QVDX Quovadx (MM)

Quovadx, Inc. (NASDAQ: QVDX), a global software and vertical solutions company, today announced financial results for the first quarter ended March 31, 2007. Total revenues for the quarter were $13.5 million, down $2.9 million, or 18 percent, when compared to $16.4 million in the same period a year ago. The decline in revenue is primarily related to the previously announced December 31, 2006 expiration of a contract with the Medical University of South Carolina (MUSC) in the Company�s Integration Solutions division (ISD), partially offset by increased services revenue in the Company�s Rogue Wave Software division. Excluding the first quarter 2006 revenue impact of MUSC of $3.4 million, first quarter revenue grew 4 percent year over year. Net income for the quarter was $12.8 million, or $0.30 per share, up from a net loss of $7.8 million, or $0.19 per share, in the first quarter a year ago. Net income for the first quarter of 2007 includes a gain of $15.4 million, or $0.37 per share, from the sale of CareScience, as well as a loss from discontinued operations of $0.5 million, or $0.01 per share, for CareScience. First quarter net loss from continuing operations was $2.2 million, or $0.06 per share, improved from a net loss from continuing operations of $8.4 million, or $0.20 per share, in the same period a year ago. Net loss from continuing operations for the first quarter of 2006 included $6.9 million, or $0.17 per share, of litigation settlement expense. As of March 31, 2007, the Company�s cash balance, including cash, cash equivalents, short-term investments and restricted cash, was $57.0 million, up from $30.6 million at year end 2006. Days Sales Outstanding (DSO) was 77 days as of March 31, 2007, up from 66 days at December 31, 2006 and 60 days at March 31, 2006. Cash for the first quarter includes $34.7 million of cash received from the sale of CareScience, partially offset by a $7.8 million payment related to litigation settlement expense. Business Division Highlights For the first quarter of 2007, ISD reported revenue of $6.5 million, down $3.3 million, or 34 percent, when compared to the first quarter of 2006. ISD results were affected by the 2006 expiration of the MUSC contract, which contributed $3.4 million of revenue and $0.6 million of operating income in the first quarter of 2006. Despite the expiration of the MUSC contract, ISD�s operating income for the quarter was $0.9 million, up $0.5 million, or 134 percent, when compared to the first quarter a year ago. For the first quarter of 2007, Rogue Wave Software reported revenue of $7.0 million, up $0.4 million, or 6 percent, compared to the first quarter of 2006. Rogue Wave Software�s operating income for the quarter was $1.5 million, down $0.8 million, or 35 percent, compared to the first quarter a year ago. Primary drivers of Rogue Wave Software�s first quarter 2007 results included increased demand for consulting services and continued investment to increase market awareness for Rogue Wave� Hydra. Strategic Transactions On March 30, 2007, the Company sold its CareScience division to Premier, Inc. Under terms of the agreement, Premier offered to acquire 100 percent of the outstanding shares of common stock of CareScience, Inc. for $34.9 million in cash, subject to a final working capital adjustment at closing. Closing working capital was determined as current assets less current liabilities. As a result of the closing working capital adjustment, the final purchase price is estimated to be $34.0 million, subject to final agreement, and the difference has been recorded as a payable to Premier as of March 31, 2007. Additional details on the working capital adjustment are included in the Company�s first quarter 2007 Form 10-Q, filed with the SEC on May 3, 2007. On April 1, 2007, Quovadx, Inc. and Battery Ventures entered into an agreement and plan of merger wherein Battery Ventures would acquire 100 percent of the outstanding shares of the common stock of Quovadx, Inc. The final purchase price for the transaction, as amended May 4, 2007 is $139.1 million, or approximately $3.20 per share, payable to shareholders at close. The proposed transaction is subject to customary conditions to closing, including the affirmative vote of Quovadx stockholders; pending this approval, the proposed transaction is expected to close within 90 days. Detailed information on these transactions are described in a related Form 8-K filed with the SEC on April 2, 2007 and a Form 8-K/A filed with the SEC on April 5, 2007, as well as in a press release and related Form 8-K dated May 4, 2007. Additional information on the Battery Ventures transaction is included in Forms 8-K filed with the SEC on April 3rd and 20th. These documents are currently available on the Investor Relations portion of the Quovadx website at www.quovadx.com. In addition, more detailed information on the Battery Ventures transaction will be provided in a proxy statement, which, subject to approval from the SEC, is expected to be mailed to Quovadx stockholders in June 2007. Other Matters In the fourth quarter of 2006, the Company reached an agreement to settle a shareholder lawsuit captioned Special Situations Fund III, L.P. et al. v. Quovadx, Inc. Under the terms of this agreement, in the first quarter of 2007 Quovadx paid $7.8 million into a settlement fund in exchange for a release with prejudice of all related claims against the Company and individual defendants.. On May 4, 2007, the court granted final approval to this settlement agreement. On September 