UNITED STATES | ||
SECURITIES AND EXCHANGE COMMISSION | ||
WASHINGTON, DC 20549 | ||
Form 10-K |
(Mark One) | |
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2013 | |
or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 001-35413 | ||
Greenway Medical Technologies, Inc. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 58-2412516 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) | |
100 Greenway Boulevard | ||
Carrollton, GA | 30117 | |
(Address of Principal Executive Offices) | (Zip Code) |
(770) 836-3100 |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act: |
Title of Each Class | Name of Each Exchange on Which Registered | |||
Common Stock, par value $0.0001 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: | ||
None | ||
Large accelerated filer | o | Accelerated filer | x | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | o |
DOCUMENTS INCORPORATED BY REFERENCE |
Page | ||
PART I | ||
Item 1. Business | 3 | |
Item 1A. Risk Factors | 19 | |
Item 1B. Unresolved Staff Comments | ||
Item 2. Properties | 30 | |
Item 3. Legal Proceedings | 30 | |
Item 4. Mine Safety Disclosures | 30 | |
PART II | ||
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 31 | |
Item 6. Selected Financial Data | 34 | |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 36 | |
Item 7A. Quantitative and Qualitative Disclosures about Market Risk | 52 | |
Item 8. Financial Statements and Supplementary Data | 52 | |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 52 | |
Item 9A. Controls and Procedures | 52 | |
Item 9B. Other Information | 53 | |
PART III | ||
Item 10. Directors, Executive Officers and Corporate Governance | 53 | |
Item 11. Executive Compensation | 53 | |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 53 | |
Item 13. Certain Relationships and Related Transactions, and Director Independence | 53 | |
Item 14. Principal Accountant Fees and Services | 53 | |
PART IV | ||
Item 15. Exhibits and Financial Statement Schedules | 53 | |
SIGNATURES | 56 |
1 |
● | failure to maintain adequate security measures for our customers confidential information and personal identifiable information and patient’s protected health information; |
2 |
Item 1. | Business. |
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● | Compelling Return on Investment. We believe providers are becoming increasingly aware of and comfortable with the potential benefits of using integrated EHR/PM solutions including helping them practice more advanced medicine and deliver higher-quality care, while simultaneously improving revenue generation and operating and cost efficiency. These systems can help providers practice more advanced medicine and enhance the quality of the care they deliver, while increasing their efficiency and profitability. Through the adoption and proper use of these solutions, providers can increase revenue and reduce costs. Providers are recognizing the potential of EHR/PM solutions to significantly improve their operations and profitability. These providers are also demanding more convenient mobile solutions, speech recognition solutions, as well as fully-integrated, clinically driven RCM solutions. |
● | Government Initiatives and Incentives. Over the last several years, the government has enacted initiatives to accelerate the adoption of certified EHR solutions. Most importantly, the enacted HITECH Act, part of the American Recovery and Reinvestment Act certified (“ARRA”), specifically targeted healthcare by providing a substantial amount of incentives to Healthcare Providers by Medicare and Medicaid programs to encourage the adoption of certified EHR products in the ambulatory market. Eligible professionals who qualify can receive financial incentives from Medicare or Medicaid. In order to qualify for these incentives, providers must achieve “meaningful use” of their certified EHR solutions. Meaningful use criteria have helped to establish standards for EHR products, resulting in higher adoption rates among providers. |
● | Trends in the Evolving Ambulatory Market. Three major trends impacting ambulatory providers are: (i) greater electronification of health data, which includes adoption of ambulatory technology solutions and the inter-operability of solutions across the broader healthcare community; (ii) growing consumerism, including more consumer participation in reimbursing providers, and (iii) greater interest in measuring quality outcomes; and initiatives aimed at improving population health. The electronic capture and exchange of health information is becoming standardized within the ambulatory market, leading to heightened interest in and need for interoperable technology solutions that achieve data liquidity. Furthermore, as patients are increasingly responsible for paying for the care they receive, they are becoming more engaged in decisions about which providers to use. Similar to consumers in other industries, patients weigh factors such as cost, quality, convenience and overall experience when selecting where to receive their care. Finally, providers want to deliver the most advanced care possible and participate in the improvement of population health. This may include participation by Healthcare Providers in clinical trials or contributing to health surveillance initiatives. Ambulatory providers now understand that the adoption of integrated EHR/PM and related technology solutions can help them succeed in this evolving and complex market by taking advantage of these key trends. |
We believe that many existing EHR and PM technology vendors do not adequately meet the evolving needs of Healthcare Providers. EHR systems are often difficult to use and disrupt provider workflows, creating inefficiencies and ultimately leading to low adoption rates within provider groups. Additionally, many EHR/PM systems are not integrated, which creates inefficiencies in not only the delivery and documentation of patient care, but also through multiple keying of the same data, which raises the potential for errors and inefficiency and results in a lack of confidence with the system. Lack of interoperability with IT systems in other care settings prevents the exchange of clinical, financial and administrative data within the practice itself, or with the rest of the healthcare community. Finally, many vendors have multiple versions of their software installed across their customer bases, which reduces their ability to provide effective service and support to ambulatory providers. Due in part to these dynamics, 35% to as much as 50% of providers who have adopted EHR solutions indicated that they are considering replacing their EHR systems, according to surveys conducted by KLAS. Greenway Medical has consistently invested in innovation, constantly updating its PrimeSUITE platform, and delivering new versions to existing users. Substantially all of the Company’s customer base operate from the same version of PrimeSUITE which is periodically updated as new features and functionality is released.
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● | PrimeEXCHANGE (Electronification), which facilitates data liquidity by enabling standards-based interoperability of clinical and financial data between providers and the broader healthcare community; |
● | PrimePATIENT (Consumerism), a consumer-driven patient portal also enables web-enabled consultations between patients and physicians, often referred to as e-visits that can supplement or replace traditional in-person office visits, save time for both patients and provider, and increase revenue for physicians; |
● | PrimeDATACLOUD (Population Health), a collaborative care portal that enables the aggregation of clinical, financial and administrative data across both related and disparate entities and electronic health record systems. The secure aggregation of data makes it possible for healthcare communities to manage population health, access longitudinal health records and report on quality outcomes. |
● | PrimeMOBILE (Electronfication), allows providers to access PrimeSUITE from their mobile devices when working remotely; |
● | PrimeSPEECH (Electronification), a sophisticated speech understanding solution that simplifies data entry into PrimeSUITE, improving workflow saving time and money that providers currently spend on transcription services; and |
● | PrimeRESEARCH (Population Health), our EHR-enabled research service that allows providers to participate in clinical research and contribute to population health initiatives. |
6 |
● | Enable the Delivery of Higher-Quality Care and More Advanced Medicine. Our provider customers can deliver higher-quality care and practice more advanced medicine using PrimeSUITE’s clinical decision support capabilities, clinical alerts and reminders, electronic order entry and tracking and active device controls that integrate data from peripheral medical devices directly into the patient’s record. PrimeSUITE’s clinical decision support capabilities assist providers in patient evaluation and diagnosis, evidence-based treatment, error reductions and proper data capture. Our clinical alerts and reminders ensure care is delivered to patients in a timely manner by notifying providers if a patient is due for an exam or test and identifying potential drug contra-indications based on the patient’s medical history. Our electronic order entry application increases the speed and accuracy of ordering, tracking and viewing results of prescriptions and lab tests. Active device controls capture data from peripheral medical devices, and integrate it directly into the patient’s record. Over time, clinical encounter data captured in PrimeSUITE creates a comprehensive electronic healthcare record that enables providers to more effectively identify and proactively address emerging trends in a patient’s health. |
