QVDX Quovadx (MM)

Quovadx, Inc. (NASDAQ: QVDX), a global software and vertical solutions company, today announced financial results for the fourth quarter and full year ended December 31, 2006. For the fourth quarter of 2006, the Company reported: Total revenue of $22.6 million, up 11 percent sequentially and up five percent year over year; Software license revenue of $8.8 million, up 24 percent sequentially and up six percent year over year; Gross margin of 63 percent, up from 60 percent in the third quarter and 58 percent in the fourth quarter a year ago; Net loss of $4.0 million, or $0.10 per share, up from a third quarter loss of $9,000, or $0.00 per share, and year-ago net income of $0.4 million, or $0.01 per diluted share. Net loss for the fourth quarter of 2006 included $4.5 million, or $0.11 per share, of legal settlement expense, $0.4 million, or $0.01 per share, of share-based compensation expense and an income tax benefit of $0.6 million, or $0.01 per share. Earning before interest, taxes, depreciation and amortization, or EBITDA, of negative $2.4 million, compared to EBITDA of $2.6 million in the previous quarter and $2.8 million in the fourth quarter a year ago. EBITDA for the third and fourth quarters of 2006 also included the impacts of legal settlements, share based compensation and the fourth-quarter tax benefit. Cash provided by operations of $1.3 million, down from $3.1 million in the previous quarter and $3.1 million in the fourth quarter of 2005. Total cash, cash equivalents, investments and restricted cash as of December 31, 2006 of $30.6 million, in line with $30.6 million in the third quarter and down from $32.8 million a year ago; and Days sales outstanding (DSO) of 66, up from 48 in the third quarter and 62 in the fourth quarter of 2005. DSO was negatively impacted due to the delayed receipt of a $2.5 million payment from the Medical University of South Carolina. This payment was received in early January 2007. For full year 2006, the Company reported: Total revenue of $84.1 million, up one percent from $83.1 million a year ago; Software license revenue of $30.9 million, up four percent from $29.8 million a year ago; Gross margin of 60 percent, up from 56 percent in 2005; Net loss of $13.1 million, or $0.32 per share, compared to a net loss of $2.9 million, or $0.07 per share in 2005. Net loss for 2006 includes $10.4 million, or $0.25 per share, of legal settlement expense and $1.9 million, or $0.05 per share, of share-based compensation expense. EBITDA of negative $3.6 million, compared to EBITDA of $8.2 million a year ago. EBITDA for 2006 also included the impacts of the legal settlements and share based compensation. Cash provided by operations was $4.2 million, down from $10.6 million in 2005. Key drivers of revenue for the quarter included increased sales to new customers and the expansion of solutions to existing customers, especially in the Company�s ISD and Rogue Wave divisions. �In 2006, we made continued progress against our operational objectives,� said Harvey A. Wagner, president and chief executive officer of Quovadx. �We launched key new products in all three businesses. We added sales personnel and expanded our indirect sales channels by signing nine new partners to assist with sales of Rogue Wave� Hydra and by developing or expanding ISD partner relationships in Canada, China, Greece, South Africa, the U.K. and the U.S. We continued to invest in research and development to further strengthen our product offerings in order to meet customer needs. And finally, in the fourth quarter, we reached an agreement to settle the last of our legacy shareholder lawsuits. �Overall, I am pleased with our financial performance in 2006,� Wagner continued. �Although our 2006 revenue growth was slower than expected, we delivered solid growth in the fourth quarter. We made the critical investments needed to support our growth initiatives and still improved gross margins, held losses well below expected limits, delivered positive cash from operations and ended the year with a cash balance of more than $30 million. Looking forward, we expect to continue to invest selectively in growth initiatives while remaining committed to our goal of achieving sustainable profitability in the second half of 2007,� Wagner concluded. Business Division Highlights Integration Solutions Division (ISD) ISD provides clinical and financial interoperability solutions for hospitals, government entities, health plans and healthcare communities, designed to improve business process efficiency, meet patient safety and regulatory requirements and leverage existing technology infrastructure. ISD highlights for the fourth quarter of 2006 included the following: Sales to new customers, including CareSpark, a regional health information organization (RHIO) serving the central Appalachian region; Digichart, a leading provider of electronic medical records to OB-GYN practices nationwide; Provider Advantage, NW Inc., a technology services company offering reimbursement solutions for the healthcare industry; and others; Expanded or renewed sales to existing customers, including Capital Health Authority, one of the largest integrated health regions in Canada; Smart Systems for Health Agency, a Canadian agency tasked with creating an infrastructure to connect and support healthcare facilities in Ontario; and others; Sales to and through existing channel partners, both domestically and abroad, including CommerceWorks in Brussels; e.Novation Lifeline in the Netherlands; Health-Comm GmbH in Germany; and RxHub and others in the United States; New and expanded partner relationships, including a new reseller agreement with Chongqing Zhengda Software (Group) Co., Ltd. in China, as well as a new sub-distributor agreement via e.Novation Lifeline with Integrity in Greece; Successful development, as part of an Accenture-led team, of a fully integrated health information system prototype for the National Health Information Network (NHIN) demonstration