SOURCE: I-many

May 01, 2008 16:05 ET

I-many Reports First Quarter 2008 Financial Results

EDISON, NJ--(Marketwire - May 1, 2008) - I-many, Inc. (NASDAQ: IMNY), a leading provider of contract management software and services for the enterprise, reported financial results for the first quarter ended March 31, 2008.

Q1 2008 Highlights

--  Net revenues totaled $7.4 million, a decrease of 12% vs. Q1 2007
    
--  Recurring revenue up 11% vs. Q1 2007 to $4.9 million
    
--  Cash: $20.6 million, compared with $29.0 million at December 31, 2007
    

Financial Results for Q1 2008

Net revenues for the first quarter totaled $7.4 million, a decrease of 36% from $11.5 million reported in the previous quarter and a decrease of 12% from $8.4 million reported for the first quarter a year ago. For further analysis of the company's performance, see the discussion of non-GAAP financial results below.

Total expenses in the quarter were $12.6 million, an increase of 2% from $12.4 million in the previous quarter and a decrease of 4% from $13.1 million in the same quarter a year ago. Expense for the quarter included a $.8 million onetime charge for the write off of in-process research and development relating to the acquisition of the ClaimRight data validation business from Global Healthcare Exchange. Excluding this charge, expenses would have totaled $11.8 million for the quarter.

Loss per share totaled ($0.10), as compared to ($0.02) for the previous quarter and ($0.09) for the first quarter of 2007.

Research and development expense totaled $3.7 million in the first quarter, which increased 5% from $3.5 million in the previous quarter and was 15% lower than the $4.3 million expensed in the first quarter of 2007.

Kevin M. Harris, I-many's CFO, commented, "Our R&D expense ticked up five percent this quarter after two sequential quarterly decreases, primarily due to work on an accelerated software development contract that we booked in the fourth quarter of 2007. We expect to see a measurable decline in R&D expense in the second half of 2008."

Quarter-end cash, restricted cash and short-term investments totaled an estimated $20.6 million, as compared to $29.0 million at the end of the previous quarter and $15.7 million at the end of the first quarter of 2007. Approximately $1.8 million in net cash was used during the first quarter to pay certain expenses accrued at year-end 2007. Additionally, $1.6 million was used during the quarter for the acquisition of the ClaimRight software business, and $1.1 million was used to pay the remaining financing fees and other costs related to the company's financing completed in December 2007. These three uses of cash accounted for $4.5 million of the $8.4 million decrease in cash during the quarter.

Results by Revenue Category

Recurring revenue generated from software subscriptions, maintenance and support, and hosting totaled $4.9 million in the quarter, a decrease of 12% from $5.6 million in the prior quarter and an increase of 11% from $4.4 million reported in the same quarter a year ago.

Services revenue from professional services totaled $2.2 million, a decrease of 41% from $3.8 million in the prior quarter and a decrease of 25% from $3.0 million reported in the same period a year ago.

License revenue, representing onetime 'perpetual license' fees from product sales, totaled $205,000, a decrease of 90% from $2.1 million in the prior quarter and a decrease of 78% from $940,000 reported in the same period a year ago.

Non-GAAP Financial Results

Management believes certain non-GAAP financial results may present a useful picture of the company's progress as it continues to include software subscriptions in its licensing mix. (See "Use of Non-GAAP Financial Information" below.)

This includes the gross value of license contracts signed that the company calls "bookings," which totaled $518,000 in the first quarter of 2008. This represents a decrease of 88% from $4.2 million signed in the prior quarter and a decrease of 86% from $3.6 million signed in the first quarter of 2007.

Unamortized software subscriptions expected to be recognized over the next five years totaled $15.1 million. This represented a decrease of 7% from $16.1 million at the end of the prior quarter and a decrease of 4% from $15.7 million at the end of the first quarter 2007. The sequential quarter decrease was due to the recognition of subscription revenue that exceeded the amount of new subscriptions signed in the quarter. (The company defines "unamortized software subscriptions" as the remaining portion of non-cancellable subscription contracts that have been signed but not yet recognized into revenue.)

The combined amount of deferred revenue and unamortized software subscriptions totaled $29.6 million at the end of the first quarter, a decrease of 4% from $30.9 million at the end of the prior quarter and a decrease of 7% from $31.9 million at the end of the first quarter 2007. The sequential quarter decrease is attributed to the recognition of subscription revenue that exceeded the amount of new subscription bookings signed in the quarter.

