Eclipsys Announces Second-Quarter 2009 Results

Eclipsys Corporation® (NASDAQ: ECLP), The Outcomes Company®, today announced results for the quarter ended June 30, 2009.

GAAP Results

Revenues for the quarter ended June 30, 2009 were $129.8 million, compared to revenues of $132.1 million for the quarter ended June 30, 2008.

GAAP net loss for the second quarter of 2009 was $4.1 million, or $0.07 per diluted common share, compared to GAAP net income of $8.5 million, or $0.15 per share on a diluted basis for the second quarter of 2008.

Non-GAAP Results

Non-GAAP net income for the second quarter of 2009 was $8.9 million, or $0.16 per diluted common share, compared to second quarter 2008 non-GAAP net income of $13.2 million, or $0.24 per diluted share.

Non-GAAP net income excludes stock-based compensation expense, acquisition related amortization, and certain additional items that the company does not consider to be indicative of its underlying business performance. For second quarter 2008, these additional items were costs associated with the relocation of the corporate headquarters from Boca Raton, FL, to Atlanta, GA; a gain resulting from completion of post-closing milestones associated with the sale of the Clinical Practice Model Resource Center business, which was completed in December 2007; and a reduction in general and administrative expenses associated with insurance recoveries from our previously disclosed derivative litigation that was ultimately settled in September 2008.

For second quarter 2009, these additional items were severance costs primarily associated with the resignation of the company’s former chief executive officer; and exclusion of tax expense related to discrete tax items in the quarter, primarily deferred tax asset adjustments for Canadian research and development credits, and non-GAAP tax adjustments to reflect the non-GAAP annual effective tax rate. Additionally, we excluded the effect of purchase accounting adjustments in connection with the acquisition of Premise Corporation, which was completed in December 2008.

A reconciliation of GAAP to non-GAAP results is included in the attached tables.

"In reviewing our operations and market potential over the last three months, it is clear that we have a significant opportunity to grow revenues while also increasing profitability," said Philip M. Pead, Eclipsys president and chief executive officer. "The American Recovery and Reinvestment Act of 2009 (ARRA) is driving increased activity with both clients and prospects. We expect this activity to accelerate as hospitals and physician practices gain a clearer understanding of what constitutes 'meaningful use.' In addition, we have several initiatives underway that will enable us to be more cost efficient, and we expect the positive effects on margins from these initiatives to become apparent in 2010 and beyond."

Change to Projected Non-GAAP Tax Rate and 2009 Financial Guidance

Eclipsys now anticipates that the full year 2009 non-GAAP income tax rate will be in the range of 37 to 38 percent, compared to the 33 to 35 percent tax rate previously communicated on the company’s first quarter 2009 conference call. This increase is primarily due to lower estimates of available research and development tax credits and revisions in projected income taxes related to foreign earnings.

Due to this anticipated increase in the company’s effective income tax rate for 2009, Eclipsys non-GAAP EPS for 2009 is now expected to range from $0.55 to $0.60.

Conference call

Eclipsys executives will discuss the second-quarter results on a teleconference scheduled for 4:30 p.m. Eastern time on August 6. Persons interested in participating in the teleconference should call (800) 230-1059 approximately 15 minutes before the conference call is slated to begin. For listen-only mode, participants can go to www.eclipsys.com prior to the conference call to register and download the necessary audio software.

Replay

About two hours after its completion, an audio replay of the call will be available on www.eclipsys.com for approximately 48 hours.

About Eclipsys

Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and performance management software, clinical content and professional services that help healthcare organizations improve clinical, financial and operational outcomes. For more information, see www.eclipsys.com or email info@eclipsys.com.

