Eclipsys Releases Financial Results for Quarter Ended March 31, 2008

Eclipsys Corporation® (NASDAQ: ECLP), The Outcomes Company®, today released results for the quarter ended March 31, 2008. First-Quarter Results Revenues for the quarter ended March 31, 2008 were $124.4 million, compared with revenues of $113.0 million for the quarter ended March 31, 2007, an increase of 10 percent. Non-GAAP net income for the quarter was $8.1 million, or $0.15 per diluted share, compared to non-GAAP net income of $6.2 million, or $0.12 per diluted share for the first quarter in 2007. This represents a 25 percent growth in non-GAAP EPS year over year. Non-GAAP net income excludes stock-based compensation expense and certain other items incurred in the quarter that the company does not consider to be indicative of its ongoing business. Non-GAAP net income for the first quarter of 2008 excludes stock-based compensation expense of $3.3 million, or $0.06 per diluted share, as well as the following items: Costs of $1.7 million, or $0.03 per diluted share associated with the relocation of the corporate headquarters from Boca Raton, FL to Atlanta, GA. Costs of $2.0 million, or $0.04 per diluted share, associated with the defense and anticipated settlement of the derivative litigation, which was filed in July 2007 following completion of the voluntary stock option review, and which was tentatively settled in March 2008, subject to court approval. A charge of $1.3 million or $0.02 per diluted share for a write-off of in-process research and development and amortization of intangible assets associated with the acquisition of EPSi, which was completed in February 2008. Additional gain of $2.0 million, or $0.04 per diluted share, resulting from completion of post-closing milestones associated with the sale of the Clinical Practice Model Resource Center business, which was completed in December 2007. A charge of $1.5 million or $0.03 per diluted share resulting from a change in the company’s estimate for uncertainties in income taxes. On a GAAP basis, the net income for the first quarter of 2008 was $290 thousand, or $0.01 per share on a diluted basis, compared to net income of $2.4 million, or $0.04 per share on a diluted basis in the first-quarter of 2007. This year-over-year decline in net income on a GAAP basis is attributable to the costs above, which significantly exceeded costs excluded from non-GAAP net income for the first quarter of 2007. The company’s operating cash flows for the first quarter of 2008 were $6.9 million, a decrease of $3.4 million compared to the first quarter of 2007. Eclipsys ended the quarter with $65.2 million in cash and marketable securities, as well as $112.0 million in auction rate securities that were previously classified as marketable securities and have been reclassified as long-term investments. The following table summarizes (unaudited) select financial data:                 In thousands, except per share data       Three months ended March 31, (unaudited) 2008 2007 $ Change % Change Revenues $124,380 $113,030 $11,350 10.0%   GAAP Results:         Net income $290 $2,401 ($2,111) -87.9% Earnings per common share, diluted $0.01 $0.04 ($0.03) -75.0%   Non-GAAP Results:         Net income* $8,115 $6,171 $1,944 31.5% Earnings per common share, diluted* $0.15 $0.12 $0.03 25.0% *A reconciliation of GAAP to non-GAAP results is included in the attached table. "Eclipsys built on our success in 2007 to start 2008 with positive results. While we are pleased with our execution during the first quarter, we are also well positioned for the future as we leveraged our presence at the Healthcare Information and Management Systems Society (HIMSS) Annual Conference & Exhibition to significantly grow our sales pipeline,” said R. Andrew Eckert, Eclipsys president and chief executive officer. "We are also excited about the completion of the EPSi acquisition in the first quarter, as our sales force now has a ’Best in KLAS’ solution that addresses critical market requirements to sell into our existing client base as well as to prospects.” Investor Teleconference May 6 Eclipsys senior executives will discuss the results on a teleconference for investors scheduled for 8:30 a.m. Eastern time on May 6, 2008. Persons interested in participating in the teleconference should call (800) 398-9402 around 15 minutes before