Revenue Increases 71% for the Year as Demand Remains Strong Across All Business Segments
Company Expects 35% Sequential Increase in Revenue for Q1 09 as Healthaxis Integration Proceeds According to Plan
ANAHEIM, Calif., April 1 /PRNewswire-FirstCall/ -- BPO Management Services Inc., (OTC Bulletin Board: HAXS), a full-service healthcare and business process outsourcing company focused on serving the middle-market, today announced its financial results for the fourth quarter and full year 2008 ended December 31, 2008. The income statement does not reflect the merger of BPO Management Services and Healthaxis, Inc., which was completed on December 30, 2008.
(in $ thousands) Q4 2008 Q4 2007 % Change FY 2008 FY 2007 % Change Revenues $7,115 $7,480 (4.9)% $28,111 $16,469 71% ECM $3,271 $4,274 (23.5)% $14,170 $10,141 40% ITO $3,455 $2,754 25.4% $12,214 $ 5,616 118% HRO $ 389 $ 452 (13.9)% $ 1,728 $ 712 143% Loss from Operations $(13,393) $(2,493) 437% $(17,594) $(5,668) 210% Net Loss $(13,619) $(2,536) 437% $(18,138) $(6,468) 180% Income (loss) from Operations before non-cash items $(1,402) $(1,462) 17.4% $(2,787) $(4,154) (24.2)%
Patrick Dolan, chief executive officer of BPOMS, said, "We continue to believe that the Company is well-positioned to succeed in the current economic environment as the middle market looks for ways to reduce their cost of ownership, improve operational efficiencies and enhance the quality of their technology investment. We are operating at approximately 25% percent capacity, providing lots of room to grow without adding significant costs. Our future ability to grow has been somewhat tempered by the ongoing crisis in the capital/credit markets, which like most companies today, has made obtaining additional growth capital very challenging. We are actively pursuing several strategic alternatives in order to strengthen our balance sheet and provide the necessary working capital to fully accelerate our growth as we continue to drive towards critical mass."
Fiscal 2008 Financial Results
Revenue for the full year ended December 31, 2008 was $28.1 million, an increase of 71% compared to the $16.5 million for the full year 2007. The Company experienced a 40% increase in Enterprise Content Management (ECM) revenue, to $14.2 million compared to $10.1 million last year. IT Outsourcing Services (ITO) revenue increased 118% to $12.2 million from $5.6 million last year. Human Resource Outsourcing (HRO) revenue increased 143% to $1.7 million from $712,000 in the year-ago period.
Total operating expenses increased 106.5% to $45.7 million after a goodwill and intangible asset charge of $10.6 million compared to $22.1 million for of the same period last year. Inclusive in this increase was an increase in cost of services provided to $15.3 million from $8.0 million last year. SG&A expenses, as a percent of revenue, decreased to 53% from 72.7% in the full year last year, demonstrating strong expense management and the inherent leverage in the Company's business model. The loss from operations for the year was $17.6 million, inclusive of $14.8 million in non-cash expenses, compared to a loss from operations of $5.7 million, inclusive of $3.0 in non-cash expenses in 2007. The non-cash expenses included a one-time, non-cash $10.6 million charge for impairment of goodwill and intangible assets. Excluding non-cash expenses, the loss from operations for the full year period was $2.8 million from $3.8 million in the year-ago period. The net loss for the full year 2008 was $18.1 million, or $(5.74) per basic and fully diluted share (based on 3.2 million shares) compared to a net loss of $5.9 million, or $(0.67) per basic and fully diluted share (based on 9.5 million shares).
Fourth Quarter 2008 Financial Results
For the fourth quarter, total revenue decreased 4.9% to $7.1 million from $7.5 million for the same period last year. The change was due to decreases in the ECM and HRO business segments offset by a 25.5% increase in ITO revenue. ECM revenue reduction was a result of the recent decline in value of the Canadian dollar vs. the U.S. dollar and greater focus on higher margin opportunities yielding improved bottom-line performance. HRO experienced a revenue decline as the Company shifts focus from one-time licensing fees to growing Software as a Service, recurring revenue contracts generating long-term customer relationships Total operating expenses for the quarter were $20.5 million, an increase of 105.6% compared to total operating expenses of $10.0 million during the fourth quarter last year. Included in the operating expenses was a 36.5% increase in cost of services provided, reflecting a spike in short-term migration expenses as new ITO service contracts are migrated into the BPOMS processing environment. The loss from operations for the quarter increased to $13.4 from $2.5 million in the prior-year fourth quarter. Included in the operating loss was a one-time, non-cash charge for the impairment of goodwill totaling $10.6 million, as well as depreciation and amortization and share-based compensation, which in aggregate totaled $12.0 million for the fourth quarter of 2008 and $2.5 million for the fourth quarter of 2007. Excluding these non-cash expenses, the Company's operating loss was $1.4 million during the fourth quarter, compared to a loss of $1.5 million in the fourth quarter last year. The net loss for the quarter was $13.6 million compared to a net loss of $2.5 million in the fourth quarter last year.
