QD Quadramed Corp.

QuadraMed Corporation (Amex:QD) announced today that it will report net income of $3.8 million before preferred stock accretion for the three months ended June 30, 2006, compared to net income of $1.3 million for the same period in 2005. Income from operations was $3.6 million for the three months ended June 30, 2006, compared to income from operations of $1.2 million for the same period in 2005. On a year-to-date basis, net income was $2.0 million in 2006 compared to a net loss of $(1.2) million for the corresponding six month period in 2005. Cash provided by operating activities was $4.1 million for the three months ended June 30, 2006, compared to $8.9 million for the three months ended June 30, 2005. Overall, net cash flow for the current quarter was an increase of $2.4 million, compared to an increase of $8.6 million during the comparable quarter in 2005. Cash and cash equivalents were $39.2 million and $29.0 million as of June 30, 2006 and 2005 respectively. Revenues of $32.0 million, gross margin of 64% and operating expenses of $16.9 million combined to produce the achieved operating results for the quarter. These compare to revenues of $30.7 million, gross margin of 64% and operating expenses of $18.5 million of the same period in 2005. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $5.6 million for the three months ended June 30, 2006, compared to EBITDA of $3.6 million for the same period in 2005. The Company will also report net income attributable to common shareholders of $2.6 million, or $0.06 basic per share and $0.03 fully-diluted per share for the three months ended June 30, 2006; this is compared to net income attributable to common shareholders of $0.1 million, or zero basic and fully-diluted per share for the same period in 2005. "We are pleased that the management actions taken in late 2005 and earlier this year combined with our focus on sales bookings and installation project control are producing results. Although the majority of our revenue is recurring and has a high degree of predictability, some of it is project specific and therefore one-time in nature, as can be seen in these second quarter results. We continue to focus on executing on our strategic and operating plans, while advancing the success of healthcare organizations through solutions that leverage quality care into positive financial outcomes for our clients," said Keith Hagen, QuadraMed president and chief executive officer. Management will review these results in an investment community conference call at 4:00 PM Eastern (1:00 PM Pacific) on Wednesday, August 9, 2006. 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 800-946-0783 domestic, and 719-457-2658 international. Callers should dial in by 3:45 PM Eastern (12:45 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 3:45 PM Eastern (12:45 PM Pacific) to register and to download and install any necessary audio software. The webcast replays will be available until 12:00 AM ET on August 15, 2006 by dialing 719-457-0820 or 888-203-1112. The replay passcode is 4718036. -0- *T Attachments Exhibit 1 Condensed Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005 Exhibit 2 Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2006 and 2005 and Six Months Ended June 30, 2006 and 2005 Exhibit 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2006 and 2005 and Six Months Ended June 30, 2006 and 2005 Exhibit 4 Reconciliation of EBITDA and Non-GAAP Measurements for the Three Months Ended June 30, 2006, March 31, 2006, December 31, 2005, September 30, 2005, June 30, 2005 and March 31, 2005 Exhibit 5 Reconciliation of EBITDA and Non-GAAP Measurements for the Six Months Ended June 30, 2006 and June 30, 2005 and the Twelve Months Ended June 30, 2006 *T About QuadraMed Corporation QuadraMed Corporation advances the success of healthcare organizations through IT solutions that leverage quality care into positive financial outcomes. As evolving reimbursement scenarios challenge healthcare organizations to leverage quality of care into payment, clients committing to QuadraMed's care-based solutions can realize market leading financial performance. Using QuadraMed's end-to-end solutions to optimize the patient experience and leverage quality of care into payment, our clients can receive