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Epocrates Reports 2010 Fourth Quarter and Full-Year Financial Results and Provides 2011 Outlook

/ Source: GlobeNewswire

SAN MATEO, Calif., March 29, 2011 (GLOBE NEWSWIRE) -- Epocrates, Inc. (Nasdaq:EPOC), a leading provider of mobile drug reference tools to healthcare professionals and interactive services to the healthcare industry, today reported financial results for its fiscal fourth quarter and full-year of 2010 and its financial outlook for 2011. Epocrates' net sales totaled $30.3 million in the fourth quarter of 2010 compared to $27.4 million in the same quarter of the prior year, an increase of 11%. For the year ended December 31, 2010, Epocrates' net sales increased 11% to $104.0 million compared to $93.7 million for the year ended December 31, 2009.

Rose Crane, president and chief executive officer of Epocrates, Inc., commented, "The fourth quarter of 2010 was another successful quarter for our company, demonstrating consistent double-digit revenue growth and further solidifying our position as a leading provider of point-of-care reference solutions. We are beginning to see positive momentum from the incremental investments we have made throughout 2010 to expand our portfolio of products targeted to the pharmaceutical industry, including line extensions for our flagship DocAlert® product offering and the launch of a suite of virtual representative services. We also remain encouraged by the favorable customer response to our recent acquisition of Modality, Inc., which has allowed us to diversify and expand the breadth of clinical information available to our large, established clinician network."

For the fourth quarter ended December 31, 2010, net income was $2.7 million, or $0.09 per diluted share, compared to $3.5 million, or $0.13 per diluted share, in the same quarter of the prior year. The decline in net income for the quarter was primarily attributable to an increase in research and development investment and sales and marketing expenses related to the development of a new Epocrates EHR™ electronic health records platform and the development and launch of new interactive services offerings.     

Epocrates' adjusted EBITDA, as defined in Epocrates' final prospectus filed with the Securities and Exchange Commission in connection with its recent initial public offering, and in the GAAP to non-GAAP reconciliation provided later in this release, was $7.1 million, or 23% of revenue for the fourth quarter of 2010, compared to $8.2 million, or 30% of revenue, in the same period last year. The decline in adjusted EBITDA for the quarter was primarily attributable to the ongoing investment in the development of an EHR platform. 

For the year ended December 31, 2010, GAAP net income was $3.8 million, or $0.01 per diluted share, compared to $7.7 million, or $0.20 per diluted share, in 2009. The decline in net income for the year was primarily attributable to an increase in research and development investment and sales and marketing expenses related to the development of a new EHR platform and the development and launch of new products for the pharmaceutical industry.       

For 2010, Epocrates' adjusted EBITDA was $16.9 million or 16% of revenue, from $21.8 million, or 23% of revenue in 2009. The decline in adjusted EBITDA for the year was primarily attributable to the ongoing investment in the development of the EHR platform. 

Cash, cash equivalents and short-term investments totaled $54.7 million as of the end of the fourth quarter of 2010 and does not reflect the proceeds from the initial public offering that closed on February 7, 2011.

As of December 31, 2010, Epocrates had total backlog of $86.5 million, consisting of deferred revenue of $55.0 million, along with $31.5 million of contractual backlog. Bookings were $37.0 million in the fourth quarter of 2010, a 22% increase compared to the fourth quarter of 2009, led by a 43% increase in bookings from pharmaceutical company clients.

Crane concluded, "With our 2010 investments and recently completed initial public offering providing a strong foundation for growth, an expanded product portfolio and strong cash flow profile, we are poised to deliver on our growth targets and strengthen our leadership position. We see opportunities to build shareholder value by further leveraging our broad physician network, expanding our interactive services opportunities and developing an innovative EHR platform specifically targeted for solo and small physician practices. We are confident that we have the right strategic programs in place to position Epocrates for future success." 

An investor presentation summarizing the company's fourth quarter of 2010 results is available in the Investor Relations section of the Epocrates website at .

Outlook for Full-Year 2011 

Epocrates expects full-year 2011 net sales to be in the range of $122 million to $125 million, representing growth of 17% to 20% over full-year 2010. Epocrates expects 2011 adjusted EBITDA of 16% to 17% of sales, or $19.5 million to $21.5 million. This would represent an increase in adjusted EBITDA of 15% to 27% over the adjusted EBITDA reported in 2010. In addition, full-year 2011 net income is expected to be in the range of $3.0 million to $4.0 million, and net income per diluted share is expected to be between $0.12 and $0.15, based on approximately 26.0 million shares outstanding.

Post Year End Events

On February 7, 2011, Epocrates closed its initial public offering by issuing 3,574,285 shares of its common stock at $16.00 per share, raising approximately $53.2 million net of underwriters' discounts and commissions. In addition, the underwriters exercised their over-allotment option on an additional 804,000 shares, raising approximately $11.9 million more for the company, net of underwriters' discounts and commissions. From these proceeds, aggregate cumulative dividends to the holders of Epocrates' Series B preferred stock were paid in full, in the amount of approximately $29.6 million. 

