QD Quadramed Corp.

QuadraMed Corporation (Amex:QD) announced today that it will report net income of $0.3 million before preferred stock accretion and dividends declared for the three months ended March 31, 2008, compared to a net income of $2.6 million for the same period in 2007. Included in the current period results is approximately $0.6 million of severance costs related to the change in the Company�s product development strategy announced in February 2008. Revenues of $35.3 million, gross margin of 56% and operating expenses of $19.4 million combined to produce the achieved operating results for the quarter. These are compared to revenues of $29.2 million, gross margin of 62% and operating expenses of $16.1 million for the same period in 2007. The increases in revenues and expenses are primarily attributable to the September 2007 acquisition of the CPR business assets from Misys plc. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $1.5 million for the three months ended March 31, 2008, compared to EBITDA of $3.7 million for the same period in 2007. EBITDA adjusted for non-cash compensation of $0.8 million and $0.4 million respectively, and severance costs of $0.6 million and zero respectively, was $2.9 million for the three months ended March 31, 2008 and $4.1 million for the three months ended March 31, 2007. Cash and investments increased by $4.6 million during the three months ended March 31, 2008, to $22.1 million from $17.5 million at December 31, 2007. Cash flow from operations was $7.9 million for three months ended March 31, 2008, compared to $8.9 million for the corresponding three months in 2007. Cash flow in both periods was significantly influenced by the collection of annual maintenance billings which are billed early in the first quarter. The Company will also report net loss attributable to common shareholders of $(1.1) million, or $(0.02) per basic and diluted share for the three months ended March 31, 2008; this is compared to a net income attributable to common shareholders of $1.3 million, or $0.03 per basic and diluted share for the same period in 2007. �Achieving a 20% revenue growth in our Q1 year-over-year results was an important step toward hitting our 2008 revenue target. This success, the QCPR win at Sibley Hospital and the successful QCPR conversion and live operation of InterSystem�s Cache are all important execution steps for our business. These accomplishments demonstrate progress toward the operational improvements and market success outlined in our strategic plan.� said Keith Hagen, QuadraMed president and chief executive officer. The Company also reported that on February 13, 2008 Washington, D.C.-based Sibley Memorial Hospital selected QuadraMed's Computerized Patient Record (QCPR) as part of its initiative to build a longitudinal electronic health record (EHR) to further drive its patient safety and care delivery. Sibley concluded that the selection of QuadraMed�s enterprise-wide computer-based patient record system would leverage its previous investment in QuadraMed�s solutions while also contributing to its goal of vendor consolidation to integrate and streamline data flow within the enterprise. Additionally, QCPR met the hospital�s functionality requirements including computerized physician order entry, clinical decision support tools and electronic medication administration. Sibley, which is upgrading from QuadraMed�s Affinity to QCPR, plans to integrate that solution with QuadraMed�s Patient Registration, Revenue Cycle Management and Electronic Document Management applications. Management will review these results in an investment community conference call at 5:00 PM Eastern (2:00 PM Pacific) on Thursday, May 8, 2008. To ensure fair dissemination of information, no inquiries of management should be made regarding QuadraMed�s results until after the conference call. A brief question and answer period will follow management�s presentation. The dial-in number for the conference call is 877-718-5099 domestic and 719-325-4746 international. Callers should dial in by 4:45 PM Eastern (1:45 PM Pacific) to register. The call will also be webcast live and available to the public via the Investor Relations section of QuadraMed�s webpage at www.quadramed.com. Please note that the webcast is listen-only. Listeners should access the website at 4:45 PM Eastern (1:45 PM Pacific) to register and to download and install any necessary audio software. Webcast replays will be available shortly after the live call is completed. The replay will be available until midnight, May 15, 2008. Replay telephone numbers are 719-457-0820 or 888-203-1112; replay passcode is 1535400. � � Attachments Exhibit 1 Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007 Exhibit 2 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007 Exhibit 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 