Eclipsys 8-K Eclipsys Releases Second-Quarter Results

Exhibit 99.1

Eclipsys Releases Second-Quarter Results

ATLANTA--(BUSINESS WIRE)--August 5, 2010--Eclipsys Corporation (NASDAQ: ECLP), The Outcomes Company®, today announced results for the second quarter ended June 30, 2010.

Revenues for the quarter ended June 30, 2010 were $134.4 million, compared to revenues of $129.8 million for the quarter ended June 30, 2009.

On a GAAP basis, net income for the second quarter 2010 was $1.6 million, or $0.03 per diluted common share, compared to net loss of $4.1 million, or $0.07 per diluted common share in the second quarter 2009.

Non-GAAP net income for the second quarter 2010 was $9.2 million, or $0.16 per diluted common share, compared to non-GAAP net income for the second quarter 2009 of $8.9 million, or $0.16 per diluted common share.

A reconciliation of GAAP to non-GAAP results is included in the attached tables.

For the six months ended June 30, 2010, new business bookings were $259.4 million, which were positively impacted by new and existing customers making investment decisions to meet the meaningful use criteria of the American Reinvestment and Recovery Act. The company defines new business bookings as the total amount of all new contracts signed, excluding renewal contracts.

Eclipsys ended the quarter with $143.3 million of cash and $37.3 million in long-term investments.

“In the quarter, we executed successfully on our key growth drivers with continued strong bookings, significant new client wins and the release of our most user-intuitive clinical solution, Sunrise Enterprise 5.5,” said Philip M. Pead, Eclipsys president and chief executive officer. “Our results in the first half of the year and the momentum we are building in the market position us well to have a strong performance in 2010.”

Today’s Conference Call

Eclipsys executives will discuss the second-quarter results on a teleconference at 4:30 p.m. Eastern time on August 5. Persons interested in participating in the teleconference should call: (800) 230-1059 (in the U.S.) or (612) 234-9959 (international) approximately 15 minutes before the conference call 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.

Replay

About two hours after its completion, an audio replay of the conference call will be available on www.eclipsys.com for approximately 48 hours.

About Eclipsys

Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and performance management software, clinical content and professional services that help healthcare organizations improve clinical, financial and operational outcomes. For more information, see www.eclipsys.com or email info@eclipsys.com.

Non-GAAP Measures

The company has provided net income and earnings per share financial measures on a non-GAAP basis for the three months ended June 30, 2009 and June 30, 2010, which exclude non-cash stock-based compensation expense, amortization expense associated with acquisitions, and certain additional items that the company does not consider to be indicative of its underlying business performance, as listed on the attached GAAP to non-GAAP reconciliation tables. Because of the significance of the GAAP components excluded, 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. When considered in conjunction with comparable GAAP financial measures, management believes that the non-GAAP financial measures provide useful supplemental information to management and investors to facilitate the understanding and evaluation of the company’s underlying operating performance and future prospects, as well as comparisons of the company’s results with its prior period results that did not include these gains and/or charges, and with results of other companies on a more consistent basis. Internally, management also uses non-GAAP net income and earnings 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 company omits non-cash stock-based compensation because such expense can vary significantly between periods as a result of the timing (which determines various input assumptions that impact the compensation expense amount) and number of new equity-based incentive awards in any one period, including grants in connection with acquisitions. The company omits non-cash acquisition-related amortization expense arising from the acquisition of intangible assets in presenting non-GAAP earnings because such expense in any one period may not directly correlate to its underlying business performance and because such expense can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired intangible assets. This adjustment also provides management and investors with consistent measures of performance both before and after including such non-cash acquisition-related amortization charges. The economic substance of omitting the other items incurred that the company does not consider to be indicative of its underlying business performance derives from the fact that such episodic gains and/or charges make it more difficult to compare operating results of different periods, not all of which include such gains and/or 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 charges related to the company’s other non-GAAP adjustments may mask actual and expected future costs associated with such matters. Management compensates for these limitations by using both the GAAP and non-GAAP measures. Although the company has provided 2010 guidance for non-GAAP diluted earnings per share and non-GAAP operating income margin, a quantitative reconciliation to the equivalent GAAP guidance financial measures is not available given the number of variables that affect the reconciliation.

The company has provided reconciling tables attached to this release.

