Netsmart Reports Third Quarter 2006 Results

Quarterly Results Reflect 81 Percent Increase in Revenue and 171 Percent Increase in Net Income 


GREAT RIVER, N.Y., Nov. 14  /PRNewswire-FirstCall/ -- Netsmart Technologies, Inc. (NASDAQ:NTST), a leading provider of enterprise-wide software for health and human services organizations, today reported record results for the third quarter ended September 30, 2006.

Revenue for the quarter was $15,392,000, an 81 percent increase from $8,517,000 for the quarter ended September 30, 2005. Net income for the third quarter was $1,026,000, an increase of 171 percent compared with net income of $379,000 for the same quarter in 2005. Net income per diluted share for the quarter was $0.15 compared with $0.07 for the same quarter last year. Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) for the three months ended September 30, 2006 were $2,918,000, compared to $1,151,000 for the same period last year. The third quarter of 2006 represents the company's 33rd consecutive quarter of profitability.

Backlog of orders at September 30, 2006 was a record $54.7 million, compared to $28.6 million at September 30, 2005. The September 30, 2006 backlog includes $35.7 million for recurring revenue related to support, ASP and clearinghouse areas, as compared to $16.5 million for those categories at September 30, 2005. Recurring revenue for the quarter ended September 30, 2006 was $8,230,000, compared to $3,718,000 for the same quarter in 2005.

Revenue for the nine months ended September 30, 2006 was $43,535,000, an 84 percent increase from $23,705,000 for the nine months ended September 30, 2005. Net income for the nine months was $2,270,000, an increase of 91 percent compared with net income of $1,191,000 for the same period in 2005.

Net income per diluted share for the nine months ended September 30, 2006 was $0.33 compared with $0.21 for the same period last year. EBITDA for the nine months ended September 30, 2006 was $7,262,000 compared to $3,138,000 for the same period last year. Recurring revenue for the nine months ended September 30, 2006 was $23,453,000, compared to $10,243,000 for the same period last year.

"We are pleased to report another record quarter, including a 171 percent increase in net income over the same quarter last year and a $4.1 million increase in EBITDA for the nine months ended September 30, 2006," said James L. Conway, chairman and chief executive officer of Netsmart Technologies. "We enjoyed another strong quarter attributable to the integration of acquired companies, including QS Technologies, which deepens our public health product offerings and our ability to provide solutions to integrated public and behavioral health systems, as well as to organic growth."

   Reconciliation of Earnings before Interest, Taxes, Depreciation and
                   Amortization (EBITDA) to Net Income



EBITDA is calculated for any period as the sum of net income, plus net interest expense, income tax expense, and depreciation and amortization expense. We consider EBITDA to be a widely accepted financial indicator of a company's ability to service debt, fund capital expenditures and expand its business. EBITDA is not calculated in the same way by all companies and therefore may not be comparable to similarly titled measures reported by other companies. EBITDA is not a measure in accordance with accounting principles generally accepted in the United States.

EBITDA should not be considered as an alternative to net income, as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity. The funds depicted by this measure may not be available for management's discretionary use due to legal or functional requirements, debt service, or other commitments and uncertainties.

                                Three Months Ended     Nine Months Ended
                                   September 30            September 30
                               2006         2005        2006        2005

  EBITDA                   $2,918,000   $1,151,000   $7,262,000  $3,138,000
  Less: Depreciation and
   Amortization            (1,144,000)    (566,000)  (3,261,000) (1,419,000)
  Interest Income
   (expense), net              24,000       86,000       94,000     194,000
  Income Taxes               (772,000)    (292,000)  (1,825,000)   (722,000)
  Net Income               $1,026,000     $379,000   $2,270,000  $1,191,000


                       NETSMART TECHNOLOGIES, INC.

Comparative Operating Results for the Three Months and Nine Months, Ended
                               September 30


                            Three Months                Nine Months
                          2006         2005          2006         2005

  Revenue            $15,392,000   $8,517,000   $43,535,000  $23,705,000
  Net Income          $1,026,000     $379,000    $2,270,000   $1,191,000
  Net Income
  Per Share Basic          $0.16        $0.07         $0.35        $0.22
  Weighted Average
   Shares of Common
    Stock Outstanding
     Basic             6,547,937    5,537,862     6,522,215    5,409,836
  Net Income Per Share
   Diluted                 $0.15        $0.07         $0.33        $0.21
  Weighted Average
   Shares of Common
    Stock Outstanding
     Diluted           6,835,360    5,798,017     6,813,735    5,655,631


  About Netsmart Technologies, Inc.


Netsmart Technologies, Inc., based in Great River, N.Y., is an established, leading supplier of enterprise-wide software solutions for health and human services providers, with more than 1,300 clients, including more than 30 systems with state agencies. Netsmart's clients include health and human services organizations, public health agencies, mental health and substance abuse clinics, psychiatric hospitals, and managed care organizations. Netsmart's products are full-featured information systems that operate on a variety of operating systems, hardware platforms, and mobile devices, and offer unlimited scalability.

Statement on Behalf of Netsmart Technologies, Inc.

Statements in this press release may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to the company or its management, identify forward-looking statements. These statements are based on current expectations, estimates and projections about the company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in Netsmart's filings with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to product demand, market and customer acceptance, competition, pricing and development difficulties, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release. Information on Netsmart's website does not constitute a part of this release. 

DATASOURCE: Netsmart Technologies, Inc.



CONTACT:  Anthony Grisanti, Executive Vice President and CFO of Netsmart

Technologies, Inc., [phone]



Web site:  http://www.ntst.com/ 

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