the conference is slated to begin. For listen-only mode, participants can go to www.eclipsys.com prior to the conference call to register and download the necessary audio software. An audio replay will be available at www.eclipsys.com approximately 2 hours after the completion of the call on May 6. Non-GAAP Measures The financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). In addition to the GAAP results, the company has provided net income and earnings per share information on a non-GAAP basis: (i) for the three month period ended March 31, 2008 to exclude stock-based compensation expenses, costs related to the company’s derivative litigation, corporate restructuring and relocation charges, charges associated with the acquisition of EPSi, a gain associated with the sale of the CPMRC assets and a charge related to a change in estimate of income taxes; and (ii) for the three month period ended March 31, 2007 to exclude stock-based compensation expenses and costs related to the company’s voluntary stock option review. These non-GAAP financial measures should not be considered a substitute for, or superior to, any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Internally, management uses this non-GAAP information for forecasting and to help make management decisions, as an indicator of business performance, and to evaluate management’s effectiveness and help determine bonuses for management and others. The economic substance of omitting non-cash stock-based compensation expense in presenting non-GAAP earnings derives from providing investors with consistent measures of performance both before and after including non-cash stock-based compensation charges. The economic substance of omitting the expenses related to the company’s voluntary stock option review and related derivative litigation, corporate restructuring and relocation charges, charges associated with the acquisition of EPSi, a gain associated with the sale of the CPMRC assets and a charge related to a change in estimate for income taxes in presenting non-GAAP earnings derives from the fact that episodic charges of this kind make it more difficult to compare operating results of different periods, not all of which include such expenses and charges. However, the omission of non-cash stock-based compensation expense may mask an economic cost incurred by the company in connection with stock-based compensation, and the omission of the expenses related to the company’s other non-GAAP adjustments may mask actual and expected future cash expenditures associated with such matters. Management compensates for these limitations by using both the GAAP and non-GAAP measures. Management believes that the non-GAAP financial measures provided, when considered in conjunction with comparable GAAP financial measures, facilitate the understanding and evaluation of the company’s operating performance and future prospects, as well as comparisons of the company’s results with its prior period results that did not include these charges and with results of other companies on a more consistent basis. For example, omitting the stock-based compensation expense facilitates review by the majority of the company’s analysts, who model the company’s earnings excluding stock-based compensation charges. The company has provided reconciling information in the attachment to this release. About Eclipsys Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and access management software, clinical content and professional services that help healthcare organizations improve clinical, financial, operational and client satisfaction outcomes. For more information, see www.eclipsys.com or email info@eclipsys.com. Special Note Statements in this news release or the investor call referenced herein concerning the company’s sales, marketing and operational initiatives; future financial results, operating performance, and development efforts; and the benefits provided by Eclipsys software and services are forward-looking statements and actual results may differ from those projected due to a variety of risks and uncertainties. Future performance expectations are predicated upon achievement of various sales and performance targets that may be difficult to meet. Sales may be slower than expected due to market conditions, competition, and other factors. Costs may be greater than