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Emageon Reports Third Quarter 2007 Financial Results

Company Reaffirms Earnings Guidance and Provides Updated Revenue Guidance

for 2007

BIRMINGHAM, Ala., Nov. 6 /PRNewswire-FirstCall/ -- Emageon Inc. (Nasdaq: EMAG) today reported financial results for its third quarter and nine months ended September 30, 2007.

Revenue for the quarter was $22.7 million, a 31.2% decrease from third quarter 2006 revenue of $33.0 million. The net loss for the quarter was $4.3 million, or $0.20 per share. In the third quarter of 2006, the Company had a net loss of $0.3 million, or $0.01 per share, including $2.1 million, or $0.10 per share, in expenses related to the integration of Camtronics Medical Systems, Ltd. ("Camtronics") into the Company's operations. The Company acquired Camtronics November 1, 2005.

Revenue for the nine months ended September 30, 2007 was $75.7 million, a decrease of 16.0% from the comparable prior year period. Net loss for the nine months ended September 30, 2007 was $6.4 million, or $0.30 per share, including $0.6 million, or $0.03 per share, in restructuring expenses related to the Company's May 2007 reduction in workforce. For the nine months ended September 30, 2006, the Company's net loss was $8.1 million, or $0.39 per share, including $4.3 million, or $0.21 per share, in expenses related to the integration of Camtronics.

The Company's loss excluding non-cash charges for depreciation, amortization of intangible assets, and stock-based compensation ("non-cash charges") was $1.3 million, or $0.06 per share, in third quarter 2007 compared to income of $3.6 million, or $0.17 per diluted share, in third quarter 2006. For the nine months ended September 30, 2007, the Company's earnings excluding non-cash charges were $2.7 million, or $0.13 per diluted share, compared to $3.2 million, or $0.15 per diluted share, for the nine months ended September 30, 2006. These measures of earnings were not determined in accordance with generally accepted accounting principles ("GAAP"). A reconciliation of earnings determined under GAAP to earnings exclusive of non-cash charges is included below.

For the nine months ended September 30, 2007, net cash used in operations was $1.8 million compared to net usage in operations of $2.8 million for the nine months ended September 30, 2006. At September 30, 2007, unrestricted cash and marketable securities totaled $17.8 million compared to $23.0 million at December 31, 2006 and $13.8 million at September 30, 2006.

The Company reaffirmed its previously announced guidance of a full year net loss in the range of $3.7 to $4.9 million, or $0.17 to $0.22 per share, and full year earnings excluding non-cash charges in the range of $7.6 to $8.8 million, or $0.35 to $0.40 per share. Earnings excluding non-cash charges was determined by adjusting the Company's anticipated 2007 GAAP earnings for anticipated depreciation expense of $0.29 per share, amortization expense of $0.14 per share, and stock-based compensation expense of $0.14 per share. The Company lowered its guidance for full year 2007 revenue from that provided in May 2007. Total revenue for the year is now anticipated in the range of $104 to $108 million. Revenue guidance previously provided by the Company was in the range of $112 to $115 million.

"As we had previously discussed, Emageon's operating results for the third quarter of 2007 were disappointing, largely as a result of lower bookings earlier in the year," said Chuck Jett, Chairman, CEO, and President of Emageon. "With the introduction of RadSuite Express(TM) for the small and mid-size hospital market, and with additional sales opportunities inside our base of approximately 600 hospital customers, we remain confident in the long- term business prospects for Emageon."

Non-GAAP Financial Measure. Emageon's financial results are reported in accordance with GAAP. In addition, the Company reports earnings exclusive of certain non-cash charges. Earnings determined in this manner do not represent earnings in accordance with GAAP. Management believes that this financial measure, 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 with 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. A reconciliation to earnings determined under GAAP is included as part of this release.

Conference Call. Emageon will host a conference call for investors on November 6, 2007, at 9:00 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 The dial-in telephone number for the call is 866-770-7129 (internationally, at 617-213-8067), passcode 75884541. Replay is available from 11:00 A.M. EST, November 6, 2007, until 11:59 P.M. EST, November 16, 2007, at 888-286-8010 (internationally, at 617-801-6888), passcode 60230611.