● | Deliver Improved Financial Performance. Our solutions enhance provider economics by increasing revenue, improving receivables collection, and reducing administrative costs. They enable increased revenue capture at the point of care, whether in the office or working remotely on a mobile device, and the ability to see more patients due to more efficient workflows. Automated reporting of key metrics, through practice management dashboards, supports the generation of additional revenue by helping the provider track progress towards qualification for available incentive payments, such as those based on improvement in quality measures or for demonstrating use of e-prescribing and certified EHR technology. Reduced administrative costs are realized through reduction or elimination of transcription, paper chart, administrative staff and other costs. Additionally, space currently used to store paper records can be repurposed for revenue-generating activities, including additional exam and procedure rooms. |
● | Enhance the Workflow of the Provider. PrimeSUITE accommodates and supports the unique clinical workflows of providers in over 39 specialties and subspecialties and the financial and administrative workflows of their staff. Through our patented processes for specialty-specific templates, our suite of solutions delivered on the PrimeSUITE platform are adaptable to a provider’s workflow, which results in quick implementation and overcomes their aversion to switch to electronic systems from traditional paper-based records. |
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● | Position Providers for the Future of Healthcare. We believe the future of healthcare will require providers to deliver high-quality care in the most collaborative and cost-effective way possible, while dealing with increasing consumerism among patients and the desire to participate in the improvement of population health. We believe that in order to succeed in the future, providers will need an integrated and inter-operable ambulatory platform that allows them to connect, communicate and collaborate electronically with patients, other providers and the broader healthcare community. We believe providers will also need the ability to satisfy increasing consumer demands and contribute to the improvement of population health. In addition, the emergence of pay-for-performance and value-based reimbursement models will require that providers not only enhance the quality of care and patient experience but also be able to quantify and report on various measures and adapt quickly to changes in the healthcare market. |
![(DIAGRAM)](https://capedge.com/proxy/10-K/0001188112-13-002704/t77369001_v1.jpg)
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● | Proven, Long-Term Vision. We partner with Healthcare Providers to enable them to meet the changing needs of the ambulatory market. We have succeeded in developing innovative solutions and services to help providers respond to the key trends in the ambulatory market, which we identified early in our history as electronification, consumerism and improving population health. Our solutions rely on core EHR and PM capabilities, are interoperable and enable easy aggregation and sharing of patient information, enhance physician-patient relationships by providing online self-service options for patients and allowing providers to participate in improving population health through clinical research, health surveillance and disease registries. We continuously monitor themes that will shape the future for ambulatory care and develop innovative solutions and services to help providers succeed in an evolving market. |
● | Integrated Technology Model. Our integrated, scalable and flexible technology provides a range of benefits to our customers while also providing us a strong foundation for a sustainable business model. Our architecture has proven to be secure, reliable and support mission-critical operations for over 14,600 providers. Our EHR is based on an individual, integrated database that contains clinical, financial and administrative data and supports exceptional interoperability, data analytics and reporting. We have and will continue to develop a technology model that supports rapid innovation. Using our Greenway Service Manager architecture, our centralized support team can easily update customers to new versions of our solutions and provide monitoring services remotely. Our technology architecture scales to support ambulatory providers ranging from single provider practices to large enterprises with hundreds of providers. Our technology allows customers the flexibility to choose the deployment option they prefer, including either a cloud-based or premise-based model. Furthermore, our cloud-based internal technologies enable us to focus on innovative product and service development while outsourcing non-core activities, such as server hosting, server maintenance, application security and our other IT services. We believe this technology model provides a distinct competitive advantage. We are able to focus resources on our innovative product and service development, our strong customer service and our efficient and centralized customer support model. |
● | Superior Customer Service and Support. We believe that successful adoption of our solutions requires partnering with our customers to empower them to utilize our technology to its maximum capability. As such, customer service and support are one of our core priorities. Our commitment to our customers’ success starts during the sales process and continues throughout our relationship, including initial implementation, training, ongoing education and support, as well as continuous development of new functionalities, technology upgrades and business services. In addition to traditional training, we offer on-demand, web-based training options, webinars covering cutting-edge industry topics, such as how customers can meet “meaningful use” incentive criteria, and our annual user conference where customers meet one another, exchange ideas and learn how other customers have used our products and services to improve their businesses. We consider customer input critical to the development of new functionalities and a core part of customer service and support. We deliver a single version of our technology platform to all of our customers, which enable us to deliver “best-in-class” customer support. We offer phone, email and web-based technical and business support 24 hours a day and seven days a week, as well as remote monitoring and upgrade deployment services. We continuously improve our support processes, which leads to faster response and issue resolution times. Our high-quality customer service has contributed to our approximately 95% customer retention rate in a market where it is estimated that 35% to as many as 50% of providers who have adopted EHR technology are considering replacing it. |
● | Trusted Brand. We have a trusted and recognized brand with our customers and within our industry. As ambulatory providers compare available EHR solutions across multiple vendors, our recognized brand and reputation for differentiated technology, solutions and services position us for success. Our PrimeSUITE solution has received 13 “Best in KLAS” awards since 2004. PrimseSUITE 2014 (17.0) is 2014 compliant and was certified as a Complete EHR on February 6, 2013 by the Certification Commission for Health Information Technology (CCHIT), an ONC-ATCB, in accordance with the applicable eligible provider certification criteria adopted by the Secretary of Health and Human Services. The ONC 2014 Edition criteria supports both the Stage 1 and Stage 2 meaningful use measures required to qualify eligible providers and hospitals for funding under the American Recovery and Reinvestment Act (“ARRA”). Furthermore, PrimeSUITE has been selected as a solution of choice or option by a substantial majority of regional extension centers (“RECs”) with established operations. We believe that word-of-mouth referrals are a significant source of bookings, showing that our customers trust our solutions and services and are willing to recommend us to colleagues. These accolades, combined with our continued involvement in industry initiatives, focus on innovation and high levels of customer service and support, drive increased brand recognition among customers and in our industry. |
9 |
● | Attractive Business Model. Our broad range of solutions and services and our high customer retention rate provide us with a powerful business model. This model has driven our growth rate over the past several years due to our continued ability to sell our core PrimeSUITE solution to new customers and then build upon its success by providing complementary technology solutions and business services. Our high customer retention leads to a growing percentage of recurring revenue from support services, business services such as revenue cycle management and subscription revenue. Recurring revenue represented 55% of total revenue in 2013. The combination of this recurring revenue with our backlog of new business sold provides high revenue visibility. Our integrated technology solution provides operating leverage, allowing us to focus our research and development solely on innovation as opposed to integration of legacy technologies. Furthermore, our cost structure is also more efficient due to the ease of supporting and upgrading our technology platform. These factors help us drive predictable revenue growth and generate greater operating profit. |
