QuadraMed Corporation Announces 2007 Results Updated for Additional Income Tax Benefits

Business Wire,  March 14, 2008  

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Revenues of $137.4 million

Net Income of $63 million includes Net Income Tax Benefit of $52.4 million

Income before Income Taxes of $10.6 million

Adjusted EBITDA of $15.9 million

RESTON, Va. -- QuadraMed Corporation (Amex:QD) announced today that it will report net income of $56.7 million before preferred stock accretion for the three months ended December 31, 2007, compared to $4.0 million for the same period in 2006. For the twelve months ended December 31, 2007, the Company had net income before preferred stock accretion of $63.0 million compared to $11.9 million for the twelve months ended December 31, 2006. Included in the three month and twelve month periods ended December 31, 2007 is an income tax benefit of $52.9 million, which includes deferred income tax expense of $10.9 million. The Company recorded these items as a result of management's determination that it is now more likely than not that most of its deferred tax assets will in all probability be realized in future periods. Accordingly, a substantial portion of the valuation allowance that the Company had maintained against its deferred tax assets was released, which together with other miscellaneous tax expense of $0.5 million, resulted in the recording of the net income tax benefit for 2007 of $52.4 million. The Company has completed its review of deferred tax assets related to its research credits, and has recorded additional deferred tax assets of $3.1 million as of December 31, 2007, and recognized additional income tax benefit of $3.1 million for the three month and twelve month periods ended December 31, 2007; these amounts were not included in the unaudited results announced on March 13, 2008. No corresponding amounts of this nature were recorded in 2006. The Company expects to record book income tax expense in future periods as a function of any reported pretax earnings, but does not expect to pay substantial cash taxes for the next few years.

Income before income taxes was $3.9 million and $4.0 million for the three month periods ended December 31, 2007 and 2006, and $10.6 million and $12.3 million for the twelve month periods ended December 31, 2007 and 2006.

Revenues of $40.9 million for the quarter ended December 31, 2007 exceeded quarterly revenue guidance of $36 million to $39 million, and compares to $31.2 million for the same period in 2006, an increase of 31%. For the twelve months ended December 31, 2007, revenue of $137.4 million, increased 9.7%, compared to revenue of $125.2 million in 2006. Included in both of the 2007 periods is $5.6 million of revenue recognized as a result of the integration of the Computerized Patient Record (CPR) business assets during the fourth quarter. Sales bookings for 2007 amounted to $93 million (including approximately $8 million from CPR for the nine months prior to the acquisition), compared to $84.5 million in 2006.

As previously announced at the UBS Global Healthcare Conference in February, QuadraMed expects 2008 revenues to be between $146 million and $152 million which would represent a 6% to 10% increase over 2007 revenues of $137.4 million.

Income from operations was $3.5 million for the three months ended December 31, 2007, compared to $3.6 million for the same period in 2006. For the twelve months ended December 31, 2007, income from operations was $7.9 million, compared to $10.8 million for the twelve months ended December 31, 2006. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, adjusted for stock based compensation) was $15.9 million for the twelve months ended December 31, 2007, compared to adjusted EBITDA of $19.8 million for the same period in 2006. The declines in income from operations and adjusted EBITDA for the 2007 periods from 2006 are due primarily to costs incurred related to the acquisition of the CPR assets on September 23, 2007 from Misys Healthcare, the recording of a $1.3 million expense related to the change in wage/hour classifications of certain employees in the third quarter of 2007, and the inclusion of $3.0 million of additional income in 2006 that was generated from cash basis revenues originated in 2005 but not recognized until 2006.

The Company also reported net income attributable to common shareholders of $57.0 million, or $1.29 income per share basic, and $0.79 income per share diluted for the twelve months ended December 31, 2007. This is compared to a net income attributable to common shareholders of $6.0 million, or income per share of $0.14 basic, and $0.13 diluted for the same period in 2006.

Cash provided by operating activities was $12.8 million in 2007 compared to $16.7 million for 2006. Included in the 2007 period is the effect of paying the $1.3 million expense related to the change in wage/hour classifications of certain employees in the third quarter of 2007, as well as the first full quarter of activities related to the acquired CPR assets, which amounted to a use of cash of $1.2 million. In addition, during the fourth quarter of 2007, no monies were received from the Veterans Administration related to $4.6 million of term licenses earned, pending resolution of contract negotiations and Federal government budget resolutions; however all of the $4.6 million outstanding was subsequently received on January 6, 2008. By contrast, cash flow from operating activities in 2006 included approximately $6 million related to the reduction in DSO that year from 81 to 60. Cash, cash equivalents and investments decreased $27 million during 2007 to $17.5 million, compared to an increase of $11.2 million in 2006. The primary reason for the decline in cash and investments during 2007 was the $33 million cash purchase of the CPR assets during the third quarter.