Neoforma (NASDAQ:NEOF)
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Neoforma Reports First Quarter 2005 Financial Results
SAN JOSE, Calif., April 25 /PRNewswire-FirstCall/ -- Neoforma, Inc.
(NASDAQ:NEOF), a leading provider of supply chain management solutions for the
healthcare industry, generated total revenue of $2.6 million on a generally
accepted accounting principles (GAAP) basis in the quarter ended March 31,
2005, a decrease from the $2.9 million reported in the same quarter in the
previous year. Excluding the impact of Emerging Issues Task Force Abstract No.
01-9 (EITF No. 01-9), Neoforma generated total adjusted revenue of $18.0
million in the first quarter of 2005, a decrease from the $18.4 million
reported in the same quarter of the prior year.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030226/NEOFORMALOGO )
In accordance with GAAP, Neoforma's net loss and net loss per share were $17.0
million and $0.87, respectively, in the first quarter of 2005, increasing from
the $13.2 million net loss and $0.69 net loss per share reported in the same
quarter of 2004. On an adjusted basis, net income and net income per share
were $3.5 million and $0.18, respectively, decreasing from the $5.5 million net
income and $0.29 net income per share reported in the first quarter of 2004.
Neoforma's adjusted financial information, which is not in accordance with
GAAP, excludes the application of EITF No. 01-9 and certain expenses, gains and
losses. Adjusted financial information serves as a measure of the performance
of Neoforma's ongoing core operations. A description of the adjusted financial
information for the periods presented and a reconciliation of these results to
GAAP financial information are included in the attached financial statements
and are available in the investor relations section of Neoforma's Web site at
http://investor.neoforma.com/ .
"While we are exploring strategic alternatives, we continue to maintain our
focus on serving our customers with a high level of passion and commitment to
their success," says Bob Zollars, chairman and chief executive officer.
First Quarter 2005 Highlights
In the first quarter, Neoforma made significant progress in several key areas,
including:
* Forged a strategic relationship with Consorta, Inc. to provide order and
data management solutions to Consorta members;
* Renewed contracts for all eight of the hospitals up for renewal during
the first quarter and signed seven new hospitals to
Marketplace@Novation(R);
* Implemented approximately 700 connections, up nearly 50% over the same
quarter of 2004;
* Supported $3.0 billion in volume, representing a 25% increase from the
same quarter in the previous year and comprised of $1.2 billion in gross
transaction volume and $1.8 billion in supply chain data; and
* Ended the quarter with $30.5 million in cash, cash equivalents and
short-term investments.
First Quarter 2005 Financial Results
For the quarter ended March 31, 2005, on a GAAP basis, Neoforma generated $2.6
million in total revenue, entirely comprised of non-related party revenue and
decreasing from the $2.9 million in both total revenue and non-related party
revenue recognized in the same quarter in the prior year. The primary reason
for this decline was an anticipated $282,000 decrease in revenue related to a
technology license sale that occurred in 2001. The revenue from this license
sale was recognized over the three-year life of the underlying agreement
through August 2004. As a result, the Company recognized $282,000 in revenue
in the first quarter of 2004 and no revenue in the first quarter of 2005
related to this license sale.
On an adjusted basis, excluding the impact of EITF No. 01-9, Neoforma generated
total revenue of $18.0 million in the first quarter of 2005, consisting of
$15.4 million in related party revenue and $2.6 million in non- related party
revenue. These revenue results represented a decrease from the $18.4 million
in total revenue, $15.5 million in related party revenue and $2.9 million in
non-related party revenue reported in the same quarter of the previous year.
Under EITF No. 01-9, Neoforma classifies non-cash amortization of partnership
costs as an offset against related party revenue. Because the reductions to
operating expenses and revenue are equal, this accounting treatment has no
impact on Neoforma's loss from operations, net loss, net loss per share or
total cash flow.