● | Experienced Management Team. Our management team has significant experience in our industry and a majority of our executives have worked together for more than a decade. In the late 1990s, our team worked with ambulatory providers to develop a vision of the future of the healthcare market, including electronification, increasing consumerism and improved population health. Our team’s vision is now coming to fruition and has driven the design of our innovative solution suite and business services. Our operational teams are organized to optimize our key areas of (i) growth, (ii) innovation and (iii) customer service. Furthermore, our management team has been and remains heavily involved in the industry organizations that set policy and standards for healthcare in general and, more specifically, healthcare information technology. Our leadership efforts have served to establish our reputation for a consistent focus on developing solutions to meet both the current and future needs of providers in an evolving healthcare system. |
● | Increase our Share of the Expanding Market for Ambulatory Technology Solutions. We plan to capitalize on the large and growing ambulatory technology market opportunity by leveraging our targeted and multi-pronged sales strategy. We utilize a combination of direct, enterprise, indirect and small practice solutions sales teams, in addition to strategic partners, to attract new customers and drive penetration of PrimeSUITE. We believe our solutions address the most important clinical, financial and administrative needs of our large and growing customer base, and we are experiencing increasing demand for our solutions. Furthermore, as the ambulatory care market expands, we are offering our solutions to a wider range of customers, including FQHCs and employer and retail health clinics and other innovative delivery networks. Our market is underpenetrated and many customers are not satisfied with their current solutions. This dissatisfaction creates substantial opportunity to grow our business by attracting new customers and displacing existing and competitive products. |
● | Generate Greater Revenue per Customer by Expanding Their Use of Our Suite of Solutions and Services. We will continue to cross-sell our integrated product and service offerings to customers already using PrimeSUITE. As our customers successfully implement and utilize PrimeSUITE to improve efficiency and profitability of their practices, they increasingly adopt our complementary technologies and managed business services. These technologies include PrimeEXCHANGE, PrimePATIENT, PrimeDATACLOUD, PrimeMOBILE, Greenway Clearinghouse, PrimeSPEECH and PrimeIMAGE, and managed business services include PrimeRCM and PrimeRESEARCH. These solutions fully integrate with PrimeSUITE and its data structure to provide additional technological capabilities, further positioning our customers at the forefront of technology innovation. These solutions are built to work seamlessly with PrimeSUITE. As our customers use more of our solutions and services, we become more critical to their operating infrastructure, further solidifying our partnership with them and generating increased revenue per customer. |
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● | Develop Innovative Solutions for the Evolving Needs of the Ambulatory Provider Market. We continuously monitor and work with our customers to understand the evolving technology needs of the ambulatory provider market. The insights we gather help drive our development of new and innovative solutions and services. Two recent and notable examples are our PrimeRESEARCH and PrimeDATACLOUD solutions. PrimeRESEARCH helps physicians identify opportunities to participate in clinical research studies which simultaneously increase revenue and provide access to cutting edge therapies for their patients. PrimeDATACLOUD is a collaborative care portal that securely and cost-effectively empowers population health through the sharing and aggregation of clinical, financial and administrative data across electronic health record systems in different provider settings. In both cases, these products are used in conjunction with PrimeSUITE and are highly complementary to one another. We will continue to work closely with customers to develop solutions that position them to succeed as the ambulatory care market evolves. |
● | Expand Margins by Leveraging our Operating Platform. We expect operating margins to increase as we continue to grow revenue by substantially leveraging our existing infrastructure and operations. Our focused technology and business model enables us to efficiently deploy capital and resources in key areas such as sales and marketing and research and development. We have made, and will continue to make, investments in our technology infrastructure and processes, which we believe will allow us to profitably grow our business as we add new customers and solutions. |
● | Pursue Targeted Acquisitions. We intend to pursue acquisitions on a targeted basis, seeking out complementary and innovative technologies and services that augment and differentiate our current solutions. |
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● | PrimeRESEARCH. An EHR-enabled service that allows our customers to deliver the most advanced medicine possible and provides our customers with access to a vast network of clinical trials (Phase II, III, IV, post-market and observation), registries, pharmaceutical research, remote monitoring services, benchmarking services, EDC integration, and clinical trial management software. |
● | PrimeRCM. A clinically-driven revenue cycle service that includes accounts receivable management, patient and insurance follow up, and financial performance benchmarking. PrimeRCM is driven to provide expertise and service to navigate our customers through the emerging changes in reimbursement models, quality care initiatives, and accountable care. |
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● | Expanding the unintended disclosure of personal health records (PHI) defined as breach reporting, and the ability to submit a risk assessment matched to any breach incident; |
● | Expands the definition of a “covered entity” (with a compliance date of September 23, 2013) to update business associate agreements; |
● | Expands patient access to their health records; and |
● | Establishes a HIPAA compliance and readiness audit program effective October 1, 2013. |
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● | establishment registration and device listing with the FDA; |
● | the Quality System Regulation (“QSR”), which requires manufacturers, including third-party or contract manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all aspects of manufacturing; |
● | labeling regulations and FDA prohibitions against the advertising and promotion of products for uncleared, unapproved off-label uses and other requirements related to advertising and promotional activities; |
● | medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; |
● | corrections and removal reporting regulations, which require that manufacturers report to the FDA any field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; and |
● | post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device. |
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Item 1A. | Risk Factors |
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● | inability to integrate new operations, products, services and personnel; |
● | diversion of resources from our existing business; |
● | failure in client communication and branding awareness; |
● | inability to generate revenue from new products and services sufficient to offset associated acquisition costs; |
● | inability to maintain uniform standards, controls and policies; |
● | accounting issues that adversely affect our financial results; |
● | impairment of employee and customer relations as a result of any integration of new management personnel; and |
● | assumption of liabilities or other obligations associated with an acquired business. |
23 |
● | be time-consuming and expensive to defend, whether meritorious or not; |
● | require us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property; |
● | divert the attention of our technical and managerial resources; |
● | require us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable; |
● | prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive; |
● | subject us to significant liability for damages or result in significant settlement payments; or |
● | require us to indemnify our customers, as certain of our customer contracts require us to indemnify the customer for certain claims of infringement or alleged infringement of third-party’s intellectual property rights resulting from customer’s use of our intellectual property. |
24 |
● | restrict our ability to pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; |
● | limit our ability to make certain investments or sell or transfer assets; |
● | require us to obtain consent from our lenders with respect to acquisitions under certain circumstances; |
● | restrict our ability to consolidate, merge, sell or otherwise dispose of our properties or assets; and |
● | we do not impair our lenders’ security interests in our assets. |
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● | fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; |
● | changes in estimates of our financial results or recommendations by securities analysts; |
● | investors’ general perception of us; and |
● | changes in general economic, industry and market conditions. |
27 |
● | prepare and distribute periodic reports and other stockholder communications in compliance with our obligations under the federal securities laws and applicable stock exchange rules; |
● | create or expand the roles and duties of our Board of Directors and committees of the board; |
● | institute compliance and internal audit functions that are more comprehensive; |
● | evaluate and maintain our system of internal control over financial reporting, and, report on management’s assessment thereof, in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board; |
