Greenway fiscal 2013 second quarter revenue increases 12% to $32.7 million

Greenway Medical Technologies, Inc. (NYSE: GWAY), which delivers innovative software and business services solutions for ambulatory care providers through its PrimeSUITE® platform, today announced financial results for the three months and six months ended December 31, 2012, as well as a revised outlook for results from operations for fiscal 2013.

"Our results for the second quarter of our fiscal year reflect continued strong growth of recurring revenue as providers adopt our cloud-based services, offset by a decline in revenue related to deployment," said Tee Green, president and chief executive officer of Greenway®. "We added more than 750 providers to our network during the second quarter, and we are gaining appeal among larger healthcare system accounts — transactions that are more complex and take more time to complete. We believe that the update to our outlook for the remainder of fiscal 2013 reflects an appropriate adjustment to the impact of an increasing percentage of our revenue derived from recurring sources."

Highlights

Highlights for the fiscal 2013 second quarter, when compared with the prior-year period, include:

• Revenue growth of 12%, which includes recurring revenue growth of 32%;
• Gross profit growth of 16% results in gross margin expansion of 177 basis points;
• Cash flow from operations growth of 22% to $3.7 million.

Operating Results

For the three months ended December 31, 2012, Greenway generated revenue of $32.7 million, a 12% increase from $29.1 million for the comparable prior-year period. Revenue from recurring sources grew by 32%, and comprised 55% of total revenue for the fiscal 2013 second quarter. This compares with recurring revenue of 47% of total revenue for the prior-year period. The growth in recurring revenue as a percent of total revenue is a function of increased adoption of Greenway's cloud-based services, including PrimeSUITE, PrimePATIENT® patient portal and PrimeEXCHANGE®, as well as the growth of PrimeRCM®, Greenway's clinically driven revenue cycle management platform. Greenway's revenue mix for the second quarter was impacted by a decline in Training and Consulting revenue related to fewer deployments than in the prior-year period. Through the first half of fiscal 2013, Greenway's revenue has grown by 20%, to $65.5 million, compared with $54.8 million for the first half of fiscal 2012.

Greenway generated gross profit of $17.4 million for the three months ended December 31, 2012, an increase of 16% from $15.0 million for the prior-year period.

Gross profit margin for the fiscal 2013 second quarter improved by 177 basis points, to 53.2%, as a result of growth related to recurring subscription solutions and services, offset by a decline in gross margin for System Sales and Training and Consulting Services. Gross margin for recurring revenue sources grew to 57.8% for the three months ended December 31, 2012, from 49.9% for the prior-year period, as the customer adoption of innovative solutions increased and the Company improved margins on Customer Support Services and EDI and Business Services. Gross margin for System Sales and Training and Consulting Services declined as a result of fewer deployments in the quarter, compared to the prior-year period.

Greenway has earned gross profit of $35.3 million, and overall gross margin has improved to 53.8%, through the six months ended December 31, 2012. This compared with gross profit of $28.3 million, and gross margin of 51.6%, for the first half of the prior fiscal year.

Greenway reported a loss from operations of ($1.8 million) for the fiscal 2013 second quarter, which compares with an operating loss of ($350,000) for the prior-year period. Through six months ended December 31, 2012, Greenway has reported an operating loss of ($2.0 million), which compares with an operating loss of ($900,000) for the prior-year period.

The Company had a net loss of ($985,000), or (three cents) per share, based on a weighted average 30.9 million shares outstanding, for the three months ended December 31, 2012. This compares with a net loss of ($268,000) for the prior-year period. The Company's results for the three months ended December 31, 2011, reflected income available to common shareholders of $37.8 million, or $1.70 per share based on a weighted average 22 million shares outstanding. This included dividends and accretion related to preferred stock that was converted to common stock in February 2012.

As of December 31, 2012, Greenway had $27.4 million in cash and short-term investments and no outstanding indebtedness.

Greenway generated cash flow from operations of $3.7 million for the fiscal 2013 second quarter, up from $3.0 million for the comparable prior-year period. Through the first six months of fiscal 2013, Greenway generated cash flow from operations of $6.0 million, up from $3.8 million for the comparable period of fiscal 2012.

Non-GAAP Measures

Greenway's non-GAAP adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization, acquisition-related transaction costs and stock-based compensation, was $1.3 million for the three months ended December 31, 2012, unchanged from the prior-year period, and for both periods non-GAAP EBITDA margin was 4%. Through six months ended December 31, 2012, Greenway's adjusted EBITDA was $3.9 million, or 6% of revenue, a 75% increase from $2.2 million, or 4% of revenue, for the first half of the prior fiscal year.

Adjusted, or non-GAAP net income (loss), which is defined as net income before stock-based compensation, acquisition-related transaction costs and amortization of purchased intangibles and any estimated tax impact related to these items, was $(41,000), or (zero) cents per diluted share, for the three months ended December 31, 2012. This compares with non-GAAP net income of $231,000, or one cent per diluted share for the second quarter of fiscal 2012. For the six months ended December 31, 2012, Greenway's non-GAAP net income was $843,000, or two cents per share, which compares with adjusted net income of $512,000 for the first half of the prior fiscal year, or two cents per share.

The GAAP financial measures most directly comparable to each non-GAAP financial measure used, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release following the condensed financial statements.

Fiscal 2013 Outlook Update

Greenway Medical Technologies is updating its previously issued outlook for Fiscal 2013, based on actual results for the first half of the fiscal year. Greenway believes that its revenue will grow by 17% to 21% for the 12 months ended June 30, 2013, from fiscal 2012 actual results, while achieving gross margin and adjusted EBITDA margin improvement. The following table summarizes the Company's revised outlook for fiscal 2013 as of February 12, 2012: