Quovadx Reports Third-Quarter Results, Records 59% Growth in Software License Revenue; Software Revenue Totals $2.8 Million

Business Wire, Oct 23, 2002

Business Editors

ENGLEWOOD, Colo.--(BUSINESS WIRE)--Oct. 23, 2002

Pro Forma EBITDA Loss Per Share, Before Goodwill

Impairment Charge, is $(0.04)

Quovadx, Inc. (Nasdaq: QVDX), a leading provider of software and services enabling competitive process advantage, today announced revenue of $14.8 million and a pro forma EBITDA loss of $(0.04) per share, before a one time, non-cash goodwill impairment charge of $93.1 million, for the quarter ended September 30, 2002. Pro forma results exclude interest income, taxes, depreciation and amortization and stock based compensation expense. Due to certain market indicators, the Company recorded a one-time non-cash goodwill impairment charge calculated in accordance with FAS 142.

Net loss calculated in accordance with generally accepted accounting principles (GAAP) was $(96.7) million or $(3.22) per share compared to a profit of $0.1 million or $0.00 per share a year ago. The third quarter 2002 loss was $(3.7) million or $(0.12) per share, before the one time, non-cash goodwill impairment charge. These results are consistent with the Company's updated guidance, provided on October 2, 2002.

"During the quarter, we were successful in achieving the near term priorities set last quarter: improving our closing process, increasing the significance of our pipeline, and focusing on the value proposition of our products," said Lorine Sweeney, president and chief executive officer of Quovadx. "Our products meet time-critical needs in the healthcare sector, such as HIPAA compliance, and offer our clients productivity and efficiency improvements. I'm encouraged by our progress in the face of a continuing difficult business environment."

Gross margin in the third quarter was 47%, excluding $1.4 million of acquired and developed software amortization, compared to 41% in the third quarter a year ago on the same basis. The improvement reflects the Company's efforts to shift its revenue mix toward higher margin software sales. Software revenue in the third quarter totaled $2.8 million. This represents a 59% improvement over the second quarter, 2002 as well as over the third quarter, 2001.

The Company continued to maintain a strong balance sheet, ending the third quarter with $52.6 million in cash and cash equivalents, compared to $54.0 million at June 30, 2002. The Company has no debt.

Revenue for the nine months ended September 30, 2002, which included revenue from the Company's 2001 acquisitions, increased 49% to $47.5 million compared with $31.9 million in the first nine months of 2001. For the 2002 nine-month period, Quovadx recorded a GAAP loss of $(100.7) million or $(3.36) per share compared to a GAAP loss of $(4.3) million or $(0.23) per share a year ago. Excluding the third quarter, one-time non-cash charge, Quovadx reported a nine month loss of $(7.6) million or $(0.25) per share.

Third Quarter Business Activity and Key Accomplishments include the following:

-- Omnicare Clinical Research, Inc. selected our newest adaptive application, QDX(TM) Quick Trials, as a key management tool in its management of clinical trials. They will also implement QDX(TM) BPMS and QDX(TM) Integrator to fully integrate their clinical trials management process with their other systems.

-- Memorial Hermann Healthcare System, a not-for-profit community-owned health care system, selected the QUOVADX INSURENET(R) solution, with access to over 500 payers, to perform patient insurance eligibility verification.

-- Private Healthcare Systems, Inc., the nation's leading healthcare cost management company, purchased QDX(TM)CutomerFocus to manage and optimize its interactions with key healthcare payors and providers.

-- GE Medical Systems Information Technologies, Inc. selected Quovadx as its worldwide integration vendor of choice. They intend to imbed QDX(TM)Platform V into their medical systems for a unified integration approach.

-- Other customers and partners signing contracts during the quarter included Bayshore Community Health Services, DeKalb Medical Center, Keane, Inc., MeritCare Health Systems, Northwestern Medical Faculty Foundation, QuadraMed Corporation, St. Barnabas Hospital, and Tanner Medical Center.

-- Quovadx strengthened its channel partnerships by signing its first channel relationship in the government sector with system reseller Government Technology Systems, Inc. (GTSI). GTSI will be a distributor of QUOVADX products for use in the federal government.

-- Last week, Quovadx introduced QDX Platform V, a next generation integrated product for rapid application development. It incorporates services-oriented development of applications (SODA), enabling developers to call on a set of common tools, frameworks, engines, interfaces and other internal or external services to rapidly develop browser-based composite applications.

-- In September, KLAS Enterprises, an organization that provides the healthcare information technology (HIT) industry with unbiased factual information on HIT vendor performance, ranked QDX Integrator first in their integration engine study, based on customer interviews.

-- In August, Quovadx announced an upgrade to QDX HIPAA Express. QDX HIPAA Express 2.0 validates against all levels and types of HIPAA transaction and code set compliance as provided by WEDI-SNIP (Workgroup for Electronic Data Interchange - Strategic National Implementation Process).

-- During the quarter, the United Sates Patent and Trademark Office issued Quovadx its seventh patent. The latest patent covers business processes management, expanding Quovadx's portfolio of intellectual property to include the technology used to manage versions of processes, a critical feature for organizations with a dynamic enterprise environment.

-- Quovadx was named Colorado's tenth fastest growing technology company in Deloitte & Touche's Technology Fast 50 for Colorado, a ranking of the 50 fastest growing technology companies in the state.