Exhibit 99.1
Healthaxis Announces Second Quarter 2006 Operating Results;
Results Continue Improvement from 2005 and First Quarter 2006
IRVING, Texas--(BUSINESS WIRE)--Aug. 9, 2006--Healthaxis Inc.
(Nasdaq:HAXS), an innovative provider of technology-enhanced, integrated
business process solutions and services, including claims and benefit
administration applications, web-enabled software solutions and outsourced
claims related services for health benefit administrators and health insurance
claims processors, reported financial results today for the three- and six-month
periods ending June 30, 2006.
Second Quarter 2006 Financial Highlights
-- 2006 second quarter revenues were $4.1 million, a 5% increase compared
to the first quarter of 2006. Revenues this quarter were also modestly
higher than in the second quarter of 2005, but over 10%, or almost
$400,000, higher than the fourth quarter of 2005.
-- Revenue from transaction fees, license fees, and BPO services all
showed improvement over the prior year's second quarter. The
improvement was primarily the result of new customer implementations.
As in the first quarter of 2006, professional services revenue
declined compared to the same quarter of 2005. This happened because a
significant portion of our billable professional services relates to
customer implementations, thus the revenue is deferred to future
periods. Deferred revenues increased approximately $278,000 during the
second quarter of 2006.
-- The 2006 second quarter net loss was $266,000 ($0.04 per share), a
reduction from the $325,000 loss ($0.07 per share) for the same
quarter in 2005. For comparison purposes, it should also be noted that
results for the second quarter of 2005 benefited from the elimination
of a contingent tax liability totaling $979,000 partially offset by a
lease abandonment charge of $500,000 related to moving the company's
headquarters. Net results were also substantially improved from the
first quarter of 2006.
The improved operating results for the second quarter of 2006 are primarily
derived from higher revenue, combined with lower corporate facility costs
resulting from the relocation of the Company's headquarters in June 2005, lower
amortization and depreciation expenses, and higher capitalized startup costs for
new customer implementations. The cost improvements were partially offset by
increases from the expansion of the company's operations to support the
implementation of new business, increased sales and marketing efforts begun in
the last half of 2005, and non-cash equity compensation of approximately
$41,000.
First Half 2006 Financial Highlights
-- Revenues for the first six months of 2006 were $8.0 million, slightly
lower than the $8.1 million reported for the same period of 2005.
Revenues from transaction fees, license fees, and BPO services each
increased in 2006 compared to last year. As with each of the first two
quarters of 2006, the overall decrease for the year to date period is
attributable to lower professional services revenue. This decrease is
due to the previously mentioned requirement to defer professional
services revenues tied to client implementations. Deferred revenues
have increased by approximately $647,000 since December 31, 2005.
-- The net loss attributable to common shareholders for the six months
ended June 30, 2006 was $728,000 ($0.12 per share) compared to $1.3
million ($0.30) for the same period of 2005. The improved financial
results stem from the factors previously described.
Company Highlights
-- We continue our large-scale customer implementation that has already
added a significant number of revenue-generating lives to our systems.
In addition, this year we have completed, or are in the process of
completing, three other new customer implementations, and have renewed
contracts with a number of existing customers and expanded our
relationship with others. Due to the subscription nature of our
business, these customer wins do not always immediately impact
operating results, but are expected to provide additional revenue in
future periods.
-- In July 2006, we announced the expansion of our Ultimate TPA(TM)
Solution. The Ultimate TPA Solution is Healthaxis' unique combination
of technology and BPO services that help TPAs gain operational
efficiency and reduce costs. The packaged suite of technology and
services is offered as a "turnkey" solution that benefits smaller to
midsize organizations the most, but can bring value to operations of
any size. The Ultimate TPA enables growth minded organizations to
pursue their expansion objectives with both minimal capital and
infrastructure investment, and affordable and predictable ongoing
costs.
-- During June and July of 2006, two shareholders converted approximately
2 million shares of their Series A Convertible Preferred Stock into
common stock. The Company understands that some of those shares were
sold in large blocks and it appears that the blocks were sold at
prices substantially below the then market price of the stock. It is
common for large blocks of stock to be sold at a discount to market
and it should be noted that the Company did not participate in
facilitating these stock sales and purchases.
-- In July 2006, we renewed and extended the debt due to HealthMarkets
(formerly known as UICI) on terms favorable to the Company. The
maturity date was moved to February 1, 2008 from September 30, 2006.
As part of the renewal agreement, the Company will make a principal
payment of $500,000 on August 31, 2006. As we have been doing already,
we will continue making monthly payments of not less than $65,000
until maturity on February 1, 2008. Partially as a result of this
transaction, but more importantly to support future growth, the
Company is in the late stages of securing working capital and capital
equipment lines of credit with a bank that will expand our available
liquidity and strengthen our financial condition. We are confident
that we will complete the financing agreement. However, it should be
noted that until such financings are in place, there is always the
possibility that they will not be completed.
Review and Outlook
Commenting on the Company's second quarter results, John M. Carradine, the
Company's President and Chief Executive Officer said: "This is now the second
quarter in a row that our revenues have increased compared to the prior
quarterly period. Second quarter 2006 revenues were five percent higher than
revenues in the first quarter 2006 and ten percent higher than revenues in the
fourth quarter of 2005. These sequential improvements are a critical success
factor for a subscription and transaction based revenue model such as ours.
"It is also important that our revenue in the second quarter this year was
greater than it was in the year ago quarter. This is real progress. Is it a
trend? We will see. But this we know - we have closed contracts with new
customers this year, we have renewed contracts with existing customers, and we
have expanded the size and scope of business with existing customers. That's why
revenue is increasing. It would have increased more, but we must defer some of
our professional services revenue to future periods because of the nature of the
work and the accounting rules for those circumstances. Deferred revenue has
increased substantially in the last nine months.