● | involve and retain outside legal counsel and accountants in connection with the activities listed above; |
● | enhance our investor relations function; and |
● | maintain internal policies, including those relating to disclosure controls and procedures. |
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Item 2. | Facilities |
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Price Range | |||||||||
High | Low | ||||||||
2012 | |||||||||
Quarter ended March 31, 2012(1) | $ | 16.19 | $ | 10.10 | |||||
Quarter ended June 30, 2012 | $ | 17.50 | $ | 12.20 | |||||
2013 | |||||||||
Quarter ended September 30, 2012 | $ | 17.24 | $ | 12.92 | |||||
Quarter ended December 31, 2012 | $ | 19.65 | $ | 14.61 | |||||
Quarter ended March 31, 2013 | $ | 17.20 | $ | 13.57 | |||||
Quarter ended June 30, 2013 | $ | 16.16 | $ | 11.02 |
(1) | Our common stock began trading on February 2, 2012. |
Number of securities to be issued upon exercise of outstanding options, warrants and rights (A) | Weighted average exercise price of outstanding options, warrants and rights (B) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C) | ||||||||||
Equity compensation plans approved by stockholders | 3,759,585 | (1) | $ | 7.33 | 1,673,691 | (2) | ||||||
Equity compensation plans not approved by stockholders | — | — | — | |||||||||
Total | 3,759,585 | $ | 7.33 | 1,673,691 |
(1) | Includes options outstanding under the Company’s 1999 Option Plan, 2004 Stock Plan, and 2011 Stock Plan. |
(2) | Includes shares available for issuance under the Company’s 2004 Stock Plan and 2011 Stock Plan. |
31 |
![(LINE GRAPH)](https://capedge.com/proxy/10-K/0001188112-13-002704/t77369002_v1.jpg)
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INDEXED RETURNS | ||||||||||||||||||||||||
Base | Quarter Ending | |||||||||||||||||||||||
Period | ||||||||||||||||||||||||
Company / Index | 2/1/12 | 6/30/12 | 9/30/12 | 12/31/12 | 3/31/13 | 6/30/13 | ||||||||||||||||||
Greenway Medical Technologies | 100 | 163.10 | 171.00 | 153.60 | 159.00 | 123.40 | ||||||||||||||||||
NYSE Composite Index | 100 | 98.37 | 104.03 | 106.46 | 114.82 | 114.89 | ||||||||||||||||||
S&P 1500 Health Care Technology Index | 100 | 106.90 | 102.38 | 98.31 | 119.89 | 121.32 |
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Item 6. | Selected Financial Data |
For the years ended June 30, | ||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Consolidated statements of operations data | ||||||||||||||||||||
Revenue: | ||||||||||||||||||||
Systems sales | $ | 20,650 | $ | 24,172 | $ | 31,726 | $ | 39,300 | $ | 40,975 | ||||||||||
Training and consulting services | 7,925 | 11,863 | 18,373 | 27,816 | 19,420 | |||||||||||||||
Support services | 11,421 | 16,031 | 22,401 | 33,143 | 44,553 | |||||||||||||||
Electronic data interchange and business services | 8,716 | 12,576 | 17,339 | 23,754 | 29,896 | |||||||||||||||
Total revenue | 48,712 | 64,642 | 89,839 | 124,013 | 134,844 | |||||||||||||||
Cost of revenue: | ||||||||||||||||||||
Systems sales(1) | 6,500 | 6,752 | 7,522 | 10,259 | 18,420 | |||||||||||||||
Training and consulting services(1) | 5,708 | 8,152 | 13,550 | 18,881 | 13,682 | |||||||||||||||
Support services(1) | 3,279 | 4,179 | 7,059 | 10,564 | 13,092 | |||||||||||||||
Electronic data interchange and business services(1) | 5,954 | 8,713 | 12,280 | 16,197 | 19,265 | |||||||||||||||
Total cost of revenue(1) | 21,441 | 27,796 | 40,411 | 55,901 | 64,459 | |||||||||||||||
Gross profit | 27,271 | 36,846 | 49,428 | 68,112 | 70,385 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales, general and administrative(1) | 20,370 | 27,727 | 37,399 | 47,565 | 58,336 | |||||||||||||||
Research and development(1) | 5,767 | 5,991 | 8,218 | 15,696 | 18,959 | |||||||||||||||
Total operating expenses(1) | 26,137 | 33,718 | 45,617 | 63,261 | 77,295 | |||||||||||||||
Operating income (loss) | 1,134 | 3,128 | 3,811 | 4,851 | (6,910 | ) | ||||||||||||||
Interest (income) expense and other expense, net | 153 | 115 | 46 | (14 | ) | (254 | ) | |||||||||||||
Income (loss) before income taxes | 981 | 3,013 | 3,765 | 4,865 | (6,656 | ) | ||||||||||||||
Provision (benefit) for income taxes | 26 | 148 | (29,200 | ) | 1,955 | (1,591 | ) | |||||||||||||
Net income (loss) | 955 | 2,865 | 32,965 | 2,910 | (5,065 | ) | ||||||||||||||
Preferred stock dividends and accretion | (9,014 | ) | (8,038 | ) | (54,961 | ) | 28,395 | — | ||||||||||||
Income (loss) available to common stockholders | $ | (8,059 | ) | $ | (5,173 | ) | $ | (21,966 | ) | $ | 31,305 | $ | (5,065 | ) | ||||||
Per share data: | ||||||||||||||||||||
Net income (loss) available to common shareholders per share: | ||||||||||||||||||||
Basic | $ | (0.81 | ) | $ | (0.48 | ) | $ | (1.90 | ) | $ | 1.66 | $ | (.17 | ) | ||||||
Diluted | $ | (0.81 | ) | $ | (0.48 | ) | $ | (1.90 | ) | $ | .11 | $ | (.17 | ) | ||||||
Weighted average number of common shares outstanding: | ||||||||||||||||||||
Basic | 9,947 | 10,684 | 11,579 | 18,809 | 29,577 | |||||||||||||||
Diluted | 9,947 | 10,684 | 11,579 | 25,369 | 29,577 |
Cost of revenue: | ||||||||||||||||||||
System sales | $ | — | $ | 8 | $ | 7 | $ | 11 | $ | 33 | ||||||||||
Training and consulting services | 57 | 64 | 74 | 290 | 192 | |||||||||||||||
Support services | 14 | 23 | 37 | 112 | 106 | |||||||||||||||
Electronic data interchange and business services | 1 | 1 | 9 | 55 | 19 | |||||||||||||||
Total cost of revenue | $ | 72 | $ | 96 | $ | 127 | $ | 468 | $ | 350 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Sales, general and administrative | $ | 482 | $ | 463 | $ | 1,118 | $ | 1,543 | $ | 3,394 | ||||||||||
Research and development | 11 | 63 | 154 | 744 | 679 | |||||||||||||||
Total operating expenses | 493 | 526 | 1,272 | 2,287 | 4,073 | |||||||||||||||
Total stock-compensation expense | $ | 565 | $ | 622 | $ | 1,399 | $ | 2,755 | $ | 4,423 |
(1) Includes stock-based compensation in the following amounts (in thousands): |
34 |
As of June 30, | ||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Consolidated balance sheet data: | ||||||||||||||||||||
Cash, cash equivalents, and short-term investments | $ | 9,711 | $ | 19,179 | $ | 16,168 | $ | 34,395 | $ | 11,227 | ||||||||||
Working capital | 9,861 | 16,966 | 14,446 | 34,630 | 14,347 | |||||||||||||||
Total assets | 22,210 | 38,604 | 82,156 | 133,123 | 126,129 | |||||||||||||||
Deferred revenue | 3,717 | 4,320 | 8,672 | 12,192 | 9,323 | |||||||||||||||
Long-term obligations | 1,904 | — | 349 | 116 | — | |||||||||||||||
Convertible preferred stock at fair value | 95,818 | 103,855 | 158,815 | — | — | |||||||||||||||
Accumulated deficit | (142,850 | ) | (148,024 | ) | (170,020 | ) | (138,715 | ) | (143,780 | ) | ||||||||||
Total shareholders’ (deficit) equity | (84,539 | ) | (79,996 | ) | (99,484 | ) | 98,846 | 101,675 | ||||||||||||
For the years ended June 30, | ||||||||||||||||||||
Other Financial Data | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||
(Unaudited) (in thousands) | ||||||||||||||||||||
Adjusted EBITDA(1) | $ | 2,029 | $ | 4,144 | $ | 6,385 | $ | 12,061 | $ | 6,732 | ||||||||||
Net cash provided by (used in) operating activities | (2,070 | ) | 6,628 | 6,243 | 8,286 | 4,646 | ||||||||||||||
Capital expenditures | 325 | 2,784 | 4,129 | 8,041 | 8,578 |
(1) | Adjusted EBITDA, a non-GAAP measure, is an unaudited number and represents income (loss) before interest, income taxes, depreciation and amortization, acquisition-related transaction costs and stock-based compensation. See discussion and reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP equivalent, in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” |
35 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
36 |
37 |
38 |
For the years ended June 30, | ||||||||||||
2011 | 2012 | 2013 | ||||||||||
(in thousands) | ||||||||||||
Revenue: | ||||||||||||
Systems sales | $ | 31,726 | $ | 39,300 | $ | 40,975 | ||||||
Training and consulting services | 18,373 | 27,816 | 19,420 | |||||||||
Support services | 22,401 | 33,143 | 44,553 | |||||||||
Electronic data interchange and business services | 17,339 | 23,754 | 29,896 | |||||||||
Total revenue | 89,839 | 124,013 | 134,844 | |||||||||
Cost of revenue: | ||||||||||||
Systems sales(1) | 7,522 | 10,259 | 18,420 | |||||||||
Training and consulting services(1) | 13,550 | 18,881 | 13,682 | |||||||||
Support services(1) | 7,059 | 10,564 | 13,092 | |||||||||
Electronic data interchange and business services(1) | 12,280 | 16,197 | 19,265 | |||||||||
Total cost of revenue | 40,411 | 55,901 | 64,459 | |||||||||
Gross profit | 49,428 | 68,112 | 70,385 | |||||||||
Operating expenses: | ||||||||||||
Sales, general and administrative(1) | 37,399 | 47,565 | 58,336 | |||||||||
Research and development(1) | 8,218 | 15,696 | 18,959 | |||||||||
Total operating expenses | 45,617 | 63,261 | 77,295 | |||||||||
Operating income (loss) | 3,811 | 4,851 | (6,910 | ) | ||||||||
Interest (income) expense and other expense, net | 46 | (14 | ) | (254 | ) | |||||||
Income (loss) before income taxes | 3,765 | 4,865 | (6,656 | ) | ||||||||
Provision (benefit) for income taxes | (29,200 | ) | 1,955 | (1,591 | ) | |||||||
Net income (loss) | $ | 32,965 | $ | 2,910 | $ | (5,065 | ) | |||||
Other Financial Data: | ||||||||||||
Adjusted EBITDA(2) | $ | 6,385 | $ | 12,061 | $ | 6,732 |
(1) Includes stock-based compensation in the following amounts: |
Cost of revenue: | ||||||||||||
System sales | $ | 7 | $ | 11 | $ | 33 | ||||||
Training and consulting services | 74 | 290 | 192 | |||||||||
Support services | 37 | 112 | 106 | |||||||||
Electronic data interchange and business services | 9 | 55 | 19 | |||||||||
Total cost of revenue | 127 | 468 | 350 | |||||||||
Operating expenses: | ||||||||||||
Sales, general and administrative | $ | 1,118 | $ | 1,543 | $ | 3,394 | ||||||
Research and development | 154 | 744 | 679 | |||||||||
Total operating expenses | 1,272 | 2,287 | 4,073 | |||||||||
