DAOU Systems, Inc. Reports Financial Results For First Quarter 2000.Business Editors/Health & Medical Writers SAN DIEGO--(BW HealthWire)--May 4, 2000 Progress Made On Enosus(TM) Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Initiative Offset By Post-Y2K Lag In Health Care IT Business; Health Care IT Demand Now Improving in Current Quarter DAOU Systems, Inc. (Nasdaq:DAOU) today reported financial results for the first quarter of 2000. For the quarter ended March 31, 2000, DAOU reported a net loss of $4,466,000, or $.26 per common share, on revenue of $17,575,000, compared to a net loss of $1,668,000, or $.09 per common share, on revenue of $27,323,000 for the first quarter of 1999. As anticipated, despite growing momentum in its newly launched Enosus Internet initiative, DAOU's first quarter revenues declined year to year due to a continued lag in the company's core health care information technology (IT) business, attributable largely to weak post-Y2K market demand. In addition, the first quarter of 1999 included $2.8 million in revenue from discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: businesses and a contract the company chose to terminate in early 1999. Gross margin for the first quarter of 2000 decreased to 9%, from 20% in the same quarter last year, due primarily to reduced demand for professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. . Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. decreased 24% to $6,254,000 for the first quarter of 2000, compared to $8,241,000 in the first quarter of 1999. The decrease in operating expenses was due primarily to the consolidation of certain selling, general and administrative functions, and to further integration of acquired entities. Due to the revenue decline, however, operating expenses increased as a percentage of sales from 30% in the first quarter of last year to 36% in the first quarter of 2000. As of March 31, 2000, cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments totaled $12,701,000, compared to $15,548,000 at the end of 1999. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased to $16,857,000 from $21,912,000 at the end of 1999. Contract work in progress decreased to $3,743,000 from $8,059,000 in the equivalent quarter last year. "Our performance during the first quarter of 2000, while disappointing, was in line with our stated expectations as we continued to face weak market demand for our core health care IT services in the wake of heavy Y2K See Y2K problem and Y2K compliant. Y2K - Year 2000 spending by customers in 1999," stated Larry Lar´ry n. 1. Same as Lorry, or Lorrie. D. Grandia Grandia is a Console role-playing game series created by Game Arts. Games in the Grandia series have been published on Sega and Sony consoles, and Game Boy Color. The Grandia games have been published by Sega, Ubisoft, Enix and Hudson Soft. , president and chief executive officer of DAOU Systems Inc. "At the same time, we made considerable progress during the quarter in building our Enosus Internet sales pipeline, and in enhancing our service offerings for both the health care IT, eHealth and non-health care eCommerce markets. In addition, we are experiencing a recent strengthening in the market for health care IT support and services. "We continue to see considerable opportunity for DAOU and Enosus in the eCommerce arena," added Grandia, "as demonstrated by our agreement announced today for the initial phase of a potential multi-year, multi-million agreement with WellStreet. This agreement, which is clearly in the bull's eye of our targeted market, represents a significant opportunity for Enosus to develop and deploy WellStreet's e-Healthcare infrastructure and Web site, and to support the execution of its e-Healthcare strategy. WellStreet is on the leading edge of Internet-based health care delivery, and we view this as a major breakthrough opportunity for Enosus. In addition, we are building a meaningful pipeline of potential health care and non-health care Internet opportunities for Enosus, and are establishing significant partnerships with numerous industry-leading providers of Internet tools and solutions, such as Viador, STC STC Supplemental Type Certificate (FAA) STC Society for Technical Communication STC Subject to Change STC Surf the Channel (website) STC Sound Transmission Class STC Singapore Turf Club and MedComply, to further enhance our position in the market place. "In our core health care IT business," stated Grandia, "improving market demand is evident in our backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of signed contracts, such as our newly signed maintenance and support contract with West Tennessee West Tennessee is one of the three Grand Divisions in the U.S. state of Tennessee. Of the three, it is the most sharply defined geographically. Its boundaries are the Mississippi River on the west and the Tennessee River on the east. Healthcare, and in our pipeline of additional potential new business. While demand does appear to be strengthening, we expect the improvement to be gradual as we continue to plan for a return to profitability in the second half of 2000. As in our Enosus business, we have entered into additional alliances with health care IT partners, including 3M Health Information Services See Information Systems. , to enhance our service offerings. We continue to see significant opportunity for DAOU relative to health care industry compliance with the Health