The amount of recurring revenue generated from subscription contracts signed in prior periods and recorded in the first quarter of 2008 totaled $1.4 million, a decrease of 30% from $2.1 million recorded in the previous quarter and an increase of 52% from $944,000 recorded in the first quarter of 2007. The sequential quarter decrease is mostly attributable to onetime revenues of $431,000 included in recurring revenue in the fourth quarter of 2007.

Other Q1 2008 Operational Highlights

--  Four new license transactions (exceeding $50,000 in gross value) were
    signed during the quarter, which compares to 10 in the previous quarter and
    seven in the same period a year ago. These new transactions averaged
    approximately $89,000 in net software license value, as compared to
    $353,000 in the previous quarter and $402,000 in the same period a year
    ago. ("Net software license value" represents the perpetual license fee or
    the net present value of non-cancelable subscription payments, exclusive of
    the value of maintenance and support.) Two of these new transactions were
    in the company's Life Sciences market segment and two were in Industry
    Solutions. Two of the transactions were subscription based.
    
--  I-many completed the acquisition of the ClaimRight data validation
    software business from Global Healthcare Exchange, LLC and Global
    Healthcare Exchange, Inc. (GHX). With the acquisition, I-many acquired
    talented and uniquely skilled employees from GHX, as well as valuable
    intellectual property and business process knowledge that will increase the
    strength of I-many's product offerings.
    
--  Pfizer, the world's largest pharmaceutical company with $50 billion in
    annual revenues, extended its more than decade-long relationship with I-
    many by licensing additional elements of the I-many Contract Management
    Suite for Life Sciences. Pfizer is also contributing its industry knowledge
    to assist with additional product development, enabling I-many to add
    valuable new contract management functionalities to the Contract Management
    Suite and bring these core functions to market in upcoming versions in a
    shorter time span.
    
--  Sales to existing Fortune 100 clients in the company's Industry
    Solution segment included another subscription for I-many Contract Manager
    by a major Aerospace and Defense company and a long-time non-Life Sciences
    customer and product development partner. This brought the benefits of I-
    many's Contract Lifecycle Management to another company division.
    

"After six sequential quarters of revenue growth, the first quarter fell far below our expectations," said John A. Rade, chairman, president and CEO of I-many. "We do not see these results reflecting a general weakening in demand for our products or issues with our business model, but we are seeing the sales process slow down. Many deals in our 2008 pipeline appear to be for large, perpetual licenses to some of the world's largest corporations, with more complex buying processes than smaller deals. This is exactly what happened in Q1. One such deal in Q1 was with a top 10 pharmaceutical customer, and we finally completed and announced the signing shortly after the quarter ended. Just this week we signed another deal also delayed from Q1, which was announced today. We expect others to eventually follow over time.

"As I said in our preliminary announcement a few weeks ago," continued Rade, "it is important to recognize our quarter-to-quarter revenue growth has never been smooth, and for this reason we do not provide quarterly guidance. We have, however, worked to build our recurring revenue stream with the introduction of subscriptions.

"While demand is unchanged, our ability to predict the pace of our customer buying cycles has undeniably declined for a variety of reasons. Thus, we are adjusting our 2008 guidance accordingly. Despite these lower targets for 2008, our strong product offerings, substantial deal pipeline, and our pursuit of a new adjacent vertical in the medical device market, all give us confidence that our prospects for growth remain strong."

Fiscal 2008 Guidance Update

The company has revised its guidance for fiscal 2008 as follows:

--  Net Revenue: $42 million to $46 million, or up 4% - 13% vs. 2007, with
    at least $20 million expected to come from recurring revenue (subscription,
    maintenance and support, and hosting).
    
--  Gross value of new license transactions of at least $17 million.
    Additionally, the company expects to sign at least 75% of those
    transactions as perpetual licenses.
    
--  Cash at year-end of at least $21 million.
    
--  GAAP income/loss to range ($0.02) to $0.02 for the last three quarters
    of the year. GAAP loss of ($0.08) to ($0.12) for the year.
    
--  Non-cash expenses (depreciation, amortization, in-process R&D, and
    stock option charges) of $0.05 for the last three quarters of the year,
    $0.08 for the year.
    
--  Consistent with the company's previous guidance, management expects to
    generate cash in the last three quarters of the year (in total).
    
