Greenway Reports Fiscal 2013 Second-Quarter Results, Revises Outlook for Fiscal 2013

Greenway Reports Fiscal 2013 Second-Quarter Results, Revises Outlook for Fiscal 2013

12% Q2 Revenue Growth Driven by Higher Recurring Revenue Mix

32% Growth of Revenue from Recurring Sources


Gross Margin of 53% for Second Quarter Improves by 177 Basis Points YOY

CARROLLTON, Ga.--(BUSINESS WIRE)-- Greenway Medical Technologies, Inc. (NYS: GWAY) , which delivers innovative software and business services solutions for ambulatory care providers through its PrimeSUITE® platform, today announced financial results for the three months and six months ended December 31, 2012, as well as a revised outlook for results from operations for fiscal 2013.

"Our results for the second quarter of our fiscal year reflect continued strong growth of recurring revenue as providers adopt our cloud-based services, offset by a decline in revenue related to deployment," said Tee Green, president and chief executive officer of Greenway®. "We added more than 750 providers to our network during the second quarter, and we are gaining appeal among larger healthcare system accounts — transactions that are more complex and take more time to complete. We believe that the update to our outlook for the remainder of fiscal 2013 reflects an appropriate adjustment to the impact of an increasing percentage of our revenue derived from recurring sources."

Highlights

Highlights for the fiscal 2013 second quarter, when compared with the prior-year period, include:

  • Revenue growth of 12%, which includes recurring revenue growth of 32%;

  • Gross profit growth of 16% results in gross margin expansion of 177 basis points;

  • Cash flow from operations growth of 22% to $3.7 million.

Operating Results

For the three months ended December 31, 2012, Greenway generated revenue of $32.7 million, a 12% increase from $29.1 million for the comparable prior-year period. Revenue from recurring sources grew by 32%, and comprised 55% of total revenue for the fiscal 2013 second quarter. This compares with recurring revenue of 47% of total revenue for the prior-year period. The growth in recurring revenue as a percent of total revenue is a function of increased adoption of Greenway's cloud-based services, including PrimeSUITE, PrimePATIENT® patient portal and PrimeEXCHANGE®, as well as the growth of PrimeRCM®, Greenway's clinically driven revenue cycle management platform. Greenway's revenue mix for the second quarter was impacted by a decline in Training and Consulting revenue related to fewer deployments than in the prior-year period. Through the first half of fiscal 2013, Greenway's revenue has grown by 20%, to $65.5 million, compared with $54.8 million for the first half of fiscal 2012.

Greenway generated gross profit of $17.4 million for the three months ended December 31, 2012, an increase of 16% from $15.0 million for the prior-year period.

Gross profit margin for the fiscal 2013 second quarter improved by 177 basis points, to 53.2%, as a result of growth related to recurring subscription solutions and services, offset by a decline in gross margin for System Sales and Training and Consulting Services. Gross margin for recurring revenue sources grew to 57.8% for the three months ended December 31, 2012, from 49.9% for the prior-year period, as the customer adoption of innovative solutions increased and the Company improved margins on Customer Support Services and EDI and Business Services. Gross margin for System Sales and Training and Consulting Services declined as a result of fewer deployments in the quarter, compared to the prior-year period.

Greenway has earned gross profit of $35.3 million, and overall gross margin has improved to 53.8%, through the six months ended December 31, 2012. This compared with gross profit of $28.3 million, and gross margin of 51.6%, for the first half of the prior fiscal year.

Greenway reported a loss from operations of ($1.8 million) for the fiscal 2013 second quarter, which compares with an operating loss of ($350,000) for the prior-year period. Through six months ended December 31, 2012, Greenway has reported an operating loss of ($2.0 million), which compares with an operating loss of ($900,000) for the prior-year period.

The Company had a net loss of ($985,000), or (three cents) per share, based on a weighted average 30.9 million shares outstanding, for the three months ended December 31, 2012. This compares with a net loss of ($268,000) for the prior-year period. The Company's results for the three months ended December 31, 2011, reflected income available to common shareholders of $37.8 million, or $1.70 per share based on a weighted average 22 million shares outstanding. This included dividends and accretion related to preferred stock that was converted to common stock in February 2012.

