MEDecision issues lower 2Q revenue guidance
Provider of software, services and clinical content to healthcare payers MEDecision, Inc. (Nasdaq: MEDE), announced before the opening bell Monday that it is cutting its second quarter guidance on account of later revenue recognition of two licensing deals signed during the second quarter of 2007, ended June 30, 2007.
“This is primarily an accounting issue than it is anything else,” MEDecision CEO David St. Clair said on a conference call. “We believe we will be able to clear both of these hurdles before the end of the year and hence be able to recognize not only the term licenses, but the other revenue that must be defined until such time is viewed at those contingencies.”
MEDecision signed contracts with Blue Cross and Blue Shield of Minnesota (BCBSMN) and Lovelace Health Plan of New Mexico during the second quarter. These two new customers have licensed MEDecision’s collaborative care management suite, which includes the patient clinical summary.
Company officials said that generally term license contracts allow them to record revenue when signed; however, both of the recently signed contracts were conditioned upon MEDecision meeting certain requirements before recognizing revenue.
MEDecision now anticipates recognizing revenue from the term license contracts almost entirely in the fourth quarter of 2007. MEDecision now expects total revenue for the second quarter of 2007 to clock in between $9.2 million and $9.4 million, compared with previous guidance of $10.7 million to $11.5 million. The contracts represent aggregate term license revenues of approximately $3.2 million.
MEDecision also reported that as a result of expense management, it expects to record total GAAP expenses for the second quarter of between $12.2 million and $12.5 million. Consequently, the company expects a GAAP net loss for the quarter in the range of $2.7 million to $3.2 million, compared with previous guidance calling for a loss of $2.5 million to $3.0 million.
“It is a little unusual that both [contracts] will be recognized later,” St. Clair said. “So guidance did anticipate what I will call ‘normal term license’ deals.”
Management had originally expected to close the BCBSMN licensing deal in the fourth quarter of 2006. MEDecision had been engaged in serious bid to win BCBSMN’s business and said it believed it was closing in on a contract in the fourth quarter. However, BCBSMN suddenly went in a different direction. MEDecision continued to talk with BCBSMN and ultimately closed the deal in the second quarter of 2007.
Shares of MEDecision traded down 0.4%, or $0.02 to $4.96 in mid-day trading Monday.