29, 2006, the Company offered to enter into a settlement with the Securities and Exchange Commission (SEC) to settle the formal SEC investigation initiated April 12, 2004. The proposed settlement, if approved, would not involve any financial penalty. The Company�s understanding is that the Staff of the Enforcement Division will recommend to the SEC that the proposed settlement be approved. Non-GAAP Financial Measures The financial tables accompanying this press release contain �non-GAAP financial measure(s)� as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended, including: EBITDA for each division for the three months ended March 31, 2007, December 31, 2006, September 30, 2006, June 30, 2006 and March 31, 2006; and Days sales outstanding, or DSO, on March 31, 2007, December 31, 2006, and March 31, 2006. The Company believes these measures provide useful information to management and to investors; however, these �non-GAAP� measures should be viewed in addition to, and not as an alternative for, the Company�s reported results prepared in accordance with Generally Accepted Accounting Principles in the United States (�GAAP�). A reconciliation of EBITDA, as compared to the most directly similar GAAP financial measure, is presented for each of the Company�s divisions in the table near the end of the press release that contains selected financial information for those divisions. DSO is calculated as: net outstanding accounts and unbilled receivables at the end of the quarter divided by total revenue for the quarter, multiplied by 90. About Quovadx, Inc. Quovadx (Nasdaq: QVDX) offers software and services for software system development, extension, and integration to enterprise customers worldwide. Quovadx has two divisions, including the Integration Solutions division (ISD), which offers private and public healthcare and healthcare IT organizations software infrastructure to facilitate system interoperability and leverage existing technology, and, the Rogue Wave Software division, which provides reusable software components and services for enterprise-class application development and high-performance SOA. A third business unit, CareScience, Inc., was sold to Premier on March 30, 2007. For more information, please visit www.quovadx.com. QUOVADX, QUOVADX logo and ROGUE WAVE are registered trademarks or service marks of Quovadx, Inc. in the U.S. and/or select foreign countries. The absence of a trademark from this list does not constitute a waiver of Quovadx, Inc.�s intellectual property rights concerning that trademark. All other company and product names mentioned may be trademarks of the companies with which they are associated. Cautionary Statement Certain forward-looking statements are included in this release, including statements relating to a proposed transaction between Quovadx, Inc. and Battery Ventures. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Quovadx management's current expectations regarding the proposed transaction, and speak only as of the date of this release. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainties that could cause actual results to differ materially from those referred to in the forward-looking statements. Such risks and uncertainties include, among other things: i) that Quovadx stockholders will not support or approve the transaction in a timely manner, if at all; ii) that the closing of the transaction with Battery Ventures could be materially delayed or more costly and difficult than expected; and/or iii) that the transaction will not be consummated. A full discussion of known risks and uncertainties is included in the Company's Annual Report on Forms 10-K and 10-K/A and Quarterly Reports on Form 10-Q as filed with the SEC, copies of which are available without charge from the Company. These filings are also available electronically through a link from the Quovadx Investor Relations Web page or from the SEC Web site at www.sec.gov under "Quovadx, Inc." If any of the events described in those filings were to occur, either alone or in combination, it is likely that the Company�s ability to reach the results described in the forward-looking statements could be impaired and the Company�s stock price could be adversely affected. Quovadx does not undertake any obligation to update or correct any forward-looking statements included in this release to reflect events or circumstances occurring after the date of this release. Quovadx, Inc. Condensed Consolidated Balance Sheets (in thousands) � � March 31, 2007 December 31, 2006 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 46,379� $ 15,808� Short-term investments 10,534� 14,611� Accounts receivable, net 11,731� 13,086� Unbilled accounts receivable 163� 1,073� Prepaid and other 2,030� 1,393� Assets held for sale -� 22,725� Total current assets 70,837� 68,696� � Property and equipment, net 3,298� 3,418� Software, net 6,267� 6,038� Other intangible assets, net 4,833� 5,471� Goodwill 33,981� 33,981� Restricted cash 135� 135� Other assets 5,866� 4,235� Total assets $ 125,217� $ 121,974� � LIABILITIES AND STOCKHOLDERS� EQUITY � Current liabilities: Accounts payable $ 3,038� $ 3,701� Accrued liabilities 9,700� 16,174� Deferred revenue 15,545� 13,230� Liabilities held for sale -� 6,792� Total current liabilities 28,283� 39,897� � Long term liabilities 5,135� 3,506� � Total liabilities 33,418� 43,403� � Commitments and contingencies � Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued and outstanding -� -� Common stock, $.01 par value; 100,000,000 authorized and 42,220,419 and 