Streamline Health® Reports Improved Income and EPS For Third Quarter 2012

From the Wires

Adjustment in Tax Valuation Allowance Improves Quarterly Net Income to $2.3 Million and EPS to $.18

Dec. 14, 2012 04:38 PM

ATLANTA, Dec. 14, 2012 /PRNewswire/ -- Streamline Health Solutions, Inc. (NASDAQ: STRM), a leading provider of enterprise content management, business analytics, computer assisted coding (CAC), and clinical documentation improvement (CDI) solutions for healthcare providers, today announced that following the release of its third quarter 2012 earnings on December 13, 2012, after having received approval for that press release from its independent auditors, the company has been encouraged by its auditors to take a non-cash adjustment in its tax valuation allowance, as a result of the deferred tax liabilities recorded in conjunction with the Meta Health Technology acquisition, thereby altering its net income and earnings per share (EPS) performance for the quarter.

The adjustment in the tax valuation allowance also increased the company's year-to-date net income and EPS, to $2.3 million and $.20 respectively.

About Streamline Health

Streamline Health Solutions, Inc. (NASDAQ: STRM) is a leading provider of SaaS-based healthcare information technology (HCIT) solutions for hospitals and physician groups with offices in Atlanta, Cincinnati, and New York. The company's comprehensive suite of solutions includes: enterprise content management (ECM), business analytics, integrated workflow systems, clinical documentation improvement (CDI), and computer assisted coding (CAC). Across the revenue cycle, these solutions offer healthcare enterprises a flexible, customizable way to communicate between disparate departments and information systems to improve processes, boost productivity, and optimize clinical, administrative and financial performance. For more information, please visit our website at http://www.streamlinehealth.net.

* Non-GAAP Financial Measures

Streamline Health reports its financial results in accordance with generally accepted accounting principles in the United States ("GAAP"). Streamline Health's management also evaluates and makes operating decisions using various other measures. One such measure is adjusted EBITDA, which is a non-GAAP financial measure. Streamline Health's management believes that these measures provide useful supplemental information regarding the performance of Streamline Health's business operations.

Streamline Health defines "adjusted EBITDA" as net earnings (loss) plus interest expense, tax expense, depreciation and amortization expense of tangible and intangible assets, stock-based compensation expense, and non-recurring transaction costs. A table illustrating this measure is included in this publication.

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995

Statements made by Streamline Health Solutions, Inc. that are not historical facts are forward-looking statements that are subject to risks and uncertainties and are no guarantee of future performance. The forward looking statements contained herein are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements, included herein. These risks and uncertainties include, but are not limited to, the timing of contract negotiations and execution of contracts and the related timing of the revenue recognition related thereto, the potential cancellation of existing contracts or clients not completing projects included in the backlog, the impact of competitive products and pricing, product demand and market acceptance, new product development, key strategic alliances with vendors that resell the Company's products, the ability of the Company to control costs, availability of products obtained from third party vendors, the healthcare regulatory environment, potential changes in legislation, regulation and government funding affecting the healthcare industry, healthcare information systems budgets, availability of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems, fluctuations in operating results, effects of critical accounting policies and judgments, changes in accounting policies or procedures as may be required by the Financial Accountings Standards Board or other similar entities, changes in economic, business and market conditions impacting the healthcare industry, the markets in which the Company operates and nationally, and the Company's ability to maintain compliance with the terms of its credit facilities, and other risks detailed from time to time in the Streamline Health Solutions, Inc. filings with the U. S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Company Contact:

Ashley Moore

Director, Marketing

(404)-446-2057

ashley.moore@streamlinehealth.net

Investor Contacts:

Randy Salisbury

Investor Relations

(404)-229-4242

randy.salisbury@streamlinehealth.net

BPC Financial Marketing

John Baldissera

800-368-1217

STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three and Nine Months Ended October 31,
(Unaudited)

		Three Months				Nine Months
		2012		2011		2012		2011
Revenues:
Systems sales	$	290,294	$	232,395	$	719,495	$	526,597
Professional services		1,089,814		833,592		3,153,672		2,708,824
Maintenance and support		3,148,442		2,279,886		7,797,263		6,558,484
Software as a service		2,005,813		966,218		5,358,120		2,804,141
Total revenues		6,534,363		4,312,091		17,028,550		12,598,046

