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STREAMLINE HEALTH® SOLUTIONS REPORTS Q4 RESULTS

Cincinnati, Ohio – April 12, 2011 — Streamline Health Solutions, Inc. (Nasdaq: STRM) today announced financial results for the fourth quarter of fiscal year 2010, ended January 31, 2011.

Highlights for the quarter included:

  • Company secured two new accessANYwareTM purchase contracts for add-on licenses
  • with existing clients totaling approximately $800,000; of which $450,000 of systems
  • revenue was recognized during the quarter;
  • Company completed and delivered a new enterprise Referral Order Workflow (ROW)
  • license from third quarter backlog resulting in $220,000 of systems revenue recorded
  • in the fourth quarter;
  • Total system sales for the quarter were $867,000;
  • Professional services revenues improved by 44% versus the fourth quarter of the prior
  • year;
  • Application hosting recurring revenues for the quarter increased 7% over the prior
  • comparable quarter;
  • New bookings for the quarter, excluding maintenance revenue, exceeded $1.9 million;
  • Backlog at year end was $17.6 million

Revenues for the fourth quarter totaled $4.9 million, compared to $6.3 million in the prior year fourth quarter, which benefitted from a $1.7 million system sale as a result of delivery of the newly developed accessANYware platform when it reached General Availability status in January 2010. In fiscal 2010 the Company generated $867,000 in system sales. These
system sales included nearly $450,000 from two new accessANYware add-on sales to existing clients. The Company also completed and delivered from backlog a $220,000 Referral Order Workflow solution that was sold to a Texas hospital in the third quarter.

Professional services revenues improved by $328,000 or 44% over the prior comparable period. Recurring revenues from maintenance contracts improved by 5% or $95,000 over the prior comparable fourth quarter. Hosting revenues from backlog increased by $58,000 or 7% over the prior comparable quarter.

Total operating expenses for the fourth quarter of fiscal 2010 were $5.7 million compared with $4.7 million in the comparable prior year quarter. This increase was the result of nearly $1.4 million of one-time expenses attributable to a $755,000 non-cash charge for the impairment of capitalized software assets on uncompleted development products and nearly $500,000 of costs associated with the recent change in CEO. The results of the fourth quarter were also impacted by a $997,000 increase in non-cash tax expense due to an incremental increase in the non-cash deferred tax asset valuation allowance.

As a result, the Company recorded a net loss for the fourth quarter ended January 31, 2011 of $1.8 million, or $0.19 per share, compared with net income of $1.6 million, or $0.17 per fully diluted share, for the prior year comparable quarter. Adjusted EBITDA* (a non-GAAP measure) for the quarter ended January 31, 2011 was $976,000, or $0.10 per fully diluted common share (adjusted), compared to $2.5 million, or $0.26 per fully diluted common share (adjusted) in the comparable prior quarter. A reconciliation table is provided below.

New bookings for the fourth quarter, excluding maintenance services, were in excess of $1.9 million. Highlights of the new bookings included an accessANYware license to an existing client through one of our re-marketing partners and another one sold by our direct sales force.

Backlog at January 31, 2011 was $17.6 million, compared with $19.5 million at October 31, 2010 and $19.9 million at January 31, 2010. Current backlog was also impacted by the recognition of revenue for application-hosted and maintenance contracts that were in the prior backlog totals as well as the previously discussed ROW solution delivery in the fourth quarter that had been in the prior quarter’s backlog.

Robert E. Watson, chief executive officer of Streamline Health, commented, “We look forward to improved operational and financial results as we implement our strategic plan in the coming quarters. I firmly believe that Streamline Health has a solid portfolio of products and services that can increasingly drive significant efficiencies in healthcare institutions throughout the country while substantially assisting those institutions in meeting the requirements of ‘meaningful use’ and their ability to qualify for sizable incentive payments as outlined in the Health Information Technology for Economic and Clinical Health Act (HITECH). I believe there are great opportunities ahead to substantially grow our business and enhance shareholder value.”

* Non-GAAP Financial Measures
Streamline Health reports its financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). Streamline Health’s management also evaluates and makes operating decisions using various other measures. One such measure is adjusted EBITDA, which is a non-GAAP financial measure. Streamline Health’s management believes that these measures provide useful supplemental information regarding the performance of Streamline Health’s business operations.

Streamline Health defines “adjusted EBITDA” as net earnings(loss) plus interest expense, tax expense, depreciation and amortization expense of tangible and intangible assets, and stock- based compensation expense. A table illustrating this measure is included in this publication.

Conference Call Information
The Company will conduct a conference call and web cast to review the results of the fourth quarter of fiscal 2010, today April 12, 2011 at 4:30 p.m. ET.