Total stock-compensation expense | $ | 1,399 | $ | 2,755 | $ | 4,423 |
(2) | Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net income (loss) in the next section and is not a substitute for net income (loss), the GAAP equivalent. |
39 |
For the years ended June 30, | ||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
(Unaudited) (in thousands) | ||||||||||||||||||||
Reconciliation of net income (loss) to Adjusted EBITDA: | ||||||||||||||||||||
Net income (loss) | $ | 955 | $ | 2,865 | $ | 32,965 | $ | 2,910 | $ | (5,065 | ) | |||||||||
Stock-based compensation | 565 | 622 | 1,399 | 2,755 | 4,423 | |||||||||||||||
Depreciation and amortization | 406 | 432 | 1,252 | 4,372 | 9,129 | |||||||||||||||
Acquisition-related transaction costs | — | — | — | 123 | 145 | |||||||||||||||
Interest (income) expense, net | 77 | 77 | (31 | ) | (54 | ) | (309 | ) | ||||||||||||
Provision (benefit) for income taxes | 26 | 148 | (29,200 | ) | 1,955 | (1,591 | ) | |||||||||||||
Adjusted EBITDA | $ | 2,029 | $ | 4,144 | $ | 6,385 | $ | 12,061 | $ | 6,732 |
40 |
For the years ended June 30, | ||||||||||||||||
2010 | 2011 | 2012 | 2013 | |||||||||||||
Providers | ||||||||||||||||
Premise | 6,000 | 8,000 | 12,000 | 14,000 | ||||||||||||
Plus S | - | 200 | 400 | 600 | ||||||||||||
6,000 | 8,200 | 12,400 | 14,600 |
30-Jun-12 | 31-Mar-13 | 30-Jun-13 | YoY | Sequential | ||||||||||||||||
Non-recurring revenue | $ | 29,971 | $ | 24,612 | $ | 30,338 | 1 | % | 23 | % | ||||||||||
Recurring revenue | $ | 66,382 | $ | 78,702 | $ | 83,111 | 25 | % | 6 | % | ||||||||||
Total | $ | 96,353 | $ | 103,314 | $ | 113,449 | 18 | % | 10 | % |
41 |
42 |
43 |
Consolidated statements of operations (Unaudited) | ||||||||||||||||||||
2013– Quarter Ended | ||||||||||||||||||||
(In thousands) | September 30 | December 31 | March 31 | June 30 | Total | |||||||||||||||
Revenue: | ||||||||||||||||||||
Systems sales | $ | 9,035 | $ | 10,638 | $ | 10,430 | $ | 10,872 | $ | 40,975 | ||||||||||
Training and consulting services | 6,863 | 4,107 | 4,243 | 4,207 | 19,420 | |||||||||||||||
Support services | 10,292 | 11,059 | 11,375 | 11,827 | 44,553 | |||||||||||||||
Electronic data interchange and business services | 6,584 | 6,917 | 7,775 | 8,620 | 29,896 | |||||||||||||||
Total revenue | 32,774 | 32,721 | 33,823 | 35,526 | 134,844 | |||||||||||||||
Cost of revenue: | ||||||||||||||||||||
Systems sales | 3,007 | 4,415 | 5,221 | 5,777 | 18,420 | |||||||||||||||
Training and consulting services(1) | 4,602 | 3,312 | 3,281 | 2,487 | 13,682 | |||||||||||||||
Support services(1) | 3,125 | 3,189 | 3,340 | 3,438 | 13,092 | |||||||||||||||
Electronic data interchange and business services(1) | 4,194 | 4,399 | 5,130 | 5,542 | 19,265 | |||||||||||||||
Total cost of revenue | 14,928 | 15,315 | 16,972 | 18,282 | 64,459 | |||||||||||||||
Gross profit | 17,846 | 17,406 | 16,851 | 70,385 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales, general and administrative(1) | 13,324 | 14,749 | 15,088 | 15,175 | 58,336 | |||||||||||||||
Research and development(1) | 4,772 | 4,440 | 4,555 | 5,192 | 18,959 | |||||||||||||||
Total operating expenses | 18,096 | 19,189 | 19,643 | 20,367 | 77,295 | |||||||||||||||
Operating income (loss) | (250 | ) | (1,783 | ) | (2,792 | ) | (2,085 | ) | (6,910 | ) | ||||||||||
Interest (income) expense and other expense, net | (265 | ) | 33 | (22 | ) | - | (254 | ) | ||||||||||||
Income (loss) before income taxes | 15 | (1,816 | ) | (2,770 | ) | (2,085 | ) | (6,656 | ) | |||||||||||
Provision (benefit) for income taxes | 7 | (831 | ) | (2,162 | ) | 1,395 | (1,591 | ) | ||||||||||||
Net income (loss) | $ | 8 | $ | (985 | ) | $ | (608 | ) | $ | (3,480 | ) | $ | (5,065 | ) |
Other Financial Data: | ||||||||||||||||||||
Adjusted EBITDA(2) | $ | 2,609 | $ | 1,287 | $ | 588 | $ | 2,248 | $ | 6,732 | ||||||||||
Cost of revenue: | ||||||||||||||||||||
System sales | $ | 8 | $ | 8 | $ | 8 | $ | 9 | $ | 33 | ||||||||||
Training and consulting services | 47 | 48 | 46 | 51 | 192 | |||||||||||||||
Support services | 26 | 27 | 26 | 27 | 106 | |||||||||||||||
Electronic data interchange and business services | 5 | 5 | 5 | 4 | 19 | |||||||||||||||
Total cost of revenue | 86 | 88 | 85 | 91 | 350 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales, general and administrative | 843 | 791 | 791 | 969 | 3,394 | |||||||||||||||
Research and development | 170 | 169 | 169 | 171 | 679 | |||||||||||||||
Total operating expenses | 1,013 | 960 | 960 | 1,140 | 4,073 | |||||||||||||||
Total stock-compensation expense | $ | 1,099 | $ | 1,048 | $ | 1,045 | $ | 1,231 | $ | 4,423 |
44 |
Consolidated statements of operations (Unaudited) | ||||||||||||||||||||
2012 – Quarter Ended | ||||||||||||||||||||
(In thousands) | September 30 | December 31 | March 31 | June 30 | Total | |||||||||||||||
Revenue: | ||||||||||||||||||||
Systems sales | $ | 6,648 | $ | 9,205 | $ | 10,271 | $ | 13,176 | $ | 39,300 | ||||||||||
Training and consulting services | 6,603 | 6,301 | 7,643 | 7,269 | 27,816 | |||||||||||||||
Support services | 7,056 | 7,710 | 8,741 | 9,636 | 33,143 | |||||||||||||||
Electronic data interchange and business services | 5,343 | 5,906 | 6,210 | 6,295 | 23,754 | |||||||||||||||
Total revenue | 25,650 | 29,122 | 32,865 | 36,376 | 124,013 | |||||||||||||||
Cost of revenue: | ||||||||||||||||||||
Systems sales | 1,847 | 2,761 | 2,558 | 3,093 | 10,259 | |||||||||||||||
Training and consulting services(1) | 4,431 | 4,560 | 5,355 | 4,535 | 18,881 | |||||||||||||||
Support services(1) | 2,257 | 2,672 | 2,691 | 2,944 | 10,564 | |||||||||||||||
Electronic data interchange and business services(1) | 3,821 | 4,153 | 4,226 | 3,997 | 16,197 | |||||||||||||||
Total cost of revenue | 12,356 | 14,146 | 14,830 | 14,569 | 55,901 | |||||||||||||||
Gross profit | 13,294 | 14,976 | 18,035 | 21,807 | 68,112 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales, general and administrative(1) | 10,678 | 11,482 | 11,802 | 13,603 | 47,565 | |||||||||||||||
Research and development(1) | 3,165 | 3,844 | 4,021 | 4,666 | 15,696 | |||||||||||||||
Total operating expenses | 13,843 | 15,326 | 15,823 | 18,269 | 63,261 | |||||||||||||||
Operating income (loss) | (549 | ) | (350 | ) | 2,212 | 3,538 | 4,851 | |||||||||||||
Interest (income) and other expense, net | (47 | ) | (48 | ) | 115 | (6 | ) | (14 | ) | |||||||||||
Income (loss) before income taxes | (596 | ) | (398 | ) | 2,327 | 3,532 | 4,865 | |||||||||||||
Provision (benefit) for income taxes | (190 | ) | (130 | ) | 948 | 1,327 | 1,955 | |||||||||||||
Net income (loss) | $ | (406 | ) | $ | (268 | ) | $ | 1,379 | $ | 2,205 | $ | 2,910 |
Other Financial Data: | ||||||||||||||||||||
Adjusted EBITDA(2) | $ | 930 | $ | 1,303 | $ | 3,974 | $ | 5,854 | $ | 12,061 | ||||||||||
(1) Includes stock-based compensation in the following amounts: | ||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||
System sales | $ | 8 | $ | (2 | ) | $ | 3 | $ | 2 | $ | 11 | |||||||||
Training and consulting services | 92 | 119 | 34 | 45 | 290 | |||||||||||||||
Support services | 79 | 3 | 15 | 15 | 112 | |||||||||||||||
Electronic data interchange and business services | — | 43 | 6 | 6 | 55 | |||||||||||||||
Total cost of revenue | 179 | 163 | 58 | 68 | 468 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales, general and administrative | 214 | 343 | 218 | 768 | 1,543 | |||||||||||||||
Research and development | 664 | (76 | ) | 68 | 88 | 744 | ||||||||||||||
Total operating expenses | 878 | 267 | 286 | 856 | 2,287 | |||||||||||||||
Total stock-compensation expense | $ | 1,057 | $ | 430 | $ | 344 | $ | 924 | $ | 2,755 |
45 |
2013- Quarter Ended | September 30 | December 31 | March 31 | June 30 | Total | |||||||||||||||
Net (loss) income | $ | 8 | $ | (985 | ) | $ | (608 | ) | $ | (3,480 | ) | $ | (5,065 | ) | ||||||
Stock-based compensation expense | 1,099 | 1,048 | 1,045 | 1,231 | 4,423 | |||||||||||||||
Depreciation and amortization expense | 1,784 | 1,908 | 2,337 | 3,100 | 9,129 | |||||||||||||||
Acquisition-related transaction costs | - | 131 | 14 | - | 145 | |||||||||||||||
Interest and other expenses, net | (289 | ) | 16 | (38 | ) | 2 | (309 | ) | ||||||||||||
Provision (benefit) for income taxes | 7 | (831 | ) | (2,162 | ) | 1,395 | (1,591 | ) | ||||||||||||
Adjusted EBITDA: | $ | 2,609 | $ | 1,287 | $ | 588 | $ | 2,248 | $ | 6,732 | ||||||||||
2012 - Quarter Ended | September 30 | December 31 | March 31 | June 30 | Total | |||||||||||||||
Net (loss) income | $ | (406 | ) | $ | (268 | ) | $ | 1,379 | $ | 2,205 | $ | 2,910 | ||||||||
Stock-based compensation expense | 1,057 | 430 | 344 | 924 | 2,755 | |||||||||||||||
Depreciation and amortization expense | 460 | 1,149 | 1,353 | 1,410 | 4,372 | |||||||||||||||
Acquisition-related transaction costs | 123 | 123 | ||||||||||||||||||
Interest and other expenses, net | 9 | (1 | ) | (50 | ) | (12 | ) | (54 | ) | |||||||||||
Provision (benefit) for income taxes | (190 | ) | (130 | ) | 948 | 1,327 | 1,955 | |||||||||||||
Adjusted EBITDA: | $ | 930 | $ | 1,303 | $ | 3,974 | $ | 5,854 | $ | 12,061 |
46 |
For the years ended June 30, | ||||||||||||
2011 | 2012 | 2013 | ||||||||||
Net cash provided by operating activities | $ | 6,243 | $ | 8,286 | $ | 4,646 | ||||||
Net cash used in investing activities | (20,314 | ) | (42,136 | ) | (9,362 | ) | ||||||
Net cash provided by financing activities | 614 | 33,713 | 2,315 | |||||||||
Net decrease in cash and cash equivalents | $ | (13,457 | ) | $ | (137 | ) | $ | (2,401 | ) |
47 |
Total | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||
Operating leases | $ | 3,936 | $ | 2,301 | $ | 1,196 | $ | 365 | $ | 58 | 16 |
48 |
● | The sale of information systems, which includes software, hardware and peripherals, deployment and training |
● | The provision of system support services (PCS), which includes software application support and hardware maintenance |