42,250,290 shares issued and outstanding, respectively 422� 422� Accumulated other comprehensive income 1,071� 976� Additional paid-in capital 275,195� 274,578� Accumulated deficit (184,889) (197,405) Total stockholders� equity 91,799� 78,571� Total liabilities and stockholders� equity $ 125,217� $ 121,974� � End of the period common shares outstanding 42,220� 42,250� Quovadx, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (Unaudited) � Three Months Ended March 31, 2007� 2006� � � Revenue: Software license $ 5,120� $ 5,530� Professional services 1,935� 1,319� Recurring services 6,401� 9,527� Total revenue 13,456� 16,376� � Cost of revenue: Software license 708� 1,295� Professional services 1,367� 1,257� Recurring services 1,196� 4,301� Total cost of revenue 3,271� 6,853� � Gross profit 10,185� 9,523� � Operating expenses: Sales and marketing 4,860� 4,399� General and administrative 4,995� 4,493� Litigation settlements -� 6,875� Research and development 2,214� 1,780� Amortization of acquired intangibles 637� 657� Total operating expenses 12,706� 18,204� Loss from continuing operations (2,521) (8,681) � Other income (expense), net 79� (9) Interest income, net 153� 392� Loss from continuing operations before income taxes, discontinued operations and cumulative effect of accounting change (2,289) (8,298) Income tax expense (benefit) (114) 58� Loss from continuing operations (2,175) (8,356) Discontinued operations: Income (loss) from discontinued operations (502) 579� Gain on sale of CareScience division, net of taxes 15,433� -� Income (loss) before cumulative effect of accounting change 12,756� (7,777) Cumulative effect of accounting change -� 11� Net income (loss) $ 12,756� $ (7,766) � Net loss from continuing operations before discontinued operations and effect of accounting change per common share � basic and diluted $ (0.06) $ (0.20) Income (loss) from discontinued operations per common share � basic and diluted (0.01) 0.01� Gain on sale of CareScience division, net of taxes per common share � basic and diluted 0.37� -� Cumulative effect of accounting change per common share � basic and diluted -� 0.00� Net income (loss) per common share � basic and diluted $ 0.30� $ (0.19) � Shares used in computing net loss per share � basic and diluted $ 41,831� 41,446� Quovadx, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) Three Months Ended March 31, 2007� � 2006� Cash flows from operating activities Net income (loss) $ 12,756� $ (7,766) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: � Gain on sale of discontinued operations, net of taxes (15,433) -� Loss (income) from discontinued operations 502� (579) Deferred income taxes (240) -� Depreciation and amortization 979� 1,642� Amortization of acquired intangibles 637� 657� Stock based compensation 369� 453� Bad debt expense 78� 51� Non cash items from discontinued operations 768� 492� Change in assets and liabilities: Accounts receivable 1,304� 1,346� Unbilled accounts receivable 910� (598) Prepaid and other (2,262) (175) Accounts payable (664) 1,562� Accrued liabilities (5,713) 5,396� Deferred revenue 2,292� � 359� Net cash (used in) provided by operating activities from continuing operations (3,717) � 2,840� Net cash used in discontinued operations (3,289) (291) Cash flows from investing activities Purchase of property and equipment (308) (1,449) Capitalized software (773) (936) Purchases of short-term investments (47) (21,145) Sales of short-term investments 4,125� � 18,832� Net cash provided by (used in) investing activities from continuing operations 2,997� � (4,698) Net cash provided by (used in) investing activities from discontinued operations 34,409� (201) � Cash flows from financing activities Proceeds from issuance of common stock 61� � 29� Net cash provided by financing activities 61� � 29� � Effect of foreign exchange rate changes on cash 110� � 156� � Cash and cash equivalents Net increase (decrease) 30,571� (2,165) Beginning of period 15,808� � 17,806� End of period $ 46,379� � $ 15,641� � Short-term investments 10,534� 17,163� Restricted cash 135� � 132� Total cash, cash equivalents and short-term investments $ 57,048� � $ 32,936� Quovadx, Inc. Selected Financial Information by Division (in thousands) (Unaudited) � � � � � Integration Solutions Division (ISD) Three Months Ended 3/31/07� 12/31/06� 9/30/06� 6/30/06� 3/31/06� Revenue: Software license $ 1,518� $ 2,984� $ 1,558� $ 1,866� $ 1,985� Professional services 1,543� 1,409� 1,550� 1,003� 1,163� Recurring services 3,439� 6,745� 6,545� 6,171� 6,649� Total revenue 6,500� 11,138� 9,653� 9,040� 9,797� Gross profit 4,244� 6,217� 4,427� 3,677� 3,818� Gross margin % 65% 56% 46% 41% 39% Income from operations [1] $ 886� $ 2,736� $ 1,204� $ 424� $ 378� � Depreciation and amortization 614� 572� 984� 1,308� 1,252� EBITDA $ 1,500� $ 3,308� $ 2,188� $ 1,732� $ 1,630� � Capitalized Software Additions $ 243� $ 248� $ 285� $ 440� $ 331� � Rogue Wave Software Division � Revenue: Software license $ 3,602� $ 4,442� $ 4,021� $ 4,531� $ 3,545� Professional services 392� 360� 273� 194� 156� Recurring services 2,962� 2,892� 2,733� 2,992� 2,878� Total revenue 6,956� 7,694� 7,027� 7,717� 6,579� Gross profit 5,941� 6,440� 6,084� 6,743� 5,705� Gross margin % 85% 84% 87% 87% 87% Income from operations [1] $ 1,464� $ 1,742� $ 2,283� $ 2,506� $ 2,239� � Depreciation and amortization 846� 988� 1,034� 1,003� 924� EBITDA $ 2,310� $ 2,730� $ 3,317� $ 3,509� $ 3,163� � Capitalized Software Additions $ 529� $ 594� $ 571� $ 460� $ 605� � [1] Does not include allocation of corporate overhead