--  Keeping profitability as the primary objective for the balance of the
    year, management plans to adjust expenses as necessary in order to achieve
    these guidance goals.
    

Conference Call

I-many will hold a conference call to discuss the first quarter today at 4:30 p.m Eastern Time. I-many Chairman, President and CEO John A. Rade and CFO Kevin M. Harris will host the presentation, followed by a question and answer period.

Dial-In Number: 1-800-862-9098
International: 1-785-424-1051
Conference ID#: 7IMANY

The call is also being webcast and will be accessible via I-many's investor section at www.imany.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact the Liolios Group at (949) 574-3860.

A replay of the call will be available after 7:30 p.m. Eastern Time and until June 1, 2008:

Toll-free replay number: 1-800-695-1624
International replay number: 1-402-530-9026

Use of Non-GAAP Financial Information

The company supplements its GAAP financial statements in this release and in its annual report on Form 10-K with a reconciliation of the non-GAAP gross value of license transactions to its reported GAAP license revenues. This non-GAAP financial information is provided as additional information for investors and is not in accordance with or an alternative to GAAP. Management has included a table that shows the results for the first quarter 2008 compared to the comparable periods in 2007 for new license transactions including subscription contracts, the recognition into reportable revenue of deferred non-subscription license transactions, and the reconciliation of those numbers to total license revenue according to GAAP. Management believes its inclusion can enhance an overall understanding of the company's past operational performance and also its prospects for the future. This reconciliation of license revenues is made with the intent of providing both management and investors a more complete understanding of the revenue performance of the company, as opposed to GAAP revenue results, which do not include the impact of newly-executed subscription agreements and other deferred revenue arrangements that are material to the ongoing performance of the company's business. This information quantifies the various components comprising current license revenue, which in each quarter consists of revenues from licenses sold in current periods plus revenues deferred from prior periods, less revenue deferred from licenses sold in current periods. Management uses this information as a basis for planning and forecasting core business activity in future periods and believes it is useful in understanding our results of operations. The presentation of this additional revenue information is not meant to be considered in isolation or as a substitute for revenues reported in accordance with generally accepted accounting principles in the United States.

About I-many

I-many, Inc. is a leading provider of contract management software and services for the enterprise. With more than 280 customers across 21 industries worldwide, I-many is enabling businesses to manage the entire contract lifecycle, from pre-contract processes and contract management to active compliance and contract optimization. The result is an end-to-end solution that provides enterprises with greater levels of insight into contract performance, allowing companies to improve profitability and achieve measurable return on investment. For more information, please visit www.imany.com.

This news release contains forward-looking statements, and actual results may vary from those expressed or implied herein. Factors that could affect these results include the risk that in-process research and development charges from our acquisition of the ClaimRight technology from Global Health Exchange could be larger than estimated; the risk that licenses and other transactions that the Company believes did not occur during the first quarter due to timing issues might not happen as forecasted, or at all, the risk of unforeseen technical or practical impediments to planned software development, which could affect the company's product release timetable; the risk that the ratio of subscription license sales to perpetual license sales could be higher than anticipated, possibly leading to lower revenue in current periods and less cash than predicted in the near term; the risk of lower demand for the company's new products than management anticipates; the inherent risks of large software implementation projects, which can cause customer disagreements that could affect I-many's ability to collect both services and license revenue, whether recognized or deferred; the possibility that customers could cancel maintenance and support services at the time of annual renewal, which could decrease I-many's base of recurring revenue; the possibility that extraordinary events outside the company's control could extend the length of the sales cycle for the company's products or make the market for the company's products more unpredictable; the risk that the company will not be successful in opening new markets for its products; and other risk factors set forth from time to time in the company's filings with the Securities and Exchange Commission.

                      I-MANY, INC. AND SUBSIDIARIES
              Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)
                                (Unaudited)

                                                     Three months ended
                                                          March 31,
                                                  ------------------------
                                                      2008         2007
                                                  -----------  -----------

Net Revenues:
  Recurring                                       $     4,916  $     4,425
  Services                                              2,242        2,988
  License                                                 205          940
                                                  -----------  -----------
       Total net revenues                               7,363        8,353
Operating expenses:
  Cost of recurring revenue (1)                         1,566        1,651
  Cost of services revenue (1)                          2,381        2,956
  Cost of third-party technology                            9           76
  Amortization of acquired intangible assets               56           46
  Sales and marketing (1)                               2,398        2,315
  Research and development (1)                          3,656        4,304
  General and administrative (1)                        1,532        1,452
  Depreciation                                            229          188
  In-process research and development                     760            -
  Restructuring and other charges                          13           62
                                                  -----------  -----------
       Total operating expenses                        12,600       13,050
                                                  -----------  -----------