"These sequential improvements are good, but we need to grow faster. That's
why we're also expanding our marketing efforts with regard to the Ultimate TPA.
We are receiving positive feedback from prospective customers. We like our
position with this collection of services because it puts us in a differentiated
position compared to other market competitors. Why? Because we give companies
almost immediate access to a wide range of best-in-class products and services
at a compelling price. More importantly, if we are successful in our approach,
we create not only new customers, but new sources of revenue and better
profitability for the business. The Ultimate TPA is built on the strength of our
service offerings in total, not individually. That's why it works. Our
competitors cannot demonstrate their ability to compete on this level, even
though many of them are trying. That's the other encouraging thing about the
Ultimate TPA. Others are trying to copy the model. We are one of only a few who
can really do it now, and no one has been doing it for as long as we have.
"We don't expect to see as much revenue growth from the Ultimate TPA this
year as we do next year, but we should see some. We'll announce it as it
happens, but everyone should realize that there is a ramp involved, and not
every deal is a big one. Steady growth and progress is what we are after.
"Most of the revenue and operating improvement this year is from the lives
being added in the large customer implementation we began last year. We have
also sold, implemented and gone live with two other new customers this year, as
well as several expanded opportunities with existing customers. We are now
within striking distance of our profitability objective. Our operating loss this
quarter was cut almost in half compared to the first quarter of 2006. If you
review our results, compared to the first quarter you will find that revenue
increased by $196,000. Not coincidentally, the operating loss went down
$195,000. Nice formula. It won't always happen this way, but the leverage in our
operations is beginning to show itself more prominently as we approach
break-even. Future revenue growth will not necessarily generate this kind of
marginal profitability, but we certainly expect that there will always be a
component that does. We count on that working to our advantage.
"All in all, the first six months of this year have been encouraging. We
are gaining customers, our revenue and results are improving, our marketing
plans are working and we are becoming better recognized as an industry leader.
We successfully extended our existing debt on favorable terms and are in the
final stages of adding other financing facilities to support our growth
opportunities. We have proven our ability to add large amounts of business in
short timeframes, while continuing to meet existing customer needs. We believe
that our strategy of bringing the Ultimate TPA to a broader market segment, and
of creating a 'turnkey' solution for organizations that want to grow quickly,
efficiently and without a large capital investment is a sound one that could
lead us to faster, more consistent and more profitable growth. We are looking
forward to the Self-Insured Institute of America national conference in October.
Our EVP Larry Thompson is on the agenda to speak on several topics and is on at
least one other panel discussion. We will use this widely attended conference to
bring Healthaxis more and more into the minds of potential customers, and this
year we will be showcasing the Ultimate TPA."
About Healthaxis Inc.
Healthaxis (Nasdaq:HAXS) is a leading technology enhanced provider of fully
integrated business process outsourcing and claims and administration solutions
and services for health benefit administrators and health insurance claims
processors. For information on Healthaxis products and services, call
800-519-0679 or visit www.healthaxis.com.
Forward-looking statements:
Statements that are not purely historical facts, including without
limitation statements about anticipated or expected future revenue and
performance, constitute forward-looking statements within the meaning of Section
27A of the Securities and Exchange Act of 1934, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors, which may cause actual results to be materially different from those
contemplated by the forward-looking statements. Such factors include without
limitation the risks and uncertainties identified in our documents filed with,
or furnished to, the Securities and Exchange Commission, including those
identified under the caption "Risk Factors" in our most recently filed Form
10-K. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Readers are cautioned not to place undue reliance on
forward-looking statements.
Healthaxis Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data) (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues $4,114 $4,011 $8,032 $8,137
Expenses:
Cost of revenues 3,409 3,696 6,785 7,792
Sales and marketing 319 254 693 467
General and
administrative 632 813 1,240 1,457
Reversal of contingent
tax liability -- (979) -- (979)
Lease abandonment
charge -- 500 -- 500
Amortization of
intangibles -- -- -- 84
---------- ---------- ---------- ----------
Total operating expenses 4,360 4,284 8,718 9,321
---------- ---------- ---------- ----------
Operating loss (246) (273) (686) (1,184)
Interest and other income
(expense), net (20) (52) (42) (99)
---------- ---------- ---------- ----------
Net loss $(266) $(325) $(728) $(1,283)
========== ========== ========== ==========
---------- ---------- ---------- ----------
Net loss per share of
common stock (basic and
diluted) $(0.04) $(0.07) $(0.12) $(0.30)
========== ========== ========== ==========
Weighted average common
shares used in computing
loss per share
Basic and diluted 6,123,833 4,938,794 6,106,441 4,321,650
Healthaxis Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data) (Unaudited)
June 30 Dec. 31,
2006 2005
-------- --------
Assets
Cash and cash equivalents $2,843 $4,729
Accounts receivable, net 2,969 2,256
Other current assets 656 628
-------- --------
Current assets 6,468 7,613
Property, equipment and software, net 1,764 1,726
Goodwill 11,276 11,276
Other assets 1,256 531
-------- --------
Total assets $20,764 $21,146
======== ========
Liabilities and stockholders' equity
Current liabilities $4,991 $5,100
Long-term debt 477 --
Other long-term liabilities 1,195 1,239
Stockholders' equity 14,101 14,807
-------- --------
Total liabilities and stockholders' equity $20,764 $21,146
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CONTACT: Healthaxis Inc.
Ron Herbert, 972-443-5000
rherbert@healthaxis.com