Operating expenses:
Cost of systems sales		717,901		583,388		1,936,761		1,751,890
Cost of professional services		854,997		572,056		1,910,951		1,923,576
Cost of maintenance and support		918,750		513,868		2,349,745		1,651,884
Cost of software as a service		550,875		480,368		1,849,962		1,334,659
Selling, general and administrative		2,926,830		1,494,891		6,800,794		4,742,084
Product research and development		866,659		303,973		1,833,865		1,063,903
Total operating expenses		6,836,012		3,948,544		16,682,078		12,467,996
Operating income (loss)		(301,649)		363,547		346,472		130,050
Other income (expense):
Interest expense		(895,142)		(25,896)		(1,494,161)		(67,529)
Miscellaneous income (expenses)		43,549		(36,885)		55,805		(42,155)
Earnings (loss) before income taxes		(1,153,242)		300,766		(1,091,884)		20,366
Income tax benefit (expense)		3,552,879		(5,000)		3,519,879		(12,315)
Net earnings	$	2,399,637	$	295,766	$	2,427,995	$	8,051
Less: deemed dividends on Series A Preferred Shares		(139,133)				(139,133)
Net earnings attributable to common shareholders	$	2,260,504			$	2,288,862
Basic net earnings per common share	$	0.18	$	0.03	$	0.20	$	0.00
Number of shares used in basic per common share computation		12,393,352		9,943,567		11,346,428		9,823,937
Diluted net earnings per common share	$	0.15	$	0.03	$	0.18	$	0.00
Number of shares used in diluted per common share computation		15,365,238		9,958,947		12,417,256		9,837,750

STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

Assets

		(Unaudited) October 31, 2012		January 31, 2012

Current assets:
Cash and cash equivalents	$	10,528,695	$	2,243,054
Accounts receivable, net of allowance for doubtful
accounts of $134,000 and $100,000, respectively		3,389,738		4,484,605
Contract receivables		648,736		430,370
Prepaid hardware and third party software for future delivery		22,777		38,193
Prepaid client maintenance contracts		1,038,035		788,917
Prepaid and other assets		555,310		256,104
Deferred income taxes		-		167,000
Total current assets		16,183,291		8,408,243

Non-current assets:
Property and equipment:
Computer equipment		3,418,500		2,892,885
Computer software		2,196,236		2,131,730
Office furniture, fixtures and equipment		818,231		756,375
Leasehold improvements		693,890		667,000
		7,126,857		6,447,990
Accumulated depreciation and amortization		(5,778,675)		(5,232,321)
Property and equipment, net		1,348,182		1,215,669

Contract receivables, less current portion		142,021		221,596
Capitalized software development costs, net of accumulated amortization of $16,733,274 and $14,805,236, respectively		13,119,354		9,830,175
Intangible assets, net		8,517,084		417,666
Deferred financing cost, net		1,211,912		145,857
Goodwill		12,038,226		4,060,504
Other, including deferred income taxes of $0 and $711,000, respectively		366,857		841,348
Total non-current assets		36,743,636		16,732,815
	$	52,926,927	$	25,141,058

STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

Liabilities and Stockholders' Equity

		(Unaudited) October 31, 2012		January 31, 2012

Current liabilities:
Accounts payable	$	832,657	$	879,027
Accrued compensation		1,603,355		887,130
Accrued other expenses		1,373,307		479,526
Deferred revenues		6,262,960		6,496,938
Contingent consideration for earn-out		1,319,559		-
Current portion of long-term debt		1,250,000		-
Total current liabilities		12,641,838		8,742,621

Non-current liabilities:
Term loans		12,750,000		4,120,000
Convertible note payable, net of unamortized discount of $1,822,255 and $0, respectively		3,877,322		3,000,000
Warrants liability		4,138,783		-
Lease incentive liability		101,453		47,193
Contingent consideration for earn-out, less current portion		-		1,232,720
Total non-current liabilities		20,867,558		8,399,913
Total liabilities		33,509,396		17,142,534

Series A 0% Convertible Redeemable Preferred Stock, $.01 par
value per share, $7,250,355 redemption value, 5,000,000
shares authorized, 2,416,785 shares issued		2,979,170		-

Stockholders' equity:

Common stock, $.01 par value per share, 25,000,000 shares authorized, 12,582,598 and 10,433,716 shares issued and outstanding, respectively		125,826		104,338

Convertible Redeemable Preferred Stock, $0.01 par value per share, 1,000,000 authorized, no shares issued		-		-

Additional paid in capital		44,351,334		38,360,980
Accumulated deficit		(28,038,799)		(30,466,794)
Total stockholders' equity		16,438,361		7,998,524
	$	52,926,927	$	25,141,058

STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended October 31,
(Unaudited)

		2012		2011
Operating activities:
Net earnings	$	2,427,995	$	8,051
Adjustments to reconcile net earnings to net cash provided by operating activities, net of effect of acquisition:
Depreciation and amortization		2,847,665		2,008,432
Loss on disposal of equipment		-		26,667
Share-based compensation expense		645,407		529,104
Deferred tax benefit		(3,564,612)		-
Provision for accounts receivable		-		40,000
Amortization of debt discount		111,584		-
Fair value adjustment for contingent earnout		86,839		-
Net loss from conversion of convertible note		56,682		-
Change in assets and liabilities:
Accounts and contract receivables		(1,351,935)		419,517
Other assets		(482,785)		(89,066)
Accounts payable		(137,107)		161,609
Accrued expenses		947,630		(574,012)
Deferred revenues		881,677		(1,904,641)
Net cash provided by operating activities		2,469,040		625,661

