Epocrates, Inc. (Nasdaq:EPOC), a leading physician platform for
clinical content, practice tools and health industry engagement,
today reported its first quarter 2012 results and provided full
year earnings guidance.
First Quarter 2012 Results
- Revenue for the quarter ended March 31, 2012 was $27.5 million
compared to $29.2 million for the quarter ended March 31, 2011, a
decrease of 6%.
- Income from continuing operations was $1.4 million for the
first quarter of 2012, versus $0.2 million for the first quarter of
2011. On a dilutive basis, income from continuing operations per
share was $0.06 for the first quarter of 2012 compared to a loss
from continuing operations of negative $0.01 per share for the
first quarter of 2011. On a non-GAAP dilutive basis, income from
continuing operations per share was $0.09 and $0.12 for the
quarters ended March 31, 2012 and 2011, respectively.
- Net loss was $1.4 million for the quarter ended March 31, 2012
versus $1.1 million for the quarter ended March 31, 2011. The net
loss in Q1 2012 was impacted by decreased revenue and increased
costs associated with discontinued operations, offset by a decrease
in operating expenses. Following the previously disclosed strategic
decision to discontinue the Epocrates EHR solution, the EHR
business is presented as discontinued operations for both Q1 2012
and Q1 2011.
- Earnings before interest, taxes, non-cash and other items
("adjusted EBITDA"), as defined in the GAAP to non-GAAP
reconciliation provided later in this release, was $4.7 million for
the current period compared to adjusted EBITDA of $6.3 million in
the prior year period. The decrease in adjusted EBITDA for the
first quarter of 2012 was primarily attributable to decreased
revenue coupled with an increase in cost of revenue, offset by
lower operating expenses compared to the first quarter of
2011.
Balance Sheet Highlights
- Cash, cash equivalents and short-term investments totaled $81.6
million as of March 31, 2012.
Outlook for Full Year
2012
- Revenue is reaffirmed to be in the range of $105 to $115
million, representing a decrease of 7% to an increase of 1% over
full year 2011 revenue.
- Adjusted EBITDA is expected to be $9.0 million to $12.0
million, or 9% to 10% of revenue. This would represent a
decrease in adjusted EBITDA of 9% to 32% over adjusted EBITDA
reported in 2011.
- Net loss is expected to be in the range of $2.3 to $4.3
million, and net loss per diluted share is expected to be between a
negative $0.09 and a negative $0.16 per share based on
approximately 26.0 million shares outstanding.
"Epocrates is in a strong position in the dynamic and evolving
mHealth industry," said Andy Hurd, Epocrates' president and chief
executive officer. "We are focused on growing the business by
deepening our relationship with the Epocrates network that includes
more than 50 percent of U.S. physicians."
Earnings Call Information
Epocrates will host a conference call today beginning at 5:00
p.m. ET to discuss its first quarter 2012 results, followed by a
question and answer session.
To participate in Epocrates' live conference call and webcast,
please dial (877) 398-9481 (domestic) or (760) 298-5095
(international) using conference code 62943507, or visit
http://investor.epocrates.com. A replay of the call will be
available at the same address.
About Epocrates, Inc.
Epocrates, Inc. (Nasdaq:EPOC) is a leading physician platform
for clinical content, practice tools and health industry engagement
at the point of care. The Epocrates network consists of more than
one million healthcare professionals, including 50 percent of U.S.
physicians, who routinely use its solutions and services.
Epocrates' portfolio includes top-ranked medical apps, such as the
industry's #1 most used mobile drug reference, and valuable
manufacturer resources. Through these intuitive and reliable
resources, Epocrates supports clinical decisions, helps improve
physician workflow and impacts patient outcomes. For more
information, please visit www.epocrates.com/company.
Epocrates is a trademark of Epocrates, Inc., registered in the
U.S. and other countries.