As of December 31, 2012, Greenway had $27.4 million in cash and short-term investments and no outstanding indebtedness.

Greenway generated cash flow from operations of $3.7 million for the fiscal 2013 second quarter, up from $3.0 million for the comparable prior-year period. Through the first six months of fiscal 2013, Greenway generated cash flow from operations of $6.0 million, up from $3.8 million for the comparable period of fiscal 2012.

Non-GAAP Measures

Greenway's non-GAAP adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization, acquisition-related transaction costs and stock-based compensation, was $1.3 million for the three months ended December 31, 2012, unchanged from the prior-year period, and for both periods non-GAAP EBITDA margin was 4%. Through six months ended December 31, 2012, Greenway's adjusted EBITDA was $3.9 million, or 6% of revenue, a 75% increase from $2.2 million, or 4% of revenue, for the first half of the prior fiscal year.

Adjusted, or non-GAAP net income (loss), which is defined as net income before stock-based compensation, acquisition-related transaction costs and amortization of purchased intangibles and any estimated tax impact related to these items, was $(41,000), or (zero) cents per diluted share, for the three months ended December 31, 2012. This compares with non-GAAP net income of $231,000, or one cent per diluted share for the second quarter of fiscal 2012. For the six months ended December 31, 2012, Greenway's non-GAAP net income was $843,000, or two cents per share, which compares with adjusted net income of $512,000 for the first half of the prior fiscal year, or two cents per share.

The GAAP financial measures most directly comparable to each non-GAAP financial measure used, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release following the condensed financial statements.

Fiscal 2013 Outlook Update

Greenway Medical Technologies is updating its previously issued outlook for Fiscal 2013, based on actual results for the first half of the fiscal year. Greenway believes that its revenue will grow by 17% to 21% for the 12 months ended June 30, 2013, from fiscal 2012 actual results, while achieving gross margin and adjusted EBITDA margin improvement. The following table summarizes the Company's revised outlook for fiscal 2013 as of February 12, 2012:

Range

($ in millions except

per share data)

Revenue

$145.0 to $150.0

Gross Profit

$79.0 to $84.0

Margin

54.5% to 56.0%

Operating Income

$5.5 to $8.3

Effective Tax Rate

40%

Net income

$3.1 to $5.2

GAAP EPS

$0.10 to $0.17

Adjusted EBITDA

$18.0 to $21.0

Margin

12.4% to 14.0%

Adjusted EPS

$0.21 to $0.28

Conference Call

Greenway will host a conference call today, Tuesday, February 12, 2013, at 5 p.m. Eastern time to discuss the Company's earnings and other information. The call can be accessed by dialing (888) 679-8034 or (617) 213-4847 for international calls. The participant code is 98566108. For listen-only mode, participants should go to the Investors section of www.greenwaymedical.com prior to the call to register and download the necessary audio software.

An audio replay will be posted following the call and will be available from approximately 7 p.m. Eastern time on Feb. 12 through 11:59 p.m. Eastern time on Feb. 19. The replay will be accessible through a link on www.greenwaymedical.com/investors or by calling (888) 286-8010 or internationally (617) 801-6888. Replay code is 69503212.

About Greenway and PrimeSUITE

Greenway Medical Technologies, Inc. (NYS: GWAY) delivers smarter solutions for smarter healthcare. PrimeSUITE® — Greenway's certified and fully integrated electronic health record, practice management and interoperability solution — helps improve care coordination, quality and cost-efficiency as part of a smarter, sustainable healthcare system. Thousands of ambulatory care providers across more than 30 specialties and sub-specialties use cloud-based, remote-hosted or on-premise Greenway® solutions in healthcare enterprises, physician practices and clinics nationwide. For details, see greenwaymedical.com,Twitter, Facebook or YouTube.