Non-GAAP Measures

The company has provided net income and earnings per share financial measures on a non-GAAP basis for the three months ended June 30, 2009 and June 30, 2008, which exclude non-cash stock-based compensation expenses, amortization expense associated with acquisitions, and certain additional items that the company does not consider to be indicative of its underlying business performance, as listed on the attached GAAP to non-GAAP reconciliation tables. Because of the significance of the GAAP components excluded, these non-GAAP financial measures should not be considered a substitute for, or superior to, any measure derived in accordance with GAAP. These non-GAAP financial measures may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management believes that the non-GAAP financial measures provided, when considered in conjunction with comparable GAAP financial measures, facilitate the understanding and evaluation of the company’s operating performance and future prospects, as well as comparisons of the company’s results with its prior period results that did not include these gains and/or charges, and with results of other companies on a more consistent basis. Internally, management uses non-GAAP net income and earnings for forecasting and to help make management decisions, as an indicator of business performance, and to evaluate management’s effectiveness and help determine bonuses for management and others.

The economic substance of omitting non-cash stock-based compensation expense in presenting non-GAAP earnings derives from providing investors with consistent measures of performance both before and after including non-cash stock-based compensation charges. The economic substance of omitting the other items incurred that the company does not consider to be indicative of its underlying business performance derives from the fact that such episodic gains and/or charges make it more difficult to compare operating results of different periods, not all of which include such gains and/or charges. However, the omission of non-cash stock-based compensation expense may mask an economic cost incurred by the company in connection with stock-based compensation, and the omission of the charges related to the company’s other non-GAAP adjustments may mask actual and expected future costs associated with such matters. Management compensates for these limitations by using both the GAAP and non-GAAP measures.

The company has provided reconciling tables attached to this release.

Caution Regarding Forward-Looking Statements

Certain statements in this news release or the investor call referenced herein, including those concerning the company’s second quarter 2009 financial results, operational initiatives, future performance expectations, and effects of economic conditions are forward-looking statements and actual results may differ materially from those projected or implied by the forward-looking statements due to a variety of risks and uncertainties. Future performance expectations are predicated upon achievement of various sales and performance targets that may be difficult to meet. Economic conditions are unstable and may cause hospitals and other healthcare providers to curtail HIT system spending. Eclipsys’ cost reduction and other initiatives in response to the challenging economic environment may not be effective, and it is difficult to predict what the company may be able to achieve. Eclipsys sales may fall below expectations due to market conditions, competition, and other factors, including client demands for pricing and financing concessions. Costs may be greater than anticipated due to the potential need to increase spending to ensure performance in accordance with commitments to clients, regulatory requirements, and other factors. Software development may take longer and cost more than expected, and incorporation of anticipated features and functionality may be delayed, due to various factors including programming and integration challenges and resource constraints. The market is highly competitive. Implementation and customization of Eclipsys software is complex and time-consuming. Results depend upon a variety of factors and can vary by client. Each client’s circumstances are unique and may include unforeseen issues that make it more difficult than anticipated to implement or derive benefit from software, implementation or consulting services. The success and timeliness of the company’s services will depend at least in part upon client involvement, which can be difficult to control. Eclipsys is required to meet specified performance standards and regulatory requirements, and clients can terminate contracts, assess penalties or reduce contract scope under certain circumstances. More information about company risks is available in recent Form 10-K and other filings made by Eclipsys from time to time with the Securities and Exchange Commission. Special attention is directed to the portions of those documents entitled "Risk Factors” and "Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Eclipsys Corporation
Non-GAAP Income Statements
(in thousands, except per share amounts)
							Non-GAAP				Non-GAAP											Non-GAAP				Non-GAAP
							Three Months Ended June 30, 2009				Three Months Ended June 30, 2008				$ Change				% Change			Year-to-date June 30, 2009				Year-to-date June 30, 2008				$ Change				% Change
Revenues:
	Systems and services						$	131,185			$	126,308			$	4,877			3.9	%		$	261,048			$	245,446			$	15,602			6.4	%
	Hardware							2,275				5,834				(3,559	)		-61.0	%			4,317				11,076				(6,759	)		-61.0	%
	Total revenues							133,460				132,142				1,318			1.0	%			265,365				256,522				8,843			3.4	%
Cost and expenses:
	Costs of systems and services							68,334				67,413				921			1.4	%			134,916				133,072				1,844			1.4	%
	Costs of hardware							1,979				3,615				(1,636	)		-45.3	%			3,679				7,951				(4,272	)		-53.7	%
	Sales and marketing							21,016				20,916				100			0.5	%			41,272				40,242				1,030			2.6	%
	Research and development							13,326				15,465				(2,139	)		-13.8	%			26,365				32,158				(5,793	)		-18.0	%
	General and administrative							9,908				7,051				2,857			40.5	%			20,962				14,879				6,083			40.9	%
	Depreciation and amortization							4,993				4,619				374			8.1	%			9,904				8,961				943			10.5	%
	Restructuring							-				-				-							-				-				-
	In-process research and development charge							-				-				-							-				-				-
	Total costs and expenses							119,556				119,079				477			0.4	%			237,098				237,263				(165	)		-0.1	%
Income (loss) from operations								13,904				13,063				841			6.4	%			28,267				19,259				9,008			46.8	%
Gain (loss) on sale of assets								838				-				838			* N/M				1,237				33				1,204			* N/M
Gain (loss) on ARS								691				-				691			* N/M				533				-				533			* N/M
Interest expense								(961	)			(457	)			(504	)		110.3	%			(2,105	)			(720	)			(1,385	)		192.4	%
Interest income								681				1,285				(604	)		-47.0	%			1,528				3,667				(2,139	)		-58.3	%
Income (loss) before income taxes								15,153				13,891				1,262			9.1	%			29,460				22,239				7,221			32.5	%
Provision for income taxes								6,265				737				5,528			* N/M				10,989				971				10,018			* N/M
Net income (loss)							$	8,888			$	13,154			$	(4,266	)		-32.4	%		$	18,471			$	21,268			$	(2,797	)		-13.2	%
	Income allocated to participating securities							147				175				(28	)		-16.0	%			288				253				35			13.8	%
	Net income (loss) available to common stockholders						$	8,741			$	12,979			$	(4,238	)		-32.7	%		$	18,183			$	21,015			$	(2,832	)		-13.5	%
	Diluted income (loss) common per share						$	0.16			$	0.24			$	(0.08	)		-33.3	%		$	0.33			$	0.39			$	(0.06	)		-15.4	%
	Shares used in computing earnings (loss) per common share
			Basic					55,710				53,657				2,053			3.8	%			55,588				53,595				1,993			3.7	%
			Diluted					56,346				54,468				1,878			3.4	%			55,914				54,481				1,433			2.6	%