The Epocrates, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=10943
Certain statements contained in this press release are
forward-looking statements intended to qualify for the safe harbors
from liability established by the Private Securities Litigation
Reform Act of 1995. The words "believe," "estimate," "anticipate,"
"plan," "predict," "may," "hope," "can," "potential," "will,"
"should," "expect," "intend," "is designed to," "with the intent,"
and the negative of these words or such other variations may
identify statements as forward-looking statements, but their
absence does not mean that a statement is not forward-looking.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. The forward-looking
statements include uncertainties and risks including, among others:
the inability to retain and expand the Epocrates physician network
at the rate expected; unexpected delays in delivering new products;
lack of market acceptance of new products; the inability to
maintain product quality and brand credibility; the inability to
keep up with the technological advances within the marketplace and
by competitors; the inability to realize estimates and guidance
made by management with respect to Epocrates' financial results;
and other factors, including general economic conditions and
regulatory developments not within Epocrates' control. The factors
discussed herein and expressed from time to time in Epocrates'
filings with the Securities and Exchange Commission could cause
actual results and developments to be materially different from
those expressed in or implied by such statements. The
forward-looking statements are made only as of the date of this
press release, and except as required by law, Epocrates undertakes
no obligation to publicly update its forward-looking statements to
reflect subsequent events or circumstances. You should review the
Epocrates' filings, especially the risk factors contained in its
most recent filings with the Securities and Exchange Commission on
Form 10-K and Form 10-Q.
EPOCRATES,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS - UNAUDITED |
(in thousands, except per share
data) |
|
|
|
|
|
Three Months
Ended March 31, |
|
|
2012 |
2011 |
|
|
|
|
|
Subscription revenues |
$ 4,676 |
$ 6,209 |
|
Interactive services
revenues |
22,855 |
22,968 |
|
Total revenues, net |
27,531 |
29,177 |
|
|
|
|
|
Cost of subscription
revenues |
1,949 |
2,043 |
|
Cost of interactive services
revenues |
8,338 |
7,347 |
|
Total cost of revenues
(1) |
10,287 |
9,390 |
|
|
|
|
|
Gross profit |
17,244 |
19,787 |
|
|
|
|
|
Operating expenses (1): |
|
|
|
Sales and marketing |
6,082 |
7,121 |
|
Research and development |
4,921 |
5,020 |
|
General and administrative |
4,986 |
6,257 |
|
Change in fair value of contingent
consideration |
-- |
506 |
|
Facilities exit costs |
-- |
560 |
|
Total operating expenses |
15,989 |
19,464 |
|
|
|
|
|
Income from operations |
1,255 |
323 |
|
|
|
|
|
Interest income |
6 |
28 |
|
Other income, net |
1 |
2 |
|
|
|
|
|
Income before income taxes |
1,262 |
353 |
|
|
|
|
|
Benefit from (provision for) income
taxes |
141 |
(152) |
|
|
|
|
|
Income from continuing
operations |
1,403 |
201 |
|
Loss from discontinued operations, net
of tax |
(2,841) |
(1,326) |
|
Net loss |
(1,438) |
(1,125) |
|
Unrealized losses on available-for-sale
securities, net |
(1) |
-- |
|
Comprehensive loss |
(1,439) |
(1,125) |
|
|
|
|
|
Less: 8% dividend on preferred
stock |
-- |
294 |
|
|
|
|
|
Net loss attributable to common
stockholders - basic and diluted |
$ (1,438) |
$ (1,419) |
|
|
|
|
|
Net income (loss) per share - basic and
diluted |
|
|
|
Continuing operations |
$ 0.06 |
$ (0.01) |
|
Discontinued operations, net of
tax |
(0.12) |
(0.07) |
|
Net loss per share attributable to
common stockholders |
$ (0.06) |
$ (0.08) |
|
|
|
|
|
Weighted average common shares
outstanding - basic |
24,775 |
17,839 |
|
Weighted average common shares
outstanding - diluted |
25,258 |
20,146 |
|
|
|
|
|
(1) Includes stock-based
compensation in the following amounts: |
|
|
|
|
|
|
|
Cost of revenues |
$ 49 |
$ 107 |
|
Discontinued operations |
11 |
-- |
|
Sales and marketing |
202 |
747 |
|
Research and development |
198 |
391 |
|
General and administrative |
1,009 |
1,562 |
|
|
|
EPOCRATES,
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS - UNAUDITED |