Interested parties can access the call by dialing (877) 317-6789 or (412) 317-6789, or listen via a live Internet web cast, which can be found at www.streamlinehealth.net. A replay of the call will be available by visiting www.streamlinehealth.net for 30 days or by calling (877) 344- 7529 or (412) 317-0088, access code 449946, through April 15, 2011.

About Streamline Health
Streamline Health is a leading provider of document workflow and document management solutions, applications and services that help strategic business partners and healthcare organizations improve operational efficiencies through business process optimization. The Company provides integrated tools and technologies for automating document-intensive environments, including document workflow, document management, e-forms, connectivity, optical character recognition (OCR) and business process integration.

The Company’s workflow-based services offer solutions to inefficient and labor-intensive healthcare business processes throughout the revenue cycle, such as chart coding, abstracting and completion, remote physician referral order processing, pre-admission registration scanning and signature capture, financial screening, perioperative processing, mitigation processing, secondary billing services, explanation of benefits processing and release of information processing. The Company’s solutions also address the document workflow needs of the Human Resources and Supply Chain Management processes of the healthcare enterprise. All solutions are available through a ‘Software as a Service’ (SaaS) model of delivery via the Company’s Remote Hosting Center that better matches customers’ capital or operating budget needs, or via a locally installed software licensing model.

Streamline Health’s solutions create a permanent document-based repository of historical health information that is complementary and can be seamlessly integrated with existing disparate clinical, financial and administrative information systems, providing convenient electronic access to multiple forms of patient information from any location through secure web-based access. These integrated solutions allow providers and administrators to link existing systems with documents, which can dramatically improve the availability of patient information while decreasing direct costs associated with document retrieval, work-in- process, chart processing, document retention, and archiving.

For additional information please visit our website at www.streamlinehealth.net.

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995
Statements made by Streamline Health Solutions, Inc. that are not historical facts are forward-looking statements that are subject to risks and uncertainties. The forward looking statements contained herein are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements, included herein. These risks and uncertainties include, but are not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, key strategic alliances with vendors that resell the Company products, the ability of the Company to control costs, availability of products produced from third party vendors, the healthcare regulatory environment, potential changes in legislation, regulation and government funding affecting the healthcare industry, healthcare information systems budgets, availability of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems, fluctuations in operating results, effects of critical accounting policies and judgments, changes in accounting policies or procedures as may be required by the Financial Accountings Standards Board or other similar entities, changes in economic, business and market conditions impacting the healthcare industry, the markets in which the Company operates and nationally, and the Company’s ability to maintain compliance with the terms of its credit facilities, and other risks detailed from time to time in the Streamline Health Solutions, Inc. filings with the U. S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management‘s analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward- looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Financial Tables on Following Pages

 

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months and Fiscal Year Ended January 31,

(Unaudited)

 
    Three Months   Fiscal Year  
    2011   2010   2011   2010  
Revenues:                  
   Systems sales $ 867,147 $ 2,716,138 $ 2,557,797 $ 3,673,522  
   Services, maintenance and support   3,133,849   2,710,208   11,497,969   11,233,183  
   Application-hosting services   913,626   855,515   3,550,225   3,301,493  
       Total revenues   4,914,622   6,281,861   17,605,991   18,208,198  
                   
Operating expenses:                  
   Cost of systems sales   1,571,533   901,453   3,827,313   2,993,442  
   Cost of services, maintenance and support   1,453,535   1,335,410   5,561,578   5,033,145  
   Cost of application-hosting services   493,068   437,970   1,902,521   1,641,576  
   Selling, general and administrative   1,841,093   1,492,703   6,406,190   5,503,580  
   Product research and development   322,243   486,128   1,759,694   1,682,773  
       Total operating expenses   5,681,472   4,653,664   19,457,296   16,854,516  
Operating profit (loss)   (766,850)   1,628,197   (1,851,305)   1,353,682  
Other income (expense):                  
   Interest expense   (28,471)   (13,569)   (116,392)   (43,823)  
   Other income (expense)   4,452   (1,641)   34,080   18,749  
Earnings (loss) before taxes   (790,869)   1,612,987   (1,933,617)   1,328,608  
   Income taxes   (1,002,000)   (27,500)   (1,017,000)   (40,500)  
Net earnings (loss) $ (1,792,869) $ 1,585,487 $ (2,950,617) $ 1,288,108  
                   
Basic net earnings (loss) per common share $ (0.19) $ 0.17 $ (0.31) $ 0.14  
                   
Diluted net earnings (loss) per common share $ (0.19) $ 0.17 $ (0.31) $ 0.14  
Number of shares used in per common share computations:                  
  Basic   9,560,636   9,401,342   9,504,986   9,381,285  
  Diluted   9,560,636   9,554,363   9,504,986   9,530,891  
   
                 