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, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (

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 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. 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. In addition, Emageon and Dell have teamed to produce RadSuite Express(TM) for the fast growing small to mid-size hospital, clinic and imaging center market. 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 all digital medical images, reports, and associated clinical content. Emageon's standards-based solutions are designed to help customers enhance patient care, automate imaging workflow, lower costs, improve productivity, and provide better service to physicians. For more information, please visit

Unaudited Statements of Operations

In Thousands, Except Per Share Amounts

Three Months Ended Nine Months Ended

September 30, September 30,

2007 2006 (1) 2007 2006 (1)


System sales $10,706 $19,370 $35,609 $54,240

Support services 12,022 13,641 40,045 35,788

Total revenue 22,728 33,011 75,654 90,028

Cost of revenue:

System sales 6,327 10,712 21,359 33,973

Support services 7,311 6,187 21,365 18,939

Total cost of revenue 13,638 16,899 42,724 52,912

Gross profit 9,090 16,112 32,930 37,116

Operating expenses:

Research and development 5,567 4,601 15,374 12,763

Sales and marketing 4,121 4,435 13,013 13,026

General and administrative 3,549 4,495 9,968 12,668

Amortization of intangible

assets related to Camtronics

acquisition 346 885 1,036 2,655

Integration costs related to

Camtronics acquisition - 2,062 - 4,343

Restructuring charge - 578 -

Total operating expenses 13,583 16,478 39,969 45,455

Operating loss (4,493) (366) (7,039) (8,339)

Interest income 232 157 711 473

Interest expense (19) (64) (75) (257)

Net loss $(4,280) $(273) $(6,403) $(8,123)

Net loss per share,

basic and diluted $(0.20) $(0.01) $(0.30) $(0.39)

Weighted average shares

outstanding, basic

and diluted 21,382 21,013 21,342 20,822

(1) Certain reclassifications have been made to prior year amounts

to conform with the current year presentation.

Summary Consolidated Balance Sheets

In Thousands


September 30, December 31,

2007 2006


Current assets:

Cash and cash equivalents $17,830 $23,008

Trade accounts receivable, net 21,325 26,706

Inventories 7,210 8,579

Prepaid expenses and other

current assets 5,311 4,459

Total current assets 51,676 62,752

Property and equipment, net 15,581 18,362

Other noncurrent assets 2,299 1,808

Intangible assets, net 28,344 30,090

Total assets $97,900 $113,012


Current liabilities:

Accounts payable and accrued

expenses $12,983 $16,454

Deferred revenue 16,910 23,953

Current portion of long-term debt

and capital lease obligations 56 953

Total current liabilities 29,949 41,360

Long-term deferred revenue 5,634 5,851

Other long-term liabilities 477 686

Long-term portion of capital lease

obligations 63 8

Total liabilities 36,123 47,905

Stockholder's equity 61,777 65,107

Total Liabilities and Stockholders'

Equity $97,900 $113,012

Reconciliation of Non-GAAP Measure of Earnings

In Thousands, Except Per Share Amounts


The following table presents the Company's net (loss) income adjusted for non-cash charges for depreciation, amortization of intangible assets, and stock-based compensation for the three month and nine month periods ended September 30, 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 determined under GAAP to derive earnings excluding the expenses described above for the periods presented.

Three Months Ended September 30,

2007 2006

Income Per Income Per

(Loss) Share (Loss) Share

Net loss, as reported $(4,280) $(0.20) $(273) $(0.01)


Depreciation 1,466 0.07 1,736 0.08

Amortization 808 0.04 1,167 0.05

Stock-based compensation 751 0.03 982 0.05

Net (loss) income exclusive

of non-cash charges:

Basic $(1,255) $(0.06) $3,612 $0.17

Fully Diluted $(1,255) $(0.06) $3,612 $0.17

Weighted average shares


Basic 21,382 21,013

Fully Diluted 21,382 21,560

Nine Months Ended September 30,

2007 2006

Income Per Income Per

(Loss) Share (Loss) Share

Net loss, as reported $(6,403) $(0.30) $(8,123) $(0.39)


Depreciation 4,747 0.22 5,320 0.26

Amortization 2,290 0.11 3,677 0.18

Stock-based compensation 2,091 0.10 2,348 0.11

Net (loss) income exclusive

of non-cash charges:

Basic $2,725 $0.13 $3,222 $0.16

Fully Diluted $2,725 $0.13 $3,222 $0.15

Weighted average shares


Basic 21,342 20,822

Fully Diluted 21,690 21,485

SOURCE Emageon Inc.
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