QDHC Quadramed Corp (MM)

QuadraMed Corporation (NASDAQ:QDHC) today announced results for the fourth quarter and year ended December 31, 2008.

Revenue for the three months ended December 31, 2008 was $38.6 million, compared to $40.9 million for the three months ended December 31, 2007; the prior year�s quarter benefited from a higher level of government contract completions and work completed on Affinity contracts. For the year ended December 31, 2008, the Company grew revenue by 9.5%, reporting revenue of $150.4 million, compared to $137.4 million for the year ended December 31, 2007. Fiscal year 2008 results include twelve months of operations attributable to the Computerized Patient Record (CPR) business assets acquired from Misys plc in September 2007, compared to only three months during 2007.

Income from operations was $3.6 million for the three-month period ended December 31, 2008, compared to $3.5 million for the same period in 2007. For the twelve months ended December 31, 2008, income from operations grew 35.4% to $10.7 million from $7.9 million for the same period in 2007. Adjusted Non-GAAP EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, adjusted for stock-based compensation, cash severance, and the loss on sale of assets) increased 22.6%, growing to $19.5 million for the twelve months ended December 31, 2008, compared to $15.9 million for the twelve months ended December 31, 2007.

The Company began recording deferred income tax expense at its statutory effective tax rate during the fourth quarter of 2007 following the release of its deferred tax asset valuation allowance and the recognition of a $52.4 million income tax benefit. As a result, the net income of $2.6 million before preferred stock accretion for the three months ended December 31, 2008 compares to $56.7 million for the same period in 2007. For the twelve months ended December 31, 2008, the Company had net income before preferred stock accretion of $7.2 million, compared to $63.0 million for the twelve months ended December 31, 2007. Income before income taxes was $3.7 million and $3.9 million for the three-month periods ended December 31, 2008 and 2007, respectively, and $11.2 million and $10.6 million for the twelve-month periods ended December 31, 2008 and 2007, respectively.

The Company also reported net income attributable to common shareholders of $1.7 million, or $0.19 income per basic and diluted share, for the twelve months ended December 31, 2008. This compares to net income attributable to common shareholders of $57.0 million, or income of $6.47 per basic share and $3.96 income per diluted share for the twelve months ended December 31, 2007. As described above, the 2007 results included a non-recurring net tax benefit of $52.4 million related to the release of a valuation allowance against the Company�s deferred tax assets; this tax benefit represented income of $5.95 per basic share and $3.50 income per diluted share, approximately.

Cash provided by operating activities was $25.7 million in 2008, compared to $12.8 million in 2007. Included in the 2008 amount is approximately $9.1 million related to revenues and expenses recognized in 2007 and revenues and expenses to be recognized in 2009 related to our Veterans Health Administration license fees. Cash of $12.4 million was used in financing activities during 2008, including $5.5 million to pay the dividends on the Series A Preferred stock and $7.5 million to repurchase shares of common stock; this compares to a net of $3.7 million used for financing activities in 2007. Cash, cash equivalents and investments increased $10.4 million during 2008 to $27.9 million as of December 31, 2008, compared to $17.5 million as of December 31, 2007.

As described above, the Company completed its acquisition of the CPR business in late September 2007, an event which makes the comparability of the 2008 and 2007 financial results somewhat difficult. Although calendar year 2008 included an entire year of revenue from the QCPR product line and customer base, and additional headcount-related costs primarily within cost of services and software development expense categories, calendar year 2007 reflected these items only during the three months ended December 31, 2007.

During February 2008, the Company began a strategic initiative to increase overall product development capacity through a partnering arrangement with Tata Consultancy Services (�TCS�). Concurrent with this partnering arrangement, the Company reduced its U.S. based workforce by 69 employees, primarily in the service and software development areas, and incurred severance costs of $0.7 million. Today the Company utilizes over 100 TCS technical resources through this partnership.