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Assets

 
    January 31,  
    2011   2010  
Current assets:          
 Cash and cash equivalents $ 1,403,949 $ 1,025,173  
 Accounts receivable, net of allowance for doubtful          
   accounts of $100,000   2,620,756   1,922,279  
 Contract receivables   680,096   1,182,308  
 Prepaid hardware and third party software for future delivery   72,259   149,281  
 Prepaid customer maintenance contracts   794,299   1,058,282  
 Other prepaid assets   200,056   305,050  
 Deferred income taxes   167,000   224,000  
       Total current assets   5,938,415   5,866,373  
           
Property and equipment:          
 Computer equipment   2,708,819   2,987,039  
 Computer software   1,947,135   1,816,397  
 Office furniture, fixtures and equipment   747,867   747,867  
 Leasehold improvements   639,864   574,257  
    6,043,685   6,125,560  
 Accumulated depreciation and amortization   (4,517,860)   (4,344,432)  
    1,525,825   1,781,128  
Contract receivables, less current portion   241,742   146,093  
Capitalized software development costs, net of accumulated          
 amortization of $12,832,347 and $10,411,828, respectively   7,575,064   8,049,292  
Other, including deferred taxes of $711,000 and $1,651,000, respectively   734,376   1,681,661  
  $ 16,015,422 $ 17,524,547  
Liabilities and Stockholders’ Equity  
Current liabilities:          
 Accounts payable $ 565,252 $ 887,928  
 Accrued compensation   1,163,843   559,235  
 Accrued other expenses   480,422   476,504  
 Current portion of capital lease obligations   183,637   249,309  
 Current portion of deferred revenues   5,766,795   4,956,303  
       Total current liabilities   8,159,949   7,129,279  
           
Deferred revenues, less current portion   -   602,239  
Line of credit   1,200,000   900,000  
Lease incentive liability, less current portion   61,034   -  
Capital lease obligation, less current portion   -   161,666  
       Total liabilities   9,420,983   8,793,184  
           
Stockholders’ equity:          
 Convertible redeemable preferred stock, $.01 par value per share,          
   5,000,000 shares authorized, no shares issued   -   -  
 Common stock, $.01 par value per share, 25,000,000 shares authorized, 9,856,517 and  9,436,824 shares issued and outstanding, respectively   98,565   94,368  
 Additional paid in capital   36,975,242   36,160,126  
 Accumulated other comprehensive income   -   5,620  
 Accumulated (deficit)   (30,479,368)   (27,528,751)  
       Total stockholders’ equity   6,594,439   8,731,363  
  $ 16,015,422 $ 17,524,547  
   
         

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Year Ended January 31,

 
       
    2011   2010  
           
Operating activities:          
 Net earnings (loss) $ (2,950,617) $ 1,288,108  
 Adjustments to reconcile net earnings (loss) to net cash

 

   provided by operating activities:

         
   Depreciation and amortization   3,270,902   2,868,997  
   Impairment loss on capitalized software development costs   754,709   -  
   Deferred tax provision   997,000   -  
   Loss on disposal of fixed assets   1,050   4,308  
   Share-based compensation expense   678,172   274,629  
 Change in assets and liabilities:          
   Accounts, contract and installment receivables   (291,914)   (1,098,299)  
   Other assets   440,379   54,664  
   Accounts payable   (322,676)   174,020  
   Accrued expenses   608,526   264,627  
   Deferred revenues   208,253   (1,697,272)  
 Net cash provided by operating activities   3,393,784   2,133,782  
           
Investing activities:          
 Purchases of property and equipment   (530,434)   (698,698)  
 Capitalization of software development costs   (2,701,000)   (3,668,000)  
 Other   2,622   (36,612)  
 Net cash used in investing activities   (3,228,812)   (4,403,310)  
           
Financing activities:          
 Net change under revolving credit facility   300,000   100,000  
 Proceeds from exercise of stock options and stock purchase plan   141,141   65,900  
Payments on capital lease   (227,337)   -  
 Net cash provided by financing activities   213,804   165,900  
(Decrease) Increase in cash and cash equivalents   378,776   (2,103,628)  
Cash and cash equivalents at beginning of year   1,025,173   3,128,801  
Cash and cash equivalents at end of year $ 1,403,949 $ 1,025,173  
Supplemental cash flow disclosures:          
 Interest paid $ 74,898 $ 34,507  
 Income taxes paid $ 47,658 $ 7,265  
 Property and equipment additions financed by capital leases $ - $ 410,975  
           
   
         

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

Backlog (in thousands)

 
    January 31,
2011
  October 31,
2010
  January 31,
2010
   
Streamline Health software licenses $ 121   298   201    
Custom software   42   42   105    
Hardware and third party software   66   176   171    
Professional services   4,629   3,293   3,977    
Application-hosting services   7,362   8,068   9,414    
Recurring maintenance   5,384   7,641   5,987    
   Total $ 17,604   19,518   19,855    
   
               

STREAMLINE HEALTH SOLUTIONS, INC.

