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TriZetto Exceeds Q3 Guidance and Confirms
Expectations for Full Year 2004
NEWPORT BEACH, Calif. – October 26, 2004 – The TriZetto Group, Inc. (Nasdaq: TZIX), today reported above-guidance diluted earnings per share (EPS) of $0.12 on revenue of $67.0 million for its third quarter ended September 30, 2004. The company also reported $75 million in new business bookings for the quarter and reconfirmed its guidance for the full year 2004.
"Record quarterly profit achievement reflects strong sales growth of specialized component software and associated services, new consulting engagements and realization of significant cost savings from actions initiated in May 2004," said TriZetto Chairman and CEO Jeff Margolis. "We are driving increasing profitability as we continue to refine our product portfolio."
Third Quarter Financial Review
Summary (millions except per share and DSO amounts)
| |
3 Months Ended Sep. 30, 2004 |
9 Months Ended Sep. 30, 2004 |
| Revenue |
$67.0 |
$200.3 |
| Bookings |
$75.0 |
$276.5 |
| Backlog |
$586.6 |
$586.6 |
| Diluted EPS |
$0.12 |
$0.04 |
| EBITDA |
$13.1 |
$21.6 |
| Cash & Equivalents |
$54.0 |
$54.0 |
| Days Sales Outstanding (DSO) |
65 |
68 |
Revenue and Bookings
Third quarter revenue totaled $67.0 million versus $67.5 million in the second quarter of 2004. Sequential growth in health plan specialized software revenue and associated recurring maintenance offset reductions from the scheduled termination of services for Altius Health Plan and the planned exit from other non-strategic lines of business, such as hosting of competing software platforms. Recurring revenue represented 55% of total revenue in the quarter.
There were 288 new customer contracts signed in the quarter with a total value of $75.0 million, compared to $120.5 million in the second quarter of 2004 and $37.4 million in the year-ago quarter. Contract bookings comprise a mix of current and future period revenues and represent the expected minimum total revenue to be generated under each contract. Of the new third quarter contracts, 39 were outsourced services contracts (software hosting, business process management and other services) valued at $20.5 million; 59 were software license contracts valued at $34.6 million; and 190 were for consulting, implementation services, software customizations and other services valued at $19.9 million. The Regence Group accounted for $45.6 million of the bookings total, which included a combination of specialized component software, hosting services for that component software and consulting.
Sales of specialized component software grew in the third quarter, comprising nearly half of total software license bookings. This included NetworX Modeler,Ô NetworX Pricer,Ô Facets e2™ Defined Contribution, Facets e2™ Workflow, BI Toolkit, CareAdvanceÔ Enterprise and DirectLink.
At September 30, 2004, the company's total revenue backlog was approximately $587 million and the 12-month revenue backlog was approximately $171 million, compared to $567 million and $165 million, respectively, at the end of the second quarter. The timing of contract closings and other factors can cause the company's backlog to vary from one quarter to the next.
Profitability
Third quarter net income was $6.0 million, or $0.12 per diluted share, compared to $0.4 million, or $0.01 per share in the second quarter of 2004. EBITDA was $13.1 million compared to $6.5 million in the second quarter. TriZetto reports earnings in accordance with Generally Accepted Accounting Principles (GAAP) and, additionally, on a non-GAAP basis referred to as EBITDA. A definition of EBITDA and a reconciliation to GAAP are included in the attached financial schedules.
The sequential increase in profitability from the second quarter is primarily due to a higher margin mix of products and services brought about by an increase in specialized component software sales, the planned exit of certain business lines and contracts, and the benefits from cost reduction actions initiated in the second quarter. To date, TriZetto has realized approximately half of its targeted $21.5 million in cost reductions for the year.
Cash Resources
Cash, restricted cash and short-term investments totaled $54.0 million at September 30, 2004, versus $65.6 million at June 30, 2004. Although the company achieved $13.1 million of EBITDA in the third quarter, cash and short-term investments declined in the period primarily due to late third quarter license sales that are expected to result in cash collections in future periods, a reduction in trade payables of $5.1 million, debt service of $1.9 million and planned capital expenditures, including property, plant and equipment, and capitalized research and development costs, of $5.8 million. Days sales outstanding was 65 versus 63 in the second quarter.
2004 Outlook
For the full year 2004, TriZetto expects to generate revenue of approximately $270 million, EBITDA of $35 to $38 million, and earnings per share of $0.12 to $0.17, on a fully diluted share count of approximately 50 million. Capital expenditures in 2004 are expected to be between $19 and $21 million.
Conference Call
TriZetto will host a conference call at 2:00 p.m. Eastern Time / 11:00 a.m. Pacific Time today to discuss the quarter's results. Investors may access the webcast through TriZetto's web site at www.trizetto.com, first by clicking on the Investors button, and then on the Company Information drop-down menu item. The conference call will be archived and available through TriZetto's web site for 30 days following the call.
The webcast will also be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com).
About TriZetto
TriZetto serves the payer market, which is comprised primarily of national and regional health insurance plans, and benefits administrators that provide transaction services to self-insured employer groups. The company offers a broad portfolio of information technology products, including software, services and consulting, tailored to the needs of healthcare payers. Headquartered in Newport Beach, Calif., TriZetto can be reached at (949) 719-2200 or www.trizetto.com.
Important Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements about future net revenues, profits, and financial results, the market for TriZetto's services, future service offerings, industry trends, client and partner relationships, and TriZetto's operational capabilities. Actual results may differ materially from those stated in any forward-looking statements based on a number of factors, including the effectiveness of TriZetto's implementation of its business plan, the market's acceptance of TriZetto's new and existing products and services, the timing of new bookings, risks associated with management of growth, reliance on third parties to supply key components of TriZetto's services, attraction and retention of employees, variability of quarterly operating results, competitive factors, risks associated with acquisitions, changes in demand for third party products or solutions which form the basis of TriZetto's service and product offerings, financial stability of our customers, the ability of TriZetto to meet its contractual obligations to customers, including service level and disaster recovery commitments, changes in government laws and regulations and risks associated with rapidly changing technology, as well as the other risks identified in TriZetto's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting TriZetto's investor relations department at 949/719-2225 or at TriZetto's web site at www.trizetto.com. All information in this release is as of October 26, 2004. TriZetto undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
CONTACTS:
Investors:
Brad Samson
949-719-2220
brad.samson@trizetto.com
Media:
Audrey Mautner
303-495-7197
audrey.mautner@trizetto.com
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