the proper reimbursement, in the shortest time, at the lowest administrative cost. Behind our products and services is a staff of almost 600 professionals whose experience and dedication to service have earned QuadraMed the trust and loyalty of customers at approximately 2,000 healthcare provider facilities. To find out more about QuadraMed, visit www.quadramed.com. Cautionary Statement on Risks Associated with QuadraMed's Forward-Looking Statements This press release contains forward-looking statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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 Affinity and Care-based Revenue Cycle are registered trademarks of QuadraMed Corporation. All other trademarks are the property of their respective holders. -0- *T Exhibit 1 QUADRAMED CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) June 30, December 31, ASSETS 2006 2005 ------------ ------------ Current assets Cash and cash equivalents $39,154 $33,042 Accounts receivable, net of allowance for doubtful accounts of $3,878 and $4,177, respectively 22,840 27,089 Unbilled and other receivables 3,334 3,387 Notes and other receivables, net of allowance for doubtful accounts of $822 and $715, respectively - 50 Prepaid expenses and other current assets 11,857 11,734 ------------ ------------ Total current assets 77,185 75,302 Restricted cash 2,368 2,391 Property and equipment, net of accumulated depreciation and amortization of $20,129 and $19,052, respectively 3,108 3,737 Capitalized software development costs, net of accumulated amortization of $12,980 and $12,562, respectively 63 481 Goodwill 25,983 25,983 Other intangible assets, net of accumulated amortization of $26,007 and $23,343, respectively 4,459 7,143 Other long-term assets 4,485 4,859 ------------ ------------ Total assets $117,651 $119,896 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $3,932 $3,551 Accrued payroll and related 7,275 7,422 Other accrued liabilities 5,961 10,114 Dividends payable 6,488 9,054 Deferred revenue 54,554 52,169 ------------ ------------ Total current liabilities 78,210 82,310 Accrued exit cost of facility closing 2,812 3,613 Other long-term liabilities 2,993 2,781 ------------ ------------ Total liabilities 84,015 88,704 Stockholders' equity Preferred stock, $0.01 par, 5,000 shares authorized; 4,000 shares issued and outstanding 90,727 88,231 Common stock, $0.01 par, 150,000 shares authorized; 42,101 and 41,245 shares issued and outstanding, including 457 and 457 shares of treasury stock, respectively 426 417 Shares held in treasury (5) (5) Additional paid-in-capital 303,394 302,324 Accumulated other comprehensive loss (157) (89) Accumulated deficit (360,749) (359,686) ------------ ------------ Total stockholders' equity 33,636 31,192 ------------ ------------ Total liabilities and stockholders' equity $117,651 $119,896 ============ ============ Exhibit 2 QUADRAMED CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three months ended, Six months ended, June 30, June 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Revenue Services $2,706 $3,547 $5,621 $6,624 Maintenance 14,241 13,975 27,803 27,385 Installation and other 3,283 2,408 6,155 5,104 --------- --------- --------- --------- Services and other revenue 20,230 19,930 39,579 39,113 Licenses 11,380 9,782 20,562 20,134 Hardware 418 971 815 1,811 --------- --------- --------- --------- Total revenue 32,028 30,683 60,956 61,058 --------- --------- --------- --------- Cost of revenue Cost of services and other revenue 7,189 7,119 14,651 14,438 Royalties and other 3,026 2,259 5,790 4,426 Amortization of acquired technology and capitalized software 956 1,024 1,951 2,059 --------- --------- --------- --------- Cost of license revenue 3,982 3,283 7,741 6,485 Cost of hardware revenue 421 543 784 1,508 --------- --------- --------- --------- Total cost of revenue 11,592 10,945 23,176 22,431 --------- --------- --------- --------- Gross margin 20,436 19,738 37,780 38,627 --------- --------- --------- --------- Operating expense General and administration 4,307 6,175 10,929 12,285 Software development 7,842 7,724 15,956 15,441 Sales and marketing 3,628 3,495 7,119 7,567 Amortization of intangible assets and depreciation 1,081 1,115 2,204 2,706 --------- --------- --------- --------- Total operating