Exhibit 4 Reconciliation of EBITDA and Non-GAAP Measurements for the Three Months Ended March 31, 2008, December 31, 2007, September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006, September 30, 2006, and June 30, 2006 � About Adjusted EBITDA and other Non-GAAP Measurements The Company�s use and presentation of the terms EBITDA, Adjusted EBITDA and other Non-GAAP Measurements included in this press release and Exhibit 4 thereto, and the reconciliations of those items to the most directly comparable GAAP financial measure with equal or greater prominence as the non-GAAP financial measures, have been prepared in direct response to questions from its investors and other interested parties. Although the Company has frequently discussed these reconciling items when they occur, both in its filings as well as in investment community conference calls that are open to the public at large, many inquiries are still made as to the nature of these items, and the impact of removing these items from the GAAP financial results. As a result, the Company believes it is important to provide these reconciliations, so that the requesting investors will not have to perform the arithmetic themselves and so that all interested parties will benefit from the disclosures and reconciliations, through a straightforward and unambiguous presentation. The Company believes that the use and presentation of the terms EBITDA, Adjusted EBITDA and the other non-GAAP financial measures is useful because it allows readers of its financial information to evaluate its performance for different periods on a more comparable basis by excluding items that are unique in nature such as non-cash compensation, or do not relate to the ongoing operation of its core business. The items presented in calculating Adjusted EBITDA and other Non-GAAP reconciliations represent specific events or items as follows (please see Exhibit 4 to this press release): Cash Severance -- costs associated with restructuring and downsizing of the Company�s employee base during the three-month periods ended March 31, 2008; Non-cash Compensation � the costs of employee stock options and restricted stock; Tax benefit, Net � the amount recorded in the period resulting from the release of a portion of the reserve against the Company�s deferred tax assets, net of deferred income tax expense recorded in the period; Strategic Initiatives � the expenses recorded in connection with merger and acquisition activities during the three- month period ended June 30, 2007 and December 31, 2007; Employment Matters � the cost of the Company�s review of wage/hour classifications for certain employees during the three-month periods ended December 31, 2007 and September 30, 2007. About QuadraMed Corporation QuadraMed Corporation advances the success of healthcare organizations through IT solutions that leverage quality care into positive financial outcomes. QuadraMed provides real world solutions that help healthcare professionals deliver outstanding patient care efficiently and cost effectively. Behind the company�s products and services is a staff of 650 professionals whose experience and dedication have earned QuadraMed the trust and loyalty of clients at over 2,000 healthcare provider facilities. For more information about QuadraMed, visit http://www.quadramed.com Cautionary Statement on Risks Associated with QuadraMed Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 by QuadraMed that are subject to risks and uncertainties. The words "believe," "expect," "anticipate," "intend," "plan," "estimate," "may," "should," "could," and similar expressions are intended to identify such statements. Forward-looking statements are not guarantees of future performance and are to be interpreted only as of the date on which they are made. QuadraMed undertakes no obligation to update or revise any forward-looking statement except as required by law. QuadraMed advises investors that it discusses risk factors and uncertainties that could cause QuadraMed�s actual results to differ from forward-looking statements in its periodic reports filed with the Securities and Exchange Commission ("SEC"). QuadraMed�s SEC filings can be accessed through the Investor Relations section of our website, www.quadramed.com, or through the SEC�s EDGAR Database at www.sec.gov (QuadraMed has EDGAR CIK No. 0001018833). QuadraMed is a registered trademark of QuadraMed Corporation. All other trademarks are the property of their respective holders. � Exhibit 1 QUADRAMED CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) � � � March 31, � December 31, ASSETS 2008 2007 � Current assets Cash and cash equivalents $ 15,796 $ 7,119 Short-term investments 2,910 9,169 Accounts receivable, net of allowance for doubtful accounts of $1,495 and $1,449, respectively 28,887 26,088 Unbilled receivables 9,051 5,183 Deferred