Investing activities:
Purchases of property and equipment		(546,061)		(245,262)
Capitalization of software development costs		(1,571,420)		(1,970,000)
Payment for acquisition, net of cash acquired		(12,161,634)		-
Net cash used in investing activities		(14,279,115)		(2,215,262)

Financing activities:
Net change in borrowings		9,880,000		550,000
Payment of deferred financing costs		(1,246,107)		-
Proceeds from exercise of stock options and stock purchase plan		161,823		92,711
Proceeds from private placement		12,000,000		-
Payment of success fee		(700,000)		-
Payments on capital lease obligation		-		(156,621)
Net cash provided by financing activities		20,095,716		486,090
Increase (decrease) in cash and cash equivalents		8,285,641		(1,103,511)
Cash and cash equivalents at beginning of period		2,243,054		1,403,949
Cash and cash equivalents at end of period	$	10,528,695	$	300,438
Supplemental cash flow disclosures:
Interest paid	$	1,181,929	$	61,532
Income taxes paid	$	78,041	$	19,136

Supplemental Disclosure of Non-Cash Financing and Investing Activities:

- In June 2012, the $3,000,000 convertible note and accrued interest was converted to 1,529,729 common shares at $2.00 per share.

- In August 2012, we issued 393,086 shares of our common stock at a price of $4.07, as part of the Meta acquisition purchase price.

- In October 2012, we issued approximately 200,000 common stock warrants, convertible into common stock shares at $4.06 per share.

- During the third quarter of 2012, we recorded approximately $139,000 of deemed dividends from preferred shares discount accretion.

STREAMLINE HEALTH SOLUTIONS, INC.
Backlog
(Unaudited)
Table A
Backlog

		October 31, 2012		January 31, 2012		October 31, 2011
Streamline Health Software Licenses	$	3,650,000	$	181,000	$	67,000
Hardware and Third Party Software		84,000		194,000		190,000
Professional Services		4,348,000		5,945,000		4,946,000
Software as a service		19,117,000		10,542,000		6,237,000
Maintenance and support		21,535,000		10,504,000		5,374,000
Total	$	48,734,000	$	27,366,000	$	16,814,000

STREAMLINE HEALTH SOLUTIONS, INC.
Bookings
(Unaudited)
Table B

New bookings (1)

		Three Months Ended
		October 31, 2012
		Value	% of Total Bookings
Streamline Health Software licenses	$	-	-%
Software as a service		2,200,000	76%
Maintenance and support		-	-%
Professional services		684,000	23%
Hardware & third party software		20,000	1%
Total bookings	$	2,904,000	100%

		Nine Months Ended
		October 31, 2012
		Value	% of Total Bookings
Streamline Health Software licenses	$	50,000	-%
Software as a service		9,757,000	86%
Maintenance and support		64,000	1%
Professional services		1,160,000	10%
Hardware & third party software		368,000	3%
Total bookings	$	11,399,000	100%

(1) Bookings are the aggregate of signed contracts and/or completed customer purchase orders approved and accepted by the Company as binding commitments to purchase its products and/or services. New bookings do not include maintenance services as these tend to be recurring in nature on an annual or more frequent basis.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

Table C

This press release contains a non-GAAP financial measure under the rules of the U.S. Securities and Exchange Commission for adjusted EBITDA. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget. Non-GAAP financial measures are used by Streamline Health's management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the Company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. The Company's management compensates for these limitations by considering the company's financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Reconciliation of net earnings (loss) to non-GAAP adjusted EBITDA (in thousands)

Adjusted EBITDA Reconciliation		Three Months Ended,				Nine Months Ended,
		October 31, 2012		October 31, 2011		October 31, 2012		October 31, 2011
Net earnings	$	2,400	$	296	$	2,428	$	8
Interest expense		895		26		1,494		68
Income tax benefit (expense)		(3,553)		5		(3,520)		12
Depreciation and other amortization		184		163		548		553
Amortization of capitalized software development costs		708		454		1,930		1,455
Amortization of intangible assets		229		-		254		-
EBITDA		863		944		3,134		2,096
Stock-based compensation expense		245		133		645		529
Transaction expenses		494		-		1,043		-
Adjusted EBITDA	$	1,602	$	1,077	$	4,822	$	2,625

Adjusted EBITDA per diluted share
Earnings per share - diluted	$	0.15	$	0.03	$	0.18	$	0.00
Adjusted EBITDA per adjusted diluted share	$	0.10	$	0.11	$	0.39	$	0.27

Diluted weighted average shares		15,365,238		9,958,947		12,417,256		9,837,750

SOURCE Streamline Health Solutions, Inc.

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