expenses 16,858 18,509 36,208 37,999 --------- --------- --------- --------- Income from operations 3,578 1,229 1,572 628 --------- --------- --------- --------- Other income (expense) Interest expense, includes non-cash charges of $102, $191 and $221, $356, respectively (103) (191) (226) (360) Interest income 399 120 765 221 Other income (expense), net 36 138 54 (16) --------- --------- --------- --------- Other income (expense) 332 67 593 (155) --------- --------- --------- --------- Income from continuing operations before income taxes $3,910 $1,296 $2,165 $473 Provision for income taxes (63) (3) (161) (14) --------- --------- --------- --------- Income from continuing operations 3,847 1,293 2,004 459 Loss from discontinued operations - - - (1,686) --------- --------- --------- --------- Net income (loss) $3,847 $1,293 $2,004 $(1,227) Preferred stock accretion (1,257) (1,191) (2,496) (2,366) --------- --------- --------- --------- Net income (loss) attributable to common shareholders $2,590 $102 $(492) $(3,593) ========= ========= ========= ========= Income (loss) per share-basic Continuing operations $0.06 $0.00 $(0.01) $(0.05) Discontinued operations - - - (0.04) --------- --------- --------- --------- Net income (loss) $0.06 $0.00 $(0.01) $(0.09) ========= ========= ========= ========= Income (loss) per share- diluted Continuing operations $0.03 $0.00 $(0.01) $(0.05) Discontinued operations - - - (0.04) --------- --------- --------- --------- Net income (loss) $0.03 $0.00 $(0.01) $(0.09) ========= ========= ========= ========= Weighted average shares outstanding Basic 41,864 40,499 41,602 40,338 ========= ========= ========= ========= Diluted 78,072 73,992 41,602 40,338 ========= ========= ========= ========= Exhibit 3 QUADRAMED CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three months ended Six months ended June 30, June 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Cash flows from operating activities Net income (loss) attributable to common shareholders $2,590 $102 $(492) $(3,593) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,144 2,471 4,340 6,013 Preferred stock accretion 1,257 1,191 2,496 2,366 Impairment and other charges for Financial Services Division - - - 914 Provision for bad debts 434 625 820 825 Stock-based compensation expense 293 - 660 - Other (21) - (21) - Changes in assets and liabilities: Accounts receivable 4,469 3,825 3,429 (6,617) Prepaid expenses and other (490) 1,112 360 2,990 Accounts payable and accrued liabilities (675) 1,763 (4,573) (3,191) Deferred revenue (5,861) (2,198) 2,385 8,396 --------- --------- --------- --------- Cash provided by operating activities 4,140 8,891 9,404 8,103 Cash flows from investing activities Decrease (increase) in restricted cash (57) 1,562 23 1,547 Capital expenditures (269) (501) (500) (804) Other 7 (50) 16 (117) --------- --------- --------- --------- Cash (used in) provided by investing activities (319) 1,011 (461) 626 Cash flows from financing activities Proceeds from issuance of common stock and other 172 108 419 606 Payment of preferred stock dividends (1,625) (1,375) (3,250) (2,750) --------- --------- --------- --------- Cash used in financing activities (1,453) (1,267) (2,831) (2,144) Net increase in cash and cash equivalents 2,368 8,635 6,112 6,585 Cash and cash equivalents, beginning of period 36,786 20,379 33,042 22,429 --------- --------- --------- --------- Cash and cash equivalents, end of period $39,154 $29,014 $39,154 $29,014 ========= ========= ========= ========= Supplemental disclosure of cash flow information Net cash (refunded) paid for taxes (14) - 11 - Exhibit 4 QUADRAMED CORPORATION Reconciliation of EBITDA and Non-GAAP Measurements (in thousands) (unaudited) For the Three Months Ended ------------------------------------------------------ 6/30/06 3/31/06 12/31/05 9/30/05 6/30/05 3/31/05 -------- -------- --------- -------- -------- -------- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) --------------------------------- Net income (loss), as reported $3,847 ($1,843) $1,247 ($3,958) $1,293 ($2,520) Adjustments to Net Income for EBITDA Interest Expense 103 123 (156) 403 191 169 Interest Income (399) (366) (305) (223) (120) (101) Benefit (provision) for Income Taxes 63 98 149 114 3 11 Depreciation and Amortization 2,060 2,094 