(in thousands) |
|
|
|
|
March 31, 2012 |
December 31,
2011 |
Assets |
|
|
|
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 72,765 |
$ 75,326 |
Short-term investments |
8,878 |
9,897 |
Accounts receivable, net |
23,127 |
22,748 |
Deferred tax asset |
7,390 |
7,390 |
Prepaid expenses and other current
assets |
4,508 |
3,218 |
Total current assets |
116,668 |
118,579 |
|
|
|
Property and equipment, net |
7,554 |
7,283 |
Deferred tax asset, long-term |
713 |
1,280 |
Goodwill |
17,959 |
17,959 |
Other intangible assets, net |
5,763 |
6,771 |
Other assets |
354 |
352 |
Total assets |
$ 149,011 |
$ 152,224 |
|
|
|
|
|
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
Current liabilities |
|
|
Accounts payable |
$ 2,209 |
$ 3,282 |
Deferred revenue |
45,369 |
46,429 |
Other accrued liabilities |
7,700 |
9,600 |
Total current liabilities |
55,278 |
59,311 |
|
|
|
Deferred revenue, less current portion |
8,565 |
8,088 |
Other liabilities |
1,566 |
1,893 |
Total liabilities |
65,409 |
69,292 |
|
|
|
Stockholders' equity |
|
|
Common stock at par |
25 |
24 |
Additional paid-in capital |
131,346 |
129,238 |
Accumulated other comprehensive loss |
(3) |
(2) |
Accumulated deficit |
(47,766) |
(46,328) |
Total stockholders' equity |
83,602 |
82,932 |
Total liabilities and stockholders'
equity |
$ 149,011 |
$ 152,224 |
|
EPOCRATES,
INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS -
UNAUDITED |
(in thousands) |
|
|
|
|
Three Months Ended March 31, |
|
2012 |
2011 |
|
|
|
Cash flows from operating
activities: |
|
|
Net loss |
$ (1,438) |
$ (1,125) |
Adjustments to reconcile net loss to net cash
(used in) |
|
|
provided by operating activities: |
|
|
Stock-based compensation |
1,469 |
2,807 |
Depreciation and amortization |
964 |
992 |
Amortization of intangible assets |
1,008 |
1,030 |
Allowance for doubtful accounts and sales
returns reserve |
(14) |
70 |
Change in fair value of contingent
consideration |
-- |
301 |
Facilities exit costs |
-- |
560 |
Changes in assets and liabilities, net of
effect of acquisitions: |
|
|
Accounts receivable |
(365) |
(350) |
Deferred tax asset, current and
noncurrent |
240 |
-- |
Prepaid expenses and other assets |
(1,292) |
(1,403) |
Accounts payable |
(865) |
(936) |
Deferred revenue |
(583) |
3,970 |
Other accrued liabilities and other
payables |
(1,953) |
338 |
Net cash (used in) provided by operating
activities |
(2,829) |
6,254 |
|
|
|
Cash flows from investing
activities: |
|
|
Purchase of property and equipment |
(1,691) |
(2,711) |
Purchase of short-term investments |
(1,482) |
(5,509) |
Sale of short-term investments |
-- |
500 |
Maturity of short-term investments |
2,500 |
7,950 |
Net cash (used in) provided by investing
activities |
(673) |
230 |
|
|
|
Cash flows from financing
activities: |
|
|
Net proceeds from issuance of common
stock |
-- |
64,208 |
Proceeds from exercise of common stock
options |
941 |
326 |
Payment of accrued dividends on Series B
mandatorily redeemable convertible preferred stock |
-- |
(29,586) |
Net cash provided by financing
activities |
941 |
34,948 |
|
|
|
Net (decrease) increase in cash and cash
equivalents |
(2,561) |
41,432 |
Cash and cash equivalents at beginning of
period |
75,326 |
35,987 |
Cash and cash equivalents at end of
period |
$ 72,765 |
$ 77,419 |
Use of non-GAAP Financial
Measures
To supplement Epocrates' consolidated financial statements
presented on a U.S. generally accepted accounting principles
("GAAP") basis, Epocrates uses non-GAAP measures of adjusted
EBITDA, gross profit, gross margin, net income (loss) and net
income (loss) per share, which are adjusted to exclude certain
costs, expenses, gains and losses Epocrates believes are
appropriate to enhance an overall understanding of its past and
future financial performance. These adjustments to current period
GAAP results are made with the intent of providing both management
and investors a more complete understanding of Epocrates'
underlying operational results and trends and its marketplace
performance. In addition, these adjusted non-GAAP results are among
the information management uses as a basis for planning and
forecasting for future periods. The presentation of this additional
information is not meant to be considered in isolation or as a
substitute for results prepared in accordance with GAAP.