Eclipsys Corporation
GAAP Income Statements
(in thousands, except per share amounts)
							GAAP				GAAP											GAAP				GAAP
							Three Months Ended June 30, 2009				Three Months Ended June 30, 2008				$ Change				% Change			Year-to-date June 30, 2009				Year-to-date June 30, 2008				$ Change				% Change
Revenues:
	Systems and services						$	127,675			$	126,308			$	1,367			1.1	%		$	255,812			$	245,446			$	10,366			4.2	%
	Hardware							2,173				5,834				(3,661	)		-62.8	%			4,202				11,076				(6,874	)		-62.1	%
	Total revenues							129,848				132,142				(2,294	)		-1.7	%			260,014				256,522				3,492			1.4	%
Cost and expenses:
	Costs of systems and services							68,315				69,316				(1,001	)		-1.4	%			135,189				136,876				(1,687	)		-1.2	%
	Costs of hardware							1,950				3,615				(1,665	)		-46.1	%			3,606				7,951				(4,345	)		-54.6	%
	Sales and marketing							27,394				22,781				4,613			20.2	%			50,144				43,652				6,492			14.9	%
	Research and development							13,872				15,753				(1,881	)		-11.9	%			27,364				32,907				(5,543	)		-16.8	%
	General and administrative							12,429				7,713				4,716			61.1	%			24,451				18,676				5,775			30.9	%
	Depreciation and amortization							8,117				5,740				2,377			41.4	%			16,152				10,506				5,646			53.7	%
	Restructuring							-				-				-							5,434				-				5,434
	In-process research and development charge							-				-				-							-				850				(850	)		-100.0	%
	Total costs and expenses							132,077				124,918				7,159			5.7	%			262,340				251,418				10,922			4.3	%
Income (loss) from operations								(2,229	)			7,224				(9,453	)		-130.9	%			(2,326	)			5,104				(7,430	)		-145.6	%
Gain (loss) on sale of assets								838				1,451				(613	)		-42.2	%			1,237				3,515				(2,278	)		-64.8	%
Gain (loss) on ARS								691				-				691							533				-				533
Interest expense								(961	)			(457	)			(504	)		110.3	%			(2,105	)			(720	)			(1,385	)		192.4	%
Interest income								681				1,285				(604	)		-47.0	%			1,528				3,667				(2,139	)		-58.3	%
Income (loss) before income taxes								(980	)			9,503				(10,483	)		-110.3	%			(1,133	)			11,566				(12,699	)		-109.8	%
Provision for income taxes								3,120				992				2,128			214.5	%			3,834				2,766				1,068			38.6	%
Net income (loss)							$	(4,100	)		$	8,511			$	(12,611	)		-148.2	%		$	(4,967	)		$	8,800			$	(13,767	)		-156.4	%
	Basic EPS:
Net income (loss)							$	(4,100	)		$	8,511				(12,611	)		-148.2	%		$	(4,967	)		$	8,800				(13,767	)		-156.4	%
Less: Income allocated to participating securities								-				115				(115	)		-100.0	%			-				107				(107	)		-100.0	%
Net income (loss) available to common shareholders							$	(4,100	)		$	8,396				(12,496	)		-148.8	%		$	(4,967	)		$	8,693				(13,660	)		-157.1	%
	Basic weighted average common shares outstanding							55,710				53,657				2,053			3.8	%			55,588				53,595				1,993			3.7	%
	Basic net income (loss) per common share						$	(0.07	)		$	0.16			$	(0.23	)		-143.8	%		$	(0.09	)		$	0.16			$	(0.25	)		-156.3	%
	Diluted EPS:
Net income (loss)								(4,100	)			8,511				(12,611	)		-148.2	%			(4,967	)			8,800				(13,767	)		-156.4	%
Less: Income allocated to participating securities								-				113				(113	)		-100.0	%			-				105				(105	)		-100.0	%
Net income (loss) available to common shareholders							$	(4,100	)		$	8,398				(12,498	)		-148.8	%		$	(4,967	)		$	8,695				(13,662	)		-157.1	%
	Basic weighted average common shares outstanding							55,710				53,657				2,053			3.8	%			55,588				53,595				1,993			3.7	%
	Dilutive effect of potential common shares							-				811				(811	)		-100.0	%			-				886				(886	)		-100.0	%
Diluted weighted average shares common outstanding								55,710				54,468				1,242			2.3	%			55,588				54,481				1,107			2.0	%
Diluted earnings (loss) per common share							$	(0.07	)		$	0.15			$	(0.22	)		-146.7	%		$	(0.09	)		$	0.16			$	(0.25	)		-156.3	%