On April�30, 2008, the Company completed the sale of substantially all of the assets of our wholly owned subsidiaries, QuadraMed International Pty Limited in Australia and QuadraMed International Limited in the United Kingdom. In connection with this sale, the Company recorded a loss on sale of these assets of $0.8 million and severance expense of $0.2 million, which are reflected primarily in costs of services in our second quarter of 2008. The products contained within these subsidiaries focused on stand-alone lab and radiology products installed in the United Kingdom, Australia and New Zealand. However, with the addition of the QuadraMed CPR (�QCPR�) product last year, which includes integrated lab and radiology, and our focus on the Care-Based Revenue Cycle and core products, these foreign-based products were considered redundant to our portfolio.

On June 13, 2008, QuadraMed Corporation announced the effectiveness of a one-for-five reverse stock split. On June 25, 2008 the Company received approval to list its common stock, par value $0.01, on the NASDAQ Global Market under the new trading symbol QDHC. The Company delisted its common stock from the American Stock Exchange on July 8, 2008 and began trading on the NASDAQ Global Market on July 9, 2008.

On July�5, 2008, the Saudi Arabia National Guard Health Affairs, located in Riyadh, Saudi Arabia, signed a contract for QCPR service expansion, migration to InterSystem�s Cache database and interface licenses that represent sales bookings of approximately $8.8 million, with a total contract value of approximately $10.6 million. The revenue will be recognized on a percentage of completion basis over the contract service period, which is anticipated to be three to four years

On July�7, 2008, the Company announced the general availability of QCPR�Cache/SQL 5.0.5, which provides hospitals with a fully integrated electronic health record operating on an enterprise platform built upon the InterSystems Cache, a high performance, post-relational SQL database.

On August 1, 2008, Daughters of Charity Health System of Los Altos Hills, California signed a $15.8 million contract for the Phase II and Phase III options of a Master Agreement that was originally finalized on November 30, 2006, prior to QuadraMed�s acquisition of the CPR Business. Phase II and Phase III include the purchase of software and services for the QCPR platform including interactive care-grid, order management, access management, clinical decision support, nursing documentation, chart management and additional software for scheduling, electronic document management, medical records, computerized physician order entry and patient registration, all for their five facility network of hospitals.

Sales bookings for the year ended December 31, 2008 were $110 million compared to proforma 2007 sales bookings of $93 million (including approximately $8 million from CPR for the nine months prior to the acquisition). This growth was driven largely by the success of QCPR, and on a like for like basis, sales bookings have increased by over 18% year to year.

�By almost any measure, 2008 was a very successful year for QuadraMed,� said Keith B. Hagen, QuadraMed�s President and Chief Executive Officer. �During 2008, we signed the second and third largest contracts in the Company�s history, growing our relationship with two key clients. In addition to sales successes within the QCPR base, we also signed five contracts to migrate Affinity Clinical systems clients to QCPR and also signed a net new QCPR contract with a new client in Canada. In total, 15 hospitals contracted with us in 2008 to implement the full QCPR solution. In addition, we moved our stock from AMEX to NASDAQ and reported strong operating results. We remain optimistic but cautious about 2009, given the ongoing market declines, uncertain credit availability and the expected impacts these trends will have on the capital spending plans of hospitals. We will continue to monitor these matters closely throughout the year,� he concluded.

Management will review these results in an investment community conference call at 5:00 PM Eastern (2:00 PM Pacific) Tuesday, March 10, 2009. 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 866-588-9250 domestic, and 973-638-3397 international. If you are calling the international number, you will also need to provide Conference ID # 89280459. 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. The replay will be available until 23:59 EST on March 18, 2009 by dialing 800-642-1687 or 706-645-9291. Reference Conference ID # 89280459.

Attachments

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Exhibit 1

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Consolidated Balance Sheets as of December 31, 2008 and December 31, 2007

Exhibit 2

Consolidated Statements of Operations for the Three Months Ended December 31, 2008, and December 31, 2007 and Years Ended December 31, 2008 and December 31, 2007

Exhibit 3

Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2008 and December 31, 2007 and the years ended December 31, 2008 and December 31, 2007

Exhibit 4

Reconciliation of EBITDA and Non-GAAP Measurements for the Three Months Ended December 31, 2008, September 30, 2008, June 30, 2008, March 31, 2008 and December 31, 2007, September 30, 2007, June 30, 2007, and March 31, 2007