As a result of its initial public offering, Epocrates has strengthened its balance sheet. At February 2011 month end, Epocrates held approximately $89.9 million in cash, cash equivalents and short-term investments and no debt. At the end of February 2011, Epocrates had approximately 23.4 million shares issued and outstanding.

Earnings Call Information

Epocrates will host a conference call today beginning at 8:30 a.m. Eastern Time to review its 2010 fourth quarter results and full-year operating results and future outlook, followed by a question and answer session. 

To participate in the live conference call and webcast, please dial 877-398-9481 (if dialing from within the U.S.) or 760-298-5095 (if dialing from outside the U.S.) using conference code 47269531 or visit the Investor Relations section of the company's web site at . 

A replay of the conference call will be available approximately two hours after the completion of the conference call by dialing 800-642-1687 (if dialing from within the U.S.) or 706-645-9291 (if dialing from outside the U.S.) using conference code 47269531. The replay will be available for one week on the above number. A webcast replay will also be archived on the company's website for approximately 12 months.

About Epocrates, Inc.

Epocrates is a leading provider of mobile drug reference tools to healthcare professionals and interactive services to the healthcare industry. Epocrates' active user network currently has more than one million healthcare professionals, including more than 45 percent of U.S. physicians. Most commonly used on mobile devices at the point of care, the company's clinical products and services help healthcare professionals make more informed prescribing decisions, enhance patient safety and improve practice productivity. For more information about Epocrates, please visit .

Epocrates, Epocrates EHR and DocAlert are trademarks of Epocrates, Inc., in the U.S. and other countries. 

Forward-Looking Statements

Statements contained in this press release under the heading "Outlook for Full-Year 2011" and in Ms. Crane's quote regarding Epocrates being poised to deliver on its growth targets and strengthen its leadership, and opportunities for the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Uncertainties and risks may cause Epocrates' actual results to be materially different than those expressed in or implied by Epocrates' forward-looking statements. For Epocrates, particular uncertainties and risks include, among others: unexpected delays in Epocrates delivering new products may occur, which would cause revenues not to be as Epocrates expects; market acceptance of new products may not be as Epocrates expects, which would cause revenues not to be as Epocrates expects; and the impact of competitive products and pricing may force Epocrates to decrease the price of its products. More detailed information on these and additional factors that could affect Epocrates' actual results are described in Epocrates' filings with the Securities and Exchange Commission, including its final prospectus filed with the Securities and Exchange Commission on February 2, 2011. Except as required by law, Epocrates undertakes no obligation to publicly update its forward-looking statements.

Use of Non-GAAP Financial Measures  

To supplement Epocrates' condensed consolidated financial statements presented on a GAAP basis, Epocrates uses non-GAAP measures of gross margin, gross margin percentage, operating income, operating income percentage, net income and net income per share, which are adjusted to exclude certain costs, expenses, gains and losses Epocrates believes appropriate to enhance an overall understanding of its past financial performance and also its prospects for the future. These adjustments to current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Epocrates' underlying operational results and trends and its marketplace performance. In addition, these adjusted non-GAAP results are among the information management uses as a basis for planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States of America.

Adjusted EBITDA is not a measure of liquidity calculated in accordance with U.S. generally accepted accounting principles, or GAAP, and should be viewed as a supplement to—not a substitute for—results of operations presented on the basis of GAAP. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by GAAP. Epocrates' statement of cash flows presents its cash flow activity in accordance with GAAP. Furthermore, adjusted EBITDA is not necessarily comparable to similarly‑titled measures reported by other companies.

Epocrates believes adjusted EBITDA is used by and is useful to investors and other users of its financial statements in evaluating its operating performance because it provides them with an additional tool to compare business performance across companies and across periods. Epocrates believes that:

  • EBITDA is widely used by investors to measure a company's operating performance without regard to such items as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and
  • investors commonly adjust EBITDA information to eliminate the effect of stock‑based compensation expenses and other charges, which can vary widely from company to company and impair comparability.

Epocrates management uses adjusted EBITDA:

  • as a measure of operating performance to assist in comparing performance from period to period on a consistent basis;
  • as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations;
  • in communications with the board of directors, stockholders, analysts and investors concerning our financial performance; and
  • as a significant performance measurement included in its bonus plan.

The table below sets forth a reconciliation of net income (loss) to adjusted EBITDA (in thousands):

The following tables set forth a reconciliation of gross margin, gross margin percentage, operating income, operating income percentage, net income and net income per share on a GAAP basis to a non-GAAP basis (in thousands):

CONTACT: INVESTORS & MEDIA: Julie Tracy Sr. Vice President, Chief Communications Officer Epocrates, Inc. (609) 583-1464 jtracy@epocrates.com