ECLIPSYS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
			June 30,				December 31,
				2009				2008
			(Unaudited)
Assets
Current assets:
	Cash		$	120,925			$	108,304
	Marketable securities							154
	Accounts receivable, net of allowance for doubtful accounts of $3,499 and $4,912, respectively			111,258				121,811
	Prepaid expenses			24,197				23,975
	Deferred tax asset			343				2,643
	Other current assets			4,181				5,712
		Total current assets		260,904				262,599
Long-term investments				108,806				107,215
Property and equipment, net				58,436				53,996
Capitalized software development costs, net				44,908				37,718
Acquired technology, net				34,570				39,710
Intangible assets, net				8,834				10,258
Deferred tax asset				88,789				89,063
Goodwill				98,030				96,973
Other assets				14,862				11,343
		Total assets	$	718,139			$	708,875
Liabilities and Stockholders’ Equity
Current liabilities:
	Deferred revenue		$	119,534			$	123,733
	Accounts payable			14,452				20,924
	Accrued compensation costs			25,080				16,457
	Deferred tax liability			2,939
	Other current liabilities			21,159				22,481
		Total current liabilities		183,164				183,595
	Deferred revenue			3,724				5,743
	Long term debt & capital leases			105,917				105,000
	Other long-term liabilities			15,403				16,540
		Total liabilities		308,208				310,878
Stockholders’ equity:
	Common stock, $0.01 par value, 200,000,000 shares authorized; issued and outstanding, 56,512,071 and 56,126,674, respectively			565				561
	Additional paid-in capital			584,317				569,717
	Accumulated deficit			(169,679	)			(164,712	)
	Accumulated other comprehensive income			(5,272	)			(7,569	)
		Total stockholders’ equity		409,931				397,997
		Total liabilities and stockholders’ equity	$	718,139			$	708,875

