HealthGrades (HGRD)

[Golden Cross]

Health Grades, Inc. Announces Fourth Quarter and Year-End Results; Annual Revenues Grow 43%; Conference Call Scheduled for Today at 4:30 p.m. ET

Tuesday , February 21, 2006 16:09 ET

LAKEWOOD, Colo., Feb 21, 2006 (BUSINESS WIRE) -- Health Grades, Inc. (the "Company") (Nasdaq: HGRD), an independent provider of healthcare quality ratings, information, and advisory services, today announced financial results for the fourth quarter and year ended December 31, 2005. Revenue for the year ended December 31, 2005, increased 43%, while the Company's operating margin increased by 50%, from 12% for the year ended December 31, 2004, to 19% for the year ended December 31, 2005.

-- Ratings and advisory revenues for the year ended December 31, 2005, increased 43% to $20,794,000 from $14,536,000 for the same period of 2004. HealthGrades' licensing fees and quality assessment and improvement services to hospitals accounted for approximately $4,033,000 or 64% of the increase in revenue; and sales of the Company's quality information to employers, benefits consulting firms, consumers and others accounted for approximately $2,225,000 or 36% of the increase. Revenues for the quarter ended December 31, 2005, were $5,891,000 compared to $4,145,000 for the same period of 2004.

-- Income from operations was approximately $3,942,000 for the year ended December 31, 2005, an increase of approximately $2,181,000 from $1,761,000 for the same period of 2004. Sales and marketing expenses increased by $869,000 during 2005. This increase was driven directly by the Company's increase in revenues. Although the Company's revenues increased by 43%, sales and marketing expenses increased by only 18%. As a percentage of revenue, total operating expenses declined from 2004 to 2005.

-- Net income for the year ended 2005 was approximately $4,140,000 or $0.15 per basic share and $0.12 per diluted share, respectively, compared to net income of $1,782,000 or $0.07 per basic share and $0.05 per diluted share, for the same period of 2004. Net income for the quarter ended December 31, 2005, was $811,000 or $0.03 per basic share and $0.02 per diluted share, compared to net income of $515,000 or $0.02 per basic and diluted share for the same period of 2004.

-- HealthGrades completed the year ended December 31, 2005, with approximately $9,682,000 in cash. This represents positive cash flow of approximately $3,528,000 for the year. In addition, as of December 31, 2005, the Company also had $1,988,000 in short-term investments, consisting principally of U.S. government and government agency debt securities with maturity dates of 180 days or less.

Kerry Hicks, President and Chief Executive Officer of Health Grades, Inc., stated: "We are pleased with our results for the year. We experienced strong operating margin expansion as well as significant cash flows. Our operating margins increased by over 50% to 19% for the year ended December 31, 2005. In addition, cash, cash equivalents and short-term investments increased over $5.5 million during 2005. As significant as these financial results were some of the strategic investments we made near the end of the year. As we noted previously, we made two strategic hires in our Internet business group and employer and health plan businesses near the end of 2005. We believe these two individuals give us additional strength in their respective areas. We look forward to 2006 and are excited about the many initiatives we currently have underway."

Conference Call Details

As previously announced, HealthGrades will hold a conference call to discuss results for the fourth quarter and year ended December 31, 2005, today, at 4:30 p.m. Eastern time/2:30 p.m. Mountain time. If you would like to participate, please dial 800-588-4973 ten minutes before the scheduled start time. The conference call confirmation number is 13808775, the host name is Allen Dodge, and the Company is HealthGrades. The telephone replay will be available beginning one hour after the conclusion of the teleconference at 888-843-8996, passcode 13808775, and will remain available for replay until March 21, 2006.

