SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 31, 2004 |
Or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File Number: 0-21031
QUADRAMED CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| DELAWARE | 52-1992861 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) | |
| 12110 SUNSET HILLS ROAD, SUITE 600, RESTON, VIRGINIA |
20190 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(703) 709-2300
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value Per Share
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Act. Yes x No ¨
As of April 16, 2004, there were 31,091,848 shares of the Registrant’s common stock outstanding, par value $0.01.
QUADRAMED CORPORATION
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2004
TABLE OF CONTENTS
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. | Financial Statements | |||
| Condensed Consolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003 | 3 | |||
| Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2004 and 2003 | 4 | |||
| Condensed Consolidated Statements of Changes in Stockholders’ Deficit (unaudited) for the three months ended March 31, 2004 | 5 | |||
| Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2004 and 2003 | 6 | |||
| Notes to Condensed Consolidated Financial Statements | 8 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 33 | ||
| Item 4. | Controls and Procedures | 34 | ||
| PART II. OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 35 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 37 | ||
| Signatures |
38 | |||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
QUADRAMED CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except percentages and per share amounts)
| ASSETS | March 31, 2004 |
December 31, 2003 |
||||||
| (unaudited) | ||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 34,763 | $ | 36,944 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $3,183 and $3,406, respectively |
32,809 | 30,872 | ||||||
| Unbilled and other receivables |
4,650 | 6,218 | ||||||
| Prepaid expenses and other current assets |
11,639 | 11,268 | ||||||
| Total current assets |
83,861 | 85,302 | ||||||
| Restricted cash |
5,469 | 5,523 | ||||||
| Property and equipment, net |
6,066 | 5,643 | ||||||
| Capitalized software development costs, net |
2,667 | 3,219 | ||||||
| Goodwill |
22,141 | 18,445 | ||||||
| Other intangible assets, net |
7,376 | 6,992 | ||||||
| Other long-term assets |
8,160 | 8,031 | ||||||
| Total assets |
$ | 135,740 | $ | 133,155 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities |
||||||||
| Accounts payable and accrued expenses |
$ | 4,758 | $ | 2,914 | ||||
| Accrued payroll and related |
8,453 | 11,100 | ||||||
| Accrued interest |
3,876 | 1,912 | ||||||
| Other accrued liabilities |
8,415 | 7,866 | ||||||
| Deferred revenue |
51,908 | 48,502 | ||||||
| Total current liabilities |
77,410 | 72,294 | ||||||
| 10% Senior Secured Notes due 2008, net of unamortized discount of $10,604 and $11,061, respectively |
61,690 | 61,233 | ||||||
| 5.25% Convertible Subordinated Notes due 2005 |
11,931 | 11,931 | ||||||
| Other long-term liabilities |
4,645 | 4,580 | ||||||
| Total liabilities |
155,676 | 150,038 | ||||||
| Stockholders’ deficit |
||||||||
| Preferred stock, $0.01 par, 5,000 shares authorized, no shares issued and outstanding |
— | — | ||||||
| Common stock, $0.01 par, 150,000 shares authorized; 31,023 and 28,871 shares issued; 31,023 and 28,671 shares issued outstanding, respectively |
310 | 287 | ||||||
| Treasury stock at cost, 0 and 200 shares, respectively |
— | (822 | ) | |||||
| Additional paid-in-capital |
293,053 | 292,719 | ||||||
| Deferred compensation and accumulated other comprehensive loss |
(2,642 | ) | (2,951 | ) | ||||
| Accumulated deficit |
(310,657 | ) | (306,116 | ) | ||||
| Total stockholders’ deficit |
(19,936 | ) | (16,883 | ) | ||||
