QD Quadramed Corp.

In Exhibit 3, Condensed Consolidated Statements of Cash Flows, in column For the Year Ended UNAUDITED 2006, Cash and cash equivalents, beginning of period should read 33,042 (sted (33,042)), and Cash and cash equivalents, end�of period should read $32,596 (sted $(32,596)). The corrected release reads: QUADRAMED CORPORATION ANNOUNCES 2006 RESULTS Net Income of $11.9 million Earnings Per Share of $0.14 Basic and Diluted Cash Flow from Operations of $16.7 million EBITDA of $18.9 million QuadraMed Corporation (Amex:QD) announced today that it will report Net Income of $11.9 million before preferred stock accretion for the twelve months ended December 31, 2006, compared to a Net Loss of $(3.9) million for the same period in 2005. For the three months ended December 31, 2006, the Company had Net Income before preferred stock accretion of $4.0 million compared to a Net Income of $1.2 million for the three months ended December 31, 2005. Income from operations was $10.8 million for the twelve months ended December 31, 2006, compared to a Loss from operations of $(1.4) million for the same period in 2005. For the three months ended December 31, 2006, the Company had Income from operations of $3.6 million, compared to Income from operations of $0.8 million for the three months ended December 31, 2005. Cash provided by operating activities was $16.7 million in 2006 compared to $11.8 million for 2005. Cash, cash equivalents and investments increased $10.2 million during 2006 to $44.5 million. The Company will also report Net Income attributable to common shareholders of $6.0 million, and income of $0.14 per share basic and diluted, for the twelve months ended December 31, 2006. This compares to a Net Loss attributable to common shareholders of $(9.3) million, and loss of $(0.23) per share basic and diluted for the same period in 2005. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $18.9 million for the twelve months ended December 31, 2006, compared to EBITDA of $7.1 million for the same period in 2005. Sales bookings for 2006 amounted to $84.5 million, compared to $67.2 million in 2005. The year over year improvements as detailed above are primarily a result of implementation of the Company�s strategic initiatives during 2006, resulting in 25% greater sales bookings, higher revenue, more efficient operations and significantly lower expenses in 2006 as compared to 2005. �QuadraMed was very successful in 2006, achieving a return to profitable operations, a 25 percent increase in sales bookings as compared to 2005, and a significant lowering of our DSOs,� said Keith B. Hagen, QuadraMed�s president and chief executive officer. �In a relatively short period of time, management�s ability to grow and improve our business, communicate our HIT vision and manage our expenses has produced dramatically improved operational results. In addition, we improved our business execution with regard to resolving all Sarbanes-Oxley Section 404 material weaknesses and drove higher revenue production. These improvements also helped us to reduce, and in some cases eliminate, many of the one-time expenses the company incurred year-after-year from 2002 to 2005. This is hugely important as these expenses did not create value for our shareholders or customers either by leading to improved products and services or by improving our market position. �Also of note is that our Care-based Revenue Cycle solutions strategy to help hospitals leverage quality care into improved financial health gained traction throughout 2006. Coupled with an aggressive sales effort, this strategy had a positive effect on our sales bookings, helping to achieve two new Affinity sales, growth in our Smart Identity product and services lines, and the large Department of Veterans Affairs contract, each of which were critical to our bookings success,� added Mr. Hagen. Management will review these results in an investment community conference call at 4:00 PM Eastern (1:00 PM Pacific) Thursday, March 15, 2007. 