 

(10,642

)

 

2,036

 

Increase / (Decrease) in accrued compensation

 

 

(5,039

)

 

2,441

 

Increase in accounts payable and other current liabilities

 

 

29

 

 

3,930

 

Increase / (Decrease) in other long-term liabilities

 

 

(4

)

 

1,130

 

 

 



 



 

Total adjustments

 

 

24,438

 

 

13,972

 

 

 



 



 

Net cash provided  by operating activities

 

 

26,571

 

 

14,457

 

 

 



 



 

Investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(17,465

)

 

(19,288

)

Purchase of marketable securities

 

 

(85,201

)

 

(117,984

)

Proceeds from sales of marketable securities

 

 

33,107

 

 

80,529

 

Capitalized software development costs

 

 

(14,106

)

 

(20,144

)

Cash paid for acquisitions

 

 

(6,039

)

 

(312

)

 

 



 



 

Net cash used in investing activities

 

 

(89,704

)

 

(77,199

)

 

 



 



 

Financing activities:

 

 

 

 

 

 

 

Proceeds from stock options exercised

 

 

26,712

 

 

16,853

 

Proceeds from employee stock purchase plan

 

 

990

 

 

195

 

 

 



 



 

Net cash provided by financing activities

 

 

27,702

 

 

17,048

 

 

 



 



 

Effect of exchange rates on cash and cash equivalents

 

 

2

 

 

356

 

 

 



 



 

Net decrease in cash and cash equivalents

 

 

(35,429

)

 

(45,338

)

Cash and cash equivalents — beginning of period

 

 

76,693

 

 

122,031

 

 

 



 



 

Cash and cash equivalents — end of period

 

$

41,264

 

$

76,693

 

 

 



 



 




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

 

 

Three Months Ended
December 31,

 

 

 


 

 

 

2006

 

2005

 

 

 



 



 

GAAP net earnings

 

$

3,923

 

$

5,033

 

Add back:

 

 

 

 

 

 

 

Share-based compensation expense1

 

 

3,626

 

 

—  

 

Restructuring charge2

 

 

6,123

 

 

—  

 

 

 



 



 

Non-GAAP net income 3

 

$

13,672

 

$

5,033

 

 

 



 



 

GAAP earnings per share

 

$

0.07

 

$

0.10

 

Add back:

 

 

 

 

 

 

 

Share-based compensation expense1

 

 

0.07

 

 

—  

 

Restructuring charge2

 

 

0.12

 

 

—  

 

 

 



 



 

Non-GAAP diluted earnings per share3

 

$

0.26

 

$

0.10

 

 

 



 



 



(1) On January 1, 2006, we adopted SFAS 123R and applied the modified prospective transition method.  Under this method, we did not restate any prior periods.  During the fourth-quarter of 2006, we recorded share-based compensation expense of $3.6 million.


 

 

Three Months Ended
December 31, 2006

 

 

 



 

Costs of systems & services

 

$

1,566

 

Sales and marketing

 

 

736

 

Research and development

 

 

647

 

General and administrative

 

 

677

 

 

 



 

Total share-based compensation expense

 

$

3,626

 

 

 



 



(2) This charge is associated with office closures and severance costs related to employment terminations that occurred in the fourth-quarter 2006 and inlcuded a non-cash charge of $1.7 million for share-based compensation.

 

(3) These non-GAAP measures exclude fourth quarter 2006 restructuring charge and the effect of the implementation of SFAS 123R, and are provided to facilitate evaluation of the Company’s operating performance and comparisons with prior period results that did not include the impact of SFAS 123R.




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

 

 

Year Ended
December 31,

 

 

 


 

 

 

2006

 

2005

 

 

 



 



 

GAAP net earnings

 

$

2,133

 

$

485

 

Add back:

 

 

 

 

 

 

 

Share-based compensation expense1

 

 

13,209

 

 

—  

 

Restructuring charge2

 

 

14,670

 

 

—  

 

 

 



 



 

Non-GAAP net income3

 

$

30,012

 

$

485

 

 

 



 



 

GAAP earnings per share

 

$

0.04

 

$

0.01

 

Add back:

 

 

 

 

 

 

 

Share-based compensation expense1

 

 

0.25

 

 

—  

 

Restructuring charge2

 

 

0.28

 

 

—  

 

 

 



 



 

Non-GAAP diluted earnings per share3

 

$

0.57

 

$

0.01

 

 

 



 



 



(1) On January 1, 2006, we adopted SFAS 123R and applied the modified prospective transition method.  Under this method, we did not restate any prior periods.  For the year ended December 31, 2006, we recorded share-based compensation expense of $13.2 million.


 

 

Year Ended
December 31, 2006

 

 

 



 

Costs of systems & services

 

$

5,344

 

Sales and marketing

 

 

2,977

 

Research and development

 

 

2,139

 

General and administrative

 

 

2,749

 

 

 



 

Total share-based compensation expense

 

$

13,209

 

 

 



 


 


(2) This charge is associated with certain headcount reductions made in the first quarter 2006 and completed in the second quarter 2006 to reduce costs and redirect spending into client related functions including customer support and professional services. Also included are charges associated with office closures and severance costs related to employment terminations that occurred in the fourth-quarter 2006.

 

(3) These non-GAAP measures exclude the effect of first, second and fourth quarter 2006 restructuring charges and implementation of SFAS 123R, and are provided to facilitate evaluation of the Company’s operating performance and comparisons with prior period results that did not include restructuring charges or the impact of SFAS 123R.