In the first quarter of 2005, Neoforma's total operating expenses, on a GAAP
basis, were $19.7 million, increasing from the $16.2 million reported in the
same quarter in 2004. The increase in GAAP operating expenses in the first
quarter of 2005, as compared to the same quarter in the previous year, was
primarily the result of a $1.4 million increase in depreciation and
amortization of property and equipment and amortization of deferred
compensation, a $1.1 million decrease in software development costs capitalized
and a $767,000 restructuring charge recorded in the first quarter of 2005. The
restructuring charge represented anticipated costs for idle facilities, net of
expected sublease income, in the Company's headquarters building.
Adjusted operating expenses for the first quarter of 2005 totaled $14.8
million, increasing from the $12.9 million in adjusted operating expenses
reported in the same period in the prior year. The increase in adjusted
operating expenses was primarily due to the previously mentioned $1.1 million
decrease in software development costs capitalized as well as an increase in
employee-related costs due principally to an increase in headcount.
On a GAAP basis, in the first quarter of 2005, Neoforma's loss from operations
equaled $17.1 million, an increase from the $13.3 million reported in the same
quarter in the previous year.
In the first quarter of 2005, Neoforma generated $3.3 million in EBITDA,
decreasing from the $5.5 million generated in the first quarter of 2004.
As of March 31, 2005, Neoforma's cash, cash equivalents and short-term
investments totaled $30.5 million, a $4.7 million increase from the $25.9
million reported as of year-end 2004. Neoforma continues to remain debt-free.
Neoforma's free cash flow in the first quarter of 2005 totaled $4.0 million.
Free cash flow is calculated as net cash used in operating activities, plus
amortization of partnership costs offset against related party revenue, minus
purchases of property and equipment and capitalization of software development
costs. The free cash flow results for the first quarter included the January
receipt of the delayed December $5.25 million payment from Novation for the
services that Neoforma provides.
"Neoforma's financial performance in the first quarter generally met our
expectations," says Andrew Guggenhime, chief financial officer of Neoforma. "We
met our revenue guidance and increased the strength of our balance sheet. Our
expenses increased largely due to planned investments in our business to
support our strategy and a reduction in software development costs capitalized.
Our expense results will continue to be impacted by the amount of software
development costs capitalized, which we expect will fluctuate based on the
timing and nature of certain development projects. We believe our first
quarter software development costs capitalized were lower than they will be
going forward and are not necessarily indicative of our full year
expectations."
Second Quarter 2005 Revenue Outlook
Neoforma expects to generate approximately $2.8 million in GAAP revenue and
$18.2 million in adjusted revenue in the second quarter of 2005.
About Neoforma
Neoforma is a leading supply chain management solutions provider for the
healthcare industry. Through a unique combination of technology, information
and services, Neoforma provides innovative solutions to over 1,600 hospitals
and suppliers, supporting more than $11 billion in annualized transaction
volume. By bringing together contract information and order data, Neoforma's
integrated solution set delivers a comprehensive view of an organization's
supply chain, driving significant cost savings and better decision-making for
both hospitals and suppliers. For more information, point your browser to
http://www.neoforma.com/ .
This news release contains forward-looking information within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
include but are not limited to statements related to Neoforma's business and
financial outlook for part of calendar 2005. There are a number of risks that
could cause actual results to differ materially from those anticipated by these
forward-looking statements. These risks include the ongoing process of
exploring strategic alternatives and the risks associated with the previously
announced desire of Novation, LLC to lower the fees it pays to Neoforma under
its outsourcing agreement, and the willingness of customers to accept
Neoforma's business model of providing supply chain management solutions for
the healthcare industry. Some of these risks and other risks are described in
Neoforma's periodic reports filed with the SEC, including its Form 10-K for the
year ended December 31, 2004. These statements are current as of the date of
this release and Neoforma assumes no obligation to update the forward-looking
information contained in this news release.