● | The provision of outsourcing services, which includes the processing of medical claims, electronic patient statements and business services including clinically-driven revenue cycle management and EHR-enabled research |
49 |
● | company performance, our growth rate and financial condition; |
● | the value of companies that we consider peers based on a number of factors including, but not limited to, similarity to us with respect to industry, business model, stage of growth, financial risk or other factors; |
● | changes in the Company and our prospects since the last time the Board of Directors approved option grants and/or made a determination of fair value; |
● | amounts recently paid by investors for our common stock in arm’s-length transactions; |
● | the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; |
● | the likelihood of achieving a liquidity event, such as an initial public offering or sale of all or a portion of the company; |
● | future financial projections; and |
● | valuations completed near the time of the grant. |
50 |
● | For the twelve quarters ending March 31, 2011, the Company’s consolidated statements of operations reflected cumulative income before taxes of $3.5 million. The quarter ending June 30, 2011, was anticipated to generate significant positive results (which results were record revenues of $29.4 million and income before taxes of $4.3 million). |
● | The Company had utilized a significant portion of its net operating loss carryforwards in tax returns filed in the three years ending June 30, 2010 and anticipated utilization of an additional portion of such carryforwards for its return for fiscal 2011. |
● | The significant growth in revenues and earnings the Company has experienced over the past three years is forecasted to continue. The Company has achieved or exceeded its forecast in each of the past four years as it has progressed toward significant scale and profitability. |
● | The Company’s market segment is extremely positively impacted by the HITECH Act which provides significant funding through 2014 to providers for acquisition and “meaningful use” of EHR technology systems as part of the Federal government’s initiatives to facilitate improvements in healthcare delivery and mitigate costs. |
● | The above factors are somewhat tempered by the current state of the U.S. economy, which is experiencing slow to modest growth. However, the healthcare sector appears to have been less affected than other sectors of the economy due in part to the impact of certain government initiatives. |
51 |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Item 8. | Consolidated Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
● | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; | |
● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the Directors of the Company; and | |
● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
52 |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
Page | ||
Greenway Medical Technologies, Inc. | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-7 |
53 |
Exhibit Number | Description of Document | |
3.1 | Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
3.2 | Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
4.1 | Form of the Company’s Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
4.2.1 | Form of the Company’s Series A Preferred Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Form S-1/A (File No. 333-175619) filed on September 23, 2011) | |
4.2.2 | Form of the Company’s Series B Preferred Stock Certificate (incorporated by reference to Exhibit 4.3 to the Company’s Form S-1/A (File No. 333-175619) filed on September 23, 2011) | |
4.3 | Amended and Restated Investors’ Rights Agreement, by and among Greenway Medical Technologies, Inc. and the investors listed on Schedule A thereto, dated October 30, 2006(incorporated by reference to Exhibit 4.2 to the Company’s Form S-1 (File No. 333-175619) filed on July 15, 2011) | |
4.4 | Second Amended and Restated Voting Agreement by and among Greenway Medical Technologies, Inc. and the investors listed on the schedules thereto dated October 30, 2006 (incorporated by reference to the Company’s Form S-1/A (incorporated by reference to Exhibit 4.3 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) | |
10.1* | Greenway Medical Technologies, Inc. 2011 Stock Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
10.2* | Greenway Medical Technologies, Inc. 2004 Stock Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) | |
10.2.1* | 2004 Stock Plan Form of ISO and NSO Notice of Stock Option Grant and Stock Option Agreement (incorporated by reference to Exhibit 10.2.1 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) | |
10.2.2* | Amendment to 2004 Stock Plan (incorporated by reference to Exhibit 10.2.2 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
10.3* | Greenway Medical Technologies 1999 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.3 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) | |
10.3.1* | 1999 Stock Option Plan Form of ISO Agreement (incorporated by reference to Exhibit 10.3.1 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) | |
10.3.2* | 1999 Stock Option Plan Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3.2 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) | |
10.4* | Form of Indemnification Agreement by and between Greenway Medical Technologies, Inc. and each of its directors (incorporated by reference to Exhibit 10.4 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
10.5 | Triple Net Lease, by and between Elizabeth Village, LLC and Greenway Medical Technologies, Inc., dated as of July 1, 2000 (incorporated by reference to Exhibit 10.5 to the Company’s Form S-1 (File No. 333-175619) filed on July 15, 2011) | |
10.6 | Credit Agreement, among Greenway Medical Technologies, Inc., Bank of America, N.A., and the other lenders, named therein, dated as of March 22, 2011 (incorporated by reference to Exhibit 10.6 to the Company’s Form S-1/A (File No. 333-175619) filed on August 26, 2011) |
54 |
10.6.1 | Amendment to Credit Agreement (incorporated by reference to Exhibit 10.6.1 to the Company’s Form S-1/A (File No. 333-175619) filed on December 5, 2011) | |
10.6.2 | Second Amendment to Credit Agreement (incorporated by reference to Exhibit 10.6.2 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
10.6.3^ | Third Amendment to Credit Agreement | |
10.6.4^ | Fourth Amendment to Credit Agreement | |
10.7 | Security Agreement, by and between Greenway Medical Technologies, Inc. and Bank of America, N.A., dated as of March 22, 2011 (incorporated by reference to Exhibit 10.7 to the Company’s Form S-1 (File No. 333-175619) filed on July 15, 2011) | |
10.8+ | Software License and Services Agreement, by and between Greenway Medical Technologies, Inc. and Walgreen Co., dated as of February 28, 2011 (incorporated by reference to Exhibit 10.8 to the Company’s Form S-1/A (File No. 333-175619) filed on December 5, 2011) | |
10.9* | Form of 2011 Incentive Bonus Plan (incorporated by reference to Exhibit 10.9 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
10.10*+ | Form of 2012 Incentive Bonus Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on March 5, 2012) | |
10.11*+ | Form of 2013 Incentive Bonus Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on September 29, 2012) | |
10.12* | Form of Greenway Medical Technologies, Inc. 2011 Stock Plan Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on March 5, 2012) | |
14.1 | Greenway Medical Technologies, Inc. Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14 to the Company’s Form S-1/A (File No. 333-175619) filed on January 18, 2012) | |
21^ | List of subsidiaries | |
23.1^ | Consent of Grant Thornton LLP | |
31.1^ | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2^ | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1^ | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | Interactive Data File** |
^ | Filed herewith | |
* | Denotes management contract or compensatory arrangement. | |
+ | Certain portions have been omitted pursuant to a confidential treatment request. Omitted information will be filed separately with the SEC. |
55 |
GREENWAY MEDICAL TECHNOLOGIES, INC. | |||
By: | /s/ Wyche T. Green, III | ||
�� | |||
Wyche T. Green, III | |||
President and Chief Executive Officer |
Signature | Title | Date | |||||||
/s/ Wyche T. Green, III | President, Chief Executive Officer, Director | September 13, 2013 | |||||||
Wyche T. Green, III | (Principal Executive Officer) | ||||||||
/s/ W. Thomas Green, Jr. | Chairman of the Board of Directors | September 13, 2013 | |||||||
W. Thomas Green, Jr. | |||||||||
/s/ James A. Cochran | Chief Financial Officer | September 13, 2013 | |||||||
James A. Cochran | (Principal Financial and Accounting Officer) | ||||||||
/s/ Noah Walley | |||||||||
Noah Walley | Director | September 13, 2013 | |||||||
/s/ Thomas T. Richards | Director | September 13, 2013 | |||||||
Thomas T. Richards | |||||||||
/s/ Walter Turek | Director | September 13, 2013 | |||||||
Walter Turek | |||||||||
/s/ Neal Morrison | Director | September 13, 2013 | |||||||
Neal Morrison | |||||||||
/s/ Robert Hensley | Director | September 13, 2013 | |||||||
Robert Hensley |
56 |
Page | ||
Greenway Medical Technologies, Inc. | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-7 |
F-1 |
/s/ Grant Thornton LLP |
Atlanta, Georgia |
September 13, 2013 |
F-2 |
ConsolidatedBalanceSheets |
(Dollars in Thousands) |
June 30, | ||||||||
2013 | 2012 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,184 | $ | 5,585 | ||||
Short-term investments | 8,043 | 29,350 | ||||||
Accounts receivable, net of a $900 and $720 allowance for doubtful accounts in 2013 and 2012, respectively | 21,151 | 28,875 | ||||||
Inventory, net | 284 | 281 | ||||||
Prepaid and other current assets | 3,772 | 3,001 | ||||||
Deferred tax assets | 2,407 | 1,699 | ||||||