contract expenses 6,311 6,060 Prepaid expenses and other current assets, net of allowance on other receivable of $1,229 and $1,229, respectively 9,497 5,367 Deferred tax asset, net of valuation allowance � 7,376 � � 7,376 � Total current assets 79,828 66,362 � Restricted cash 1,947 2,389 Long-term investments 3,372 1,197 Property and equipment, net of accumulated depreciation and amortization of $23,209, and $22,855, respectively 3,401 3,778 Goodwill 33,878 33,942 Other amortizable intangible assets, net of accumulated amortization of $31,737 and $31,119, respectively 11,150 11,768 Other long-term assets 3,177 3,182 Deferred tax asset, net of valuation allowance � 49,724 � � 49,758 � Total assets $ 186,477 � $ 172,376 � � LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities Accounts payable and accrued expenses $ 4,863 $ 4,910 Accrued payroll and related benefits 4,870 9,602 Accrued exit cost of facility closing 896 1,178 Other accrued liabilities 4,926 7,537 Dividends payable 1,375 1,375 Deferred revenue � 60,874 � � 36,111 � Total current liabilities 77,804 60,713 � Accrued exit cost of facility closing 671 888 Other long-term liabilities � 2,608 � � 2,722 � Total liabilities 81,083 64,323 � Commitments and Contingencies � Stockholders� equity Preferred stock, $0.01 par, 5,000 shares authorized, 4,000 shares issued and outstanding, respectively 96,144 96,144 Common stock, $0.01 par, 150,000 shares authorized; 45,985 and 45,891 shares issued and 44,120 and 45,284 outstanding, respectively 460 459 Shares held in treasury, 1,408 and 607, respectively (2,802 ) (292 ) Additional paid-in-capital 311,575 310,557 Accumulated other comprehensive loss (182 ) (80 ) Accumulated deficit � (299,801 ) � (298,735 ) Total stockholders� equity � 105,394 � � 108,053 � Total liabilities and stockholders� equity $ 186,477 � $ 172,376 � � � Exhibit 2 QUADRAMED CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) � � Three months ended, March 31, 2008 � 2007 Revenue Services $ 5,567 $ 3,528 Maintenance 16,856 13,924 Installation and other � 3,329 � � 2,558 � Services and other revenue 25,752 20,010 � Term licenses 7,767 6,397 Perpetual licenses � 1,631 � � 2,278 � Licenses 9,398 8,675 Hardware � 141 � � 521 � Total revenue � 35,291 � � 29,206 � � Cost of revenue Cost of services and other revenue 11,334 7,027 � Royalties and other 3,817 2,979 Amortization of acquired technology and capitalized software � 259 � � 471 � Cost of license revenue 4,076 3,450 Cost of hardware revenue � 136 � � 492 � Total cost of revenue � 15,546 � � 10,969 � Gross margin � 19,745 � � 18,237 � � Operating expense General and administration 5,114 3,873 Software development 8,493 7,412 Sales and marketing 4,960 3,896 Amortization of intangible assets and depreciation � 827 � � 923 � Total operating expenses � 19,394 � � 16,104 � Income from operations � 351 � � 2,133 � � Other income (expense) Interest expense, includes non-cash charges of $18 and $50 (31 ) (50 ) Interest income 166 573 Other income, net � 1 � � 77 � Other income, net � 136 � � 600 � � Income from operations before income taxes $ 487 $ 2,733 Provision for income taxes � (178 ) � (109 ) Net income $ 309 $ 2,624 Preferred stock accretion and dividends declared � (1,375 ) � (1,308 ) � Net (loss) income attributable to common shareholders $ (1,066 ) $ 1,316 � � (Loss) income per share Basic $ (0.02 ) $ 0.03 Diluted $ (0.02 ) $ 0.03 � Weighted average shares outstanding Basic � 44,680 � � 43,540 � Diluted � 46,371 � � 47,097 � � � Exhibit 3 QUADRAMED CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) � � � For the three months ended March 31, 2008 � March 31, 2007 Cash flows from operating activities Net income attributable to common shareholders $ (1,066 ) $ 1,316 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,086 1,394 Deferred compensation amortization 94 96 Stock-based compensation 799 383 Preferred Stock accretion and dividend premium 1,375 1,308 Dividend discount amortization - 33 Provision for bad debts 130 156 Gain on sale of investments - (11 ) Interest income on investments (20 ) (25 ) Interest expense on note payable 18 18 Deferred income taxes 1 - � � Changes in assets and liabilities: Accounts receivable (6,797 ) 351 Prepaid expenses and other (4,376 ) (292 ) Accounts payable and accrued liabilities (8,128 ) (4,668 ) Deferred revenue � 24,763 � � 8,824 � Cash provided by operating activities 7,879 8,883 � Cash flows from investing activities Decrease in restricted cash 442 54 Purchases of available-for-sale securities (821 ) (17,359 ) Proceeds from the sale of available-for-sale securities 4,964 5,021 Payment of acquisition costs 64 - Purchases of property and equipment � (91 ) � (227 ) Cash provided by (used in) investing activities 4,558 (12,511 ) � Cash flows from financing activities Payment of preferred stock dividends (1,375 ) (1,503 ) Proceeds