Caution Regarding Forward-Looking Statements

Certain statements in this news release or the investor call referenced herein, including those concerning the company’s operational initiatives, future performance expectations, and effects of economic conditions are forward-looking statements and actual results may differ materially from those projected or implied by the forward-looking statements 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. Economic conditions are unstable and may cause hospitals and other healthcare providers to curtail HIT system spending. Eclipsys’ cost reduction and other initiatives in response to the challenging economic environment, including initiatives designed to improve operational efficiencies, may not be effective, and it is difficult to predict what the company may be able to achieve. Eclipsys sales may fall below expectations due to market conditions, competition, and other factors, including client demands for pricing and financing concessions. Costs may be greater than anticipated due to the potential need to increase spending to ensure performance in accordance with commitments to clients, regulatory requirements, and other factors. Software development may take longer and cost more than expected, and incorporation of anticipated features and functionality (including as required to comply with ARRA and related regulations, as well as other certification standards) 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 regulatory requirements, 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, The Outcomes Company, and Sunrise Enterprise are either registered trademarks or trademarks of Eclipsys Corporation (or its subsidiaries) in the United States and certain other countries.

Eclipsys Corporation
GAAP Income Statements (unaudited)
(in thousands, except per share amounts)
		GAAP											GAAP
		Three Months Ended											Year-to-date
		June 30, 2010			June 30, 2009				$ Change		% Change		June 30, 2010			June 30, 2009				$ Change		% Change
Revenues:
	Systems and services	$	131,480		$	127,675		$	3,805		3.0	%	$	257,037		$	255,812		$	1,225		0.5	%
	Hardware		2,962			2,173			789		36.3	%		5,765			4,202			1,563		37.2	%
	Total revenues		134,442			129,848			4,594		3.5	%		262,802			260,014			2,788		1.1	%
Cost and expenses:
	Costs of systems and services		71,208			68,315			2,893		4.2	%		136,407			135,189			1,218		0.9	%
	Costs of hardware		2,412			1,950			462		23.7	%		4,864			3,606			1,258		34.9	%
	Sales and marketing		17,293			27,394			(10,101	)	-36.9	%		37,041			50,144			(13,103	)	-26.1	%
	Research and development		17,229			13,872			3,357		24.2	%		30,690			27,364			3,326		12.2	%
	General and administrative		12,321			12,429			(108	)	-0.9	%		20,888			24,451			(3,563	)	-14.6	%
	Restructuring		-			-			-					-			5,434			(5,434	)	-100.0	%
	Depreciation and amortization		8,564			8,117			447		5.5	%		16,790			16,152			638		3.9	%
	Total costs and expenses		129,027			132,077			(3,050	)	-2.3	%		246,680			262,340			(15,660	)	-6.0	%
Income (loss) from operations			5,415			(2,229	)		7,644		*			16,122			(2,326	)		18,448		*
Gain (loss) on sale of assets			-			838			(838	)	-100.0	%		-			1,237			(1,237	)	-100.0	%
Gain (loss) on ARS			(1,573	)		691			(2,264	)	327.6	%		(1,799	)		533			(2,332	)	-437.5	%
Interest income			372			681			(309	)	-45.4	%		789			1,528			(739	)	-48.4	%
Interest expense			(267	)		(961	)		694		-72.2	%		(611	)		(2,105	)		1,494		-71.0	%
Income (loss) before income taxes			3,947			(980	)		4,927		*			14,501			(1,133	)		15,634		*
Provision for income taxes			2,310			3,120			(810	)	-26.0	%		7,438			3,834			3,604		94.0	%
Net income (loss)		$	1,637		$	(4,100	)	$	5,737		*		$	7,063		$	(4,967	)	$	12,030		*
	Basic EPS:
Net income (loss)		$	1,637		$	(4,100	)	$	5,737		*		$	7,063		$	(4,967	)	$	12,030		*
Less: Income allocated to participating securities			7			-			7					35			-			35
Net income (loss) available to common shareholders		$	1,630		$	(4,100	)	$	5,730		*		$	7,028		$	(4,967	)	$	11,995		*
	Basic weighted average common shares outstanding		57,208			55,710			1,498		2.7	%		57,024			55,588			1,436		2.6	%
	Basic net income (loss) per common share	$	0.03		$	(0.07	)	$	0.10		*		$	0.12		$	(0.09	)	$	0.21		*
	Diluted EPS:
Net income (loss)		$	1,637		$	(4,100	)	$	5,737		*		$	7,063		$	(4,967	)	$	12,030		*
Less: Income allocated to participating securities			7			-			7					35			-			35
Net income (loss) available to common shareholders		$	1,630		$	(4,100	)	$	5,730		*		$	7,028		$	(4,967	)	$	11,995		*
	Basic weighted average common shares outstanding		57,208			55,710			1,498		2.7	%		57,024			55,588			1,436		2.6	%
	Dilutive effect of potential common shares		862			-			862					879			-			879
Diluted weighted average shares common outstanding			58,070			55,710			2,361		4.2	%		57,903			55,588			2,315		4.2	%
Diluted earnings (loss) per common share		$	0.03		$	(0.07	)	$	0.10		*		$	0.12		$	(0.09	)	$	0.21		*
	* - not meaningful