Adjusted EBITDA is not a measure of liquidity calculated in
accordance with GAAP, and should be viewed as a supplement to—not a
substitute for—results of operations presented on a GAAP basis.
Adjusted EBITDA does not purport to represent cash flow provided
by, or used in, operating activities as defined by GAAP. Epocrates'
Condensed Consolidated Statements of Cash Flows presents its cash
flow activity in accordance with GAAP. Furthermore, adjusted EBITDA
is not necessarily comparable to similarly‑titled measures reported
by other companies.
Epocrates believes adjusted EBITDA, adjusted net income,
adjusted net income per share, adjusted gross profit and adjusted
gross margin are used by and are useful to investors and other
users of its financial statements in evaluating its operating
performance because it provides them with additional tools to
compare business performance across companies and across periods.
Epocrates believes that:
- EBITDA is widely used by investors to measure a company's
operating performance without regard to such items as non-recurring
items, interest (income) expense, taxes, depreciation and
amortization, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired;
- investors commonly adjust EBITDA information to eliminate the
effect of stock‑based compensation expenses and other charges,
which can vary widely from company to company and impair
comparability; and
- adjusted net income, adjusted net income per share and adjusted
gross profit/gross margin eliminate the effect of non-recurring and
non-cash charges, which can vary widely from company to company and
impair comparability year over year and across companies.
Epocrates management uses adjusted EBITDA, adjusted net income,
adjusted net income per share, adjusted gross profit and adjusted
gross margin:
- as measures of operating performance to assist in comparing
performance from period to period on a consistent basis;
- as measures for planning and forecasting overall expectations
and for evaluating actual results against such expectations; and
- in communications with the Board of Directors, stockholders,
analysts and investors concerning Epocrates' financial
performance.
Additionally, Epocrates management uses adjusted EBITDA as a
significant performance measurement included in its bonus plan.
The tables that follow set forth a reconciliation of net (loss)
income to adjusted net (loss) income and adjusted EBITDA. These
tables also show a reconciliation of gross profit and gross margin
from a GAAP to a non-GAAP basis.
