Press Release

Revenues of $35.8 Million

Income from Operations of $2.0 Million

Adjusted Non-GAAP EBITDA of $3.5 Million

RESTON, Va.--(BUSINESS WIRE)--Nov. 5, 2009-- QuadraMed Corporation (NASDAQ:QDHC) announced today that it will report net income of $1.5 million before preferred stock dividends for the three months ended September 30, 2009, compared to $2.5 million for the same period in 2008. For the nine months ended September 30, 2009, the Company had net income before preferred stock dividends of $3.8 million, compared to $4.6 million for the same period in 2008.

For the three months ended September 30, 2009, the Company had revenues of $35.8 million, gross margin of 59% and operating expenses of $19.3 million. These compare to revenues of $38.6 million, gross margin of 60% and operating expenses of $19.1 million for the same period in 2008. For the nine months ended September 30, 2009, the Company had revenues of $106.7 million, gross margin of 59% and operating expenses of $58.1 million. These compare to revenues of $111.9 million, gross margin of 58% and operating expenses of $57.9 million for the same period in 2008.

Income from operations was $2.0 million for the three months ended September 30, 2009, compared to $4.0 million for the three months ended September 30, 2008, and $5.0 million and $7.2 million for the nine-month periods ended September 30, 2009 and 2008, respectively. Adjusted Non-GAAP EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, before stock-based compensation, severance and loss on sale of assets) was $3.5 million for the three months ended September 30, 2009, compared to $5.9 million for the same period in 2008. For the nine months ended September 30, 2009, the Company had adjusted Non-GAAP EBITDA of $11.4 million, compared to $14.9 million for the nine months ended September 30, 2008.

The three month and nine month periods ended September 30, 2008 included revenue of $1.5 million and $2.5 million respectively, related to contracts that were completed in periods prior to 2008. The costs related to these contracts were recognized in the periods of origin; consequently, the reported gross margins, net income and adjusted Non-GAAP EBITDA and other measures also include the $1.5 million and $2.5 million, respectively for the quarterly and year-to-date periods ended September 30, 2008. The nine-month period ended September 30, 2008 also includes a $1.1 million loss on the sale of the Company’s Australia-based lab and radiology assets and the nine-month period ended September 30, 2009 included severance of $1.7 million associated with executive management changes. In addition to the above, the decreases in income from operations and Adjusted Non-GAAP EBITDA for the 2009 periods when compared to the corresponding 2008 periods were primarily driven by lower revenue and resultant gross margins in the 2009 periods.

The Company will also report net income attributable to common shareholders of $0.1 million, or $0.02 per basic and diluted share for the three months ended September 30, 2009, compared to net income attributable to common shareholders of $1.1 million, or $0.12 per basic and diluted share for the same period in 2008. The Company will also report a net loss attributable to common shareholders of $0.4 million, or $(0.05) per basic and diluted share for the nine months ended September 30, 2009, compared to net income attributable to common shareholders of $0.4 million, or $0.05 per basic and diluted share during the nine month period ended September 30, 2008.

Cash used in operations was $2.0 million for the three months ended September 30, 2009 compared to cash provided by operations of $2.4 million for the three months ended September 30, 2008; the difference between the three-month periods was due primarily to a decrease in net income during the 2009 period compared to 2008, and a decrease in working capital between periods. Cash used in operations was $3.7 million for the nine months ended September 30, 2009 compared to cash provided by operations of $14.5 million for the nine months ended September 30, 2008; the difference between nine-month periods was primarily attributable to the timing of payments related to our Veterans Health Administration contract and the payment of executive severance costs in 2009. Cash and investments decreased by $8.9 million during the nine months ended September 30, 2009 to $19.0 million, from $27.9 million at December 31, 2008. During October 2009, the Company invoiced the Department of Veterans Affairs for the $20.5 million annual license fee associated with the Task Order renewal for the Department of Veterans Affairs’ 2010 fiscal year, and payment has been received in full for this license.

Software development expenses during the current quarter of $9.3 million, or 26% of revenue, compare to $8.3 million, or 22% of revenue in the 2008 quarter; the increase in software development expenses reflect the initiatives the Company announced in March with respect to, among other things, the certification of its software in order to assist customers in meeting the criteria for meaningful use of certified electronic health record technology as currently contemplated by the American Recovery and Reinvestment Act of 2009 (ARRA).

As previously announced, during the current quarter, the Company signed four new significant license agreements to install QCPR Clinical Information Systems at three hospital systems in the United States and one hospital system in Canada. Also on October 21, 2009, the Department of Veterans Affairs awarded the Company a Task Order contract under its existing Blanket Purchase Agreement (the “Task Order”). The Task Order has a stated value of approximately $24.1 million and includes (i) a renewal of the Department of Veterans Affairs term license for QuadraMed’s Encoder and VIP software, and (ii) related training services for all Veterans Affairs Medical Centers nationwide for the government’s fiscal year 2010.

