DAOU Systems Inc. Reports Financial Results for First Quarter 1999.SAN DIEGO--(BW HealthWire)--April 29, 1999-- DAOU Systems Inc. (Nasdaq:DAOU) today reported revenue of $27.3 million for the first quarter ended March 31, 1999, up 14.0% from revenue of $24.0 million for the first quarter of 1998. Due largely to poor billable utilization rates in its Communications Infrastructure business unit and an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. at its DAOU OnLine cabling business, DAOU reported a net loss of $1.7 million, or $.09 per share, for the first quarter of 1999, compared to net income of $2.6 million, or $.14 per share (before merger costs and related tax effects), in the first quarter of 1998. "During the first quarter, three of our four business units, Application Implementation, Management Consulting Noun 1. management consulting - a service industry that provides advice to those in charge of running a business service industry - an industry that provides services rather than tangible objects and Integration Services, performed well," stated Georges Daou, chairman and chief executive officer of DAOU Systems. "We are pleased with the success of these units and with the progress we are making in integrating these businesses into our Company." "In addition to increasing revenue," added Daou, "we also reduced 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. as a percentage of revenue to 30% in the first quarter of 1999 compared to 36% in the fourth quarter of 1998. Overall, we continued to make progress toward a number of our key goals, although we are not yet where we need to be. To achieve our targeted goals for profitability and revenue, we plan to close down DAOU OnLine by May 1, 1999 and focus on increasing sales of DAOU's Communications Infrastructure capabilities more effectively and on providing these services more profitably. "With a complete line of healthcare information technology solutions now in place, we believe that we are well-positioned to capture additional market share in the growing healthcare market. We have strengthened our management team with the addition of Larry Lar´ry n. 1. Same as Lorry, or Lorrie. Grandia as President of DAOU. As the former Chief Information Officer of Intermountain in·ter·moun·tain adj. Located between mountains or mountain systems, especially lying between the Rocky Mountains and the Sierra Nevada or Cascade Range in the western United States. Health Care of Salt Lake City, Larry understands our business from the customer's perspective, has extensive experience running a big complex business and has strong relationships in the marketplace. We also have 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. our national sales force and put in place numerous new tools that should enable us to do a better job of managing our business. As a result, we believe we are moving in the right direction and expect to see improvement in our performance in the second half of 1999." 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. healthcare U.S. Healthcare is a now-defunct healthcare company. The logo had an apple. The merger with Aetna In 1996, the company merged with Aetna, calling it Aetna U.S. Healthcare. The U.S. Healthcare apple logo was next to the Aetna name, and U.S. Healthcare under it. U.S. 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 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 solutions. DAOU has nearly 800 employees, and has provided services to more than 1,300 healthcare 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 . DAOU's clients include organizations such as the Cleveland Clinic Cleveland Clinic (formally known as the Cleveland Clinic Foundation) is a multispecialty academic medical center located in Cleveland, Ohio, USA. Cleveland Clinic was established in 1921 by four physicians for the purpose of providing patient care, research, and medical , Catholic Healthcare West Catholic Healthcare West (CHW) is a California not-for-profit public benefit corporation that operates hospitals in California, Arizona, and Nevada[1]. As such, it is exempt from federal and state income taxes. , Mercy Health Services health services Managed care The benefits covered under a health contract and Saint Mary's Saint Mary's, island, Scilly Islands Saint Mary's, England: see Scilly Islands. Health Network, Reno, Nevada. 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, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . Such statements are only predictions and actual events or results may differ materially. Forward-looking statements usually contain the word "estimate", "anticipate", "believe", "expect" 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 uncertainties related to the intensely competitive nature of the company's marketplace and the inherent difficulties of successfully implementing staffing reorganizations. These 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" could cause actual results to differ materially from those indicated by such forward-looking statements. -0-
DAOU SYSTEMS INC.
Condensed Consolidated Statements
of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended
3/31/99 12/31/98 3/31/98
Revenues $ 27,323 $ 25,405 $ 23,985
Cost of Revenues 21,820 21,681 14,488
Gross Profit 5,503 3,724 9,497
Sales and Marketing 2,905 3,173 2,733
General and Administrative 5,336 5,869 3,128
Merger and Related Costs -- -- 1,796
Total Operating Expenses 8,241 9,042 7,657
Income (loss) from Operations (2,738) (5,318) 1,840
Other income (expense), net (86) 139 142
Income (loss) before taxes (2,824) (5,179) 1,982
Provision (benefit)
for income taxes (1,156) (2,131) 914
Net Income (loss) $ (1,668) $ (3,048) $ 1,068
Income (loss) before
merger and related costs $ (1,668) $ (3,048) $ 2,581
Basic earnings (loss)
per share $ (0.09) $ (0.17) $ 0.06
Basic earnings (loss)
per share before
one-time merger costs $ (0.09) $ (0.17) $ 0.15
Diluted earnings
(loss) per share $ (0.09) $ (0.17) $ 0.06
Diluted earnings
(loss) per share before
one-time merger costs $ (0.09) $ (0.17) $ 0.14
Basic weighted average
shares of common stock
outstanding 17,689 17,689 17,596
Diluted weighted average
shares of common stock
and common stock equivalents
outstanding used in diluted
earnings per share before
one-time merger costs 17,689 17,689 18,576
DAOU SYSTEMS, INC.
Condensed Consolidated
Balance Sheets
(in thousands)
March 31, Dec. 31,
1999 1998
(Unaudited)
Current assets:
Cash and cash equivalents $ 4,617 $ 6,756
Short-term investments 1,113 1,024
Accounts receivable, net 25,098 24,582
Contract work in progress 8,059 12,272
Other current assets 5,996 4,668
Total current assets 44,883 49,302
Equipment, furniture and fixtures, net 4,696 4,735
Other assets 410 480
$ 49,989 $ 54,517
Current liabilities:
Accounts payable and accrued expenses $ 6,336 $ 8,277
Accrued salaries and benefits 4,092 3,907
Current portion of long-term liabilities 4,158 5,453
Total current liabilities 14,586 17,637
Long-term liabilities 2,123 2,105
Stockholders' equity
Common stock 18 18
Additional paid-in capital 38,419 38,419
Deferred compensation (898) (980)
Unrealized gains on short-term investments 327 236
Retained deficit (4,586) (2,918)
Total stockholders' equity 33,280 34,775
$ 49,989 $ 54,517
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