anticipated due to the potential need to increase spending to ensure performance in accordance with commitments to clients and other factors. Software development may take longer and cost more than expected, and incorporation of anticipated features and functionality may be delayed, due to various factors including programming and integration challenges and resource constraints. The market is highly competitive. Implementation and customization of Eclipsys software is complex and time-consuming. Results depend upon a variety of factors and can vary by client. Each client’s circumstances are unique and may include unforeseen issues that make it more difficult than anticipated to implement or derive benefit from software, implementation or consulting services. The success and timeliness of the company’s services will depend at least in part upon client involvement, which can be difficult to control. Eclipsys is required to meet specified performance standards, and clients can terminate contracts, assess penalties or reduce contract scope under certain circumstances. More information about company risks is available in recent Form 10-K and other filings made by Eclipsys from time to time with the Securities and Exchange Commission. Special attention is directed to the portions of those documents entitled "Risk Factors” and "Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Eclipsys Corporation Non-GAAP Income Statements (in thousands, except per share amounts)         Non-GAAP Non-GAAP Three Months EndedMarch 31,2008 Three Months EndedMarch 31,2007 $ Change % Change         Revenues: Systems and services $ 119,138 $ 109,183 $ 9,955 9.1 % Hardware   5,242   3,847   1,395   36.3 % Total revenues   124,380   113,030   11,350   10.0 %   Cost and expenses: Costs of systems and services 65,659 63,417 2,242 3.5 % Costs of hardware 4,336 2,914 1,422 48.8 % Sales and marketing 19,326 17,448 1,878 10.8 % Research and development 16,693 13,729 2,964 21.6 % General and administrative 7,827 6,407 1,420 22.2 % Depreciation and amortization 4,342 4,439 (97 ) -2.2 % In-process research and development charge   -   -   -   * N/M Total costs and expenses   118,183   108,354   9,829   9.1 %   Income (loss) from operations 6,197 4,676 1,521 32.5 % Gain (loss) on sale of assets 33 - 33 * N/M Interest income, net   2,119   1,514   605   40.0 % Income (loss) before income taxes 8,349 6,190 2,159 34.9 % Provision for income taxes   234   19   215   * N/M Net income (loss) $ 8,115 $ 6,171 $ 1,944   31.5 % Net income (loss) per share: Basic net income (loss) per common share $ 0.15 $ 0.12 $ 0.03   25.0 % Diluted net income (loss) per common share $ 0.15 $ 0.12 $ 0.03   25.0 % Weighted average common shares outstanding: Basic   53,548   52,328     Diluted   54,632   53,544       * Not Meaningful Eclipsys Corporation GAAP Income Statements (Unaudited) (in thousands, except per share amounts)         GAAP GAAP Three Months EndedMarch 31,2008 Three Months EndedMarch 31, 2007 $ Change % Change         Revenues: Systems and services $ 119,138 $ 109,183 $ 9,955 9.1 % Hardware   5,242     3,847   1,395   36.3 % Total revenues   124,380     113,030   11,350   10.0 %   Cost and expenses: Costs of systems and services 67,560 64,493 3,067 4.8 % Costs of hardware 4,336 2,914 1,422 48.8 % Sales and marketing 20,871 18,418 2,453 13.3 % Research and development 17,154 14,258 2,896 20.3 % General and administrative 10,962 7,602 3,360 44.2 % Depreciation and amortization 4,766 4,439 327 7.4 % In-process research and development charge   850     -   850   * N/M Total costs and expenses   126,499     112,124   14,375   12.8 %   Income (loss) from operations (2,119 ) 906 (3,025 ) -333.9 % Gain/(loss) on sale of assets 2,064 - 2,064 * N/M Interest income, net   2,119     1,514   605   40.0 % Income (loss) before income taxes 2,064 2,420 (356 ) -14.7 % Provision for income taxes   1,774     19   1,755   * N/M Net income (loss) $ 290   $ 2,401 $ (2,111 ) -87.9 % Net income (loss) per share: Basic net income (loss) per common share $ 0.01   $ 0.05 $ (0.04 ) -80.0 % Diluted net income (loss) per common share $ 0.01   $ 0.04 $ (0.03 ) -75.0 % Weighted average common shares outstanding: Basic   53,548     52,328     Diluted   54,632     53,544       * Not Meaningful ECLIPSYS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (in thousands)             