ECLIPSYS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
			As of
			June 30, 2010			December 31, 2009
			Unaudited
Assets
Current assets:
	Cash		$	143,284		$	123,160
	Restricted cash			2,495			-
	Accounts receivable, net of allowance for doubtful accounts of $3,436 and $2,994, respectively			120,421			111,712
	Receivable from sale of investments			17,175			-
	Prepaid expenses			28,042			26,832
	Other current assets			1,932			4,250
		Total current assets		313,349			265,954
Long-term investments				37,345			85,988
Property and equipment, net				61,894			56,579
Capitalized software development costs, net				54,282			51,889
Acquired technology, net				24,602			29,557
Intangible assets, net				5,988			7,411
Goodwill				100,008			100,008
Deferred tax asset				79,145			86,639
Other assets				11,835			13,039
		Total assets	$	688,448		$	697,064
Liabilities and Stockholders’ Equity
Current liabilities:
	Deferred revenue		$	141,415		$	135,185
	Accounts payable			22,300			14,752
	Accrued compensation costs			21,624			34,034
	Deferred tax liability			6,033			6,033
	Other current liabilities			18,279			20,994
		Total current liabilities		209,651			210,998
	Deferred revenue			4,127			4,896
	Long term debt and capital lease obligations			594			29,727
	Other long-term liabilities			16,113			15,616
		Total liabilities		230,485			261,237
Stockholders’ equity:
	Common stock, $0.01 par value, 200,000,000 shares authorized; issued and outstanding, 57,622,727 and 57,162,466, respectively			576			572
	Additional paid-in capital			612,142			599,111
	Accumulated deficit			(154,941	)		(162,004	)
	Accumulated other comprehensive income (loss)			186			(1,852	)
		Total stockholders’ equity		457,963			435,827
		Total liabilities and stockholders’ equity	$	688,448		$	697,064

ECLIPSYS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
				For the Six Months Ended June 30,						For the Three Months Ended June 30,
					2010			2009			2010			2009
Operating activities:
	Net income			$	7,063		$	(4,967	)	$	1,637		$	(4,102	)
	Adjustments to reconcile net income to net cash
		provided by operating activities:
		Depreciation and amortization			27,360			24,833			15,024			12,798
		Provision for bad debt			900			1,996			450			950
		(Gain)/loss on investments, net			1,799			(533	)		1,573			(691	)
		Stock compensation expense			7,395			11,169			3,714			6,761
		Deferred income taxes			6,372			3,674			1,827			3,222
		Gain on sale of assets			-			(1,237	)		-			(837	)
	Changes in operating assets and liabilities:										-
		Accounts receivable			(9,427	)		1,948			(7,957	)		(1,747	)
		Prepaid expenses and other current assets			892			1,580			233			3,034
		Other assets			702			(497	)		(2	)		(260	)
		Deferred revenue			5,933			(3,631	)		3,402			(2,824	)
		Accrued compensation			(12,395	)		8,633			(2,958	)		1,168
		Accounts payable and other current liabilities			483			(6,888	)		4,292			(292	)
		Long-term liabilities			485			1,565			458			814
		Other			85			108			77			23
			Total adjustments		30,584			42,720			20,133			22,119
			Net cash provided by operating activities		37,647			37,753			21,770			18,017
Investing activities:
		Purchases of property and equipment			(12,191	)		(12,555	)		(5,530	)		(5,282	)
		Proceeds from sales of marketable securities			32,474			150			27,899			0
		Capitalized software development costs			(12,456	)		(14,651	)		(4,365	)		(7,435	)
		Increase in restricted cash			(2,495	)		-			(2,495	)		-
		Earnout on disposition			-			1,241			0			399
		Cash paid for acquisitions, net of cash acquired			-			(2,819	)		0			(56	)
			Net cash provided by (used in) investing activities		5,332			(28,634	)		15,509			(12,374	)
Financing activities:
		Proceeds from stock options exercised			5,999			3,306			2,568			3,232
		Proceeds from employee stock purchase plan			375			454			174			212
		Repayment of secured financing			(29,000	)		-			(15,000	)		-
		Other			(147	)		(59	)		(99	)		(59	)
			Net cash provided by (used in) financing activities		(22,773	)		3,701			(12,357	)		3,385
Effect of exchange rates on cash and cash equivalents					(82	)		(199	)		(306	)		15
Net increase (decrease) in cash and cash equivalents					20,124			12,621			24,616			9,043
Cash and cash equivalents — beginning of period					123,160			108,304			118,668			111,882
Cash and cash equivalents — end of period				$	143,284		$	120,925		$	143,284		$	120,925
Non-cash investing activities:
	Funds from sale of investments not collected			$	17,175		$	-		$	17,175		$	-