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 800-475-3716 domestic and 719-457-2728 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. Webcast replays will be available shortly after the live call is completed. The webcast replays will be available until 12:00 AM ET on March 21, 2007 by dialing 719-457-0820 or 888-203-1112. The replay passcode is 4319057. Attachments Exhibit 1 Consolidated Balance Sheets as of December 31, 2006 and December 31, 2005 Exhibit 2 Consolidated Statements of Operations for the Three Months Ended December 31, 2006 and December 31, 2005 and Years Ended December 31, 2006 and December 31, 2005 Exhibit 3 Consolidated Statements of Cash Flows for the Years Ended December 31, 2006 and December 31, 2005 Exhibit 4 Reconciliation of EBITDA and Non-GAAP Measurements for the Years Ended December 31, 2006, December 31, 2005 and December 31, 2004 Exhibit 5 Reconciliation of EBITDA for the Three Months Ended December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005, September 30, 2005, June 30, 2005, and March 31, 2005 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 is a registered trademark of QuadraMed Corporation. All other trademarks are the property of their respective holders. Exhibit 1 � QUADRAMED CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except percentages and per share amounts) � December 31, UNAUDITED ASSETS 2006� 2005� � Current assets Cash and cash equivalents $ 32,596� $ 33,042� Short-term investments 10,703� -� Accounts receivable, net of allowance for doubtful accounts of $2,612 and $4,177, respectively 20,358� 27,089� Unbilled receivables 4,253� 3,387� Prepaid expenses and other current assets, net of allowance for doubtful accounts of $833 and $715, respectively 10,848� 12,142� Total current assets � 78,758� � 75,660� � Restricted cash 2,341� 2,391� Long-term investments 1,244� 1,334� Property and equipment, net of accumulated depreciation and amortization of $21,131, and $19,052, respectively 2,557� 3,737� Goodwill 25,983� 25,983� Other amortizable intangible assets, net of accumulated amortization of $41,397 and $35,905, respectively 2,132� 7,624� Other long-term assets � 3,183� � 3,167� Total assets $ 116,198� $ 119,896� � LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities Accounts payable and accrued expenses $ 3,493� $ 3,551� Accrued payroll and related 8,720� 7,422� Other accrued liabilities 5,365� 10,114� Dividends payable 3,775� 9,054� Deferred revenue � 45,033� � 52,169� Total current liabilities 66,386� 82,310� � Accrued exit cost of building closing 2,066� 3,613� Deferred income taxes 1,343� 269� Other long-term liabilities � 2,618� � 2,512� Total liabilities 72,413� 88,704� � Stockholders' equity Preferred stock, $0.01 par, 5,000 shares authorized, 4,000 shares issued and outstanding respectively 93,290� 88,231� Common stock, $0.01 par, 150,000 shares authorized; 43,221 and 41,245 shares issued and outstanding, including 457 shares of treasury stock, respectively 437� 417� Shares held in treasury (5) (5) Additional paid-in-capital 304,504� 302,324� Accumulated other comprehensive loss (49) (89) Accumulated deficit � (354,392) � (359,686) Total stockholders� equity � 43,785� � 31,192� Total liabilities and stockholders� equity $ 116,198� $ 119,896� Exhibit 2 � QUADRAMED CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) � UNAUDITED UNAUDITED Three months ended, Year Ended December 31, December 31, 2006� 2005� 2006� 2005� Revenue Services $ 2,799� $ 3,687� $ 12,279� $ 13,135� Maintenance 13,370� 13,301� 55,975� 54,453� Installation and other � 2,708� � 2,760� � 11,756� � 11,060� Services and other revenue 18,877� 19,748� 80,010� 78,648� Licenses 11,043� 