EXTON, Pa., Aug. 12 /PRNewswire-FirstCall/ -- Daou Systems, Inc. (“Daou”) today reported financial results for the second quarter 2005. For the second quarter, Daou reported a net income available to common stockholders of $273,000, or $0.01 per basic and diluted share, on net revenue of $7,436,000. This compares to net loss available to common stockholders of $1,323,000, or ($0.06) per basic and diluted share, on net revenue of $6,643,000 for the second quarter of 2004.
Daou’s net revenue increased 12%, or $793,000, to $7.4 million for the three months ended June 30, 2005, up from $6.6 million for the three months ended June 30, 2004. The increase was primarily the result of previously announced customer engagements including: two mobile health solutions initiatives and the completion of a web portal implementation project in our provider business, and a long-term software development project funded by an agency of the U.S. Department of Health and Human Services.
Cost of revenue before reimbursable expenses increased 7%, or $317,000, to $5.2 million for the three months ended June 30, 2005, from $4.9 million for the three months ended June 30, 2004. This was attributable primarily to an increase in materials related to two mobile health solutions projects initiated in the second quarter 2005 and an increase in billable sub- contractor expense in our government business, and partially offset by a decrease in billable sub-contractor expense in our payer business unit.
Gross margin was 30% in the second quarter of 2005, compared to 26% in the second quarter of 2004. Higher margins were attributable to improved utilization of our billable consultants in all of our business units.
Second quarter 2005 operating results reflected a reduced level of marketing and business development expenses as we continue to lower our costs. For the three months ended June 30, 2005, sales and marketing expenses decreased by $361,000, or 45%, to $449,000, from $810,000 for the three months ended June 30, 2004. General and administrative expenses decreased 39%, or approximately $754,000, to $1.2 million for the three months ended June 30, 2005 from $1.9 million for the three months ended June 30, 2004, partially due to the reduced number of administrative staff, and reduced general overhead costs. We continue to manage those costs that are mostly controllable such as staffing, facilities and operational overhead.
About Daou
Daou Systems, Inc. provides expert consulting and management services to healthcare organizations in the design, deployment and support of IT infrastructure and application systems. Daou offers a range of comprehensive services including mobile health, application implementation and support, government and commercial integration services, and business process realignment. Daou has provided services to more than 1,600 healthcare organizations, including leading private and public hospitals, managed care organizations on both the payer and provider sides of the market, as well as integrated healthcare delivery networks and some of the nation’s largest government healthcare entities. http://www.daou.com
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are only predictions and actual events or results may differ materially. Forward-looking statements usually contain the word “estimate,” “anticipate,” “hope,” “believe,” “think,” “expect,” “intend,” “plan” or similar expressions. The forward-looking statements included herein are based on current expectations and certain assumptions and entail various risks and uncertainties, including risks and uncertainties relating to: the Company’s ability to achieve a successful sales program and to obtain new customer contracts; the long sales cycle in obtaining new customers and larger contracts; industry spending patterns and market conditions, including seasonal trends; the reduction in size, delay in commencement or loss or termination of one or more significant projects; the management of the Company’s operations; management of future growth; the Company’s ability to continually offer services and products that meet its customers’ demands, as new technologies or industry standards could render its services obsolete or unmarketable; the ability of the company to successfully execute strategies for realizing shareholder value; and the effects of healthcare industry consolidation and changes in the healthcare regulatory environment on existing customer contracts. These uncertainties and risk factors, as well as the matters set forth in the Company’s Annual Report on Form 10-K under the caption “Risk Factors” and its other SEC filings, could cause actual results to differ materially from those indicated by these forward-looking statements. These forward-looking statements reflect management’s opinion only as of the date of this press release and the Company assumes no obligation to update or publicly announce revisions to any such statements to reflect future events or developments.
Daou Systems, Inc. Statements of Operations (In thousands, except for per share data) (Unaudited) Three months ended Six months ended June 30, June 30, 2005 2004 2005 2004 Revenue before reimbursements (net revenue) $7,436 $6,643 $13,709 $15,481 Out-of-pocket reimbursements 577 595 764 1,304 Total revenue 8,013 7,238 14,473 16,785 Cost of revenue before reimbursable expenses 5,205 4,888 9,811 12,010 Out-of-pocket reimbursable expenses 577 595 764 1,304 Total cost of revenue 5,782 5,483 10,575 13,314 Gross profit 2,231 1,755 3,898 3,471 Operating expenses: Sales and marketing 449 810 1,063 1,967 General and administrative 1,190 1,944 2,516 3,457 1,639 2,754 3,579 5,424 Income (loss) from operations 592 (999) 319 (1,953) Other income, net 129 45 269 88 Net income (loss) 721 (954) 588 (1,865) Accrued dividends on preferred stock (448) (369) (891) (733) Net income (loss) available to common stockholders $273 ($1,323) ($303) ($2,598) Earnings (loss) per share: Basic $0.01 ($0.06) ($0.01) ($0.12) Diluted $0.01 ($0.06) ($0.01) ($0.12) Shares used in computing earnings (loss) per share: Basic 21,815 21,675 21,815 21,506 Diluted 25,850 21,675 21,815 21,506 Daou Systems, Inc. Balance Sheets (in thousands) (Unaudited) June 30, December 31, 2005 2004 Current assets: Cash and cash equivalents $4,297 $5,932 Short-term investments 5,172 5,137 Accounts receivable, net 6,793 5,218 Contract work in progress 494 190 Other current assets 514 571 Total current assets 17,270 17,048 Equipment, furniture and fixtures, net 782 885 Other assets 579 747 $18,631 $18,680 Current liabilities: Accounts payable and other accrued liabilities $1,462 $1,708 Accrued salaries and benefits 1,478 1,814 Deferred revenue 523 489 Total current liabilities 3,463 4,011 Long-term liabilities 364 394 Convertible preferred stock 18,718 17,827 Stockholders’ deficit (3,914) (3,552) $18,631 $18,680
Daou Systems, Inc.
CONTACT: Jay Roberts, Chief Financial Officer, Jay.Roberts@daou.com, orSandra Taylor, Ph.D., Vice President of Marketing, sandra.taylor@daou.com,both of Daou Systems, Inc., +1-610-594-2700
Web site: http://www.daou.com/
