Eclipsys Glides on Higher Sales - Analyst Blog - ECLIPSE BANCORP INC by Eclipse Bancorp Inc. (OTC:ECLP)

Eclipsys Corporation’s (ECLP) second-quarter fiscal 2010 adjusted earnings of 16 cents per share outshone the Zacks Consensus Estimate of 10 cents while matching the year-ago earnings. Adjusted earnings exclude special items such as restructuring charges, merger costs, amortization and adjustments related to the company’s acquisition of Premise Corporation in 2008.

On a reported basis, Eclipsys earned $1.6 million (or 3 cents per share) in the quarter as against a loss of $4.1 million (or 7 cents a share) a year-ago. The turnaround is attributable to higher revenues and lower expenses.

Revenues & Bookings

Revenues rose 3.5% year-over-year to $134.4 million, but trailed the Zacks Consensus Estimate of $136 million. Revenues from systems and services grew 3% to $125.6 million while hardware sales climbed 36% to roughly $3 million.

Revenues from systems and services included recurring revenues of $96.7 million (up 7% year-over-year), professional services revenues of $25 million (down 19%) and periodic revenues of $9.8 million (up 42%).

New business bookings (defined as the value of all new contracts signed in a particular period, excluding renewals) totaled $259.4 million for first-half fiscal 2010, favored by customer investments to meet the meaningful use criteria of the American Reinvestment and Recovery Act (ARRA). Physicians and hospitals that adopt Electronic Health Record (EHR) solutions and use them meaningfully are eligible for incentives under the ARRA.

Margins

Adjusted gross profit dipped 2.7% to $61.4 million in the quarter with gross margin declining to 45.7% from 47.3% a year-ago on account of higher cost of sales. Adjusted operating expenses fell 7% year-over-year to $45.7 million.

Balance Sheet

Eclipsys exited the quarter with cash of $143.3 million, up 18.5% year-over-year. The company repaid the remaining $15 million of its credit facility in April 2010, thereby retiring all of its long-term debt.

Outlook

Eclipsys has not provided any updated guidance for fiscal 2010. The company expects adjusted earnings between 70 cents and 75 cents per share for the year. Moreover, Eclipsys expects revenues in the range of $559 million to $569 million. New business bookings for fiscal 2010 are estimated to range from $469 million to $508 million.

Atlanta-based Eclipsys develops and licenses proprietary software for the healthcare industry. The company is a leading provider of advanced integrated clinical, revenue cycle and performance management software and related professional services.

We are impressed with Eclipsys’ broad client base coupled with its wide range of products and facilities. Moreover, the company’s efforts to expand internationally should boost revenues. However, aggressive competition fueled by an ever-changing technology, remains a significant concern.

The healthcare information systems and services market, in which Eclipsys operates, is highly competitive and the company faces stiff challenges from General Electric (GE), McKesson Corporation (MCK) and Cerner Corporation (CERN). Furthermore, Eclipsys’ strategy of growth by acquisition has inherent risks. Currently, we have a Neutral recommendation on Eclipsys.

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