Insurance Portability and Accountability Act The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when of 1996, or HIPAA (Health Insurance Portability & Accountability Act of 1996, Public Law 104-191) Also known as the "Kennedy-Kassebaum Act," this U.S. law protects employees' health insurance coverage when they change or lose their jobs (Title I) and provides standards for patient health, , and have enhanced our diverse set of security-focused products and services through a resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. agreement on Celotek Corp.'s CellCase(TM) encryption The reversible transformation of data from the original (the plaintext) to a difficult-to-interpret format (the ciphertext) as a mechanism for protecting its confidentiality, integrity and sometimes its authenticity. Encryption uses an encryption algorithm and one or more encryption keys. devices." Added Grandia, "As we continue to aggressively pursue opportunities in the eCommerce and health care IT markets, we plan to manage our cost structure and operating expenses in line with our anticipated future revenue levels in support of our objective of returning to profitability." DAOU Systems, Inc. is a provider of integrated Information Technology (company) Integrated Information Technology - (IIT) A Santa Clara based company producing a programmable, single chip H.261 and MPEG system. The chip contains a RISC processor, originally based on the MIPS architecture but now called RISCit, and a "Pixel Processor". (IT) solutions and services to the U.S. health care industry. DAOU's capabilities range from up-front strategic consulting to IT system design, implementation and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. tactical support. DAOU's IT offerings include data, voice and video networking, applications consulting and implementation, as well as operational and Internet solutions. DAOU has approximately 650 employees, and has provided services to more than 1,300 health care organizations, including many of the nation's top 100 integrated delivery systems integrated delivery system Integrated provider Medical practice A coordinated health care system formed by physician groups and hospitals which ↑ efficiency and ↓ redundancy in providing health care; IDSs coordinate delivery of a broad range of health . More information about DAOU Systems can be found at www.daou.com on the World Wide Web. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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," "believe," "expect," "plan" or similar expressions. The forward-looking statements included herein are based on current expectations and certain assumptions and entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary various risks and uncertainties, including risks and uncertainties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc : the company's ability to obtain new customer contracts; the company's ability to launch and manage successfully its new eCommerce services to health care and non-health care customers, including the hiring, retention and training of professionals dedicated to eCommerce services; the ability to maintain relationships with key technology partners; the management and integration of the company's operations as it develops new service offerings and management practices and implements staffing reorganizations; and the effects of health care industry consolidation and changes in the health care regulatory environment on existing customer contracts and the company's ability to obtain new customer contracts. These uncertainties and risk factors and the matters set forth in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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.
DAOU Systems, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months Three months
ended ended
3/31/2000 3/31/1999
Revenues $ 17,575 $ 27,323
Cost of revenues 15,956 21,820
Gross profit 1,619 5,503
Sales and marketing 1,790 2,905
General and administrative 4,464 5,336
Total operating expenses 6,254 8,241
Loss from operations (4,635) (2,738)
Other income (expenses), net 169 (86)
Income before taxes (4,466) (2,824)
Provision (benefit) for income taxes -- (1,156)
Net income (loss) (4,466) (1,668)
Dividends on preferred stock (184) --
Net income (loss) available to
common stockholders $ (4,650) $ (1,668)
Basic and diluted loss per share $ (0.26) $ (0.09)
Shares used in calculation of basic
and diluted
loss per share: 17,712 17,689
DAOU Systems, Inc.
Consolidated Balance Sheet
(in thousands)
March 31, Dec. 31,
2000 1999
(unaudited)
Current assets:
Cash and cash equivalents $12,642 $15,480
Short-term investments 59 68
Accounts receivable, net 16,857 21,912
Contract work in progress 3,743 2,816
Other current assets 1,660 1,048
Total current assets 34,961 41,324
Equipment, furniture
and fixtures, net 4,126 4,319
Other assets 341 417
$39,428 $46,060
Current liabilities:
Accounts payable and
accrued expenses 3,019 4,698
Accrued salaries and wages 3,706 4,248
Current portion of
long-term debt 210 210
Total current liabilities 6,935 9,156
Long-term liabilities 567 548
Redeemable convertible
preferred stock 11,566 11,382
Stockholders' equity
Common stock 18 18
Additional paid-in capital 37,395 37,395
Deferred compensation (155) (192)
Unrealized gain on securities (44) (43)
Retained deficit (16,854) (12,204)
Total stockholders' equity 20,360 24,974
$39,428 $46,060
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