ECLIPSYS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
				For the Six Months Ended June 30,								For the Three Months Ended June 30,
					2009				2008				2009				2008
Operating activities:
	Net income			$	(4,967	)		$	8,800			$	(4,100	)		$	8,511
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			24,833				20,551				12,798				10,363
		Provision for bad debt			1,996				1,400				950				450
		In-process research and development charge			-				850				-				-
		Stock compensation expense			11,169				7,466				6,761				4,119
		Gain on sale of assets			(1,237	)			(3,515	)			(837	)			(1,451	)
		Deferred provision for income taxes			3,674				367				3,222				299
	Changes in operating assets and liabilities, excluding the effect of acquisitions and dispositions:																0
		Accounts receivable			1,948				(18,808	)			(1,747	)			(16,716	)
		Prepaid expenses and other current assets			1,580				(4,086	)			3,034				1,914
		Other assets			(497	)			1,047				(260	)			513
		Deferred revenue			(3,631	)			(8,505	)			(2,824	)			(5,154	)
		Accrued compensation			8,633				(6,707	)			1,168				(2,170	)
		Accounts payable and other current liabilities			(6,888	)			3,898				(292	)			(2,054	)
		Long-term liabilities			1,565				2,938				814				595
		Other reconciling items			(425	)			862				(670	)			434
			Total adjustments		42,720				(2,242	)			22,117				(8,858	)
			Net cash provided by operating activities		37,753				6,558				18,017				(347	)
Investing activities:
		Purchases of property and equipment			(12,555	)			(13,315	)			(5,282	)			(6,375	)
		Purchase of marketable securities							(102,000	)			-				-
		Proceeds from sales of marketable securities			150				153,641				-				18,850
		Capitalized software development costs			(14,651	)			(6,941	)			(7,435	)			(4,018	)
		Proceeds from sale of assets							698				-				-
		Earnout out on disposition			1,241				2,582				399				2,182
		Cash paid for acquisitions, net of cash acquired			(2,819	)			(54,370	)			(56	)			(736	)
			Net cash used in investing activities		(28,634	)			(19,705	)			(12,374	)			9,903
Financing activities:
		Proceeds from stock options exercised			3,306				2,439				3,232				953
		Proceeds from employee stock purchase plan			454				375				212				206
		Cash paid for debt issuance costs							(421	)			-				(421	)
		Repayment of secured financing							(45,000	)			-				(45,000	)
		Proceeds from secured financing							95,000				-				50,000
		Other			(59	)							(59	)
			Net cash provided by financing activities		3,701				52,393				3,385				5,738
Effect of exchange rates on cash and cash equivalents					(199	)			(236	)			15				28
Net increase (decrease) in cash and cash equivalents					12,621				39,010				9,043				15,322
Cash and cash equivalents — beginning of period					108,304				22,510				111,882				46,198
Cash and cash equivalents — end of period				$	120,925			$	61,520			$	120,925			$	61,520