Total current assets | 38,841 | 68,791 | ||||||
Property and equipment, net | 28,416 | 20,340 | ||||||
Software development cost, net | 28,142 | 17,156 | ||||||
Acquired technology and other assets | 1,819 | 510 | ||||||
Deferred tax assets — noncurrent, net | 26,903 | 25,846 | ||||||
Goodwill | 1,540 | 440 | ||||||
Other assets | 468 | 40 | ||||||
Total assets | $ | 126,129 | $ | 133,123 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 9,325 | $ | 12,436 | ||||
Accrued liabilities | 5,846 | 9,533 | ||||||
Deferred revenue | 9,323 | 12,192 | ||||||
Total current liabilities | 24,494 | 34,161 | ||||||
Obligation for purchased technology | — | 116 | ||||||
Commitments | ||||||||
Shareholders’ equity: | ||||||||
Common stock | 3 | 3 | ||||||
Additional paid-in capital | 245,412 | 237,558 | ||||||
Accumulated deficit | (143,780 | ) | (138,715 | ) | ||||
Total shareholders’ equity | 101,635 | 98,846 | ||||||
Total liabilities and shareholders’ equity | $ | 126,129 | $ | 133,123 |
F-3 |
ConsolidatedStatements ofOperations |
(In Thousands, except Per Share Data) |
For the years ended June 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Revenue: | ||||||||||||
Systems sales | $ | 40,975 | $ | 39,300 | $ | 31,726 | ||||||
Training and consulting services | 19,420 | 27,816 | 18,373 | |||||||||
Support services | 44,553 | 33,143 | 22,401 | |||||||||
Electronic data interchange and business services | 29,896 | 23,754 | 17,339 | |||||||||
Total revenue | 134,844 | 124,013 | 89,839 | |||||||||
Cost of revenue: | ||||||||||||
Systems sales | 18,420 | 10,259 | 7,522 | |||||||||
Training and consulting services | 13,682 | 18,881 | 13,550 | |||||||||
Support services | 13,092 | 10,564 | 7,059 | |||||||||
Electronic data interchange and business services | 19,265 | 16,197 | 12,280 | |||||||||
Total cost of revenue | 64,459 | 55,901 | 40,411 | |||||||||
Gross profit | 70,385 | 68,112 | 49,428 | |||||||||
Operating expenses: | ||||||||||||
Sales, general and administrative | 58,336 | 47,565 | 37,399 | |||||||||
Research and development | 18,959 | 15,696 | 8,218 | |||||||||
Total operating expenses | 77,295 | 63,261 | 45,617 | |||||||||
Operating (loss) income | (6,910 | ) | 4,851 | 3,811 | ||||||||
Interest income | 379 | 103 | 58 | |||||||||
Interest expense | (70 | ) | (49 | ) | (27 | ) | ||||||
Other expense, net | (55 | ) | (40 | ) | (77 | ) | ||||||
(Loss) income before income taxes | (6,656 | ) | 4,865 | 3,765 | ||||||||
Provision (benefit) for income taxes | (1,591 | ) | 1,955 | (29,200 | ) | |||||||
Net (loss) income | (5,065 | ) | 2,910 | 32,965 | ||||||||
Preferred stock dividends and accretion | — | 28,395 | (54,961 | ) | ||||||||
Net (loss) income available to common shareholders | $ | (5,065 | ) | $ | 31,305 | $ | (21,996 | ) | ||||
Per share data: | ||||||||||||
Net (loss) income per share available to common shareholders: | ||||||||||||
Basic | $ | (.17 | ) | $ | 1.66 | $ | (1.90 | ) | ||||
Diluted | $ | (.17 | ) | $ | 0.11 | $ | (1.90 | ) | ||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 29,577 | 18,808 | 11,579 | |||||||||
Diluted | 29,577 | 25,369 | 11,579 |
F-4 |
Convertible Preferred | Shareholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||
Series A | Series B | Common Stock | ||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||
Balance, June 30, 2010 | 3,333 | $ | 49,466 | 4,632 | $ | 54,388 | 11,479 | $ | 11,300 | $ | 56,728 | $ | (148,024 | ) | $ | (79,996 | ) | |||||||||||||||||||
Common stock issued for acquired technology | - | - | - | - | 50 | 50 | 350 | - | 400 | |||||||||||||||||||||||||||
Exercise of stock options | - | - | - | - | 148 | 148 | 561 | - | 709 | |||||||||||||||||||||||||||
Employee stock compensation | - | - | - | - | - | - | 1,399 | - | 1,399 | |||||||||||||||||||||||||||
Accretion of preferred stock issue cost | - | - | - | 32 | - | - | - | (32 | ) | (32 | ) | |||||||||||||||||||||||||
Preferred dividends | - | 2,598 | - | 2,235 | - | - | - | (4,833 | ) | (4,833 | ) | |||||||||||||||||||||||||
Accretion adjustment of preferred stock fair value | - | 23,569 | - | 26,527 | - | - | - | (50,096 | ) | (50,096 | ) | |||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 32,965 | 32,965 | |||||||||||||||||||||||||||
Balance, June 30, 2011 | 3,333 | 75,633 | 4,632 | 83,182 | 11,677 | 11,498 | 59,038 | (170,020 | ) | (99,484 | ) | |||||||||||||||||||||||||
Exercise of stock options and warrants | - | - | - | - | 344 | - | 896 | - | 896 | |||||||||||||||||||||||||||
Employee stock compensation | - | - | - | - | - | - | 2,755 | - | 2,755 | |||||||||||||||||||||||||||
Preferred dividends | - | 1,299 | - | 1,184 | - | - | - | (2,483 | ) | (2,483 | ) | |||||||||||||||||||||||||
Accretion adjustment of preferred stock fair value | - | (14,827 | ) | - | (16,051 | ) | - | - | - | 30,878 | 30,878 | |||||||||||||||||||||||||
Convert $1 par common to $.0001 par common | - | - | - | - | - | (11,497 | ) | 11,497 | - | - | ||||||||||||||||||||||||||
Sale of common stock, net of issue cost and expenses | - | - | - | - | 6,389 | 1 | 56,252 | - | 56,253 | |||||||||||||||||||||||||||
Convert preferred stock to common stock | (3,333 | ) | (62,105 | ) | (4,632 | ) | (68,315 | ) | 10,712 | 1 | 130,420 | - | 130,421 | |||||||||||||||||||||||
Payments in connection with preferred stock conversion | - | - | - | - | - | - | (23,300 | ) | - | (23,300 | ) | |||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 2,910 | 2,910 | |||||||||||||||||||||||||||
Balance, June 30, 2012 | - | - | - | - | 29,122 | 3 | 237,558 | (138,715 | ) | 98,846 | ||||||||||||||||||||||||||
Exercise of stock options and warrants | 658 | 3,431 | 3,431 | |||||||||||||||||||||||||||||||||
Employee stock compensation | 4,423 | 4,423 | ||||||||||||||||||||||||||||||||||
Net loss | (5,065 | ) | (5,065 | ) | ||||||||||||||||||||||||||||||||
Balance, June 30, 2013 | - | $ | - | - | $ | - | 29,780 | $ | 3 | $ | 245,412 | $ | (143,780 | ) | $ | 101,635 |
F-5 |
For the years ended June 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net (loss) income | $ | (5,065 | ) | $ | 2,910 | $ | 32,965 | |||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||||||
Net stock compensation expense | 4,423 | 2,755 | 1,399 | |||||||||
Provision for deferred income taxes | (1,765 | ) | 1,682 | 2,333 | ||||||||
Reversal of deferred tax valuation allowance | — | — | (31,560 | ) | ||||||||
Depreciation and amortization | 9,129 | 4,372 | 1,252 | |||||||||
Provision for bad debts | 2,741 | 1,412 | 1,083 | |||||||||
Reduction in obligation for acquired technology | — | (100 | ) | — | ||||||||
Changes in current assets and liabilities: | ||||||||||||
Accounts receivable | 5,052 | (12,176 | ) | (7,680 | ) | |||||||
Inventory | (3 | ) | 179 | (136 | ) | |||||||
Prepaids and other current assets | (1,199 | ) | (1,296 | ) | (1,012 | ) | ||||||
Accounts payable and accrued liabilities | (5,798 | ) | 5,028 | 3,247 | ||||||||
Deferred revenue | (2,869 | ) | 3,520 | 4,352 | ||||||||
Net cash provided by operating activities | 4,646 | 8,286 | 6,243 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of short-term investments | (1,635 | ) | (29,609 | ) | (17,561 | ) | ||||||
Sales of short-term investments | 22,942 | 10,707 | 7,115 | |||||||||
Purchases of property and equipment | (8,578 | ) | (8,041 | ) | (4,129 | ) | ||||||
Business combinations to acquire technology and other assets | (6,750 | ) | (3,000 | ) | — | |||||||
Capitalized software development cost | (15,341 | ) | (12,193 | ) | (5,739 | ) | ||||||
Net cash used in investing activities | (9,362 | ) | (42,136 | ) | (20,314 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Payments on capital leases | — | — | (12 | ) | ||||||||
Payments on obligation for acquired technology | (116 | ) | (137 | ) | (83 | ) | ||||||
Proceeds from exercise of stock options and warrants, net of issuance costs | 3,431 | 897 | 709 | |||||||||
Contingent consideration paid for business combination | (1,000 | ) | — | — | ||||||||
Conversion of preferred stock | — | (23,300 | ) | — | ||||||||
Sale of Common Stock | — | 56,253 | — | |||||||||
Net cash provided by financing activities | 2,315 | 33,713 | 614 | |||||||||
Net decrease in cash and cash equivalents | (2,401 | ) | (137 | ) | (13,457 | ) | ||||||
Cash and cash equivalents at beginning of year | 5,585 | 5,722 | 19,179 | |||||||||
Cash and cash equivalents at end of year | $ | 3,184 | $ | 5,585 | $ | 5,722 | ||||||
Supplemental cash flow information: | ||||||||||||
Cash paid for interest | $ | 70 | $ | 8 | $ | 27 | ||||||
Cash paid for taxes | $ | 326 | $ | 196 | $ | 333 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Conversion of preferred stock | $ | — | $ | 130,421 | $ | — | ||||||
Common stock and obligation for future payments at fair value, given in exchange for acquisition of technology | $ | — | $ | 954 | $ | 974 | ||||||
Reduction in obligation for acquired technology | $ | — | $ | 100 | $ | — |
F-6 |
1. | Description of Company |
2. | Summary of Significant Accounting Policies |
F-7 |
For the years ended June 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Balance at beginning of period | $ | 720 | $ | 585 | $ | 900 | ||||||
Provision for bad debts | 2,741 | 1,412 | 1,083 | |||||||||
Write-offs | (2,561 | ) | (1,277 | ) | (1,398 | ) | ||||||
Balance at end of period | $ | 900 | $ | 720 | $ | 585 |
Software | 3 | years | ||
Computer and other equipment | 3 | years | ||
Leasehold improvements | Lesser of lease term or 7 | years | ||
Furniture and fixtures | 5 | years | ||
Building and related | 15 - 39 | years |
F-8 |
● | The sale of information systems, which includes software, hardware and peripherals, deployment and training |
● | The provision of system support services (PCS), which includes software application support and hardware maintenance |
