TriZetto Reports Increases of 30% in Revenue and 45% in Adjusted EBITDA for Full-Year 2007, and Posts Bookings of $163 Million for Q4
NEWPORT BEACH, Calif. - February 4, 2008 - The TriZetto Group, Inc. (NASDAQ: TZIX) today reported diluted earnings per share (EPS) for the full-year 2007 of $0.52, on revenue of $451.8 million, versus $0.33 per share a year ago. Net cash provided by operating activities in 2007 grew 55% to $62.1 million, or $1.05 per share, on a diluted share count of 59.4 million.
"TriZetto's strong 2007 results were driven by the highly competitive and rapidly evolving market payers face," said Jeff Margolis, TriZetto's chairman and chief executive officer. "The new contracts realized during the year demonstrated a strengthening of TriZetto's position as the go-to source for software and services. Further, the company's unique assets that drive TriZetto's differentiation grew stronger as well. These include the industry's deepest payer systems expertise, the largest integrated set of payer solutions, and a customer community of more than 350 payers and 120 million lives."
"I have tremendous admiration for our team and the outstanding work accomplished in 2007 to more closely align with and serve our customers' needs," added Kathleen Earley, TriZetto's president and chief operating officer. "We made substantial organization changes at the beginning of last year to increase innovation and improve customer value in a more integrated way."
Financial Summary (in millions, except per share amounts):
| |
Year Ended Dec. 31, 2007 |
Year Ended Dec. 31, 2006 |
Change |
| Revenue |
$451.8 |
$347.9 |
30% |
| Bookings |
$431.4 |
$381.6 |
13% |
| Total Backlog |
$982.6 |
$858.2 |
14% |
| Income Before Taxes |
$46.2 |
$17.6 |
163% |
| Effective Tax Rate |
39.2% |
14.2% |
2,500 bps |
| Net Income |
$28.1 |
$15.1 |
86% |
| Basic EPS |
$0.63 |
$0.36 |
75% |
| Diluted EPS |
$0.52 |
$0.33 |
58% |
| Adjusted EBITDA* |
$96.7 |
$66.7 |
45% |
| Cash Resources |
$208.5 |
$108.0 |
93% |
| Net Cash Provided by Operating Activities |
$62.1 |
$40.2 |
55% |
| Capital Expenditures |
$26.1 |
$22.1 |
18% |
* Definition and reconciliation to GAAP are included in the attached financial schedules
Revenue
Full-year 2007 revenue totaled $451.8 million, increasing 30% from $347.9 million in 2006. An $87.5 million increase in services revenue included increases of $42.8 million in consulting and other services, $35.3 million in software maintenance and $9.4 million in outsourced services. Software products revenue increased $16.3 million from the prior year.
Recurring revenue represented 51.9% of total revenue in 2007, compared to 50.4% in 2006, driven by a 40% increase in software maintenance revenue and an 11% increase in outsourced business services.
Fourth quarter revenue was $116.5 million, versus $88.5 million in the fourth quarter a year ago.
New Business Bookings
Full-year 2007 new contract bookings were $431.4 million, and included $186.8 million for software product contracts; $143.2 million for consulting, implementation, software customization and other services; and $101.4 million for outsourced services contracts (software hosting, business process outsourcing and other services). Contract bookings comprise a mix of current and future period revenue and represent the expected minimum total revenue to be generated under each contract. New contract bookings will vary from one quarter to the next based upon a number of factors including product mix.
Fourth-quarter 2007 new contract bookings were $163.2 million, and included $65.8 million for software product contracts; $57.9 million for consulting, implementation, software customization and other services; and $39.5 million for outsourced services contracts.
Backlog
The company's total revenue backlog was approximately $983 million at December 31, 2007, compared to $858 million at December 31, 2006 and $941 million at September 30, 2007. Twelve-month revenue backlog was approximately $238 million at December 31, 2007, compared to $213 million at December 31, 2006 and $226 million at September 30, 2007. The timing of contract closings and other factors can cause the company's backlog to vary from one quarter to the next.
Profitability
Full-year 2007 net income was $28.1 million, or $0.52 per diluted share, compared to $15.1 million, or $0.33 per diluted share, for 2006. Basic EPS for 2007 was $0.63, up 75% from $0.36 in 2006. Adjusted EBITDA for the full-year 2007 was $96.7 million, up 45% from $66.7 million in 2006.
Fourth quarter 2007 net income was $9.0 million, or $0.16 per diluted share, compared to $7.5 million, or $0.16 per diluted share, for the year-ago fourth quarter. The company's effective tax rate in the year ago quarter was approximately 18%, compared to 40% in the fourth quarter of 2007.