Eclipsys Corporation
Reconciliation of GAAP to Non-GAAP Pro Forma Results
(in thousands, except per share amounts)
							GAAP																							Non-GAAP
							Three Months Ended June 30, 2009 (Unaudited)				Stock-based comp expense (1)				Restructuring (2)				Amortization (3)				Premise (4)			Tax (5)				Three Months Ended June 30, 2009 (Unaudited)
Revenues:
	Systems and services						$	127,675															$	3,510						$	131,185
	Hardware							2,173																102							2,275
	Total revenues							129,848				-				-				-				3,612			-				133,460
Cost and expenses:
	Costs of systems and services							68,315				(506	)											525							68,334
	Costs of hardware							1,950																29							1,979
	Sales and marketing							27,394				(4,237	)			(2,141	)														21,016
	Research and development							13,872				(546	)																		13,326
	General and administrative							12,429				(1,470	)			(1,051	)														9,908
	Depreciation and amortization							8,117												(3,124	)										4,993
	Restructuring																														-
	In-process research and development charge																														-
	Total costs and expenses							132,077				(6,759	)			(3,192	)			(3,124	)			554			-				119,556
Income (loss) from operations								(2,229	)			6,759				3,192				3,124				3,058			-				13,904
Gain/(loss) on sale of assets								838																							838
Gain (loss) on ARS								691																							691
Interest expense								(961	)																						(961	)
Interest income								681																							681
Income (loss) before income taxes								(980	)			6,759				3,192				3,124				3,058			-				15,153
Provision for income taxes								3,120				2,623				1,549				1,377				1,248			(3,652	)			6,265
Net income (loss)							$	(4,100	)		$	4,136			$	1,643			$	1,747			$	1,810		$	3,652			$	8,888
	Income allocated to participating securities							-				47				19				20				21			41				147
	Net income (loss) available to common stockholders						$	(4,100	)		$	4,089			$	1,624			$	1,727			$	1,789		$	3,611			$	8,741
	Diluted income (loss) common per share						$	(0.07	)		$	0.07			$	0.03			$	0.03			$	0.03		$	0.06			$	0.16
	Shares used in computing earnings (loss) per common share
			Basic					55,710				55,710				55,710				55,710				55,710			55,710				55,710
			Diluted					55,710				56,346				56,346				56,346				56,346			56,346				56,346
	1	Represents stock-based compensation expense.
	2	Represents severance related costs primarily associated with the resignation of our former CEO.
	3	This expense is the amortization of intangible assets associated with 2008 acquisitions.
	4	This represents a deferred revenue adjustment of $3.6 million net of deferred costs adjustment of $0.6 million related to our December 2008 acquisition of Premise Corporation. The amounts represent the reduction of deferred revenue and related deferred costs acquired from Premise as a result of purchase accounting adjustments.
	5	This amount represents a combination of discrete tax items in the quarter, primarily deferred tax asset adjustments for Canadian research and development credits, and non-GAAP tax adjustments to reflect the non-GAAP annual effective tax rate.