| Total liabilities and stockholders’ deficit |
$ | 135,740 | $ | 133,155 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
QUADRAMED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues |
||||||||
| Services |
$ | 4,711 | $ | 4,746 | ||||
| Maintenance |
9,824 | 8,573 | ||||||
| Installation and other |
4,923 | 4,174 | ||||||
| Services and other revenue |
19,458 | 17,493 | ||||||
| Licenses |
12,496 | 9,555 | ||||||
| Hardware |
4,514 | 2,186 | ||||||
| Total revenues |
36,468 | 29,234 | ||||||
| Cost of revenues |
||||||||
| Cost of services and other revenue |
9,667 | 10,652 | ||||||
| Cost of licenses revenue |
3,175 | 1,946 | ||||||
| Cost of hardware revenue |
2,830 | 1,816 | ||||||
| Total cost of revenues |
15,672 | 14,414 | ||||||
| Gross margin |
20,796 | 14,820 | ||||||
| Operating expenses |
||||||||
| General and administration |
9,204 | 12,096 | ||||||
| Software development |
6,763 | 5,292 | ||||||
| Sales and marketing |
6,110 | 5,712 | ||||||
| Amortization of intangible assets and depreciation |
1,255 | 1,422 | ||||||
| Total operating expenses |
23,332 | 24,522 | ||||||
| Loss from operations |
(2,536 | ) | (9,702 | ) | ||||
| Other income (expense) |
||||||||
| Interest expense, net |
(2,370 | ) | (906 | ) | ||||
| Other income (expense), net |
202 | (70 | ) | |||||
| Other income (expense) |
(2,168 | ) | (976 | ) | ||||
| Loss before income taxes |
$ | (4,704 | ) | $ | (10,678 | ) | ||
| Provision (benefit) for income taxes |
(163 | ) | — | |||||
| Net loss |
$ | (4,541 | ) | $ | (10,678 | ) | ||
| Loss per share |
||||||||
| Basic and diluted |
$ | (0.16 | ) | $ | (0.40 | ) | ||
| Weighted average shares outstanding |
||||||||
| Basic and diluted |
29,155 | 27,005 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
QUADRAMED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ DEFICIT
(in thousands)
(unaudited)
| Shares |
Common Stock And Additional Paid-in Capital |
Deferred Comp and Accumulated Other Comprehensive Income |
Accumulated (Loss) |
Total Stockholders’ Equity (Deficit) |
|||||||||||||
| Balance, December 31, 2003 |
28,871 | $ | 292,184 | $ | (2,951 | ) | $ | (306,116 | ) | $ | (16,883 | ) | |||||
| Issuance of common stock |
241 | 811 | — | — | 811 | ||||||||||||
| Issuance of treasury stock upon exercise of options |
349 | — | — | 349 | |||||||||||||
| Issuance of common stock upon exercise of warrants |
1,911 | 19 | — | — | 19 | ||||||||||||
| Amortization of deferred comp in connection with issuance of restricted common stock |
— | — | 309 | — | 309 | ||||||||||||
| Net unrealized loss on available-for-sale securities |
— | — | (5 | ) | — | (5 | ) | ||||||||||
| Foreign currency translation adjustment |
— | — | 5 | — | 5 | ||||||||||||
| Net loss |
— | — | — | (4,541 | ) | (4,541 | ) | ||||||||||
| Balance, March 31, 2004 |
31,023 | $ | 293,363 | $ | (2,642 | ) | $ | (310,657 | ) | $ | (19,936 | ) | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
QUADRAMED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | (4,541 | ) | $ | (10,678 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
2,735 | 2,468 | ||||||
| Provision for bad debts |
692 | 239 | ||||||
| Other |
(14 | ) | 51 | |||||
| Changes in assets and liabilities, net of effects of acquisition: |
||||||||
| Accounts receivable |
(2,630 | ) | (7,698 | ) | ||||
| Prepaid expenses and other |
346 | (485 | ) | |||||
| Accounts payable and accrued liabilities |
1,775 | 486 | ||||||
| Deferred revenue |
3,406 | 9,212 | ||||||
| Cash provided by (used in) operating activities |
1,769 | (6,405 | ) | |||||
| Cash flows from investing activities |
||||||||
| Proceeds from sale of assets |
— | 4,190 | ||||||
| Acquisition of Détente |
(4,074 | ) | — | |||||
| Capitalized software development costs |
— | (133 | ) | |||||
| Purchases of property and equipment |
(1,162 | ) | (479 | ) | ||||
| Other |
106 | 15 | ||||||