Basic EPS for the fourth quarter 2007 was $0.20, up 11% from $0.18 in the 2006 fourth quarter. Adjusted EBITDA for the fourth quarter of 2007 was $28.1 million, up 58% from $17.8 million in the fourth quarter of 2006.
Gross Margin, R&D and SG&A
Gross margin, excluding amortization of acquired technology and intangibles, for 2007 was 52.3%, compared to 48.4% for 2006. The improvement was driven primarily by higher-margin mix of revenue, operating efficiencies and improved pricing.
Research and development expenses in 2007 were $62.1 million, representing 13.7% of full-year revenue, compared to $42.8 million, or 12.3% of revenue, for 2006. The increase reflected primarily the addition of Plan Data Management and QCSI products, higher utilization of outside development services, increased staffing, merit increases and higher incentive compensation.
Selling, general and administrative expense for 2007 was $113.5 million, or 25.1% of revenue, compared to $103.8 million, or 29.8% of revenue, in 2006. The increase was primarily due to higher costs related to acquisitions and incentive compensation, partially offset by the absence of patent litigation and settlement costs incurred in 2006.
TriZetto reports earnings in accordance with Generally Accepted Accounting Principles (GAAP), and additionally reports certain non-GAAP measures, such as Adjusted EBITDA, recurring and nonrecurring revenue and other measures, believing that these provide additional information for investors to evaluate the company's financial performance. Definitions of non-GAAP measures and reconciliation to GAAP measures are included in the attached financial schedules.
Cash Resources and Cash Flow
Cash, restricted cash and short-term investments totaled $208.5 million at December 31, 2007, versus $108.0 million at December 31, 2006. Net cash provided by operating activities for 2007 was $62.1 million, or $1.40 per basic share and $1.05 per diluted share, versus $40.2 million, or $0.95 per basic share and $0.88 per diluted share, in 2006. Capital expenditures for the full-year 2007 were $26.1 million, versus $22.1 million in 2006. Days sales outstanding for the fourth quarter of 2007 was 71 days, versus 69 days in the year-ago quarter.
Guidance for 2008
For the full year 2008, TriZetto expects between $480 and $500 million of revenue, representing a 10 to 14% growth rate from continuing operations and reflecting the company's planned exit from nonstrategic on-site administrative BPO and ClaimsLink services, which generated approximately $15 million of revenue in 2007. TriZetto expects diluted EPS to be $0.67 to $0.74 on a diluted share count of approximately 62 million shares. Basic EPS is expected to be $0.88 to $0.98 on basic share count of approximately 43 million.
Adjusted EBITDA for 2008 is expected to be between $115 and $122 million, an increase of 19% to 26% over 2007 Adjusted EBITDA. Capital expenditures in 2008 are expected to be between $28 and $30 million. The diluted share count for 2008, which is determined as if both of the company's convertible debt issuances are fully converted to equity, is expected to be approximately 62 million. If the issuances, which may be settled in cash or stock, were treated as debt, the diluted share count for 2008 would be approximately 46 million.
For the first quarter of 2008, the company expects revenue of between $113 and $120 million, diluted EPS of between $0.08 and $0.14 on a diluted share count of approximately 60 million, basic EPS of $0.09 to $0.18 on basic share count of 42 million, and Adjusted EBITDA of between $19 and $25 million.
Conference Call
TriZetto will host a conference call at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time today to discuss the year's results. Investors may access the webcast through TriZetto's web site, 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. Investors may also dial in by telephone. The live call number is 210-234-0001 with a conference ID of TZIX. The replay is available at 203-369-3312.
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
With its technology touching nearly half of the U.S. insured population, TriZetto is distinctly focused on accelerating the ability of healthcare payers to lead the industry's transformation to consumer-retail healthcare. The company provides premier information technology solutions that enhance its customers' revenue growth, increase their administrative efficiency and improve the cost and quality of care for their members. Healthcare payers include national and regional health insurance plans, and benefits administrators that provide transaction services to self-insured employer groups. The company's broad array of payer-focused information technology offerings include enterprise and component software, hosting and business process outsourcing services, and consulting. Headquartered in Newport Beach, Calif., TriZetto can be reached at 949-719-2200 or at 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 revenue, profits, cash flows and financial results, the market for TriZetto's services, future service offerings, industry trends, client and partner relationships, TriZetto's operational capabilities, future financial structure, uses of cash, anticipated dilution or accretion of acquisitions or proposed transactions.
Actual results may differ materially from those stated in any forward-looking statements based on a number of factors, including the ability of TriZetto to successfully integrate the businesses of TriZetto and its acquisitions or partners; the contributions of acquisitions to TriZetto's operating results; 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, other 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 TriZetto's 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 February 4, 2008. 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:
Melissa Bruno
781-684-6652
MBruno@schwartz-pr.com