from issuance of common stock and other 125 1,034 Repurchase of common stock (2,510 ) - � Cash used in financing activities (3,760 ) (469 ) � Net increase (decrease) in cash and cash equivalents 8,677 (4,097 ) � Cash and cash equivalents, beginning of period � 7,119 � � 32,596 � � Cash and cash equivalents, end of period $ 15,796 � $ 28,499 � � � Exhibit 4 QUADRAMED CORPORATION RECONCILIATION OF EBITDA AND NON-GAAP MEASUREMENTS (in thousands) (unaudited) � � � For the Three Months Ended 3/31/08 � 12/31/07 � 9/30/07 � 6/30/07 � 3/31/07 � 12/31/06 � 9/30/06 � 6/30/06 � � EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) � Net income, as reported $309 $56,674 $1,502 $2,200 $2,624 $3,962 $5,979 $3,847 � Adjustments to Net Income for EBITDA Interest Expense 31 20 24 33 50 68 85 103 Interest Income (166 ) (364 ) (699 ) (644 ) (573 ) (480 ) (501 ) (399 ) (Provision) benefit for Income Taxes 178 (52,821 ) 142 162 109 80 101 63 Depreciation and Amortization 1,180 � 1,323 � 802 � 1,326 � 1,490 � 1,757 � 1,878 � 2,133 � Subtotal Non-GAAP Adjustments for EBITDA 1,223 (51,842 ) 269 877 1,076 1,425 1,563 1,900 � � � � � � � � � � � � � � � � EBITDA $1,532 � $4,832 � $1,771 � $3,077 � $3,700 � $5,387 � $7,542 � $5,747 � � Non-cash Compensation 799 928 807 356 383 182 229 196 Cash Severance 561 - - - - - - 142 � � � � � � � � � � � � � � � � Adjusted Non-GAAP EBITDA 2,892 � 5,760 � 2,578 � 3,433 � 4,083 � 5,569 � 7,771 � 6,085 � � � � Non-GAAP Net Income before Preferred Stock Accretion � Net income, as reported $309 $56,674 $1,502 $2,200 $2,624 $3,962 $5,979 $3,847 � Non-GAAP adjustments to Net income Non-cash Compensation 799 928 807 356 383 182 229 196 Cash Severance 561 - - - - - - 142 Strategic Initiatives - 57 - 412 - - - - Tax benefit, Net - (52,898 ) - - - - - - Employment Matters - � (374 ) 1,544 � - � - � - � - � - � Subtotal Non-GAAP adjustments 1,360 (52,287 ) 2,351 768 383 182 229 338 � � � � � � � � � � � � � � � � Non-GAAP net income $1,669 � $4,387 � $3,853 � $2,968 � $3,007 � $4,144 � $6,208 � $4,185 � � � � � � � � � � � � � � � � � Other Information � Revenue $35,291 $40,874 $32,908 $34,362 $29,206 $31,213 $33,032 $32,028 Costs of Revenue $15,546 � $16,167 � $14,105 � $15,991 � $10,969 � $11,401 � $10,436 � $11,133 � Gross Margin $19,745 � $24,707 � $18,803 � $18,371 � $18,237 � $19,812 � $22,596 � $20,895 � Gross Margin % 56 % 60 % 57 % 53 % 62 % 63 % 68 % 65 % � About Adjusted EBITDA and other Non-GAAP Measurements The Company�s use and presentation of the terms EBITDA, Adjusted EBITDA and other Non-GAAP Measurements included in this press release and on this Exhibit 4 thereto, and the reconciliations of those items to the most directly comparable GAAP financial measure with equal or greater prominence as the non-GAAP financial measures, have been prepared in direct response to questions from its investors and other interested parties. Although the Company has frequently discussed these reconciling items when they occur, both in its filings as well as in investment community conference calls that are open to the public at large, many inquiries are still made as to the nature of these items, and the impact of removing these items from the GAAP financial results. As a result, the Company believes it is important to provide these reconciliations, so that the requesting investors will not have to perform the arithmetic themselves and so that all interested parties will benefit from the disclosures and reconciliations, through a straightforward and unambiguous presentation. The Company believes that the use and presentation of the terms EBITDA, Adjusted EBITDA and the other non-GAAP financial measures is useful because it allows readers of its financial information to evaluate its performance for different periods on a more comparable basis by excluding items that are unique in nature such as non-cash compensation, or do not relate to the ongoing operation of its core business. The items presented in calculating Adjusted EBITDA and other Non-GAAP reconciliations represent specific events or items as follows: Cash Severance -- costs associated with restructuring and downsizing of the Company�s employee base during the three-month periods ended March 31, 2008; Non-cash Compensation � the costs of employee stock options and restricted stock; Tax benefit, Net � the amount recorded in the period resulting from the release of a portion of the reserve against the Company�s deferred tax assets, net of deferred income tax expense recorded in the period; Strategic Initiatives � the expenses recorded in connection with merger and acquisition activities during the three-month period ended June 30, 2007 and December 31, 2007; Employment Matters � the cost of the Company�s review of wage/hour classifications for certain employees during the three-month periods ended December 31, 2007 and September 30, 2007.