Eclipsys Corporation
Stock-Based Compensation Expense (unaudited)
(in thousands)
		Three Months		Three Months		Three Months		Three Months				Three Months		Three Months		Three Months		Three Months
		Ended		Ended		Ended		Ended				Ended		Ended		Ended		Ended
		March 31, 2009		June 30, 2009		September 30, 2009		December 31, 2009			2009	March 31, 2010		June 30, 2010		September 30, 2010		December 31, 2010			2010
Cost and expenses:
	Costs of systems and services	$	493	$	506	$	501	$	475	$	1,975	$	465	$	581					$	1,046
	Costs of hardware										-										-
	Sales and marketing		2,494		4,237		1,774		1,373		9,878		1,931		1,521						3,452
	Research and development		453		546		565		706		2,270		481		703						1,184
	General and administrative		968		1,470		759		840		4,037		804		909						1,713
	Total costs and expenses	$	4,408	$	6,759	$	3,599	$	3,394	$	18,160	$	3,681	$	3,714	$	-	$	-	$	7,395

Eclipsys Corporation
Reconciliation of GAAP (Unaudited) to Non-GAAP Items
(in thousands, except per share amounts)
			Three Months Ended			Three Months Ended			Year-to-date			Year-to-date
			June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Revenues:
	GAAP Revenues		$	134,442		$	129,848		$	262,802		$	260,014
		Premise acquisition accounting (1)		-			3,612			-			5,351
	Non-GAAP revenues		$	134,442		$	133,460		$	262,802		$	265,365
	GAAP Recurring revenues		$	96,682		$	89,909		$	190,991		$	178,010
		Premise acquisition accounting (1)		-			441			-			728
	Non-GAAP Recurring revenues		$	96,682		$	90,350		$	190,991		$	178,738
	GAAP Professional services revenues		$	25,022		$	30,908		$	47,769		$	58,254
		Premise acquisition accounting (1)		-			682			-			922
	Non-GAAP Professional services revenues		$	25,022		$	31,590		$	47,769		$	59,176
	GAAP Periodic revenues		$	9,776		$	6,858		$	18,277		$	19,548
		Premise acquisition accounting (1)		-			2,387			-			3,586
	Non-GAAP Periodic revenues		$	9,776		$	9,245		$	18,277		$	23,134
	GAAP Hardware revenues		$	2,962		$	2,173		$	5,765		$	4,202
		Premise acquisition accounting (1)		-			102			-			115
	Non-GAAP Hardware revenues		$	2,962		$	2,275		$	5,765		$	4,317
Gross Margin
		Revenues	$	134,442		$	129,848		$	262,802		$	260,014
		Costs of systems and services		71,208			68,315			136,407			135,189
		Costs of hardware		2,412			1,950			4,864			3,606
	GAAP Gross margin (A)			60,822			59,583			121,531			121,219
		Adjustments
		Premise acquisition accounting (1)					3,058			-			4,552
		Stock-based compensation expense (2)		581			506			1,046			999
													-
	Non-GAAP gross margin		$	61,403		$	63,147		$	122,577		$	126,770
	GAAP gross margin percentage			45.2	%		45.9	%		46.2	%		46.6	%
	Non-GAAP gross margin percentage			45.7	%		47.3	%		46.6	%		47.8	%
Operating Expenses
	GAAP operating expenses (B)		$	55,407		$	61,812		$	105,409		$	123,545
		Stock-based compensation expense (2)		(3,133	)		(6,253	)		(6,349	)		(10,168	)
		Restructuring (3)					(3,192	)					(8,626	)
		Amortization (4)		(3,124	)		(3,124	)		(6,248	)		(6,248	)
		Merger costs (5)		(3,449	)					(3,449	)
													-
	Non-GAAP operating expenses		$	45,701		$	49,243		$	89,363		$	98,503

