UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 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 0-27501
The TriZetto Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 33-0761159 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
| 567 San Nicolas Drive, Suite 360 Newport Beach, California |
92660 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (949) 719-2200
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 Exchange Act). Yes x No ¨
As of November 3, 2004, 47,500,233 shares, $0.001 par value per share, of the registrant’s common stock were outstanding.
THE TRIZETTO GROUP, INC.
QUARTERLY REPORT ON
FORM 10-Q
For the Quarterly Period Ended September 30, 2004
i
PART I — FINANCIAL INFORMATION
The TriZetto Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| September 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 42,163 | $ | 56,026 | ||||
| Short-term investments |
10,343 | 18,843 | ||||||
| Restricted cash |
1,454 | 1,478 | ||||||
| Accounts receivable, net |
49,766 | 37,349 | ||||||
| Prepaid expenses and other current assets |
8,643 | 7,592 | ||||||
| Total current assets |
112,369 | 121,288 | ||||||
| Property and equipment, net |
32,394 | 41,124 | ||||||
| Capitalized software development costs, net |
27,792 | 25,479 | ||||||
| Goodwill |
37,646 | 37,579 | ||||||
| Other intangible assets, net |
7,454 | 6,040 | ||||||
| Other assets |
1,379 | 1,798 | ||||||
| Total assets |
$ | 219,034 | $ | 233,308 | ||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Short-term notes payable and line of credit |
$ | 24,429 | $ | 29,742 | ||||
| Capital lease obligations |
4,721 | 5,178 | ||||||
| Accounts payable |
10,880 | 11,483 | ||||||
| Accrued liabilities |
29,334 | 33,379 | ||||||
| Deferred revenue |
24,598 | 23,422 | ||||||
| Total current liabilities |
93,962 | 103,204 | ||||||
| Long-term notes payable |
1,899 | 2,138 | ||||||
| Capital lease obligations |
2,579 | 5,017 | ||||||
| Deferred revenue |
332 | 832 | ||||||
| Other long-term liabilities |
3,135 | 8,594 | ||||||
| Total liabilities |
101,907 | 119,785 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock |
47 | 47 | ||||||
| Additional paid-in capital |
405,189 | 402,702 | ||||||
| Deferred stock compensation |
(1,813 | ) | (863 | ) | ||||
| Accumulated deficit |
(286,296 | ) | (288,363 | ) | ||||
| Total stockholders’ equity |
117,127 | 113,523 | ||||||
| Total liabilities and stockholders’ equity |
$ | 219,034 | $ | 233,308 | ||||
See accompanying notes.
2
The TriZetto Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Recurring revenue |
$ | 36,657 | $ | 40,496 | $ | 120,562 | $ | 120,451 | ||||||||
| Non-recurring revenue |
30,350 | 35,522 | 79,712 | 103,217 | ||||||||||||
| Total revenue |
67,007 | 76,018 | 200,274 | 223,668 | ||||||||||||
| Cost of revenue: |
||||||||||||||||
| Recurring revenue |
23,299 | 28,862 | 84,537 | 87,082 | ||||||||||||
| Non-recurring revenue |
12,662 | 24,889 | 43,019 | 69,192 | ||||||||||||
| 35,961 | 53,751 | 127,556 | 156,274 | |||||||||||||
| Recurring revenue – loss on contracts |
— | — | (5,886 | ) | — | |||||||||||
| Non-recurring revenue – loss on contracts |
— | — | 4,988 | — | ||||||||||||
| — | — | (898 | ) | — | ||||||||||||
| Total cost of revenue |
35,961 | 53,751 | 126,658 | 156,274 | ||||||||||||
| Gross profit |
31,046 | 22,267 | 73,616 | 67,394 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
7,354 | 6,334 | 22,343 | 18,542 | ||||||||||||
| Selling, general and administrative |
16,155 | 11,172 | 44,658 | 40,427 | ||||||||||||
| Amortization of other intangible assets |
976 | 3,324 | 3,087 | 9,957 | ||||||||||||
| Total operating expenses |
24,485 | 20,830 | 70,088 | 68,926 | ||||||||||||
| Income (loss) from operations |
6,561 | 1,437 | 3,528 | (1,532 | ) | |||||||||||
| Interest income |
145 | 155 | 406 | 773 | ||||||||||||
| Interest expense |
(311 | ) | (483 | ) | (1,047 | ) | (1,515 | ) | ||||||||
| Income (loss) before provision for income taxes |
6,395 | 1,109 | 2,887 | (2,274 | ) | |||||||||||
| Provision for income taxes |
(420 | ) | (479 | ) | (820 | ) | (1,124 | ) | ||||||||
| Net income (loss) |
$ | 5,975 | $ | 630 | $ | 2,067 | $ | (3,398 | ) | |||||||
| Net income (loss) per share: |
||||||||||||||||
| Basic |
$ | 0.13 | $ | 0.01 | $ | 0.04 | $ | (0.07 | ) | |||||||
| Diluted |
$ | 0.12 | $ | 0.01 | $ | 0.04 | $ | (0.07 | ) | |||||||
| Shares used in computing net income (loss) per share: |
||||||||||||||||
| Basic |
47,067 | 46,307 | 46,897 | 46,066 | ||||||||||||
| Diluted |
48,396 | 47,955 | 48,212 | 46,066 | ||||||||||||
See accompanying notes.
3
The TriZetto Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended September 30 |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 2,067 | $ | (3,398 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Provision for doubtful accounts and sales allowance |
(1,772 | ) | (1,404 | ) | ||||
| Amortization of deferred stock compensation |
370 | 1,621 | ||||||
| Depreciation and amortization |
15,497 | 13,179 | ||||||
| Amortization of other intangible assets |
3,087 | 9,957 | ||||||
| Issuance of stock in connection with a prior acquisition |
— | 37 | ||||||
| Loss on sale of property and equipment |
— | 19 | ||||||
| Loss on contracts |
(898 | ) | — | |||||
| Changes in assets and liabilities: |
||||||||
| Restricted cash |
24 | 5,000 | ||||||
| Accounts receivable |
(10,750 | ) | 1,870 | |||||
| Prepaid expenses and other current assets |
(1,716 | ) | 1,960 | |||||
| Income tax receivable |
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