|
|
|
EPOCRATES,
INC. |
RECONCILIATION OF
NET (LOSS) INCOME TO ADJUSTED NET INCOME AND ADJUSTED
EBITDA |
(dollars in
thousands) |
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
2012 |
2011 |
|
|
Earnings |
Gross Profit |
Gross Margin |
Earnings |
Gross Profit |
Gross Margin |
|
|
|
|
|
|
|
|
Net loss, as reported |
|
$ (1,438) |
$ 17,244 |
62.6% |
$ (1,125) |
$ 19,787 |
67.8% |
Loss from discontinued operations, net of
tax |
|
(2,841) |
|
|
(1,326) |
|
|
Net income from continuing
operations |
|
$ 1,403 |
|
|
$ 201 |
|
|
Less: accrued dividend on Series
B plus 8% dividend on Series A and Series C stock |
|
|
(294) |
|
|
Net loss from continuing
operations attributable to common stockholders |
|
|
$ (93) |
|
|
|
|
|
|
|
|
|
|
Add: Non-recurring and non-cash
charges |
|
|
|
|
|
|
|
Amortization of purchased
intangible assets related to core business * |
1,008 |
1,008 |
|
1,028 |
1,028 |
|
Stock-based compensation * |
|
1,458 |
49 |
|
2,807 |
107 |
|
Change in fair value of contingent
consideration * |
(1) |
-- |
-- |
|
506 |
-- |
|
|
|
|
|
|
|
|
|
Add: Tax adjustment |
(2) |
(1,483) |
|
|
(1,773) |
|
|
|
|
|
|
|
|
|
|
Net income from continuing
operations, as adjusted |
|
$ 2,386 |
$ 18,301 |
66.5% |
$ 2,475 |
$ 20,922 |
71.7% |
Loss from discontinued operations, net of
tax |
|
(2,841) |
|
|
(1,326) |
|
|
Net (loss) income, as
adjusted |
|
$ (455) |
|
|
$ 1,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss, as reported |
|
$ (1,438) |
|
|
$ (1,125) |
|
|
Loss from discontinued operations, net of
tax |
|
(2,841) |
|
|
(1,326) |
|
|
Net income from continuing
operations |
|
$ 1,403 |
|
|
$ 201 |
|
|
|
|
|
|
|
|
|
|
Add: (Income) expenses unrelated to
core business activities |
|
|
|
|
|
|
|
Interest income |
|
(6) |
|
|
(28) |
|
|
Other (income) expense, net |
|
(1) |
|
|
(2) |
|
|
(Benefit from) provision for income
taxes |
|
(141) |
|
|
152 |
|
|
|
|
|
|
|
|
|
|
Add: Non-recurring and non-cash
charges (income) |
|
|
|
|
|
|
|
Depreciation and
amortization expense (including intangible assets) related
to core business |
1,956 |
|
|
2,018 |
|
|
Stock-based compensation |
|
1,458 |
|
|
2,807 |
|
|
Change in fair value of contingent
consideration |
(1) |
-- |
|
|
506 |
|
|
Facilities exit costs |
|
-- |
|
|
560 |
|
|
Other |
|
-- |
|
|
112 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ 4,669 |
|
|
$ 6,326 |
|
|
(1) For the three months ended
March 31, 2011, represents an expense of $506 from the write-down
of the contingent consideration liability related to an earn-out
agreement with the sellers of Caretools, Inc., a company that
Epocrates acquired in 2010. |
|
|
|
|
|
|
|
|
(2) 2012 Non-GAAP net income
reflects a provision for income tax rate of 36%, which is our
current projected long-term rate. 2011 Non-GAAP net income reflects
a provision for income tax rate of 41%, which was our projected
long-term rate in fiscal year 2011. The calculation of these
adjustments is as follows: |
|
|
Three Months
Ended March 31, |
|
|
2012 |
2011 |
(Loss) income before income taxes |
|
1,262 |
353 |
Add: Non-GAAP adjustments (indicated by
*) |
|
2,466 |
4,341 |
Non-GAAP income before income taxes |
|
3,728 |
4,694 |
Effective income tax rate |
|
36% |
41% |
Non-GAAP tax provision (Non-GAAP income
before income taxes multiplied by the effective income tax
rate) |
|
1,342 |
1,925 |
|
|
|
(Benefit from) provision for income
taxes |
|
(141) |
152 |
Non-GAAP tax adjustment (calculated as
(benefit from) provision for income taxes less non-GAAP tax
provision) |
|
(1,483) |
(1,773) |
|
|
|
|
|
|
|
Note: prior period amounts have
been revised to conform to the current period presentation. |
|
The table that follows sets forth a reconciliation of net (loss)
income per diluted common share to adjusted net income per diluted
common share.