Bookings

(Unaudited)

Table B

New bookings (a)

 
    Three Months Ended  
    January 31, 2011  
    Value   % of Total Bookings  
Streamline Health Software licenses $ 522,000   27%  
Application Hosting Services   87,000   5%  
Professional services   1,075,000   56%  
Hardware & third party software   227,000   12%  
   Total bookings $ 1,911,000   100%  
   
   
    Fiscal Year Ended  
    January 31, 2011  
    Value   % of Total Bookings  
Streamline Health Software licenses $ 1,726,000   27%  
Application Hosting Services   810,000   13%  
Professional services   3,026,000   47%  
Hardware & third party software   833,000   13%  
   Total bookings $ 6,395,000   100%  
         
(a) Bookings are the aggregate of signed contracts and/or completed customer purchase orders approved and accepted by the Company as binding commitments to purchase its products and/or services. New bookings do not include maintenance services as these tend to be recurring in nature on an annual or more frequent basis.  
 

STREAMLINE HEALTH SOLUTIONS, INC.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

Table C

This press release contains a non-GAAP financial measure under the rules of the U.S. Securities and Exchange Commission for adjusted EBITDA. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget. Non-GAAP financial measures are used by Streamline Health’s management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the Company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company’s current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. The Company’s management compensates for these limitations by considering the company’s financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Reconciliation of net earnings(loss) to non-GAAP adjusted EBITDA (a, b).  

 
    Three Months Ended  
    January 31,  
    2011   2010  
Net earnings (loss) $ (1,792,869) $ 1,585,487  
EBITDA adjustments          
Interest expense   28,471   13,569  
Tax expense   1,002,000   27,500  
Amortization of capitalized software development costs   1,274,564   631,949  
Depreciation and amortization – other   200,268   197,816  
Stock based compensation   263,686   70,371  
           
Adjusted EBITDA $ 976,120 $ 2,526,692  
   
   
    Fiscal Year Ended  
    January 31,  
    2011   2010  
Net earnings (loss) $ (2,950,617) $ 1,288,108  
EBITDA adjustments          
Interest expense   116,392   43,823  
Tax expense   1,017,000   40,500  
Amortization of capitalized software development costs   3,175,228   2,100,068  
Depreciation and amortization – other   850,383   768,930  
Stock based compensation   678,172   274,630  
           
Adjusted EBITDA $ 2,886,558 $ 4,516,059  
         
(a)  Earnings Before Interest, Tax, Depreciation, Amortization, and Stock-based compensation

 

(b)  Adjusted EBITDA previously included foreign currency gains and losses.  These have now been excluded from the definition of Adjusted EBITDA to correspond to the definition under the terms of the line of credit, renewed in the first quarter of fiscal 2011.

 
 

STREAMLINE HEALTH SOLUTIONS, INC.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

Table C (continued)

Reconciliation of diluted net earnings per common share to non-GAAP diluted earnings per common share.

 
    Three Months Ended  
    January 31,  
    2011   2010  
Diluted net earnings (loss) $ (0.19) $ 0.17  
EBITDA adjustments          
Interest expense   0.00   0.00  
Tax expense   0.10   0.00  
Amortization of capitalized software development costs   0.13   0.07  
Depreciation and amortization – other   0.02   0.02  
Stock based compensation   0.03   0.01  
           
Adjusted EBITDA per adjusted diluted share $ 0.10 $ 0.26  
           
Diluted weighted average shares   9,560,636   9,554,363  
  Includable incremental shares – adjusted EBITDA (a)   5,889   -  
Adjusted diluted shares   9,566,525   9,554,363  
   
   
    Fiscal Year Ended  
    January 31,  
    2011   2010  
Diluted net earnings (loss) $ (0.31) $ 0.14  
EBITDA adjustments          
Interest expense   0.01   0.00  
Tax expense   0.11   0.00  
Amortization of capitalized software development costs   0.33   0.22  
Depreciation and amortization – other   0.09   0.08  
Stock based compensation   0.07   0.03  
           
Adjusted EBITDA per adjusted diluted share $ 0.30 $ 0.47  
           
Diluted weighted average shares   9,504,986   9,530,891  
  Includable incremental shares – adjusted EBITDA (a)   83,353   -  
Adjusted diluted shares   9,588,339   9,530,891  
         
Note: Per share amounts may not be additive due to rounding.
(a)  The number of incremental shares that would be dilutive under a profit assumption are only applicable under a  GAAP net-loss.  If GAAP profit is earned in the current period, no incremental shares are assumed.