Forward-Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company's financial condition, growth strategy, business development efforts, service offerings, and service delivery models. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. Risks that could affect the Company's future performance include, but are not limited to, our ability to adapt to evolving technology and industry standards; our ability to implement our growth strategy; our ability to retain management and other qualified personnel; failure to prevent disruptions in service or damage to our third-party providers' data centers; failure to avoid liability for the use of content we provide; regulation of the healthcare information technology industry; our ability to ensure our solutions meet industry and government standards; failure to maintain adequate security measures for our customers' confidential information and personal identifiable information and their patients' protected health information; our ability to obtain new provider clients; failure of the HITECH Act and other incentive programs to be fully implemented or funded by the government; our ability to implement our strategic relationships as currently intended; failure to establish, protect or enforce our intellectual property; restrictions in our credit facility and future indebtedness. Further information concerning these and other factors is included in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

Greenway, the Greenway logo, PrimeSUITE, PrimePATIENT, PrimeEXCHANGE and PrimeRCM are registered trademarks and the phrase "smarter solutions for smarter healthcare" is a trademark of Greenway Medical Technologies, Inc. Other product and company names are the property of their respective owners.

Greenway Medical Technologies, Inc.

Condensed Balance Sheets - Unaudited

(In Thousands)

December 31,

June 30,

2012

2012

Assets

Current assets:

Cash and cash equivalents

$

8,217

$

5,585

Short-term investments

19,161

29,350

Accounts receivable, net of a $763 and $720 allowance for doubtful accounts at December 31, 2012 and June 30, 2012, respectively

22,634

28,875

Inventory

283

281

Prepaids and other current assets

2,387

3,001

Deferred tax assets

1,679

1,699

Total current assets

54,361

68,791

Property and equipment, net

29,334

20,340

Software development cost, net

21,543

17,156

Acquired intangibles, net

2,092

510

Deferred tax assets - noncurrent

26,697

25,846

Goodwill

1,438

440

Other assets

467

40

Total assets

$

135,932

$

133,123

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

12,829

$

12,436

Accrued liabilities

10,372

9,533

Deferred revenue

10,121

12,192

Total current liabilities

33,322

34,161

Obligation for purchased technology

-

116

Shareholders' equity:

Common stock

3

3

Additional paid-in capital

242,299

237,558

Accumulated deficit

(139,692

)

(138,715

)

Total shareholders' equity

102,610

98,846

Total liabilities and shareholders' equity

$

135,932

$

133,123

Greenway Medical Technologies, Inc.

Condensed Statements of Operations - Unaudited

(In Thousands except Per Share Data)

Three Months Ended December 31,

Six Months Ended December 31,

2012

2011

2012

2011

Revenue:

System sales

$

10,638

$

9,205

$

19,673

$

15,854

Training and consulting services

4,107

6,301

10,970

12,904

Support services

11,059

7,710

21,351

14,767

Electronic data interchange and business services

6,917

5,906

13,501

11,248

Total revenue

32,721

29,122

65,495

54,773

Cost of revenue (Note 1):

System sales

4,415

2,761

7,422

4,608

Training and consulting services

3,312

4,560

7,914

8,992

Support services

3,189

2,672

6,314

4,929

Electronic data interchange and business services

4,399

4,153

8,593

7,975

Total cost of revenue

15,315

14,146

30,243

26,504

Gross profit

17,406

14,976

35,252

28,269

Operating expenses (Note 1):

Sales, general and administrative

14,749

11,482

28,073

22,160

Research and development

4,440

3,844

9,212

7,008

Total operating expenses

19,189

15,326

37,285

29,168

Operating loss

( 1,783

)

(350

)

( 2,033

)

(899

)

Interest income (expense), net

( 16

)

-

273

(8

)

Other expense, net

( 17

)

(48

)

( 41

)

(87

)

Loss before benefit for income taxes

( 1,816

)

(398

)

( 1,801

)

(994

)

Benefit for income taxes

( 831

)

(130

)

( 824

)

(320

)

Net loss

( 985

)

(268

)

( 977

)

(674

)

Preferred stock dividends and accretion

-

37,772

-

28,395

Income (loss) available to common shareholders

$

( 985

)

$

37,504

$

( 977