March 31, December 31, 2008 2007 (Unaudited) Assets Current assets: Cash $ 46,198 $ 22,510 Marketable securities 19,029 168,925 Accounts receivable, net of allowance for doubtful accounts of $4,576 and $4,240, respectively 101,134 99,260 Prepaid expenses 31,910 27,289 Deferred tax asset 7,524 7,524 Other current assets   5,393     1,759   Total current assets 211,188 327,267   Long-term investments 112,039 - Property and equipment, net 49,062 45,657 Capitalized software development costs, net 36,308 38,206 Acquired technology, net 13,453 594 Intangible assets, net 6,590 1,376 Deferred tax asset 31,187 31,187 Goodwill 40,288 7,772 Other assets   12,285     13,374   Total assets $ 512,400   $ 465,433         Liabilities and Stockholders’ Equity Current liabilities: Deferred revenue $ 103,441 $ 105,115 Accounts payable 19,594 11,679 Accrued compensation costs 20,236 24,473 Notes payable 45,000 - Deferred tax liability 1,845 1,777 Other current liabilities   19,567     19,381   Total current liabilities 209,683 162,425   Deferred revenue 7,632 9,860 Deferred tax liability 31,235 31,235 Other long-term liabilities   6,240     3,899   Total liabilities 254,790 207,419   Stockholders’ equity: Common stock, $0.01 par value, 200,000,000 shares authorized; issued and outstanding, 54,325,760 and 53,806,742, respectively 543 538 Additional paid-in capital 524,154 519,112 Accumulated deficit (263,928 ) (264,218 ) Accumulated other comprehensive income   (3,159 )   2,582   Total stockholders’ equity   257,610     258,014   Total liabilities and stockholders’ equity $ 512,400   $ 465,433   ECLIPSYS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (in thousands)           For the Three Months Ended March 31,   2008     2007     Operating activities: Net income $ 290 $ 2,401 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,188 9,671 Provision for bad debt 950 450 In-process research and development charge 850 Deferred income taxes 68 19 Gain on sale of marketable securities -   (23 ) Stock compensation expense 3,347 2,760 Gain on sale of assets (2,064 ) - Changes in operating assets and liabilities, excluding the effect of acquisitions and dispositions: Accounts receivable (2,092 ) 3,696 Prepaid expenses and other current assets (6,000 ) (5,616 ) Inventory - 825 Other assets 534 653 Deferred revenue (3,351 ) (2,223 ) Accrued compensation (4,537 ) 5,479 Accounts payable and other current liabilities 5,952 (7,768 ) Long-term liabilities 2,343 19 Other reconciling items   427     -   Total adjustments   6,615     7,942   Net cash provided by operating activities   6,905     10,343   Investing activities: Purchases of property and equipment (6,940 ) (2,771 ) Purchase of marketable securities (102,000 ) (25,744 ) Proceeds from sales of marketable securities 134,791 18,060 Proceeds from sale of assets 698 - Capitalized software development costs (2,923 ) (4,379 ) Earnout out on disposition 400 - Cash paid for acquisitions, net of cash acquired   (53,634 )   -   Net cash used in investing activities (29,608 ) (14,834 ) Financing activities: Proceeds from stock options exercised 1,486 4,131 Proceeds from employee stock purchase plan 169 - Proceeds from secured financing   45,000     -   Net cash provided by financing activities 46,655 4,131   Effect of exchange rates on cash and cash equivalents   (264 )   2   Net increase (decrease) in cash and cash equivalents 23,688 (358 ) Cash and cash equivalents — beginning of period   22,510     41,264   Cash and cash equivalents — end of period $ 46,198   $ 40,906   Eclipsys Corporation Reconciliation of GAAP to Non-GAAP Pro Forma Results (in thousands, except per share amounts)                 GAAP Non-GAAP Three Months Ended March 31, 2008 (Unaudited) Stock-based comp expense (1) Derivative Litigation (2) EPSI (3) Gain on sale of assets (4) Headquarter Relocation (5) Tax Provision (6) Three Months Ended March 31, 2008                   Revenues: Systems and services $ 119,138 $ - $ - $ - $ - $ - $ - $ 119,138 Hardware   5,242     -     -     -     -     -     -     5,242 Total revenues   124,380     -     -     -     -     -     -     124,380   Cost and expenses: Costs of systems and services 67,560 (1,608 ) (293 ) 65,659 Costs of hardware 4,336 - 4,336 Sales and marketing 20,871 (1,097 ) (448 ) 19,326 Research and development 17,154 (302 ) (159 ) 16,693 General and