“We are pleased with the extension of our relationship with the Department of Veterans Affairs and our four new QCPR agreements. However, the economic environment continues to provide a headwind for our performance,” said Duncan W. James, QuadraMed’s Chief Executive Officer. “We have increased our product development initiatives during 2009 to provide our customers with a platform to meet the criteria for meaningful use in order to maximize the benefits available to them from ARRA. In addition, we remain focused on our product roadmap so that we will be well positioned to provide solutions to our customers in 2010 and future years,” added James.

Management will review these results in an investment community conference call at 5:00 PM Eastern (2:00 PM Pacific) on Thursday, November 5, 2009. To ensure fair dissemination of information, no inquiries of management should be made regarding QuadraMed’s results until after the conference call. A brief question and answer period will follow management’s presentation. The dial-in number for the conference call is 800-974-2159 domestic and 973-638-3397 international. Callers should dial in by 4:45 PM Eastern (1:45 PM Pacific) to register. The call will also be webcast live and available to the public via the Investor Relations section of QuadraMed’s webpage at www.quadramed.com. Please note that the webcast is listen-only. Listeners should access the website at 4:45 PM Eastern (1:45 PM Pacific) to register and to download and install any necessary audio software. A digital recording of the conference will be available for replay two hours after the live call is completed. The replay will be available until midnight, November 14, 2009. Replay telephone numbers are 800-642-1687 or 706-645-9291; conference ID 39069333.

About Adjusted EBITDA and other Non-GAAP Measurements

The Company’s use and presentation of the terms EBITDA, Adjusted EBITDA and other Non-GAAP measurements included in this press release and Exhibits 4 and 5 hereto, and the reconciliations of those items to the most directly comparable GAAP financial measure with equal or greater prominence as the non-GAAP financial measures, have been prepared in direct response to questions from its investors and other interested parties. Although the Company has frequently discussed these reconciling items when they occur, both in its filings as well as in investment community conference calls that are open to the public at large, many inquiries are still made as to the nature of these items, and the impact of removing these items from the GAAP financial results. As a result, the Company believes it is important to provide these reconciliations, so that the requesting investors will not have to perform the arithmetic themselves and so that all interested parties will benefit from the disclosures and reconciliations, through a straightforward and unambiguous presentation. The Company believes that the use and presentation of the terms EBITDA, Adjusted EBITDA and the other non-GAAP financial measures is useful because it allows readers of its financial information to evaluate its performance for different periods on a more comparable basis by excluding items that are unique in nature such as non-cash compensation, or do not relate to the ongoing operation of its core business. The items presented in calculating Adjusted EBITDA and other Non-GAAP measurements represent specific events or items as follows (please see Exhibits 4 and 5 to this press release):

• Cash Severance – costs associated with payments to former executive officers of the Company in the three-month periods ended June 30, 2009 and March 31, 2009, and restructuring and downsizing of the Company’s employee base during the three-month periods ended March 31, 2008, June 30, 2008 and December 31, 2008;
• Non-cash Compensation – the costs of employee stock options and restricted stock; the three-month periods ended June 30, 2009 and March 31, 2009 include $0.2 million and $0.3 million, respectively, related to the acceleration of employee stock option expense to former executive officers of the Company upon their respective resignations from the Company;
• Tax benefit, Net – the amount recorded in the three-month period ended December 31, 2007 resulting from the release of a portion of the reserve against the Company’s deferred tax assets, net of deferred income tax expense recorded in the period;
• Strategic Initiatives – the expenses recorded in connection with merger and acquisition activities during the three-month period ended December 31, 2007;
• Employment Matters – the cost of the Company’s review of wage/hour classifications for certain employees during the three-month period ended December 31, 2007;
• Loss on Sale of Assets – a one-time loss for accounting purposes recorded in connection with the Company’s April 2008 sale of its Australia-based lab and radiology business, with operations in Australia, New Zealand and the United Kingdom.

About QuadraMed Corporation

QuadraMed^® – (NASDAQ:QDHC) is a leading provider of healthcare technologies and services that help turn quality care into positive financial outcomes. QuadraMed provides innovative solutions that streamline processes, ensure compliance and help healthcare professionals deliver quality patient care. Behind the Company's products and services is a staff of 600 professionals whose experience and dedication have earned QuadraMed the trust and loyalty of clients at over 2,000 healthcare provider facilities. For more information about QuadraMed, visit http://www.quadramed.com.

Cautionary Statement on Risks Associated with QuadraMed Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The words “believe,” “expect,” “target,” “goal,” “project,” “anticipate,” “predict,” “intend,” “plan,” “estimate,” “may,” “will,” “should,” “could” and similar expressions and their negatives are intended to identify such statements. Forward-looking statements are not guarantees of future performance, anticipated trends or growth in businesses, or other characterizations of future events or circumstances and are to be interpreted only as of the date on which they are made. QuadraMed undertakes no obligation to update or revise any forward-looking statement. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by QuadraMed described in documents filed with the Securities and Exchange Commission ("SEC") from time to time. QuadraMed’s SEC filings can be accessed through the Investor Relations section of our website, www.quadramed.com, or through the SEC’s EDGAR Database at www.sec.gov (QuadraMed has EDGAR CIK No. 0001018833).