Eclipsys Corporation
Reconciliation of GAAP (Unaudited) to Non-GAAP Items
(in thousands, except per share amounts)
			Three Months Ended			Three Months Ended			Year-to-date			Year-to-date
			June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Gross Research and Development Expenses
	GAAP research and development		$	17,229		$	13,872		$	30,690		$	27,364
		Adjustments
		Stock-based compensation expense (2)		(703	)		(546	)		(1,184	)		(999	)
	Non-GAAP research and development			16,526			13,326			29,506			26,365
	Capitalized software and development costs			4,365			7,435			12,456			14,651
	Non-GAAP gross research and development expenses		$	20,891		$	20,761		$	41,962		$	41,016
Operating Income
	GAAP operating income		$	5,415		$	(2,229	)	$	16,122		$	(2,326	)
		Premise acquisition accounting (1)		-			3,058			-			4,552
		Stock-based compensation expense (2)		3,714			6,759			7,395			11,167
		Restructuring (3)		-			3,192						8,626
		Amortization (4)		3,124			3,124			6,248			6,248
		Merger costs (5)		3,449						3,449
	Non-GAAP operating income		$	15,702		$	13,904		$	33,214		$	28,267
	GAAP Operating Margin			4.0	%		-1.7	%		6.1	%		-0.9	%
	Non-GAAP Operating Margin			11.7	%		10.4	%		12.6	%		10.7	%
Pre-tax income
	GAAP pre-tax income		$	3,947		$	(980	)	$	14,501		$	(1,133	)
		Premise acquisition accounting (1)		-			3,058			-			4,552
		Stock-based compensation expense (2)		3,714			6,759			7,395			11,167
		Restructuring (3)		-			3,192			-			8,626
		Amortization (4)		3,124			3,124			6,248			6,248
		Merger costs (5)		3,449						3,449
		ARS redemption (6)		1,501						1,501
	Non-GAAP pre-tax income		$	15,735		$	15,153		$	33,094		$	29,460

Eclipsys Corporation
Reconciliation of GAAP (Unaudited) to Non-GAAP Items
(in thousands, except per share amounts)
			Three Months Ended		Three Months Ended			Year-to-date		Year-to-date
			June 30, 2010		June 30, 2009			June 30, 2010		June 30, 2009
Net Income
	GAAP net income		$	1,637	$	(4,100	)	$	7,063	$	(4,967	)
		Premise acquisition accounting (1)		-		1,810					2,841
		Stock-based compensation expense (2)		2,872		4,136			6,259		7,665
		Restructuring (3)		-		1,643					5,382
		Amortization (4)		1,748		1,747			3,682		3,898
		Merger costs (5)		2,032					2,032
		ARS redemption (6)		885					885
		Taxes				3,652					3,652
	Non-GAAP net income		$	9,174	$	8,888		$	19,921	$	18,471
Diluted earnings per share
	Diluted earnings per share		$	0.03	$	(0.07	)	$	0.12	$	(0.09	)
		Premise acquisition accounting (1)				0.03					0.05
		Stock-based compensation expense (2)		0.05		0.07			0.11		0.14
		Restructuring (3)				0.03					0.10
		Amortization (4)		0.03		0.03			0.06		0.07
		Merger costs (5)		0.03					0.03
		ARS redemption (6)		0.02					0.02
		Taxes				0.06					0.06
	Non-GAAP diluted earnings per share		$	0.16	$	0.16		$	0.34	$	0.33

Eclipsys Corporation
Reconciliation NOTES of GAAP (Unaudited) to Non-GAAP Items
	1	Deferred revenue adjustments net of deferred costs adjustments related to the Company's December 2008 acquisition of Premise Corporation. The amounts represent the reduction of deferred revenue and related deferred costs acquired from Premise as a result of purchase accounting adjustments.
	2	Stock based compensation expense.
	3	Severance related activity primarily in the Company's professional services organization.
	4	Amortization of intangible assets associated with 2008 acquisitions.
	5	Legal, accounting and other consulting fees associated with our announced merger with Allscripts.
	6	Realized loss on the sale of certain of the Company's auction rate securities.
		Notes
	A	GAAP gross margin equals revenue less costs of systems and services and costs of hardware.
	B	GAAP operating expenses include sales and marketing expense, research and development expense, general and administrative expense, depreciation and amortization expense, restructuring charge, and in process research and development charge.

CONTACT:
Eclipsys
Jason Cigarran, 404-847-5965
Vice President, Investor Relations
jason.cigarran@eclipsys.com