10,924� 42,756� 41,067� Hardware � 1,293� � 537� � 2,435� � 2,598� Total revenue � 31,213� � 31,209� � 125,201� � 122,313� � Cost of revenue Cost of services and other revenue 7,322� 7,746� 28,819� 29,510� Royalties and other 3,271� 2,968� 12,095� 9,779� Amortization of acquired technology and capitalized software � 702� � 941� � 3,401� � 4,014� Cost of license revenue 3,973� 3,909� 15,496� 13,793� Cost of hardware revenue � 876� � 151� � 2,007� � 2,341� Total cost of revenue � 12,171� � 11,806� � 46,322� � 45,644� Gross margin � 19,042� � 19,403� � 78,879� � 76,669� � Operating expense General and administration 4,026� 6,249� 19,325� 26,874� Software development 6,604� 7,223� 29,858� 30,476� Sales and marketing 3,833� 4,003� 14,682� 14,730� Amortization of intangible assets and depreciation 956� 1,111� 4,195� 4,904� Exit cost of facility closing � -� � -� � -� � 1,066� Total operating expenses � 15,419� � 18,586� � 68,060� � 78,050� Income (loss) from operations � 3,623� � 817� � 10,819� � (1,381) � Other income (expense) Interest expense, includes non-cash charges of $68, $135, $374 and $600, respectively (68) 156� (379) (607) Interest income 480� 305� 1,746� 749� Other income (expense), net � 7� � 50� � 101� � 13� Other income (expense) � 419� � 511� � 1,468� � 155� � Income (loss) from continuing operations before income taxes $ 4,042� $ 1,328� $ 12,287� $ (1,226) Provision for income taxes � (80) � (149) � (342) � (277) Income (loss) from continuing operations 3,962� 1,179� 11,945� (1,503) Loss from discontinued operations � -� � 68� � -� � (2,435) Net income (loss) $ 3,962� $ 1,247� $ 11,945� $ (3,938) Preferred stock accretion � (1,459) � (1,473) � (5,978) � (5,338) � Net income (loss) attributable to common shareholders $ 2,503� $ (226) $ 5,967� $ (9,276) � Income (loss) per share-basic Continuing operations $ 0.06� $ (0.01) $ 0.14� $ (0.17) Discontinued operations � -� � -� � -� � (0.06) Net income (loss) $ 0.06� $ (0.01) $ 0.14� $ (0.23) � Income (loss) per share-diluted Continuing operations $ 0.05� $ (0.01) $ 0.14� $ (0.17) Discontinued operations � -� � -� � -� � (0.06) Net income (loss) $ 0.05� $ (0.01) $ 0.14� $ (0.23) � Weighted average shares outstanding Basic � 42,825� � 41,370� � 42,057� � 40,658� Diluted � 79,571� � 41,370� � 78,125� � 40,658� Exhibit 3 � QUADRAMED CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) � � For the three months ended For the Year Ended UNAUDITED UNAUDITED UNAUDITED UNAUDITED December 31, 2006 December 31, 2005 2006� 2005� Cash flows from operating activities Net income (loss) attributable to common shareholders $ 2,500� $ (226) $ 5,967� $ (9,276) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,661� 2,064� 7,598� 8,918� Dividend discount amortization 51� 117� 303� 565� Interest expense on note payable 18� 18� 72� 35� Deferred compensation amortization 96� 82� 385� 1,962� Preferred stock accretion and dividend premium 1,461� 1,474� 5,978� 5,338� Exit cost of facility closing -� -� -� 2,797� Provision for bad debts -� 443� 820� 2,263� Stock-based compensation expense 181� -� 879� -� Gain on sale of assets -� -� -� (383) Other -� -� (21) -� � Changes in assets and liabilities: Accounts receivable (1,012) (954) 5,911� (3,240) Prepaid expenses and other (795) (2,847) 413� (1,217) Accounts payable and accrued liabilities 726� (1,330) (4,508) (1,114) Deferred revenue (663) 2,144� (7,135) 8,209� Payment to former executive out of trust � -� � -� � -� � (3,100) Cash provided by operating activities 4,224� 985� 16,662� 11,757� � Cash flows from investing activities Decrease (increase) in restricted cash (55) (41) 50� 1,498� Capital expenditures (251) (183) (982) (1,278) Proceeds from the sale of assets and available-for-sale securities, net 4,618� -� 7,227� (98) Purchases of available-for-sale securities (11,106) 12� (17,813) -� Termination of trust -� -� -� 