DAOU Systems Inc. Reports Financial Results For Fourth Quarter and Full-Year 2000; Also Announces Upcoming Nasdaq Hearing.Business Editors SAN DIEGO--(BUSINESS WIRE)--Feb. 15, 2001 DAOU Systems Inc. (Nasdaq:DAOU) Thursday reported revenue of $14.7 million and a net loss available to common stockholders of $1.3 million, or $.07 per share, for the fourth quarter ended Dec. 31, 2000, before restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and one-time preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividend charges totaling $5.4 million. These results compare to a net loss available to common stockholders of $8.3 million, or $.47 per share, on revenue of $23.6 million for the fourth quarter of 1999. Including a $4.1 million one-time preferred stock dividend charge related to the company's previously announced removal of a preferred stock redemption feature, and $1.3 million in restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. related to a reorganization of the company's operating divisions and national sales force, DAOU reported a net loss available to common stockholders of $6.7 million or $.38 per share for the fourth quarter of 2000. Included in the restructuring charges are one-time expenses related to eliminating excess office space and related IT service contracts, and expenses related to a staff reduction of approximately 50 employees from unprofitable lines of business and back-office support functions. For the full year 2000, DAOU reported revenue of $63.7 million and a net loss available to common stockholders of $12.8 million, or $.72 per share, before restructuring and one-time preferred stock dividend charges totaling $6.2 million. This compares to a net loss available to common stockholders of $9.3 million, or $.52 per share on revenue of $103.4 million in 1999. Including the previously described $4.1 million one-time preferred stock dividend charge, as well as $2.1 million in restructuring charges, DAOU reported a net loss available to common stockholders of $19.0 million, or $1.07 per share, for full-year 2000. "2000 was a difficult time for DAOU, as well as for the rest of our industry," stated James T. Roberto, chief executive officer of DAOU Systems, Inc. We were unable to sustain Y2K-fueled revenue levels that we enjoyed in 1999. Once the market demand for the company's wide range of health care information technology (IT) business weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. , our revenue run-rate dropped, resulting in a decline
in DAOU's fourth quarter and full-year 2000 revenues from the prior
periods. Since my arrival at DAOU we have taken important steps to
rebuild this business. Our reorganization narrows our focus to lines of
business where we have special skills and knowledge, particularly with
respect to the implementation of application systems within the managed
care segment of the industry and integration of legacy systems we know
so well with the emerging technologies we developed in our Enosus
Internet services business. DAOU's objective is to provide the
optimum level of service to our customers, so we are choosing to focus
on what we do best. This new focus will bring improved service and
greater specialization A career option pursued by some attorneys that entails the acquisition of detailed knowledge of, and proficiency in, a particular area of law.As the law in the United States becomes increasingly complex and covers a greater number of subjects, more and more attorneys are to our customers and allows us to compete where our probability of success is highest." Gross margin for the fourth quarter of 2000 increased to 28%, compared to 27% in the same quarter last year. Billable utilization was 63% during the fourth quarter of 2000, compared to 68% in the fourth quarter of 1999. 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. for the fourth quarter of 2000, excluding restructuring charges, declined to $5.5 million or 37% of revenues, compared to $12.5 million or 53% of revenues in the fourth quarter of 1999. "We are taking a variety of strategic actions to turn our business around and to improve our operating results," stated Neil R. Cassidy, executive vice president and chief financial officer. "We are focusing on lines of business where we have the right skill set, and where we can maintain a sustainable, competitive advantage. Due to the downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in the industry, we needed to lower our cost structure, preserve our cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. and take necessary steps to enable the company to reach profitability. As a result of the actions taken, we believe we are well-positioned to move forward as a leading-edge IT partner for health care customers." As of Dec. 31, 2000, cash and short-term investments totaled $10.5 million, compared to $15.5 million at the end of 1999. The reduction in cash and short-term investments for the year was primarily due to the company's net loss and the $2.0 million cash payment in the fourth quarter of 2000 related to the removal of the preferred stock redemption feature. Cash provided by operating activities during the three months ended Dec. 31, 2000 was $463,000, compared to cash used in operating activities of $339,000 for the three months ended Dec. 31, 1999. Including the $2.0 million cash payment related to the removal of the preferred stock redemption feature, total cash used during the fourth quarter of 2000 was $1.6 million. 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 days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). in the fourth quarter of 2000 were 83 days, as compared to 93 days in the fourth quarter of 1999. DAOU maintains an $8.0 million revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. that expires on June 29, 2001. There are no compensating balance Compensating balance An excess balance that is left in a bank to provide indirect compensation for loans extended or services provided. compensating balance requirements and borrowings under the line of credit are limited to 80% of qualifying receivables. No amounts are outstanding under this revolving line of credit as of Dec. 31, 2000. DAOU also announced today that the company has notified The Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. that it has requested a hearing on Nasdaq's determination that the company is no longer in compliance with the $1.00 minimum bid price requirement for continued listing on the Nasdaq National Market. The hearing has been scheduled for late March 2001 and the proposed delisting Delisting When the stock of a company is removed from a stock exchange. Notes: Reasons for delisting include violating regulations and/or failure to meet financial specifications set out by the stock exchange. will be stayed pending a final determination following that hearing. There can be no assurance Nasdaq will grant the company's request for continued listing. In the event of delisting by Nasdaq, the company's securities may be eligible for quotation QUOTATION, practice. The allegation of some authority or case, or passage of some law, in support of a position which it is desired to establish. 