2,137 3,082 2,280 3,377 -------- --------------------------------------------- Subtotal Adjustments for EBITDA 1,827 1,949 1,825 3,376 2,354 3,456 -------- --------------------------------------------- EBITDA $5,674 $106 $3,072 ($582) $3,647 $936 ======== ============================================= Proforma Net Income (Loss) before Preferred Stock Accretion --------------------------------- Net income (loss), as reported $3,847 ($1,843) $1,247 ($3,958) $1,293 ($2,520) Exit Cost on Facility Closing (San Rafael) - - - 1,066 - - Exit Cost on Facility Closing (Dis- continued Operation) - - - 817 - 1,032 Cash Severance 142 315 - 2,344 - - Non-Cash Severance - - - 850 - 592 Costs of Litigation 27 1,124 - - - - Gain on Sale of EDI Division - - - (383) - - Loss from Discontinued Operation - - (68) - - 654 -------- --------------------------------------------- Subtotal Proforma adjustments 169 1,439 (68) 4,694 - 2,278 -------- --------------------------------------------- Proforma net income (loss) $4,016 ($404) $1,179 $736 $1,293 ($242) ======== ============================================= Proforma Income (Loss) from Operations --------------------------------- Income (loss) from operations, as reported $3,578 ($2,006) $817 ($2,826) $1,229 ($601) Exit Cost on Facility Closing (San Rafael) - - - 1,066 - - Cash Severance 142 315 - 2,344 - - Non-Cash Severance - - - 850 - 592 Costs of Litigation 27 1,124 - - - - Gain on Sale of EDI Division - - - (383) - - -------- --------------------------------------------- Subtotal Proforma adjustments 169 1,439 - 3,877 - 592 -------- --------------------------------------------- Proforma Income (loss) from operations $3,747 ($567) $817 $1,051 $1,229 ($9) ======== ============================================= Other Information --------------------------------- Revenue $32,028 $28,928 $31,209 $30,046 $30,683 $30,375 Costs of Revenue $11,592 $11,584 $11,806 $11,407 $10,945 $11,485 -------- -------- --------- -------- -------- -------- Gross Margin $20,436 $17,344 $19,403 $18,639 $19,738 $18,890 ======== ======== ========= ======== ======== ======== Gross Margin % 64% 60% 62% 62% 64% 62% Exhibit 5 QUADRAMED CORPORATION Reconciliation of EBITDA and Non-GAAP Measurements (in thousands) (unaudited) Last 12 For the Months Six Months Ended Ended ------------------- --------- 6/30/06 6/30/05 6/30/06 --------- --------- --------- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ---------------------------------------- Net income (loss), as reported $2,004 ($1,227) ($707) Adjustments to Net Income for EBITDA - - - Interest Expense 226 360 473 Interest Income (765) (221) (1,293) Benefit (provision) for Income Taxes 161 14 424 Depreciation and Amortization 4,154 5,657 9,373 --------- --------- --------- Subtotal Adjustments for EBITDA 3,776 5,810 8,977 --------- --------- --------- EBITDA $5,780 $4,583 $8,270 ========= ========= ========= Proforma Net Income (Loss) before Preferred Stock Accretion ---------------------------------------- Net income (loss), as reported $2,004 ($1,227) ($707) Exit Cost on Facility Closing (San Rafael) - - 1,066 Exit Cost on Facility Closing (Discontinued Operation) - 1,032 817 Cash Severance 457 - 2,801 Non-Cash Severance - 592 850 Costs of Litigation 1,151 - 1,151 Gain on Sale of EDI Division - - (383) Loss from Discontinued Operation - 654 (68) --------- --------- --------- Subtotal Proforma adjustments 1,608 2,278 6,234 --------- --------- --------- Proforma net income (loss) $3,612 $1,051 $5,527 ========= ========= ========= Proforma Income (Loss) from Operations ---------------------------------------- Income (loss) from operations, as reported $1,572 $628 ($437) Exit Cost on Facility Closing (San Rafael) - - 1,066 Cash Severance 457 - 2,801 Non-Cash Severance - 592 850 Costs of Litigation 1,151 - 1,151 Gain on Sale of EDI Division - - (383) --------- --------- --------- Subtotal Proforma adjustments 1,608 592 5,485 --------- --------- --------- Proforma Income (loss) from operations $3,180 $1,220 $5,048 ========= ========= ========= Other Information ---------------------------------------- Revenue $60,956 $61,058 $122,211 Costs of Revenue $23,176 $22,430 $46,389 --------- --------- --------- Gross Margin $37,780 $38,628 $75,822 ========= ========= ========= Gross Margin % 62% 63% 62% *T