3,100� Other � (33) � -� � (28) � -� Cash provided by (used in) by investing activities (6,827) (212) (11,546) 3,222� � Cash flows from financing activities Proceeds from issuance of common stock and other 339� 193� 936� 1,036� Payment of preferred stock dividends (1,625) (1,916) (6,500) (5,833) Proceeds from sale of assets -� -� -� 431� Other � -� � -� � 2� � -� Cash used in financing activities (1,286) (1,723) (5,562) (4,366) � Net increase (decrease) in cash and cash equivalents (3,889) (950) (446) 10,613� � Cash and cash equivalents, beginning of period � 36,485� � 33,992� � 33,042� � 22,429� � Cash and cash equivalents, end of period $ 32,596� $ 33,042� $ 32,596� $ 33,042� Exhibit 4 � QUADRAMED CORPORATION RECONCILIATION OF EBITDA AND NON-GAAP MEASUREMENTS For the Years Ended December 31, 2006, December 31, 2005 and December 31, 2004 (in thousands) � UNAUDITED For the Year Ended 12/31/06� 12/31/05� 12/31/04� � � EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) � Net income (loss), as reported $11,945� ($3,938) ($41,829) � Adjustments to Net Income for EBITDA Interest Expense $379� $607� $4,814� Interest Income ($1,746) ($749) ($481) Benefit (provision) for Income Taxes $342� $277� ($175) Depreciation and Amortization $7,983� $10,880� $10,540� Subtotal Adjustments for EBITDA 6,958� 11,015� 14,698� � � � EBITDA $18,903� $7,077� ($27,131) � Proforma Net Income (Loss) before Preferred Stock Accretion � Net income (loss), as reported $11,945� ($3,938) ($41,829) � Exit Cost on Facility Closing (San Rafael) -� 1,066� 4,190� Exit Cost on Facility Closing (Discontinued Operation) -� 1,849� -� Cash Severance 457� 2,844� 315� Non-Cash Severence -� 1,442� -� Costs of Litigation 1,121� -� -� Loss on Retirement of Debt -� -� 14,871� Gain on Sale of EDI Division -� (383) -� Loss from Discontinued Operation -� 586� 7,022� Other Items, Net -� -� 1,400� Subtotal Proforma adjustments 1,578� 7,404� 27,798� � � � Proforma net income (loss) $13,523� $3,466� ($14,031) � Proforma Income (Loss) from Operations � Income (loss) from operations, as reported $10,819� ($1,381) ($16,178) � Exit Cost on Facility Closing (San Rafael) -� 1,066� 4,190� Cash Severance 457� 2,844� 315� Non-Cash Severence -� 1,442� -� Costs of Litigation 1,121� -� -� Gain on Sale of EDI Division -� (383) -� Other Items, Net -� -� 1,400� Subtotal Proforma adjustments 1,578� 4,969� 5,905� � � � Proforma Income (loss) from operations $12,397� $3,588� ($10,273) � Other Information � Revenue $125,201� $122,313� $124,804� Costs of Revenue $46,322� $45,644� $50,429� Gross Margin $78,879� $76,669� $74,375� Gross Margin % 63% 63% 60% Exhibit 5 � QUADRAMED CORPORATION RECONCILIATION OF EBITDA For the Three Months Ended December 31, 2006, September 30, 2006, June 30, 2006, March 31, 2006 and December 31, 2005, September 30, 2005, June 30, 2005 and March 31, 2005 (in thousands) (unaudited) � � For the Three Months Ended 12/31/06� 9/30/06� 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 $3,962� $5,979� $3,847� ($1,843) $1,247� ($3,958) $1,293� ($2,520) � Adjustments to Net Income for EBITDA Interest Expense 68� 85� 103� 123� (156) 403� 191� 169� Interest Income (480) (501) (399) (366) (305) (223) (120) (101) Benefit (provision) for Income Taxes 80� 101� 63� 98� 149� 114� 3� 11� Depreciation and Amortization 1,756� 1,878� 2,157� 2,191� 2,141� � 3,082� 2,280� 3,377� Subtotal Adjustments for EBITDA 1,424� 1,563� 1,924� 2,046� 1,829� 3,376� 2,354� 3,456� � � � � � � � � EBITDA $5,386� $7,542� $5,771� $203� $3,076� ($582) $3,647� $936� � Other Information � � � � Revenue $31,213� $33,032� $32,028� $28,928� $31,209� $30,046� $30,683� $30,375� Costs of Revenue $12,171� $10,975� $11,592� $11,584� $11,806� $11,407� $10,945� $11,486� Gross Margin $19,042� $22,057� $20,436� $17,344� $19,403� $18,639� $19,738� $18,889� Gross Margin % 61% 67% 64% 60% 62% 62% 64% 62% �