Emageon Reports Fourth Quarter and 2007 Financial Results

BIRMINGHAM, Ala., Feb. 20 /PRNewswire-FirstCall/ -- Emageon Inc. NASDAQ: EMAG today reported financial results for its fourth quarter and full year ended December 31, 2007.

Revenue for the fourth quarter was $28.6 million, a 14.7% decrease from fourth quarter 2006 revenue of $33.5 million. The net loss for the quarter was $0.5 million, or $0.02 per share. In the fourth quarter of 2006, the Company earned net income of $2.1 million, or $0.10 per diluted share. For the year ended December 31, 2007, revenue was $104.2 million, a decrease of 15.6% from the comparable prior year period. Net loss for the year ended December 31, 2007 was $6.9 million, or $0.32 per share, compared to a net loss of $6.0 million, or $0.29 per share, for the year ended December 31, 2006.

Included in the Company's results of operations for 2007 are fourth quarter expenses of $1.1 million, or $0.05 per share, related to employee severance and associated expenses ($2.1 million, or $0.10 per share, for the year ended December 31, 2007), and included in the Company's results of operations for 2006 are fourth quarter expenses of $1.0 million, or $0.05 per share, related to the integration of an acquired company into the Company's operations ($5.4 million, or $0.26 per share, for the year ended December 31, 2006).

The company's cash earnings, which are determined by excluding non-cash charges for depreciation expense, amortization of intangible assets, and stock-based compensation expense from earnings determined under generally accepted accounting principles ("GAAP"), were $2.7 million, or $0.13 per diluted share, in fourth quarter 2007 compared to $6.1 million, or $0.28 per diluted share, in fourth quarter 2006. For the year ended December 31, 2007, the Company's cash earnings were $5.4 million, or $0.25 per diluted share, compared to $9.4 million, or $0.43 per diluted share, for the year ended December 31, 2006. These measures of earnings were not determined in accordance with GAAP. A reconciliation of earnings determined under GAAP to cash earnings is included below. Management believes that its cash earnings measurement, when viewed in addition to the Company's reported GAAP results, provides an additional meaningful measure of operating performance, enabling investors to more thoroughly evaluate current performance in comparison to past performance. This information will necessarily differ from comparable information that may be provided by other companies and should not be considered in isolation or as an alternative to the Company's operating and other financial information determined under GAAP.

At December 31, 2007, unrestricted cash and cash equivalents totaled $17.0 million compared to $23.0 million at December 31, 2006. The company has not drawn on its $15.0 million line of credit arrangement and has total debt obligations of less than $0.1 million. Net cash generated by operating activities was $0.8 million for the fourth quarter of 2007. For the year ended December 31, 2007, net cash consumed by operating activities was $1.0 million.

Total bookings, which include both system sales and support services orders, were $92.7 million for the year ended December 31, 2007 compared to $122.2 million for the year ended December 31, 2006. Fourth quarter 2007 total bookings were $34.5 million compared to $33.7 million in fourth quarter 2006. At December 31, 2007, total orders backlog was $147.8 million, of which $130.1 million are support service orders.

The Company has also announced financial guidance for its year ending December 31, 2008. The company anticipates total bookings in the range of $65.0 to $70.0 million, revenue in the range of $87.0 to $89.0 million, net loss in the range of $4.3 to $4.9 million, or $0.20 to $0.23 per share, and cash earnings, a non-GAAP measure, in the range of $4.9 to $5.8 million, or $0.23 to $0.27 per share. See "Forward Looking Statements" below.

"While 2007 proved to be a difficult year for our business, we were pleased to close the year with our strongest quarter," said Chuck Jett, Chairman and CEO of Emageon. "The market for image management systems, especially in the large hospital sector, is now heavily penetrated, and we expect to see additional challenges in new system sales in 2008. However, we have relationships with over 500 hospitals that use our solutions, and our recurring revenue from these relationships will allow us to fund investments in 2008 that will position us well as market demands change and grow and as a new market cycle evolves."

