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TriZetto Q4 and Full-Year 2005 Revenue and Earnings Exceed Guidance; 2006 Guidance Projects $0.52 to $0.60 EPS, Including Impact of SFAS 123R

NEWPORT BEACH, Calif. – February 9, 2006 – NEWPORT BEACH, Calif. - The TriZetto Group, Inc. (Nasdaq: TZIX) today reported diluted earnings per share (EPS) for the full-year 2005 of $0.48, on revenue of $292.2 million. EPS performance was $0.03 better than the high end of the company's guidance range and represents an increase of 167% over full-year 2004 EPS. The company also issued guidance for 2006 of $0.52 to $0.60 of EPS, which now includes the expensing of stock-based compensation under SFAS 123R.

"TriZetto's outstanding results for 2005 and strong expectations for 2006 demonstrate the company's leadership position at the confluence of some of the most dramatic changes that the healthcare industry has experienced in 20 years," noted TriZetto Chairman and CEO Jeff Margolis.

Added Kathleen Earley, TriZetto's President and COO, "TriZetto's results and expectations reflect a broad portfolio of software and services that help payers capitalize on the growth opportunities in consumer-directed healthcare, care management, Medicare Advantage and Medicare Part D. In 2006, TriZetto's capabilities will continue to grow to help health plans and benefits administrators enhance revenue growth, drive administrative efficiency, and improve the cost and quality of care for their members."

Financial Summary (in millions, except per share amounts):

   Quarter
Ended
Dec. 31, 2005
Quarter
Ended
Dec. 31, 2004
Change
Revenue $292.2 $274.6 6.4%
Bookings $296.6 $335.3 -11.5%
Total Backlog $703.4 $585.0 20.2%
Diluted EPS $0.48 $0.18 166.7%
Net Income $22.0 $8.5 158.8%
Adjusted EBITDA* $48.2 $35.8 34.6%
Cash Resources $108.5 $73.1 48.4%
Cash Provided by Operations $43.8 $35.8 22.3%
Capital Expenditures $17.2 $17.1 0.6%

* Definition and reconciliation to GAAP is included in the attached financial schedules

Revenue

Full-year 2005 revenue totaled $292.2 million, versus $274.6 million in 2004. Increases of $19.1 million in consulting, $11.6 million in recurring software maintenance and $12.0 million of software hosting revenue more than offset the loss of $22.5 million of outsourced services revenue from exited businesses and contracts.

Non-recurring revenue represented 45.2% of total revenue in 2005, compared to 42.1% in 2004. This reflects primarily the significant improvement in non-recurring consulting revenue in 2005 and the loss of recurring hosting and business process outsourcing revenue from exited businesses and contracts.

New Business Bookings

For the full-year 2005, TriZetto signed 1,055 new customer contracts with a total value of $296.6 million, compared to $335.3 million in 2004. Contract bookings comprise a mix of current and future period revenue and represent the expected minimum total revenue to be generated under each contract. New contract bookings will vary from one quarter to the next. The company targets approximately $50 to $60 million of new contract bookings each quarter. In the fourth quarter ended December 31, 2005, TriZetto signed 237 new customer contracts with a total value of $83.1 million, compared to $58.8 million in the year-ago quarter.

Backlog

At December 31, 2005, the company's total revenue backlog was approximately $703 million, compared to $585 million at December 31, 2004 and $663 million at September 30, 2005. Twelve-month revenue backlog was approximately $185 million at December 31, 2005, compared to $173 million at December 31, 2004 and $194 million at September 30, 2005. The timing of contract closings and other factors can cause the company's backlog to vary from one quarter to the next.

Profitability

Full-year 2005 net income was $22.0 million, or $0.48 per diluted share, compared to net income of $8.5 million, or $0.18 per share, in 2004. Due to the company's Federal net operating loss (NOL) carry forwards, the year's tax provision represented an effective rate of approximately 5.4%, which was partially offset by prior year state refunds of $0.8 million. At year-end 2005, TriZetto had $102.7 million in NOL carry forwards. Adjusted EBITDA was $48.2 million, compared to $35.8 million in 2004.

TriZetto reports earnings in accordance with Generally Accepted Accounting Principles (GAAP), and additionally reports certain non-GAAP measures, such as Adjusted EBITDA, believing that these provide additional information for investors to evaluate the company's financial performance. A definition of Adjusted EBITDA and a reconciliation to GAAP measures are included in the attached financial schedules.

Gross margin for 2005 was 45.8%, compared to 38.2% in 2004. Recurring revenue gross margin increased to 42.0% in 2005 from 35.9% in 2004. Non-recurring revenue gross margin increased to 50.3% in 2005 from 41.5% in 2004. Gross margin for the fourth quarter of 2005 was 46.4%, compared to 42.2% in the year-ago period.

Research and development expenses represented 10.8% of revenue in 2005, slightly lower than the 11.1% in 2004. This reflected the company's continuing development investments in both enterprise and component software to add new capabilities and functionality for future customer needs. Selling, general and administrative expenses were 26.3% of revenue, compared to 21.8% in 2004. The increase was primarily due to investment in developing the company's market-facing structure, higher incentive compensation and higher outside services fees and expenses.

Cash Resources and Cash Flow

Cash, restricted cash and short-term investments totaled $108.5 million at December 31, 2005, versus $73.1 million at December 31, 2004 and $57.8 million at September 30, 2005.

Net cash provided by operating activities in 2005 was $43.8 million, compared to $35.8 million in 2004. Capital expenditures for the year were $17.2 million, at the low end of the company's guidance range, compared to $17.1 million in the prior year.

In the fourth quarter of 2005, the company received net cash proceeds of $82 million after deducting the amount used to repurchase 1 million shares of the company's common stock in connection with its convertible debt offering and transaction fees and expenses. The company used $35 million of cash during the quarter in connection with its acquisition of CareKey, Inc.

Days sales outstanding for the fourth quarter of 2005 was 61 days, versus 66 in the year-ago quarter.

Guidance for 2006 Includes SFAS 123R

For the full year 2006, TriZetto expects between $315 and $330 million of revenue, representing an 8% to 13% increase over 2005. TriZetto expects diluted EPS to be $0.52 to $0.60, which includes an estimated $0.10 to $0.14 per share negative impact for the effect of adopting Statement of Financial Accounting Standards No. 123R, which requires all companies to expense stock-based compensation for 2006. Adjusted EBITDA for 2006, which excludes stock-based compensation expense, is expected to be between $63 and $67 million, an increase of 31% to 39% over 2005 Adjusted EBITDA. Capital expenditures in 2006 are expected to be between $18 and $22 million. Diluted share count for 2006 is expected to be approximately 48 million.

For the first quarter of 2006, the company expects revenue of approximately $77 to $81 million, EPS of $0.11 to $0.14 on a diluted share count of approximately 47 million, and Adjusted EBITDA of $14 to $15 million.

TriZetto is focused on growing Adjusted EBITDA at a long-term targeted rate approaching 30% per year, while maintaining capital spending at approximately the company's current rate. TriZetto projects that organic revenue growth of 8% to 12% will be required to achieve this target, depending on the mix of sales.

Conference Call

TriZetto will host a conference call at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time today to discuss the full-year and fourth quarter results. Investors may access the webcast through TriZetto's web site at www.trizetto.com, first by clicking on the Investors button, and then on the Company Information drop-down menu item. The conference call will be archived and available through TriZetto's web site for 30 days following the call.

The webcast will also be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com).

About TriZetto

Touching nearly 40% of the U.S. insured population, TriZetto is distinctly focused on accelerating the ability of healthcare payers to lead the industry's transformation. The company provides premier information technology solutions that enhance its customers' revenue growth, drive their administrative efficiency, and improve the cost and quality of care for their members. Healthcare payers include national and regional health insurance plans, and benefits administrators that provide transaction services to self-insured employer groups. The company's broad array of payer-focused information technology offerings include enterprise and component software, hosting and business process outsourcing services, and consulting. Headquartered in Newport Beach, California, TriZetto can be reached at 949-719-2200 or at www.trizetto.com.

Important Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements about future revenue, profits, cash flows and financial results, the market for TriZetto's services, future service offerings, industry trends, client and partner relationships, acquisitions, TriZetto's operational capabilities, future financial structure, uses of cash, acquisitions or proposed transactions. Actual results may differ materially from those stated in any forward-looking statements based on a number of factors, including the ability of TriZetto to successfully integrate the businesses of TriZetto and its acquisitions or partners; the contributions of acquisitions to TriZetto's operating results; the effectiveness of TriZetto's implementation of its business plan, the market's acceptance of TriZetto's new and existing products and services, the timing of new bookings, risks associated with management of growth, reliance on third parties to supply key components of TriZetto's services, attraction and retention of employees, variability of quarterly operating results, competitive factors, other risks associated with acquisitions, changes in demand for third party products or solutions which form the basis of TriZetto's service and product offerings, financial stability of TriZetto's customers, the ability of TriZetto to meet its contractual obligations to customers, including service level and disaster recovery commitments, changes in government laws and regulations and risks associated with rapidly changing technology, as well as the other risks identified in TriZetto's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting TriZetto's Investor Relations department at 949-719-2225 or at TriZetto's web site at www.trizetto.com. All information in this release is as of February 9, 2006. TriZetto undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

CONTACTS:

Investors:
Brad Samson
949-719-2220
brad.samson@trizetto.com

Media:
Audrey McDill
303-495-7197
audrey.mcdill@trizetto.com


Information
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Financial Results:

Full Press Release incl. Financial Results (125 KB PDF)
Financial Results Only (29 KB PDF)
Notes to Unaudited Condensed Consolidated Financial Statements (27 KB PDF)
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