NOTE: Neoforma is a trademark of Neoforma, Inc. Other Neoforma logos, product
names and service names are also trademarks of Neoforma, Inc., which may be
registered in other countries. Other product and brand names are trademarks of
their respective owners.
NEOFORMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
2004 2005
REVENUE:
Related party, net of amortization of
partnership costs of $15,478 and
$15,421 for the three months ended
March 31, 2004 and 2005,
respectively $-- $--
Non-related party 2,928 2,620
Total revenue 2,928 2,620
OPERATING EXPENSES:
Cost of services 2,061 2,968
Operations 2,998 3,168
Product development 3,638 5,062
Selling and marketing 3,656 3,544
General and administrative 2,238 3,046
Amortization of intangibles 147 147
Amortization of partnership costs 1,472 1,042
Restructuring -- 767
Total operating expenses 16,210 19,744
Loss from operations (13,282) (17,124)
OTHER INCOME (EXPENSE) 68 167
Net loss $(13,214) $(16,957)
NET LOSS PER SHARE:
Basic and diluted $(0.69) $(0.87)
Weighted average shares -- basic and
diluted 19,069 19,586
In addition to our consolidated financial statements presented in accordance
with GAAP, Neoforma, Inc. uses non-GAAP, or adjusted, measures of operating
results, net income and net income per share, which are adjusted from results
based on GAAP to exclude the application of EITF No. 01-9 and certain expenses,
gains and losses. Neoforma management believes that the non-GAAP adjusted
results provide added insight into the Company's performance by focusing on
results generated by the Company's ongoing core operations. Neoforma management
uses the non-GAAP adjusted results when assessing the performance of its
ongoing core operations, in making resource allocation decisions and for
planning and forecasting. Additionally, incentive compensation for the
Company, including management, is based on results on this basis. In addition,
because we historically have reported adjusted results, we believe the
inclusion of comparative numbers provides consistency in our financial
reporting. The non-GAAP financial measures should be considered in addition
to, not as a substitute for, or superior to, the measures of financial
performance prepared in accordance with GAAP. Investors are encouraged to
review the reconciliation of the non-GAAP financial measures to their most
directly comparable GAAP financial measures.
NEOFORMA, INC.
ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
2004 2005
REVENUE:
Related party $15,478 $15,421
Non-related party 2,928 2,620
Total adjusted revenue 18,406 18,041
OPERATING EXPENSES:
Cost of services 1,686 2,464
Operations 2,485 2,450
Product development 3,348 4,312
Selling and marketing 3,407 3,017
General and administrative 2,007 2,510
Adjusted operating expenses 12,933 14,753
EBITDA 5,473 3,288
OTHER INCOME (EXPENSE) 68 167
Adjusted net income $5,541 $3,455
ADJUSTED NET INCOME PER SHARE:
Basic $0.29 $0.18
Weighted average shares -- basic 19,069 19,586
(1) These adjusted condensed consolidated statements of operations exclude the
impact of EITF No. 01-9 and certain expenses, gains and losses. Under EITF No.
01-9, the Company offsets non-cash amortization of partnership costs against
related party revenue in an amount equal to the lesser of the two in any
period. Any amortization of partnership costs in excess of related party
revenue in any period is classified as an operating expense. As a result of
the adoption of EITF No. 01-9, the Company offset $15,478 and $15,421 of
amortization of partnership costs against related party revenue in its GAAP
condensed consolidated statements of operations for the three months ended
March 31, 2004 and 2005, respectively. As reclassifications, the application
of EITF No. 01-9 had no impact on loss from operations, net loss or net loss
per share. The excluded expenses, gains and losses consisted of depreciation
and amortization of property and equipment, amortization of intangibles,
amortization of deferred compensation, amortization of partnership costs and
restructuring.
NEOFORMA, INC.
RECONCILIATION OF ADJUSTED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TO GAAP
(in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31, 2005
Application
Excluded of
Expenses, EITF
Adjusted Gains No.