Conference Call. Emageon will host a conference call for investors on February 21, 2008, at 8:30 A.M. EST to discuss its financial results for the quarter. The call will be webcast by Thomson/CCBN and can be accessed at Emageon's web site at www.emageon.com. The dial-in telephone number for the call is 888-679-8033 (internationally, at 617-213-4846), passcode 49008180. Replay is available from 10:30 A.M. EST, February 21, 2008 until 11:59 P.M. EST, March 2, 2008 at 888-286-8010 (internationally, at 617-801-6888), passcode 11893635.

The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

Forward Looking Statements. This press release contains forward-looking statements about Emageon that represent the Company's current views with respect to, among other things, future events and financial performance. Any forward-looking statements contained in this press release are based on Emageon's historical performance and on current plans, beliefs and expectations. Actual results may differ materially from those expressed or implied by such forward-looking statements as a result of various risks, uncertainties and other factors beyond its control. These risks, uncertainties and other factors include, among others, the risk that negative industry or market trends could adversely affect system sales, the risk that it may not compete successfully against larger competitors, risks associated with its history of operating losses, the risk of loss of its senior executive management, risk associated with expansion of its market and selling efforts into new product segments, the risk that its target markets do not develop as expected, the risk that it may not manage its growth effectively, the risk that its acquisition strategy may fail or that acquisitions could result in integration difficulties, dilution or other adverse financial consequences, the risk of failure to raise additional capital on acceptable terms, risks associated with its reliance on continuing relationships with large customers, the risk of significant product errors or product failures, the risk of its reliance on reseller arrangements for important components of its solution, the risk that it may not respond effectively to changes in its industry, the risk of its customers' reliance on third party reimbursements, and the risk of the potential impact on its business of Food & Drug Administration (FDA) regulations and other applicable health care regulations. Additional information concerning these and other factors that could affect Emageon's financial and operating results may be found under the heading "Risk Factors" and elsewhere in the Company's Form 10-K for the year ended December 31, 2006, which was filed with the Securities and Exchange Commission on March 16, 2007. Emageon undertakes no obligation to update these forward-looking statements or other information provided in this press release except as may be required by law.

About Emageon Inc. Emageon provides information technology systems for hospitals, healthcare networks and imaging facilities. Its enterprise family of solutions includes RadSuite(TM), HeartSuite(TM) and other specialty suites. All Emageon solutions are built on a unified Enterprise Content Management system offering advanced visualization and infrastructure tools for the clinical analysis and management of digital medical images, reports and associated clinical content. Emageon's standards-based solutions are designed to help customers enhance patient care, automate workflow, lower costs, improve productivity and provide better service to physicians. For more information, please visit www.emageon.com.

    Unaudited Statements of Operations
    In Thousands, Except Per Share Amounts

                                          Three Months Ended    Year Ended
                                             December 31,       December 31,
                                             2007    2006 (1)  2007   2006 (1)
    Revenue:
       System sales                        $15,345  $21,100  $50,954  $75,340
       Support services                     13,210   12,377   53,255   48,165
       Total revenue                        28,555   33,477  104,209  123,505

    Cost of revenue:
       System sales                          7,104    9,360   28,463   43,333
       Support services                      6,779    5,392   28,144   24,331
       Total cost of revenue                13,883   14,752   56,607   67,664

    Gross profit                            14,672   18,725   47,602   55,841

    Operating expenses:
       Research and development              4,754    4,605   20,030   17,368
       Sales and marketing                   5,210    5,433   18,202   18,459
       General and administrative            3,792    4,344   13,134   17,028
       Amortization of intangible assets
        related to Camtronics acquisition      345      885    1,381    3,540
       Integration costs related to
        Camtronics acquisition                 -      1,026      -      5,369
       Employee severance and related
        charges                              1,125        -    2,120        -
       Loss on disposal of property and
        equipment                               79      453      407      437
    Total operating expenses                15,305   16,746   55,274   62,201