Exhibit 5

Reconciliation of EBITDA and Non-GAAP Measurements for the Years Ended December 31, 2008 and December 31, 2007

About Adjusted Non-GAAP EBITDA and other Non-GAAP Measurements

The Company�s use and presentation of the terms EBITDA, Adjusted Non-GAAP EBITDA and other Non-GAAP Measurements included in this press release and Exhibits 4 and 5 attached hereto, 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 Non-GAAP 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 Non-GAAP EBITDA and other Non-GAAP reconciliations represent specific events or items as follows (please see Exhibits 4 and 5 to this press release):

• Cash Severance � costs associated with restructuring and downsizing of the Company�s employee base during the three-month period ended March 31, 2008, and in connection with the sale of the Company�s Australian-based lab and radiology assets in April 2008 (see Loss on Sale of Assets);
• Loss on Sale of Assets � a one-time loss for accounting purposes recorded in connection with the Company�s April 2008 sale of its Australia-based lab and radiology business, with operations in Australia, New Zealand and the United Kingdom;
• Non-Cash Compensation � the costs of employee stock options and restricted stock;
• Tax Benefit, Net � the amount recorded during the three months ended December 31, 2007 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 periods ended June 30, 2007 and December 31, 2007; and
• 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 600 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.

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Exhibit 1

QUADRAMED CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

� December 31, ASSETS 2008 2007 � Current assets Cash and cash equivalents $ 20,649 $ 7,119 Short-term investments 4,213 9,169

Accounts receivable, net of allowance for doubtful accounts of $1,052 and $1,449, respectively

20,843 26,088 Unbilled receivables 6,177 5,183 Deferred contract expenses 5,005 6,060 Prepaid royalty expenses 7,831 2,298

Prepaid expenses and other current assets, net of allowance on other receivable of $919 and $1,229, respectively

4,485 3,069 Deferred tax asset, net of valuation allowance � 6,240 � 7,376 Total current assets � 75,443 � 66,362 � Restricted cash 1,444 2,389 Long-term investments 3,043 1,197

Property and equipment, net of accumulated depreciation and amortization of $17,732 and $22,855 respectively

3,895 3,778 Goodwill 35,632 33,942

Other amortizable intangible assets, net of accumulated amortization of $29,304 and $31,119, respectively

9,387 11,768 Other long-term assets 2,829 3,182 Deferred tax asset, net of valuation allowance � 47,921 � 49,758 Total assets $ 179,594 $ 172,376 � LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities Accounts payable and accrued expenses $ 4,705 $ 4,910 Accrued payroll and related 7,228 9,602 Accrued exit cost of facility closing 888 1,178 Income tax payable 688 483 Other accrued liabilities 4,721 7,054 Dividends payable 1,375 1,375 Deferred revenue � 53,190 � 36,111 Total current liabilities 72,795 60,713 Accrued exit cost of building closing - 888 Other long-term liabilities � 1,834 � 2,722 Total liabilities 74,629 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, 30,000 shares authorized; 9,451 and 45,891 shares issued and 8,287 and 45,284 shares outstanding, respectively

95 459 Shares held in treasury, 1,164 and 607, respectively (9,031) (292) Additional paid-in-capital 316,027 310,557 Accumulated other comprehensive loss (1,675) (80) Accumulated deficit � (296,595) � (298,735) Total stockholders� equity � 104,965 � 108,053 Total liabilities and stockholders� equity $ 179,594 $ 172,376 � � � � �

Exhibit 2

QUADRAMED CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

� Three months ended, Year ended, December 31, December 31, UNAUDITED AUDITED 2008 2007 2008 2007 Revenue Services $ 6,305 $ 6,484 $ 23,407 $ 19,760 Maintenance 16,547 17,618 68,281 59,892 Installation and other � 2,730 � � 4,005 � � 12,344 � � 11,939 � Services and other 25,582 28,107 104,032 91,591 � Term licenses 8,401 8,939 32,052 31,031 Perpetual licenses � 4,083 � � 3,560 � 13,343 � � 10,597 � Licenses 12,484 12,499 45,395 41,628 � Hardware � 503 � � 268 � � 1,008 � � 4,131 � Total revenue � 38,569 � � 40,874 � � 150,435 � � 137,350 � � Cost of revenue Cost of services and other revenue 11,587 11,303 45,911 36,737 Royalties and other 3,781 4,410 15,146 15,683 Amortization of acquired technology and capitalized software � 239 � � 265 � � 995 � � 1,090 � Cost of license revenue 4,020 4,675 16,141 16,773 � Cost of hardware revenue � 443 � � 189 � � 771 � � 3,722 � Total cost of revenue � 16,050 � � 16,167 � � 62,823 � � 57,232 � Gross margin � 22,519 � � 24,707 � � 87,612 � � 80,118 � � Operating expenses General and administration 5,388 5,359 20,295 18,275 Software development 8,311 9,172 33,673 32,390 Sales and marketing 4,918 5,712 19,023 18,057 Amortization of intangible assets and depreciation 731 963 3,131 3,468 Gain (loss) on sale of assets � (379 ) � - � � 782 � � - � Total operating expenses � 18,969 � � 21,206 � � 76,904 � � 72,190 � Income from operations � 3,550 � � 3,501 � � 10,708 � � 7,928 � � Other income (expense)

Interest expense, includes non-cash charges of $18, $18, $72 and $122, respectively

(23 ) (20 ) (122 ) (127 ) Interest income 114 364 574 2,280 Other income, net � 20 � � 8 � � 29 � � 511 � Other income � 111 � � 352 � � 481 � � 2,664 � � Income before income taxes $ 3,661 $ 3,853 $ 11,189 $ 10,592 (Provision) benefit for income taxes � (1,061 ) � 52,821 � � (4,024 ) � 52,408 � Net income $ 2,600 $ 56,674 $ 7,165 $ 63,000 Preferred stock accretion, dividend premium and dividends declared � (1,375 ) � (1,375 ) � (5,500 ) � (6,032 ) � Net income attributable to common shareholders $ 1,225 � $ 55,299 � $ 1,665 � $ 56,968 � � Income per share-basic Basic $ 0.14 $ 6.28 $ 0.19 $ 6.47 Diluted $ 0.14 $ 3.79 $ 0.19 $ 3.96 � Weighted average shares outstanding Basic � 8,275 � � 8,801 � � 8,798 � � 8,812 � Diluted � 8,276 � � 15,729 � � 8,839 � � 15,893 � � �

Exhibit 3

QUADRAMED CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

� � For the three months ended � For the Year ended UNAUDITED AUDITED December 31, 2008 � December 31, 2007 2008 � 2007 Cash flows from operating activities Net income $ 2,600 $ 56,674 $ 7,165 $ 63,000

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 969 1,228 4,126 4,559 Deferred compensation amortization 14 95 287 382 Stock based compensation 410 928 2,855 2,474 Dividend discount amortization - - - 50 Provision for bad debts 348 - 512 181 Loss (gain) on sales of investments 2 (3 ) 10 (46 ) Loss (gain) on sale of assets (379 ) - 782 - Interest income on investments (43 ) (26 ) (121 ) (101 ) Interest income on letters of credit - (103 ) - (103 ) Interest expense on note payable 18 18 72 72 Deferred income taxes 3,477 (52,102 ) 3,477 (52,102 ) � Changes in assets and liabilities: Accounts receivable 2,713 (2,254 ) (1,148 ) 2,544 Prepaid expenses and other (6,573 ) 2,676 (5,326 ) 5,663 Accounts payable and accrued liabilities (1,310 ) 1,302 (6,604 ) 258 Deferred revenue � 8,457 � � (13,456 ) � 19,612 � � (13,995 ) Cash provided by (used in) operating activities � 10,703 � � (5,023 ) � 25,699 � � 12,836 � � Cash flows from investing activities Decrease in restricted cash 112 (10 ) 945 (48 ) Purchases of property and equipment (532 ) (787 ) (1,950 ) (2,261 ) Proceeds from the sale of assets - - 106 - Sales of available-for-sale securities, net 3,031 6,893 9,080 51,162 Purchases available-for-sale securities (1,687 ) (2,739 ) (5,907 ) (49,484 ) Acquisitions of businesses, net of cash acquired - � (227 ) (56 ) (33,901 ) Cash provided by (used in) investing activities 924 � 3,130 � 2,218 � (34,532 ) � Cash flows from financing activities Payment of preferred stock dividends (1,375 ) (1,375 ) (5,500 ) (5,628 ) Proceeds from issuance of common stock and other 2 23 547 2,217 Repurchase of common stock � (3,726 ) � (287 ) � (7,453 ) � (287 ) Cash used in financing activities � (5,099 ) � (1,639 ) � (12,406 ) � (3,698 ) � Effect of exchange rate changes �

(1,289

) � (78 ) � (1,981 ) � (83 ) � Net increase (decrease) in cash and cash equivalents

5,239

(3,610 ) 13,530 (25,477 ) � Cash and cash equivalents, beginning of period �

15,410

� � 10,729 � � 7,119 � � 32,596 � � Cash and cash equivalents, end of period $

20,649

� $ 7,119 � $ 20,649 � $ 7,119 � � �

Exhibit 4

QUADRAMED CORPORATION

Reconciliation of EBITDA and Non-GAAP Measurements

(in thousands) (unaudited) � � For the Three Month Periods Ended 12/31/2008 � 9/30/08 � 6/30/08 � 3/31/08 � 12/31/07 � 9/30/07 � 6/30/07 � 3/31/07 � �

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

� Net income, as reported $2,600 $2,469 $1,787 $309 $56,674 $1,502 $2,200 $2,624 � Adjustments to Net Income for EBITDA Interest Expense 23 26 42 31 20 24 33 50 Interest Income (114 ) (136 ) (158 ) (166 ) (364 ) (699 ) (644 ) (573 ) Provision (benefit) for Income Taxes 1,061 1,634 1,151 178 (52,821 ) 142 162 109 Depreciation and Amortization 983 � 1,091 � 1,159 � 1,180 � 1,323 � 802 � 1,326 � 1,490 � Subtotal Non-GAAP Adjustments for EBITDA 1,953 2,615 2,194 1,223 (51,842 ) 269 877 1,076 � � � � � � � � � � � � � � � � EBITDA $4,553 � $5,084 � $3,981 � $1,532 � $4,832 � $1,771 � $3,077 � $3,700 � EBITDA % to Revenue 11.8 % 13.2 % 10.5 % 4.3 % 11.8 % 5.4 % 9.0 % 12.7 % � Non-GAAP Adjustments to EBITDA Non-cash Compensation 410 805 841 799 928 807 356 383 Cash Severance 11 - 161 561 - - - - Loss on Sale of Assets (333 ) - � 1,115 � - � - � - � - � - � Subtotal Non-GAAP Adjustments to EBITDA 88 805 2,117 1,360 928 807 356 383 � � � � � � � � � � � � � � � � Adjusted Non-GAAP EBITDA $4,641 � $5,889 � $6,098 � $2,892 � $5,760 � $2,578 � $3,433 � $4,083 � Adjusted Non-GAAP EBITDA % to Revenue 12.0 % 15.3 % 16.1 % 8.2 % 14.1 % 7.8 % 10.0 % 14.0 % � �

Non-GAAP Net Income before Preferred Stock Accretion

� Net income, as reported $2,600 $2,469 $1,787 $309 $56,674 $1,502 $2,200 $2,624 � Non-GAAP adjustments to Net income Non-cash Compensation 410 805 841 799 928 807 356 383 Cash Severance 11 - 161 561 - - - - Strategic Initiatives - - - - 57 - 412 - Tax benefit, Net (52,898 ) - - - Employment Matters - - - - (374 ) 1,544 - - Loss on Sale of Assets (333 ) - � 1,115 � - � - � - � - � - � Subtotal Non-GAAP adjustments 88 805 2,117 1,360 (52,287 ) 2,351 768 383 � � � � � � � � � � � � � � � � Non-GAAP Net income $2,688 � $3,274 � $3,904 � $1,669 � $4,387 � $3,853 � $2,968 � $3,007 � �

Other Information

� Revenue $38,569 $38,589 $37,986 $35,291 $40,874 $32,908 $34,362 $29,206 Costs of Revenue $16,050 � $15,467 � $15,760 � $15,546 � $16,167 � $14,105 � $15,991 � $10,969 � Gross Margin $22,519 � $23,122 � $22,226 � $19,745 � $24,707 � $18,803 � $18,371 � $18,237 �

Gross Margin %

58 % 60 % 59 % 56 % 60 % 57 % 53 % 62 % � �

About Adjusted Non-GAAP EBITDA and other Non-GAAP Measurements

� The Company�s use and presentation of the terms EBITDA, Adjusted Non-GAAP EBITDA and other Non-GAAP Measurements included in this press release and on Exhibits 4 and 5 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 Non-GAAP 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 Non-GAAP 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, and in connection with the sale of the Company�s lab and radiology assets in April 2008 (see Loss on Sale of Assets);
• Loss on Sale of Assets � a one-time loss for accounting purposes recorded in connection with the Company�s April 2008 sale of its Australia-based lab and radiology business with operations in Australia, New Zealand and the United Kingdom;
• Non-cash Compensation � the costs of employee stock options and restricted stock;
• Tax benefit, Net � the amount recorded during the three months ended December 31, 2007 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 periods 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.

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Exhibit 5

QUADRAMED CORPORATION Reconciliation of EBITDA and Non-GAAP Measurements (in thousands) (unaudited) � � For the Year Ended 12/31/2008 � 12/31/2007 � �

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

� Net income, as reported $ 7,165 $ 63,000 � Adjustments to Net Income for EBITDA Interest Expense 122 127 Interest Income (574 ) (2,280 ) Provision (benefit) for Income Taxes 4,024 (52,408 ) Depreciation and Amortization � 4,413 � � 4,941 � Subtotal Non-GAAP Adjustments for EBITDA 7,985 (49,620 ) � � � � � � EBITDA � 15,150 � � 13,380 � EBITDA % to Revenue 10.1 % 9.7 % � Non-GAAP Adjustments to EBITDA Non-cash Compensation 2,855 2,474 Cash Severance 733 - Loss on Sale of Assets � 782 � � - � Subtotal Non-GAAP Adjustments to EBITDA 4,370 2,474 � � � � � � Adjusted Non-GAAP EBITDA � 19,520 � � 15,854 � Adjusted Non-GAAP EBITDA % to Revenue 13.0 % 11.5 % � �

Non-GAAP Net Income before Preferred Stock Accretion

� Net income, as reported $ 7,165 $ 63,000 � Non-GAAP adjustments to Net income Non-cash Compensation 2,855 2,474 Cash Severance 733 - Strategic Initiatives - 469 Tax benefit, Net - (53,088 ) Employment Matters - 1,170 Loss on Sale of Assets � 782 � � - � Subtotal Non-GAAP adjustments 4,370 (48,975 ) � � � � � � Non-GAAP net income $ 11,535 � $ 14,025 � �

Other Information

� Revenue $ 150,435 $ 137,350 Costs of Revenue $ 62,823 � $ 57,232 � Gross Margin $ 87,612 � $ 80,118 � Gross Margin % 58 % 58 % � �

About Adjusted Non-GAAP EBITDA and other Non-GAAP Measurements

� The Company�s use and presentation of the terms EBITDA, Adjusted Non-GAAP EBITDA and other Non-GAAP Measurements included in this press release and on Exhibits 4 and 5 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 Non-GAAP 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 Non-GAAP 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 period ended March 31, 2008, and in connection with the sale of the Company�s lab and radiology assets in April 2008 (see Loss on Sale of Assets);
• Loss on Sale of Assets � a one-time loss for accounting purposes recorded in connection with the Company�s April 2008 sale of its Australia-based lab and radiology business with operations in Australia, New Zealand and the United Kingdom;
• Non-cash Compensation � the costs of employee stock options and restricted stock;
• Strategic Initiatives � the expenses recorded in connection with merger and acquisition activities during the three-month periods 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.