QuadraMed is a registered trademark of QuadraMed Corporation. All other trademarks are the property of their respective holders.

About Adjusted EBITDA and other Non-GAAP Measurements

The Company’s use and presentation of the terms EBITDA, Adjusted EBITDA and other Non-GAAP measurements included in this press release and Exhibits 4 and 5 hereto, and the reconciliations of those items to the most directly comparable GAAP financial measure with equal or greater prominence as the non-GAAP financial measures, have been prepared in direct response to questions from its investors and other interested parties. Although the Company has frequently discussed these reconciling items when they occur, both in its filings as well as in investment community conference calls that are open to the public at large, many inquiries are still made as to the nature of these items, and the impact of removing these items from the GAAP financial results. As a result, the Company believes it is important to provide these reconciliations, so that the requesting investors will not have to perform the arithmetic themselves and so that all interested parties will benefit from the disclosures and reconciliations, through a straightforward and unambiguous presentation. The Company believes that the use and presentation of the terms EBITDA, Adjusted EBITDA and the other non-GAAP financial measures is useful because it allows readers of its financial information to evaluate its performance for different periods on a more comparable basis by excluding items that are unique in nature such as non-cash compensation, or do not relate to the ongoing operation of its core business. The items presented in calculating Adjusted EBITDA and other Non-GAAP measurements represent specific events or items as follows:

• Cash Severance -- costs associated with payments to former executive officers of the Company in the three-month periods ended June 30, 2009 and March 31, 2009, and restructuring and downsizing of the Company’s employee base during the three-month periods ended March 31, 2008, June 30, 2008 and December 31, 2008;
• Non-cash Compensation – the costs of employee stock options and restricted stock; the three month periods ended June 30, 2009 and March 31, 2009 include $0.2 million and $0.3 million, respectively, related to the acceleration of employee stock option expense to former executive officers of the Company upon their respective resignations from the Company;
• Tax benefit, Net – the amount recorded in the three-month period ended December 31, 2007 resulting from the release of a portion of the reserve against the Company’s deferred tax assets, net of deferred income tax expense recorded in the period;
• Strategic Initiatives – the expenses recorded in connection with merger and acquisition activities during the three-month period ended December 31, 2007;
• Employment Matters – the cost of the Company’s review of wage/hour classifications for certain employees during the three-month period ended December 31, 2007;
• Loss on Sale of Assets – a one-time loss for accounting purposes recorded in connection with the Company’s April 2008 sale of its Australia-based lab and radiology business, with operations in Australia, New Zealand and the United Kingdom.

About Adjusted EBITDA and other Non-GAAP Measurements

The Company’s use and presentation of the terms EBITDA, Adjusted EBITDA and other Non-GAAP measurements included in this press release and Exhibits 4 and 5 hereto, and the reconciliations of those items to the most directly comparable GAAP financial measure with equal or greater prominence as the non-GAAP financial measures, have been prepared in direct response to questions from its investors and other interested parties. Although the Company has frequently discussed these reconciling items when they occur, both in its filings as well as in investment community conference calls that are open to the public at large, many inquiries are still made as to the nature of these items, and the impact of removing these items from the GAAP financial results. As a result, the Company believes it is important to provide these reconciliations, so that the requesting investors will not have to perform the arithmetic themselves and so that all interested parties will benefit from the disclosures and reconciliations, through a straightforward and unambiguous presentation. The Company believes that the use and presentation of the terms EBITDA, Adjusted EBITDA and the other non-GAAP financial measures is useful because it allows readers of its financial information to evaluate its performance for different periods on a more comparable basis by excluding items that are unique in nature such as non-cash compensation, or do not relate to the ongoing operation of its core business. The items presented in calculating Adjusted EBITDA and other Non-GAAP measurements represent specific events or items as follows:

• Cash Severance – costs associated with payments to former executive officers of the Company in the three-month periods ended June 30, 2009 and March 31, 2009, and restructuring and downsizing of the Company’s employee base during the three-month periods ended March 31, 2008, June 30, 2008 and December 31, 2008;
• Non-cash Compensation – the costs of employee stock options and restricted stock; the three month periods ended June 30, 2009 and March 31, 2009 include $0.2 million and $0.3 million, respectively, related to the acceleration of employee stock option expense to former executive officers of the Company upon their respective resignations from the Company;
• Tax benefit, Net – the amount recorded in the three-month period ended December 31, 2007 resulting from the release of a portion of the reserve against the Company’s deferred tax assets, net of deferred income tax expense recorded in the period;
• Strategic Initiatives – the expenses recorded in connection with merger and acquisition activities during the three-month period ended December 31, 2007;

• Employment Matters – the cost of the Company’s review of wage/hour classifications for certain employees during the three-month period ended December 31, 2007;

• Loss on Sale of Assets – a one-time loss for accounting purposes recorded in connection with the Company’s April 2008 sale of its Australia-based lab and radiology business, with operations in Australia, New Zealand and the United Kingdom.

Source: QuadraMed Corporation

QuadraMed Corporation
David L. Piazza
Investor Relations
703-742-5393
InvestorRelations@quadramed.com