Mr. Dolan continued, "Demand for our services, technology and infrastructure, provided on a recurring revenue basis, remains consistently strong across all business segments, including our Healthcare segment which was created through the recent Healthaxis merger. We anticipate continuing business improvement in the first quarter as we expand our revenue base and ongoing Company-wide integration activities reduce SG&A expenses. Going forward we continue to expand our pipeline of new business opportunities, grow our recurring revenue content and relentlessly drive operating efficiencies through cross-organization integration activities. The integration of Healthaxis is well-advanced and should contribute strong top-line growth to accelerate our overall progress during the first quarter. As of December 31, 2008, approximately 80% of our revenues were derived from recurring revenue activities and we continue to focus on building out our backlog of future business to be delivered in the years. This growing base of recurring revenue business serves as the platform on which we will build future shareholder value, and management is confident that as capital/credit markets loosen we are well-positioned to accelerate growth and achieve positive cash flow from operations in fairly short order."
Mr. Dolan concluded, "We believe our revenue will grow approximately 35% on a sequential basis, compared to the $7.1 million reported for the fourth quarter and including the contribution of Healthaxis' healthcare claims processing business. We anticipate continued improvement in our gross profit margin and ongoing reductions in SG&A expenses, as a percent of revenue, as we more effectively leverage our fixed infrastructure across an increasing base of revenue. We remain squarely focused on achieving cash flow break-even as quickly as possible, and expect to narrow our cash burn in the first quarter."
As of December 31, 2008, BPOMS' balance sheet showed $2.8 million in cash compared to $0.9 million at December 31, 2007.
About BPO Management Services, Inc.
BPO Management Services (BPOMS) is a healthcare and business process outsourcing (BPO) service provider that offers a diversified range of on-demand services, including claims processing, human resources, information technology, and enterprise content management, to support the back-office business functions of the middle-market on an outsourced basis. BPOMS supports middle-market businesses new to the BPO market, established businesses that already outsource, and businesses seeking to maximize return-on-investment from their in-house workforce. For more information, please visit http://www.bpoms.com
Certain statements in this press release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by the use of words such as "anticipate," "believe," "expect," "future," "may," "will," "would," "should," "plan," "projected," "intend," and similar expressions. Such forward-looking statements, involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of BPO Management Services, Inc. (the "Company") to be materially different from those expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to: (i) the Company's ability to obtain sufficient capital or a strategic business arrangement to fund its current operational or expansion plans; (ii) the Company's ability to build and maintain the management and human resources and infrastructure necessary to support the anticipated growth of its business; (iii) competitive factors and developments beyond the Company's control; and (iv) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission, which are available for review at http://www.sec.gov under "Search for Company Filings."