Eclipsys Corporation
Reconciliation of GAAP to Non-GAAP Pro Forma Results
(in thousands, except per share amounts)
							GAAP																							Non-GAAP
							Year-to-date June 30, 2009 (Unaudited)				Stock-based comp expense (1)				Restructuring (2)				Amortization (3)				Premise (4)			Tax (5)				Year-to-date June 30, 2009 (Unaudited)
Revenues:
	Systems and services						$	255,812															$	5,236						$	261,048
	Hardware							4,202																115							4,317
	Total revenues							260,014				-				-				-				5,351			-				265,365
Cost and expenses:
	Costs of systems and services							135,189				(999	)											726							134,916
	Costs of hardware							3,606																73							3,679
	Sales and marketing							50,144				(6,731	)			(2,141	)														41,272
	Research and development							27,364				(999	)																		26,365
	General and administrative							24,451				(2,438	)			(1,051	)														20,962
	Depreciation and amortization							16,152												(6,248	)										9,904
	Restructuring							5,434								(5,434	)														-
	In-process research and development charge																														-
	Total costs and expenses							262,340				(11,167	)			(8,626	)			(6,248	)			799			-				237,098
Income (loss) from operations								(2,326	)			11,167				8,626				6,248				4,552			-				28,267
Gain/(loss) on sale of assets								1,237																							1,237
Gain (loss) on ARS								533																							533
Interest expense								(2,105	)																						(2,105	)
Interest income								1,528																							1,528
Income (loss) before income taxes								(1,133	)			11,167				8,626				6,248				4,552			-				29,460
Provision for income taxes								3,834				3,502				3,244				2,350				1,711			(3,652	)			10,989
Net income (loss)							$	(4,967	)		$	7,665			$	5,382			$	3,898			$	2,841		$	3,652			$	18,471
	Income allocated to participating securities							-				94				66				48				35			45				288
	Net income (loss) available to common stockholders						$	(4,967	)		$	7,571			$	5,316			$	3,850			$	2,806		$	3,607			$	18,183
	Diluted income (loss) common per share						$	(0.09	)		$	0.14			$	0.10			$	0.07			$	0.05		$	0.06			$	0.33
	Shares used in computing earnings (loss) per common share
			Basic					55,588				55,588				55,588				55,588				55,588			55,588				55,588
			Diluted					55,588				55,914				55,914				55,914				55,914			55,914				55,914
	1	Represents stock-based compensation expense.
	2	This amount represents costs associated with the previously announced reduction in our professional services organization and other headcount and severance costs incurred primarily in the first quarter and severance costs primarily associated with the resignation of our former CEO in the second quarter.
	3	This expense is the amortization of intangible assets associated with 2008 acquisitions.
	4	This represents a deferred revenue adjustment of $5.4 million net of deferred costs adjustment of $0.8 million related to our December 2008 acquisition of Premise Corporation. The amounts represent the reduction of deferred revenue and related deferred costs acquired from Premise as a result of purchase accounting adjustments.
	5	This amount represents a combination of discrete tax items in the quarter, primarily deferred tax asset adjustments for Canadian research and development credits, and non-GAAP tax adjustments to reflect the non-GAAP annual effective tax rate.

Eclipsys Corporation
Reconciliation of GAAP to Non-GAAP Pro Forma Results
(in thousands, except per share amounts)
							GAAP																								Non-GAAP
							Three Months Ended June 30, 2008 (Unaudited)				Stock-based comp expense (1)				Derivative Litigation (2)				EPSI (3)				Gain on sale of assets (4)				Headquarter Relocation (5)				Three Months Ended June 30, 2008
Revenues:
	Systems and services						$	126,308																							$	126,308
	Hardware							5,834																								5,834
	Total revenues							132,142				-				-				-				-				-				132,142
Cost and expenses:
	Costs of systems and services							69,316				(1,777	)															(126	)			67,413
	Costs of hardware							3,615																								3,615
	Sales and marketing							22,781				(1,488	)															(377	)			20,916
	Research and development							15,753				(288	)																			15,465
	General and administrative							7,713				(566	)			658												(754	)			7,051
	Depreciation and amortization							5,740												(1,121	)											4,619
	Restructuring
	In-process research and development charge							-																								-
	Total costs and expenses							124,918				(4,119	)			658				(1,121	)			-				(1,257	)			119,079
Income (loss) from operations								7,224				4,119				(658	)			1,121								1,257				13,063
Gain/(loss) on sale of assets								1,451																(1,451	)							-
Gain (loss) on ARS								-																								-
Interest expense								(457	)																							(457	)
Interest income								1,285																								1,285
Income (loss) before income taxes								9,503				4,119				(658	)			1,121				(1,451	)			1,257				13,891
Provision for income taxes								992				-				-				-				(255	)							737
Net income (loss)							$	8,511			$	4,119			$	(658	)		$	1,121			$	(1,196	)		$	1,257			$	13,154
	Income allocated to participating securities							113				55				(9	)			15				(16	)			17				175
	Net income (loss) available to common stockholders						$	8,398			$	4,064			$	(649	)		$	1,106			$	(1,180	)		$	1,240			$	12,979
	Diluted income (loss) common per share						$	0.15			$	0.07			$	(0.01	)		$	0.02			$	(0.02	)		$	0.02			$	0.24
	Shares used in computing earnings (loss) per common share
			Basic					53,657				53,657				53,657				53,657				53,657				53,657				53,657
			Diluted					54,468				54,468				54,468				54,468				54,468				54,468				54,468
	1	Represents stock-based compensation expense.
	2	This reduction in general and administrative expenses is associated with insurance recoveries related to the previously disclosed derivative litigation, the settlement of which is pending final court approval.
	3	This expense is the amortization of intangible assets associated with the February 2008 acquisition of EPSi.
	4	This gain resulted from the achievement of certain post-closing milestones associated with the December 2007 sale of the Clinical Practice Model Resource Center business.
	5	This cost was related primarily to amounts incurred to relocate the corporate headquarters from Boca Raton to Atlanta. These include salaries and benefits associated with termination of employees not relocating and other administrative costs associated with the move.