2. Quotations when properly made, assist the reader, but when misplaced, they are inconvenient. on another marketplace such as the OTC Bulletin Board OTC Bulletin Board An electronic quotation listing of the bid and asked prices of OTC stocks that do not meet the requirements to be listed on the NASDAQ stock-listing system. . About DAOU (www.daou.com) DAOU Systems Inc. performs traditional network services, remote help desk and related technology support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services , applications consulting and implementation, and integrates legacy systems with emerging technologies, such as wireless and other portable computing computing - computer solutions for the U.S. health care industry. The company recently announced that in order to respond more effectively to current market opportunities and to its customers' specific IT needs, it has consolidated its five operating companies operating company A business that engages in transactions with outsiders. into two divisions. These consist of a Technology Division combining DAOU's integration, networking and Internet companies, Sentient sentient /sen·ti·ent/ (sen´she-ent) able to feel; sensitive. sen·tient adj. 1. Having sense perception; conscious. 2. Experiencing sensation or feeling. Systems, Communications Infrastructure and Enosus, and an Applications Division integrating its applications companies, Technology Management (TMI TMI Too Much Information TMI Three Mile Island TMI TRMM Microwave Imager TMI Transactions on Medical Imaging TMI Texas Military Institute TMI Teen Missions International TMI Tauber Manufacturing Institute ) and Resources in Healthcare Innovation (RHI RHI Robert Half International RHI Range Height Indicator RHI Roller Hockey International RHI Relativistic Heavy Ion RHI Rigid Hull Inflatable Boat RHI Rhinelander, WI, USA - Rhinelander Oneida County Airport (Airport Code) ). The Applications Division will also assist clients in complying with 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, regulations, which mandate that health care facilities maintain secure transmission of sensitive patient information. Stephen M. Casey, former president of Sentient Systems Inc. will serve as president of DAOU's Technology Division. Vincent K. Roach roach: see cockroach. roach Common European sport fish (Rutilus rutilus) of the carp family (Cyprinidae), found in lakes and slow rivers. A high-backed, yellowish green fish with red eyes and reddish fins, the roach is 6–16 in. , former president of Technology Management Inc. will serve as president of DAOU's Applications Division. In addition, the company reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. its national sales force to create separate, stand alone sales teams for each of its newly created divisions, and created a strategic services office, led by Eric S. Ringwall, chief technology officer to identify and develop capabilities and services responsive to emerging technologies and applications. DAOU has approximately 360 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 and middle-market payer organizations. 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 management and integration of the company's operations as it implements its corporate reorganization; the ability of the company to successfully execute strategies for realizing full shareholder value; 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 for per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
12/31/00 12/31/99 12/31/00 12/31/99
Revenues $ 14,705 $ 23,644 $ 63,748 $ 103,400
Cost of revenues 10,521 17,289 52,781 75,927
Gross profit 4,184 6,355 10,967 27,473
Sales and marketing 913 2,846 5,744 10,398
General and
administrative 4,540 9,620 17,973 25,071
Restructuring charges 1,306 -- 2,133 --
Total operating
expenses 6,759 12,466 25,850 35,469
Loss from operations (2,575) (6,111) (14,883) (7,996)
Other income, net 182 346 699 779
Loss before taxes (2,393) (5,765) (14,184) (7,217)
Provision for income
taxes -- 2,358 -- 1,761
Net loss (2,393) (8,123) (14,184) (8,978)
Dividends on preferred
stock (4,279) (180) (4,837) (308)
Net loss available
to common
stockholders $ (6,672) $ (8,303) $ (19,021) $ (9,286)
Basic and diluted net loss
per share available
to common
stockholders $ (0.38) $ (0.47) $ (1.07) $ (0.52)
Shares used in computing
basic and diluted net
loss per share 17,712 17,712 17,712 17,697
Net loss available to common
stockholders before
restructuring charges
and one-time
dividend $ (1,278) $ (8,303) $ (12,800) $ (9,286)
Net loss per share available
to common stockholders
before restructuring
charges and one-time
dividend $ (0.07) $ (0.47) $ (0.72) $ (0.52)
DAOU SYSTEMS, INC
CONSOLIDATED BALANCE SHEET
(in thousands)
December 31, December 31,
2000 1999
(unaudited)
Current assets:
Cash and cash equivalents $ 10,504 $ 15,480
Short-term investments 82 68
Accounts receivable, net 11,900 21,912
Contract work in progress 665 2,816
Other current assets 558 1,048
Total current assets 23,709 41,324
Equipment, furniture and fixtures,
net 2,565 4,319
Other assets 131 417
$ 26,405 $ 46,060
Current liabilities:
Accounts payable and accrued
expenses $ 3,288 $ 4,698
Accrued salaries and wages 2,273 4,248
Current portion of long-term debt 210 210
Total current liabilities 5,771 9,156
Long-term liabilities 306 548
Redeemable convertible preferred
stock -- 11,382
Stockholders' equity
Convertible preferred stock 12,132 --
Common stock 18 18
Additional paid-in capital 39,452 37,395
Deferred compensation -- (192)
Unrealized loss on investments (49) (43)
Retained deficit (31,225) (12,204)
Total stockholders' equity 20,328 24,974
$ 26,405 $ 46,060
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