Investor contact: Hayden IR Brett Maas, 646-536-7331 firstname.lastname@example.org Media contact: Richard Stern Stern & Co. 212-888-0044 email@example.com Alison Simard Stern & Co. 323-650-7117 firstname.lastname@example.org Company Contact: BPO Management Services, Inc. Patrick Dolan, Chairman & CEO email@example.com
BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND DECEMBER 31, 2007 2008 2007 ASSETS Current assets: Cash and cash equivalents $2,784,155 $888,043 Restricted cash - 922,888 Accounts receivable, net of allowance for doubtful accounts of $530,050 and $347,797, respectively 7,425,805 4,768,618 Inventory 181,968 268,160 Prepaid expenses and other current assets 1,384,696 417,041 Total current assets 11,776,624 7,264,750 Equipment and leaseholds, net of accumulated depreciation of $1,864,728 and $931,268, respectively 7,735,777 4,834,941 Goodwill 4,856,171 9,029,142 Intangible assets, net of accumulated amortization of $2,347,659 and $266,194, respectively 5,500,829 9,898,219 Other assets 879,605 38,449 $30,749,006 $31,065,501 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of lines of credit and long-term debt, net of discount of $2,733 and $3,405, respectively $138,666 $17,024 Current portion of capital lease obligations 394,765 149,653 Accounts payable 5,591,976 3,540,827 Accrued expenses 3,428,573 1,927,451 Working capital and equipment lines of credit 3,195,468 795,132 Accrued interest-related party - 36,672 Accrued dividend payable 1,369,331 379,222 Accrued dividend payable-related party 651,281 67,242 Amount due former shareholders of acquired companies 1,000,000 2,101,771 Deferred revenues 2,957,139 2,509,885 Related party notes payable 930,246 1,200,000 Severance obligations payable - 72,199 Income taxes payable 146,695 257,091 Other current liabilities 1,010,767 - Total current liabilities 20,814,907 13,054,169 Lines of credit and long-term debt, net of current portion and net of discount of $1,139 and $4,825, respectively 727,998 24,117 Capital lease obligations, net of current portion 690,278 392,942 Other long-term liabilities 232,115 33,115 Total liabilities 22,465,298 13,504,343 Commitments and contingencies (Note 8) Stockholders' equity Convertible preferred stock, Series A, par value $.01; authorized 1,608,12 shares, 0 and 1,608,612 shares issued and outstanding, respectively - 16,086 Convertible preferred stock, Series B, par value $1.00 and $.01 respectively; authorized 21,105,000 and 1,449,204 shares, respectively; 21,103,955 and 1,449,204 shares issued and outstanding, respectively 21,103,955 14,492 Non-convertible preferred stock, Series C, par value $.01; authorized 21,378,000 shares; 0 and 916,667 shares issued and outstanding, respectively - 9,167 Convertible preferred stock, Series D, par value $.01; authorized 1,500,000 shares; 0 and 1,458,334 shares issued and outstanding, respectively - 14,583 Convertible preferred stock, Series D-2, par value $.01; authorized 1,500,000 shares; 0 and 729,167 shares issued and outstanding, respectively - 7,292 Convertible preferred stock, Series F, par value $.01; authorized 1,300,000 shares; 0 and 894,942 shares issued and outstanding, respectively - - Common stock, par value $0.10 and $.01, respectively; authorized 1,900,000,000 and 1,500,000 shares, respectively; 15,165,586 and 12,171,034 shares issued and outstanding, respectively 1,516,559 121,711 Additional paid-in capital 14,687,206 27,500,477 Accumulated deficit (28,706,729) (10,568,915) Accumulated other comprehensive income, foreign currency translation adjustments (317,283) 446,265 Total stockholders' equity 8,283,708 17,561,158 $30,749,006 $31,065,501 BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 Revenues: Enterprise content management $3,270,928 $4,274,213 $14,169,854 $10,141,210 IT outsourcing services 3,455,225 2,754,348 12,213,508 5,616,239 Human resource outsourcing servicing 388,639 451,364 1,727,631 711,552 Total revenues 7,114,792 7,479,925 28,110,993 16,469,001 Operating expenses: Cost of services provided 4,929,326 3,608,992 15,321,356 8,045,756 Selling, general and administrative 3,258,471 4,983,125 15,254,214 11,965,666 Research and development 94,618 36,473 322,876 298,211 Depreciation and amortization 391,128 1,242,123 2,948,660 1,466,767 Stock-based compensation 665,773 101,860 1,287,048 360,721 Goodwill and intangible asset impairment 10,570,561 - 10,570,561 - Total operating expenses 15,578,665 9,972,573 45,704,715 22,137,121 Loss from operations (13,393,199) (2,492,648) 17,593,722 (5,668,120) Interest expense (income) Related parties 21,393 27,349 - 117,168 Amortization of related party debt discount - - 102,246 594,029 Other (net) 94,013 14,858 267,596 90,903 Other Expense - 1,091 - (2,011) Total interest and other expense 115,406 43,298 369,842 800,089 Loss before taxes (13,508,605) (2,535,946) (17,963,564) (6,468,209) Income tax expense 110,852 - 174,250 - Net loss 13,619,457) (2,535,946) (18,137,814) (6,468,209) Foreign currency translation gain (loss) (818,331) 222,406 (763,548) 553,586 Comprehensive loss $(14,437,788) $(2,313,540) $(18,901,362) $(5,914,623) Basic and diluted net loss per share $(5.74) $(0.67) Basic and diluted weighted average common 1,516,559 9,513,749
|SOURCE BPO Management Services, Inc.|
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