Eclipsys Corporation
Reconciliation of GAAP to Non-GAAP Pro Forma Results
(in thousands, except per share amounts)
							GAAP																												Non-GAAP
							Year-to-date June 30, 2008 (Unaudited)				Stock-based comp expense (1)				Derivative Litigation (2)				EPSI (3)				Gain on sale of assets (4)				Headquarter Relocation (5)				Tax Provision (6)				Year-to-date June 30, 2008
Revenues:
	Systems and services						$	245,446																											$	245,446
	Hardware							11,076																												11,076
	Total revenues							256,522				-				-				-				-				-				-				256,522
Cost and expenses:
	Costs of systems and services							136,876				(3,385	)															(419	)							133,072
	Costs of hardware							7,951				-																								7,951
	Sales and marketing							43,652				(2,585	)															(825	)							40,242
	Research and development							32,907				(590	)															(159	)							32,158
	General and administrative							18,676				(907	)			(1,353	)											(1,537	)							14,879
	Depreciation and amortization							10,506												(1,545	)															8,961
	In-process research and development charge							850												(850	)															-
	Total costs and expenses							251,418				(7,467	)			(1,353	)			(2,395	)			-				(2,940	)			-				237,263
Income (loss) from operations								5,104				7,467				1,353				2,395								2,940								19,259
Gain/(loss) on sale of assets								3,515																(3,482	)											33
Gain (loss) on ARS								-																												-
Interest expense								(720	)																											(720	)
Interest income								3,667																												3,667
Income (loss) before income taxes								11,566				7,467				1,353				2,395				(3,482	)			2,940				-				22,239
Provision for income taxes								2,766				-				-				-				(255	)							(1,540	)			971
Net income (loss)							$	8,800			$	7,467			$	1,353			$	2,395			$	(3,227	)		$	2,940			$	1,540			$	21,268
	Income allocated to participating securities							105				89				16				29				(38	)			35				18				253
	Net income (loss) available to common stockholders						$	8,695			$	7,378			$	1,337			$	2,366			$	(3,189	)		$	2,905			$	1,522			$	21,015
	Diluted income (loss) common per share						$	0.16			$	0.14			$	0.02			$	0.04			$	(0.06	)		$	0.05			$	0.03			$	0.39
	Shares used in computing earnings (loss) per common share
			Basic					53,595				53,595				53,595				53,595				53,595				53,595				53,595				53,595
			Diluted					54,481				54,481				54,481				54,481				54,481				54,481				54,481				54,481
	1	Represents stock-based compensation expense.
	2	These charges were incurred as a result of the voluntary stock option review completed in the second quarter 2007 and are related primarily to legal fees associated with the subsequent derivative litigation. These costs are net of insurance recoveries in the second quarter 2008.
	3	These amounts relate to a charge of $850 for a write off of in-process research and development and amortization of intangible assets recorded as part of the purchase price allocation of the February 2008 acquisition of EPSi.
	4	This gain was recorded in conjunction with contingent consideration earned related to the December 2007 sale of the Clinical Practice Model Resource Center business to Elsevier Inc.
	5	This cost was related primarily to amounts incurred to relocate the corporate headquarters from Boca Raton to Atlanta. These include salaries and benefits associated with termination of employees not relocating and other administrative costs associated with the move.
	6	FASB Interpretation 48 "Accounting for Uncertainty in Income Taxes" clarifies the criteria for recognizing income tax benefits. This charge was recorded as a result of the review of uncertain state tax positions.