administrative 10,962 (341 ) (2,011 ) (783 ) 7,827 Depreciation and amortization 4,766 - - (424 ) - - - 4,342 In-process research and development charge   850         (850 )           - Total costs and expenses   126,499     (3,348 )   (2,011 )   (1,274 )   -     (1,683 )   -     118,183   Income (loss) from operations (2,119 ) 3,348 2,011 1,274 - 1,683 - 6,197 Gain/(loss) on sale of assets 2,064 (2,031 ) 33 Interest income, net   2,119     -     -     -     -     -     -     2,119 Income (loss) before income taxes 2,064 3,348 2,011 1,274 (2,031 ) 1,683 - 8,349 Provision for income taxes   1,774     -     -     -     -         (1,540 )   234 Net income (loss) $ 290   $ 3,348   $ 2,011   $ 1,274   $ (2,031 ) $ 1,683   $ 1,540   $ 8,115 Net income (loss) per share: Basic net income (loss) per common share $ 0.01   $ 0.06   $ 0.04   $ 0.02   $ (0.04 ) $ 0.03   $ 0.03   $ 0.15 Diluted net income (loss) per common share $ 0.01   $ 0.06   $ 0.04   $ 0.02   $ (0.04 ) $ 0.03   $ 0.03   $ 0.15 Weighted average common shares outstanding: Basic   53,548     53,548     53,548     53,548     53,548     53,548     53,548     53,548 Diluted   54,632     54,632     54,632     54,632     54,632     54,632     54,632     54,632     1 Represents stock-based compensation expense.   2 These charges were incurred as a result of the voluntary stock option review completed in the second quarter 2007 and are related primarily to legal fees associated with the subsequent derivative litigation.     3 We completed our acquisition of Enterprise Performance Systems, Inc. ("EPSi") in February 2008. These amounts relate to a charge of $850 for a write off of in-process research and development and amortization of intangible assets recorded as part of the purchase price allocation.     4 This gain was recorded in conjunction with contingent consideration earned related to the sale of CPM Resource Center Assets to Elsevier Inc. that was completed in the fourth quarter of 2007.   5 This charge was related primarily to amounts incurred to relocate the corporate headquarters from Boca Raton to Atlanta. These include salaries and benefits associated with termination of employees not relocating and other administrative costs associated with the move.     6 FASB Interpretation 48 "Accounting for Uncertainty in Income Taxes" clarifies the criteria for recognizing income tax benefits. This charge was recorded as a result of our review of uncertain state tax positions. Eclipsys Corporation Reconciliation of GAAP to Non-GAAP Pro Forma Results (in thousands, except per share amouts)       GAAP   Non-GAAP Three Months EndedMarch 31, 2007 (Unaudited) Stock-based comp expense (1) Voluntary Stock Option review (2) Three Months Ended March 31,2007         Revenues: Systems and services $ 109,183 $ - $ - $ 109,183 Hardware   3,847   -     -     3,847 Total revenues   113,030   -     -     113,030   Cost and expenses: Costs of systems and services 64,493 (1,076 ) 63,417 Costs of hardware 2,914 - 2,914 Sales and marketing 18,418 (970 ) 17,448 Research and development 14,258 (529 ) 13,729 General and administrative 7,602 (185 ) (1,010 ) 6,407 Depreciation and amortization 4,439 - - 4,439 In-process research and development charge   -   -     -     - Total costs and expenses   112,124   (2,760 )   (1,010 )   108,354   Income (loss) from operations 906 2,760 1,010 4,676 Gain/(loss) on sale of assets - - - - Other income - - - - Interest income, net   1,514   -     -     1,514 Income (loss) before income taxes 2,420 2,760 1,010 6,190 Provision for income taxes   19   -     -     19 Net income (loss) $ 2,401 $ 2,760   $ 1,010   $ 6,171 Net income (loss) per share: Basic net income (loss) per common share $ 0.05 $ 0.05   $ 0.02   $ 0.12 Diluted net income (loss) per common share $ 0.04 $ 0.05   $ 0.02   $ 0.12 Weighted average common shares outstanding: Basic   52,328   52,328     52,328     52,328 Diluted   53,544   53,544     53,544     53,544     1 Represents stock-based compensation expense.   2 These charges were incurred as a result of the voluntary stock option review completed in the second quarter 2007 and relate to legal and professional fees for analysis completed to conduct the review. These fees were not excluded from the previously announced non-GAAP net income of $5.2 million or $0.10 of earnings per diluted share for the first quarter 2007.