Results and Losses 01-9
REVENUE:
Related party $15,421 $-- $(15,421)
Non-related party 2,620 -- --
Total revenue 18,041 -- (15,421)
OPERATING EXPENSES:
Cost of services 2,464 -- --
Operations 2,450 -- --
Product development 4,312 -- --
Selling and marketing 3,017 -- --
General and administrative 2,510 -- --
Adjusted operating expenses 14,753
EBITDA 3,288
Depreciation and amortization of
property and equipment -- 1,863 --
Amortization of intangibles -- 147 --
Amortization of deferred
compensation -- 1,172 --
Amortization of partnership costs 16,463 (15,421)
Restructuring -- 767 --
Total operating expenses 20,412 (15,421)
Loss from operations (20,412) --
OTHER INCOME (EXPENSE) 167 -- --
Net income (loss) $3,455 $(20,412) $--
NET INCOME (LOSS) PER SHARE:
Basic $0.18
Weighted average shares - basic 19,586
Three Months Ended March 31, 2005
GAAP Allocations
Depreciation Amortization GAAP
and of Results
Amortization Deferred As Reported
of Compensation
Property
and
Equipment
REVENUE:
Related party $-- $-- $--
Non-related party -- -- 2,620
Total revenue -- -- 2,620
OPERATING EXPENSES:
Cost of services 307 197 2,968
Operations 570 148 3,168
Product development 480 270 5,062
Selling and marketing 258 269 3,544
General and administrative 248 288 3,046
Adjusted operating expenses
EBITDA
Depreciation and amortization of
property and equipment (1,863) -- --
Amortization of intangibles -- -- 147
Amortization of deferred
compensation -- (1,172) --
Amortization of partnership costs -- -- 1,042
Restructuring -- -- 767
Total operating expenses -- -- 19,744
Loss from operations -- -- (17,124)
OTHER INCOME (EXPENSE) -- -- 167
Net income (loss) $-- $-- $(16,957)
NET INCOME (LOSS) PER SHARE:
Basic $(0.87)
Weighted average shares - basic 19,586
Three Months Ended March 31, 2004
Application
Excluded of
Expenses, EITF
Adjusted Gains No.
Results and Losses 01-9
REVENUE:
Related party $15,478 $-- $(15,478)
Non-related party 2,928 -- --
Total revenue 18,406 -- (15,478)
OPERATING EXPENSES:
Cost of services 1,686 -- --
Operations 2,485 -- --
Product development 3,348 -- --
Selling and marketing 3,407 -- --
General and administrative 2,007 -- --
Adjusted operating expenses 12,933
EBITDA 5,473
Depreciation and amortization
of property and equipment -- 1,191 --
Amortization of intangibles -- 147 --
Amortization of deferred
compensation -- 467 --
Amortization of partnership
costs -- 16,950 (15,478)
Total operating expenses 18,755 (15,478)
Loss from operations (18,755) --
OTHER INCOME (EXPENSE) 68 -- --
Net income (loss) $5,541 $(18,755) $--
NET INCOME (LOSS) PER SHARE:
Basic $0.29
Weighted average shares
- basic 19,069
Three Months Ended March 31, 2004
GAAP Allocations
Depreciation Amortization GAAP
and of Results
Amortization Deferred As Reported
of Compensation
Property
and
Equipment
REVENUE:
Related party $-- $-- $--
Non-related party -- -- 2,928
Total revenue -- -- 2,928
OPERATING EXPENSES:
Cost of services 305 70 2,061
Operations 464 49 2,998
Product development 190 100 3,638
Selling and marketing 129 120 3,656
General and administrative 103 128 2,238
Adjusted operating expenses
EBITDA
Depreciation and amortization
of property and equipment (1,191) -- --
Amortization of intangibles -- -- 147
Amortization of deferred
compensation -- (467) --
Amortization of partnership costs -- -- 1,472
Total operating expenses -- -- 16,210
Loss from operations -- -- (13,282)
OTHER INCOME (EXPENSE) -- -- 68
Net income (loss) $-- $-- $(13,214)
NET INCOME (LOSS) PER SHARE:
Basic $(0.69)
Weighted average shares - basic 19,069
NEOFORMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
ASSETS
December 31, March 31,
2004 2005
CURRENT ASSETS:
Cash and cash equivalents $13,277 $17,523
Short-term investments 12,593 13,021
Accounts receivable, net of allowance
for doubtful accounts 2,898 2,644
Related party accounts receivable 5,250 --
Prepaid expenses and other current
assets 2,983 3,668
Total current assets 37,001 36,856
PROPERTY AND EQUIPMENT, net 11,501 10,950
INTANGIBLES, net 1,434 1,287
GOODWILL 1,652 1,652
CAPITALIZED PARTNERSHIP COSTS, net 40,996 24,532
RESTRICTED CASH 1,020 1,020
OTHER ASSETS 845 782
Total assets $94,449 $77,079
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $3,994 $2,361
Accrued payroll 3,974 2,884
Other accrued liabilities 2,839 3,561
Deferred revenue, current portion 1,564 1,358
Total current liabilities 12,371 10,164
DEFERRED RENT 387 320
DEFERRED REVENUE, less current
portion 326 286
Total liabilities 13,084 10,770
STOCKHOLDERS' EQUITY:
Common Stock $0.001 par value:
Authorized -- 300,000 shares at March
31, 2005
Issued and outstanding: 20,244 and
20,558 shares at December 31, 2004
and March 31, 2005, respectively 20 21
Additional paid-in capital 839,307 841,973
Notes receivable from stockholders (225) (213)
Deferred compensation (3,775) (4,503)
Unrealized loss on available-for-sale
securities (25) (75)
Accumulated deficit (753,937) (770,894)
Total stockholders' equity 81,365 66,309
Total liabilities and stockholders'
equity $94,449 $77,079
NEOFORMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(all items unaudited)
Three Months Ended
March 31,
2004 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(13,214) $(16,957)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Provision for doubtful accounts 96 --
Accrued interest receivable on
stockholder notes receivable (6) (2)
Depreciation and amortization of
property and equipment 1,191 1,863
Amortization of intangibles 147 147
Amortization of partnership costs
classified as an operating expense 1,472 1,042
Amortization of deferred compensation 467 1,172
Restructuring -- 767
Change in assets and liabilities:
Accounts receivable 212 5,504
Prepaid expenses and other current
assets (22) (685)
Other assets 67 63
Accounts payable (581) (1,014)
Accrued liabilities and accrued
payroll (1,598) (1,160)
Deferred revenue (569) (246)
Deferred rent (14) (42)
Net cash used in operating activities (12,352) (9,548)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investments (1,347) (2,356)
Proceeds from the sale or maturity of
marketable investments 3,206 1,878
Purchases of property and equipment (1,236) (1,165)
Capitalization of software
development costs (1,768) (714)
Net cash used in investing
activities (1,145) (2,357)
CASH FLOWS FROM FINANCING ACTIVITIES:
Amortization of partnership costs
offset against related party revenue 15,478 15,421
Cash received related to options
exercised 250 242
Proceeds from the issuance of common
stock under the employee stock
purchase plan 526 474
Common stock repurchased, net of
notes receivable issued to common
stockholders (177) --
Collections of notes receivable from
stockholders 44 14
Net cash provided by financing
activities 16,121 16,151
Net increase in cash and cash
equivalents 2,624 4,246
Cash and cash equivalents, beginning
of period 9,981 13,277
Cash and cash equivalents, end of
period $12,605 $17,523
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DATASOURCE: Neoforma, Inc.
CONTACT: media, Rebecca Oles, +1-408-468-4363, or
, or investors, Amanda Mogin, +1-408-468-4251, or
, both of Neoforma, Inc.
Web site: http://www.neoforma.com/