HEALTH GRADES, INC.
Statements of Operations


Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
----------- ----------- ------------ ------------

Revenues:
Ratings and
advisory $5,891,218 $4,145,274 $20,794,173 $14,536,304
Other 19 44 13,333 1,447
----------- ----------- ------------ ------------
Total revenue 5,891,237 4,145,318 20,807,506 14,537,751

Expenses:
Cost of ratings
and advisory
revenue 864,962 626,964 3,168,668 2,488,202
----------- ----------- ------------ ------------
Gross margin 5,026,275 3,518,354 17,638,838 12,049,549

Operating expenses:
Sales and
marketing 1,854,245 1,391,195 5,801,590 4,932,210
Product
development 751,159 624,940 3,035,728 2,017,441
General and
administrative 1,180,143 999,034 4,859,096 3,339,298
----------- ----------- ------------ ------------
Income from
operations 1,240,728 503,185 3,942,424 1,760,600

Other:
Gain on sale of
assets and
other -- 53 1,405 --
Interest income 91,983 12,109 205,124 21,543
Interest expense (101) -- (763) --
----------- ----------- ------------ ------------
Income before
income taxes 1,332,610 515,347 4,148,190 1,782,143
Income tax
expense (521,907) -- (8,337) --
----------- ----------- ------------ ------------

Net income $810,703 $515,347 $4,139,853 $1,782,143
----------- ----------- ------------ ------------

Net income per
common share
(basic) $0.03 $0.02 $0.15 $0.07
----------- ----------- ------------ ------------

Weighted average
number of common
shares used in
computation (basic) 27,756,808 25,253,553 27,039,057 25,058,173
=========== =========== ============ ============

Net income per
common share
(diluted) $0.02 $0.02 $0.12 $0.05
----------- ----------- ------------ ------------

Weighted average
number of common
shares used in
computation
(diluted) 34,874,073 33,836,726 34,833,521 33,031,087
=========== =========== ============ ============

HEALTH GRADES, INC.
Balance Sheets


December 31, December 31,
2005 2004
------------ ------------
ASSETS
Cash and cash equivalents $9,682,106 $6,153,862
Short-term investments 1,988,154 --
Accounts receivable, net 5,620,736 3,034,375
Prepaid expenses and other 562,540 253,839
Deferred income taxes 1,080,562 --
------------ ------------
Total current assets 18,934,098 9,442,076

Property and equipment, net 1,595,065 382,870
Intangible assets, net 177,729 --
Goodwill 3,106,181 3,106,181
Deferred income taxes 31,400 --
------------ ------------
Total assets $23,844,473 $12,931,127
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $278,912 $44,035
Accrued payroll, incentive compensation and
related expenses 1,525,844 1,178,581
Accrued expenses 275,865 322,777
Current portion of capital lease obligations 1,310 --
Current portion of deferred rent 70,263 --
Deferred revenue 11,742,827 7,729,195
Income taxes payable 15,020 71,298
------------ ------------
Total current liabilities 13,910,041 9,345,886

Long-term portion of capital lease
obligations 5,254 --
Long-term portion of deferred rent 311,599 --
------------ ------------
Total liabilities 14,226,894 9,345,886


Stockholders' equity:
Preferred stock, $0.001 par value, 2,000,000
shares authorized, no shares issued or
outstanding -- --
Common stock, $0.001 par value, 100,000,000
shares authorized, and 47,674,779 and
44,880,176 shares issued in 2005 and 2004,
respectively 47,674 44,880
Additional paid-in-capital 91,984,099 90,094,408
Accumulated deficit (68,646,614) (72,786,467)
Treasury stock, 19,563,390 shares (13,767,580) (13,767,580)
------------ ------------
Total stockholders' equity 9,617,579 3,585,241
------------ ------------
Total liabilities and stockholders' equity $23,844,473 $12,931,127
============ ============

HealthGrades (Nasdaq: HGRD) is the leading healthcare ratings company, providing ratings and profiles of hospitals, nursing homes and physicians to consumers, corporations, health plans and hospitals. Consumers and some of the nation's largest employers, health plans and hospitals rely on HealthGrades' independent ratings to make healthcare decisions based on the quality of care. More information on the company can be found at http://www.healthgrades.com.

SOURCE: HealthGrades

HealthGrades
Allen Dodge, 303-716-0041
[e-mail]

Copyright Business Wire 2006