    Operating (loss) income                   (633)   1,979   (7,672)  (6,360)
    Interest income                            197      182      908      655
    Interest expense                           (24)     (70)     (99)    (327)
    Net (loss) income                        $(460)  $2,091  $(6,863) $(6,032)

    Net (loss) income per share, basic      $(0.02)   $0.10   $(0.32)  $(0.29)
    Net (loss) income per share, diluted    $(0.02)   $0.10   $(0.32)  $(0.29)
    Weighted average shares outstanding,
     basic                                  21,414   21,197   21,360   20,919
    Weighted average shares outstanding,
     diluted                                21,414   21,689   21,360   20,919


    (1) Certain reclassifications have been made to prior year operating
        expenses to conform with the current year presentation.



    Summary Consolidated Balance Sheets
    In Thousands

                                                (Unaudited)
                                                December 31,      December 31,
                                                    2007              2006
    ASSETS:
    Current assets:
       Cash and cash equivalents                   $17,034           $23,008
       Trade accounts receivable, net               27,974            26,706
       Inventories                                   6,241             8,579
       Prepaid expenses and other current assets     4,726             4,459
    Total current assets                            55,975            62,752
    Property and equipment, net                     15,289            18,362
    Restricted cash                                  1,000               445
    Other noncurrent assets                          2,334             1,363
    Intangible assets, net                          27,696            30,090
    Total Assets                                  $102,294          $113,012



    LIABILITIES AND STOCKHOLDER'S EQUITY:
    Current liabilities:
       Accounts payable and accrued expenses       $16,023           $16,454
       Deferred revenue                             17,052            23,953
       Current portion of long-term debt
        and capital lease obligations                   36               953
    Total current liabilities                       33,111            41,360
    Long-term deferred revenue                       6,146             5,851
    Other long-term liabilities                        466               686
    Long-term portion of capital lease obligations      53                 8
    Total liabilities                               39,776            47,905
    Stockholder's equity                            62,518            65,107
    Total Liabilities and Stockholders'
     Equity                                       $102,294          $113,012



    Reconciliation of Non-GAAP Measure of Earnings
    In Thousands, Except Per Share Amounts
    (Unaudited)

The following tables present the Company's net loss or income adjusted for non-cash charges for depreciation, amortization of intangible assets, and stock-based compensation ("cash earnings") for the three month periods and the years ended December 31, 2007 and 2006. Earnings determined in this manner do not represent earnings in accordance with generally accepted accounting principles ("GAAP").

The tables present the adjustments made to actual net loss or income determined under GAAP to derive cash earnings for the periods presented.

                                        Three Months Ended December 31,
                                            2007               2006

    Net (loss) income, as reported         $(460)            $2,091
    Add:
    Depreciation                           1,277              1,670
    Amortization                             764              1,292
    Stock-based compensation               1,122              1,082
    Net income exclusive of non-cash
     expenses                             $2,703             $6,135
    Net income per share exclusive of
     non-cash expenses, basic              $0.13              $0.29
    Net income per share exclusive of
     non-cash expenses, diluted            $0.13              $0.28
    Weighted average shares outstanding,
     basic                                21,414             21,197
    Weighted average shares outstanding,
     diluted                              21,556             21,689



                                           Year Ended December 31,
                                           2007               2006

    Net loss, as reported                $(6,863)           $(6,032)
    Add:
    Depreciation                           6,024              6,990
    Amortization                           3,054              4,969
    Stock-based compensation               3,213              3,430
    Net income exclusive of non-cash
     expenses                             $5,428             $9,357
    Net income per share exclusive of
     non-cash expenses, basic              $0.25              $0.45
    Net income per share exclusive of
     non-cash expenses, diluted            $0.25              $0.43
    Weighted average shares outstanding,
     basic                                21,360             20,919
    Weighted average shares outstanding,
     diluted                              21,753             21,541