Loss from operations                                   (5,237)      (4,697)

Other (expense) income, net                              (205)         175
                                                  -----------  -----------

Net loss                                          ($    5,442) ($    4,522)
                                                  ===========  ===========

Basic and diluted net loss per common share       ($     0.10) ($     0.09)
                                                  ===========  ===========

Weighted average shares outstanding                    52,327       51,465
                                                  ===========  ===========


Notes:
(1) Stock-based compensation amounts included
 above:
  Cost of recurring revenue                       $        22  $        45
  Cost of services revenue                                127           95
  Sales and marketing                                     100           71
  Research and development                                 92          104
  General and administrative                              180          238
                                                  -----------  -----------
                                                  $       521  $       553
                                                  ===========  ===========



                      I-MANY, INC. AND SUBSIDIARIES
                  Condensed Consolidated Balance Sheets
                              (in thousands)

                                                   March 31,   December 31,
                                                      2008         2007
                                                  -----------  ------------
                                                  (Unaudited)

Assets
Current Assets:
   Cash and cash equivalents                      $    20,263  $     28,588
   Restricted cash                                          0            80
   Accounts receivable                                  4,794         6,606
   Other current assets                                   987           526
                                                  -----------  ------------
        Total current assets                           26,044        35,800

Property and equipment, net                             1,852         1,494
Restricted cash                                           351           351
Deferred charges and other assets                       1,326         1,309
Acquired intangible assets, net                           291            46
Goodwill                                                9,255         8,667
                                                  -----------  ------------
        Total assets                              $    39,119  $     47,667
                                                  ===========  ============


Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
   Accounts payable and accrued expenses          $     5,999  $      9,438
   Current portion of deferred revenue                 13,426        13,654
   Current portion of capital lease obligations           408           276
                                                  -----------  ------------
        Total current liabilities                      19,833        23,368

Convertible notes payable                              17,000        17,000
Deferred revenue, net of current portion                1,471         1,664
Other long-term liabilities                             1,044         1,012

Stockholders' equity (deficit)                           (229)        4,623
                                                  -----------  ------------

        Total liabilities and stockholders'
         equity                                   $    39,119  $     47,667
                                                  ===========  ============



  Reconciliation of Gross Value of License Bookings to Reportable License
                                  Revenue




                                   Three Months (Quarter) ended
                         --------------------------------------------------
                         3/31/2007 6/30/2007 9/30/2007 12/31/2007 3/31/2008
                         --------- --------- --------- ---------- ---------
                                       (AMOUNTS IN THOUSANDS)

Gross value of license
 contracts sold:
  Health and Life
   Sciences              $   3,296 $   5,200 $   3,462 $    3,586 $     298
  Industry Solutions           306         4       423        644       220
                         --------- --------- --------- ---------- ---------
                             3,602     5,204     3,885      4,230       518
Add license revenue
 recorded in current
 quarter from contracts
 sold in prior periods:
  Health and Life
   Sciences                      0       850       207        767         0
  Industry Solutions             0       110       609        142         0
                         --------- --------- --------- ---------- ---------
                                 0       960       816        909         0
Less value of license
 contracts sold in
 current quarter and
 deferred to future
 periods:
  Health and Life
   Sciences                  2,436     4,069     2,434      2,396       190
  Industry Solutions           226         0        63        641       123
                         --------- --------- --------- ---------- ---------
                             2,662     4,069     2,497      3,037       313
                         --------- --------- --------- ---------- ---------
License revenue
 recorded:
  Health and Life
   Sciences                    860     1,981     1,235      1,957       108
  Industry Solutions            80       114       969        145        97
                         --------- --------- --------- ---------- ---------
                         $     940 $   2,095 $   2,204 $    2,102 $     205
                         ========= ========= ========= ========== =========

Contact Information

  • Company Contact:
    I-many, Inc.
    Kevin Harris
    CFO
    732-452-1515
    Email Contact
    or
    Investor Relations:
    Liolios Group, Inc.
    Ron Both or Geoffrey Plank
    949-574-3860
    Email Contact