● | The provision of outsourcing services, which includes the processing of medical claims, electronic patient statements and business services including clinically-driven revenue cycle management and EHR-enabled research |
F-9 |
F-10 |
F-11 |
June 30, 2013 | June 30, 2012 | June 30, 2011 | ||||||||||
Series A Convertible Preferred Stock: | ||||||||||||
Fair value measurement at beginning of period | $ | — | $ | 75,633 | $ | 49,466 | ||||||
Change in fair value recorded in accumulated deficit | — | (13,528 | ) | 26,167 | ||||||||
Conversion to common in connection with IPO | — | (62,105 | ) | — | ||||||||
Fair value measurement at end of period | $ | — | $ | — | $ | 75,633 |
June 30, 2013 | June 30, 2012 | June 30, 2011 | ||||||||||
Series B Convertible Preferred Stock: | ||||||||||||
Fair value measurement at beginning of period | $ | — | $ | 83,182 | $ | 54,388 | ||||||
Change in fair value recorded in accumulated deficit | — | (14,867 | ) | 28,794 | ||||||||
Conversion to common in connection with IPO | — | (68,315 | ) | — | ||||||||
Fair value measurement at end of period | $ | — | $ | — | $ | 83,182 |
F-12 |
F-13 |
3. | Short-term Investments |
June 30 | ||||||||
2013 | 2012 | |||||||
U.S. agency bonds | $ | — | $ | 2,071 | ||||
Corporate bonds | 84 | 359 | ||||||
Mutual funds | 7,946 | 26,875 | ||||||
Money market funds | 13 | 45 | ||||||
Total | $ | 8,043 | $ | 29,350 |
4. | Property and Equipment |
Property and equipment consists of (in thousands): |
June 30, | ||||||||
2013 | 2012 | |||||||
Land | $ | 1,287 | $ | 1,172 | ||||
Building and related | 17,749 | 4,433 | ||||||
Leasehold improvements | 304 | 304 | ||||||
Equipment | 1,582 | 3,366 | ||||||
Furniture and fixtures | 4,876 | 1,390 | ||||||
Purchased software | 5,874 | 3,056 | ||||||
Acquired technology | 7,581 | 3,894 | ||||||
39,253 | 17,615 | |||||||
Less — Accumulated depreciation and amortization | (11,109 | ) | (6,509 | ) | ||||
28,144 | 11,106 | |||||||
Construction in progress | 272 | 9,234 | ||||||
Total | $ | 28,416 | $ | 20,340 |
5. | Acquisitions |
F-14 |
Assets Acquired | Estimated Fair Value (in thousands) | Estimated Useful Life | |||
Net Working Capital | $ | 69 | N/A | ||
Property and Equipment | 352 | 3 years | |||
Developed Technology | 2,437 | 3 years | |||
Customer Relationships | 1,054 | 9 years | |||
Non-competition Agreements | 211 | 3-5 years | |||
Trademarks | 277 | 10 years | |||
Goodwill | 1,100 | Indefinite | |||
Total fair value of consideration | $ | 5,500 |
Assets Acquired | Estimated Fair Value (in thousands) | Estimated Useful Life | ||||
Developed Technology | $ | 2,920 | 3 years | |||
Customer Relationships | 530 | 5 years | ||||
Non-competition Agreements | 64 | 3-5 years | ||||
Goodwill | 440 | Indefinite | ||||
Total fair value of consideration | $ | 3,954 |
F-15 |
6 | Amortizable Intangible Assets |
June 30, 2013 | ||||||||||||||||
Amortizable Intangible Assets | Estimated Useful Lives (months) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | ||||||||||||
Customer relationships | 60-180 | $ | 1,584 | $ | ( 235 | ) | $ | 1,349 | ||||||||
Non-competition agreements | 36 - 60 | 275 | ( 68 | ) | 207 | |||||||||||
Trademarks | 120 | 277 | (14 | ) | 263 | |||||||||||
Totals | $ | 2,136 | $ | ( 317 | ) | $ | 1,819 |
June 30, 2012 | ||||||||||||||||
Amortizable Intangible Assets | Estimated Useful Lives (months) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | ||||||||||||
Customer relationships | 60 | $ | 530 | $ | ( 75 | ) | $ | 455 | ||||||||
Non-competition agreements | 36-60 | 64 | ( 9 | ) | 55 | |||||||||||
Totals | $ | 594 | $ | ( 84 | ) | $ | 510 |
Year ended June 30, | Amounts | |||
2014 | $ | 341 | ||
2015 | 329 | |||
2016 | 289 | |||
2017 | 181 | |||
2018 | 145 | |||
Thereafter | 534 | |||
Total | $ | 1,819 |
F-16 |
June 30 | ||||||||
2013 | 2012 | |||||||
Accrued salaries, wages and benefits | $ | 1,999 | $ | 4,936 | ||||
Accrued sales tax | 1,186 | 1,477 | ||||||
Accrued third party services | 2,303 | 1,827 | ||||||
Obligation for purchased technology | - | 954 | ||||||
Other accrued expenses | 358 | 339 | ||||||
Total | $ | 5,846 | $ | 9,533 |
F-17 |
(1) | 3,333,333 shares of Series A Convertible Preferred Stock converted into 4,210,533 shares of common stock based on application of the conversion ratio of 1.2631: 1; |
(2) | 4,631,579 shares of Series B Convertible Preferred Stock converted into a like number of shares of common stock based on a conversion ratio of 1: 1; |
(3) | in connection with the conversion of our convertible preferred stock, a mandatory cash payment of up to $42 million was due the holders thereof based on $4.75 per equivalent common share upon conversion; this amount was satisfied by (a) a payment of $23.3 million made to certain holders and (b) issuance of 1,870,124 shares of our common stock to those holders electing to receive common stock at the $10 IPO price in lieu of cash. |
2013 | 2012 | |||||||||||||||
Common Stock | Preferred | Common Stock | Preferred | |||||||||||||
Authorized | 80,000 | 20,000 | 80,000 | 20,000 | ||||||||||||
Issued | 29,780 | - | 29,122 | - | ||||||||||||
Outstanding | 29,780 | - | 29,122 | - |
F-18 |
Options Outstanding | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||
Outstanding as of July 1, 2010 | 2,340,681 | $ | 4.91 | |||||||||
Granted | 915,307 | 7.95 | ||||||||||
Exercised | (147,583 | ) | 4.80 | |||||||||
Canceled | (322,592 | ) | 4.09 | |||||||||
Outstanding as of June 30, 2011 | 2,785,813 | $ | 4.92 | |||||||||
Granted | 821,654 | 15.15 | ||||||||||
Exercised | (154,906 | ) | 5.14 | |||||||||
Canceled | (55,423 | ) | 6.88 | |||||||||
Outstanding as of June 30, 2012 | 3,397,138 | $ | 8.25 | $ | 35,336,000 | |||||||
Granted | 912,850 | 15.41 | ||||||||||
Exercised | (536,479 | ) | 5.04 | |||||||||
Canceled | (13,924 | ) | 9.90 | |||||||||
Outstanding as of June 30, 2013 | 3,759,585 | $ | 10.44 | $ | 18,598,000 | |||||||
Options exercisable as of June 30, 2013 | 1,836,519 | $ | 7.33 |
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Exercise Price | Number of Shares | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Exercisable as of June 30, 2013 | Weighted Average Remaining Contractual Life | |||||||||||||||||
$ | 3.00 | 5,031 | 0.42 | $ | 3.00 | 5,031 | 0.42 | |||||||||||||||
$ | 4.00 | 22,306 | 0.99 | $ | 4.00 | 19,181 | 0.92 | |||||||||||||||
$ | 4.75 | 611,035 | 3.34 | $ | 4.75 | 611,035 | 3.34 | |||||||||||||||
$ | 5.19 | 355,482 | 6.29 | $ | 5.19 | 265,059 | 6.27 | |||||||||||||||
$ | 6.00 | 66,891 | 1.47 | $ | 6.00 | 66,891 | 1.47 | |||||||||||||||
$ | 6.92 | 259,535 | 7.18 | $ | 6.92 | 195,624 | 7.15 | |||||||||||||||
$ | 7.00 | 4,883 | 0.38 | $ | 7.00 | 4,883 | 0.38 | |||||||||||||||
$ | 7.09 | 538,260 | 7.58 | $ | 7.09 | 317,000 | 7.59 | |||||||||||||||
$ | 11.58 | 176,500 | 8.00 | $ | 11.58 | 91,868 | 8.00 | |||||||||||||||
$ | 12.88 | 27,950 | 9.88 | $ | 12.88 | - | - | |||||||||||||||
$ | 13.31 | 253,984 | 8.04 | $ | 13.31 | 43,188 | 8.04 | |||||||||||||||
$ | 14.29 | 34,553 | 8.39 | $ | 14.29 | 32,084 | 8.39 | |||||||||||||||
$ | 14.50 | 3,750 | 8.69 | $ | 14.50 | 3,750 | 8.69 | |||||||||||||||
$ | 14.64 | 31,875 | 3.04 | $ | 14.64 | - | - | |||||||||||||||
$ | 15.28 | 616,350 | 9.21 | $ | 15.28 | 34,000 | 9.21 | |||||||||||||||
$ | 15.99 | 264,000 | 9.24 | $ | 15.99 | - | - | |||||||||||||||
$ | 16.25 | 487,200 | 8.92 | $ | 16.25 | 146,925 | 8.92 | |||||||||||||||
3,759,585 | 7.17 | 1,836,519 | 5.79 |
F-19 |
For the years ending June 30 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Risk-free interest rate | .68% - .72 | % | .69% - 1.51 | % | 1.14% - 2.02 | % | ||||||
Expected dividend yield | - | - | - | |||||||||
Expected volatility | 56.7 | % | 53.3 | % | 44.1 | % | ||||||
Expected lives of options | 6.25 years | 5 years | 5 years | |||||||||
Forfeiture rate | 1.2 | % | 1.4 | % | 4.1 | % | ||||||
Fair Value | $6.88 - $8.62 | $4.87 - $10.24 | $2.66 -$6.41 |
For the years ending June 30 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Current: | ||||||||||||
Federal | $ | — | $ | — | $ | 10 | ||||||
State | 174 | 273 | 17 | |||||||||
174 | 273 | 27 | ||||||||||
Deferred: | ||||||||||||
Federal | (1,671 | ) | 1,416 | 2,106 | ||||||||
State | (631 | ) | 266 | 227 | ||||||||
Change in deferred tax asset valuation allowance | 537 | — | (31,560 | ) | ||||||||
(1,765 | ) | 1,682 | (29,227 | ) | ||||||||
Provision (benefit) for income taxes | $ | (1,591 | ) | $ | 1,955 | $ | (29,200 | ) |
For the years ending June 30 | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Income tax computed at the federal statutory rate | $ | (2,263 | ) | $ | 1,654 | $ | 1,280 | |||||
State income taxes, net of federal income tax benefit | (221 | ) | 195 | 151 | ||||||||
Equity compensation | 1,001 | 673 | 391 | |||||||||
Other permanent items | 254 | 432 | 505 | |||||||||
Research and development and other credits | (647 | ) | (975 | ) | — | |||||||
Other | (252 | ) | (24 | ) | 33 | |||||||
Change in valuation allowance | 537 | — | (31,560 | ) | ||||||||
$ | (1,591 | ) | $ | 1,955 | $ | (29,200 | ) |
F-20 |
June 30 | ||||||||
2013 | 2012 | |||||||
Deferred tax assets (liabilities): | ||||||||
Deferred revenue | $ | 1,801 | $ | 3 | ||||
Stock option obligations | 1,095 | 1,115 | ||||||
Investments | 103 | 138 | ||||||
Fixed assets | — | 19 | ||||||
Intangibles | 688 | 287 | ||||||
Research and development credit | 4,792 | 3,320 | ||||||
Allowance for doubtful accounts | 336 | 274 | ||||||
Other | 361 | 1,463 | ||||||
Inventory | 19 | 13 | ||||||
Net operating loss carryforwards | 27,428 | 27,432 | ||||||
Deferred tax assets | 36,623 | 34,064 | ||||||
Fixed assets | (1,558 | ) | — | |||||
Capitalized software | (5,218 | ) | (6,519 | ) | ||||
Deferred tax liabilities | (6,776 | ) | (6,519 | ) | ||||
Valuation allowance | (537 | ) | — | |||||
Net deferred tax assets | $ | 29,310 | $ | 27,545 |
Amounts | ||||
2014 | $ | 1,565 | ||
2015 | 1,271 | |||
2016 | 433 | |||
2017 | 57 | |||
2018 and thereafter | 13 | |||
Total | $ | 3,339 |
F-21 |
F-22 |