EPOCRATES, INC. |
RECONCILIATION OF
NET (LOSS) INCOME PER DILUTED COMMON SHARE TO ADJUSTED NET INCOME
PER DILUTED COMMON SHARE |
(in thousands, except per
share amounts) |
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31, |
|
|
2012 |
2011 |
|
GAAP net income (loss) per
diluted common share |
|
|
|
Income from continuing operations |
$ 1,403 |
$ 201 |
|
Loss from discontinued operations, net of
tax |
(2,841) |
(1,326) |
|
Net loss |
$ (1,438) |
$ (1,125) |
|
Less: Accrued dividend on Series B
mandatorily redeemable convertible preferred stock plus an
8% non-cumulative dividend on Series A and Series C mandatorily
redeemable convertible preferred stock * |
-- |
294 |
|
Net loss attributable to common
stockholders |
$ (1,438) |
$ (1,419) |
|
|
|
|
|
Divided by: |
|
|
|
Weighted average number of common shares
outstanding - basic ** |
24,775 |
17,839 |
|
Weighted average number of common shares
outstanding - diluted |
25,258 |
20,146 |
|
|
|
|
|
Net income (loss) per share: |
|
|
|
Continuing operations |
$ 0.06 |
$ (0.01) |
|
Discontinued operations, net of
tax |
(0.12) |
(0.07) |
|
Net loss per share attributable to
common stockholders |
$ (0.06) |
$ (0.08) |
|
|
|
|
|
Non-GAAP net income (loss) per
diluted common share |
|
|
|
Income from continuing operations |
$ 1,403 |
$ 201 |
|
Loss from discontinued operations, net of
tax |
(2,841) |
(1,326) |
|
Net loss |
$ (1,438) |
$ (1,125) |
|
Less: Accrued dividend on Series B
mandatorily redeemable convertible preferred stock plus an 8%
non-cumulative dividend on Series A and Series C mandatorily
redeemable convertible preferred stock * |
-- |
294 |
|
Net loss attributable to common
stockholders |
$ (1,438) |
$ (1,419) |
|
|
|
|
|
Income from continuing operations, as
adjusted |
$ 2,386 |
$ 2,475 |
|
Loss from discontinued operations, net of
tax |
(2,841) |
(1,326) |
|
Net (loss) income, as adjusted |
$ (455) |
$ 1,149 |
|
|
|
|
|
Divided by: |
|
|
|
Weighted average number of common shares
outstanding - basic ** |
24,775 |
17,839 |
|
Weighted average number of common shares
outstanding - diluted |
25,258 |
20,146 |
|
|
|
|
|
Net income (loss) per share: |
|
|
|
Continuing operations |
$ 0.09 |
$ 0.12 |
|
Discontinued operations, net of
tax |
(0.12) |
(0.07) |
|
Net loss per share attributable to
common stockholders |
$ (0.02) |
$ 0.06 |
|
|
|
|
|
Weighted average number of
common shares outstanding |
|
|
|
Weighted average number of common shares
outstanding - basic |
24,775 |
17,839 |
|
Add: dilutive effect of conversion of
outstanding stock options, restricted stock units and
warrants |
483 |
2,307 |
|
Weighted average number of common shares
outstanding - diluted |
25,258 |
20,146 |
|
|
|
|
|
* The accrued dividend on Series
B mandatorily redeemable convertible preferred stock and 8%
non-cumulative dividend on Series A and Series C mandatorily
redeemable convertible preferred stock is used in the calculations
of income from continuing operations (GAAP and non-GAAP basis) and
net (loss) income (GAAP and non-GAAP basis). Accordingly, per share
calculations for continuing operations (GAAP and non-GAAP basis)
and net (loss) income (GAAP and non-GAAP basis) adjust for the
effect of these dividends. |
|
|
** In accordance with U.S. GAAP,
Epocrates does not include dilutive securities in its calculations
of per share loss from discontinued operations, net of tax, net
loss on a GAAP basis and net loss on a non-GAAP
basis. Accordingly, the denominator used in these calculations
is the weighted average number of common shares outstanding -
basic. |
|
|
Note: each per share calculation
is computed independently for each component of net income (loss)
per share presented. Accordingly, the sum of the income (loss) per
share components may not agree with the calculated total net loss
per share. |
|
|
CONTACT: INVESTORS & MEDIA:
Erica Sniad Morgenstern
Senior Director, Public Relations and Communications
Epocrates, Inc.
(650) 227-6907
ir@epocrates.com
Epocrates, Inc. (MM) (NASDAQ:EPOC)
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