project, sponsored by the U.S. Department of Health and Human Services; and The general availability release of enhanced versions of Cash Accelerator�Suite and Screen Rejuvenator, a module of the Cloverleaf� Integration Suite; as well as new technology and service partnerships to enhance product offerings and extend distribution with 3M Technology and SureScripts. These and other initiatives enabled ISD to increase fourth-quarter revenue 15 percent sequentially and three percent year-over-year and to deliver fourth-quarter EBITDA of $3.3 million. CareScience Division The CareScience division provides quality improvement and care management services and analytical solutions to hospitals and health systems. CareScience highlights for the fourth quarter of 2006 included the following: New sales agreements with Tulsa Regional Medical Center, a member of the AHS Oklahoma Health system, and Union Memorial Hospital, one of the top specialty hospitals in Baltimore, MD; Multi-year renewal agreements for products and services with Cooper Health System, a leading provider of comprehensive health services and advanced medical technology in southern New Jersey; Bronson Medical Center, a healthcare system serving all of southwest Michigan and northern Indiana; and others; Service and product expansion agreements with current customers, including Banner Health, Phoenix AZ; Providence Health System, Portland OR; Trinity Health System, Brenham, TX; and others; and An agreement with The Leapfrog Group, a consortium of Fortune 500 companies and purchaser coalitions working together to drive patient safety improvements in hospitals. This agreement certifies CareScience as a qualified Leapfrog Core Measures Vendor. These and other initiatives enabled CareScience to deliver fourth quarter revenue of $3.8 million. Fourth quarter EBITDA was a negative $23,000. Rogue Wave Software Division The Rogue Wave Software division provides reusable software components and services for enterprise-class application development and high-performance Service Oriented Architecture (SOA). Rogue Wave Software highlights for the fourth quarter of 2006 included the following: Sales of Rogue Wave � SourcePro� C++ Suite to new and existing enterprise customers in the telecommunications, financial services and healthcare markets in both the U.S. and abroad. These sales continued to provide the majority of Rogue Wave Software�s license revenue, while the division executes on initiatives to increase sales of its new Rogue Wave Hydra Suite and to continue to grow consulting revenue; Sales of Rogue Wave Hydra solutions and/or services, including an expanded agreement with an existing customer; a distribution agreement with seeMore Technologies, Ltd., a provider of innovative technology for Enterprise Information Integration (EII), and a new partner agreement with CIBER, an international system integration consultancy with annual revenue of approximately $1 billion; and Ongoing product development, including the general availability release of HydraSDO� for XML, HydraSDO for Databases and Stingray� Studio 2006, as well as ongoing enhancements to the Host Access� product and the core Hydra suite. These and other initiatives enabled Rogue Wave Software to increase fourth-quarter revenue 10 percent sequentially and 12 percent year over year and to deliver fourth-quarter EBITDA of $2.7 million. Other Matters In the fourth quarter of 2006, the Company reached an agreement to settle a shareholder lawsuit captioned Special Situations Fund III, L.P. et al. v. Quovadx, Inc. Under the terms of this agreement, Quovadx agreed to pay $7.8 million in exchange for a release with prejudice of all related claims against the Company and individual defendants. Accordingly, the Company recorded an additional $4.5 million of legal settlement expense in the fourth quarter of 2006. The Company had previously recorded an initial estimate of $3.3 million for the legal settlement in its first quarter 2006 results. The Company paid the $7.8 million into the settlement fund in the first quarter of 2007. This agreement is subject to, among other things, final approval by the court. Also in 2006, the Company reached agreements in two other legacy class-action lawsuits, In re Quovadx, Inc. Derivative Litigation and Heller v. Quovadx, Inc. et al. The derivative litigation was settled for $0.6 million with final court approval in November 2006; the Company paid the settlement expense in November 2006. The Heller class action was settled for $9.0 million with final court approval in February 2007. The Company paid its $2.0 million share of the Heller settlement in the second quarter of 2006; the remaining $7.0 million was paid by insurance carriers. On September 29, 2006, the Company offered to enter into a settlement with the Securities and Exchange Commission (SEC) to settle the formal SEC investigation initiated April 12, 2004. The proposed settlement, if approved, would not involve any financial penalty. The Company�s understanding is that the Staff of the Enforcement Division will recommend to the SEC that the proposed settlement be approved. As expected and previously disclosed, a five-year outsourcing agreement between Quovadx and the Medical University of South Carolina (MUSC) expired on December 31, 2006. In August 2006, the Company announced that it had engaged First Albany Capital, LLC, to help it explore strategic alternatives to enhance shareholder value. The Company does not intend to update its process or disclose developments with respect to potential initiatives unless or until the Board of Directors has approved a specific transaction. Conference Call Quovadx will host a conference call today, March 8, 2007, at 3:00 PM MT/5:00 PM ET, which will be broadcast live over the Internet. Please visit the "Investors" section of the Company's Website at http://www.investors.quovadx.com and click on the Investor Events page. For those who cannot access the live broadcast, a replay of the presentation will be archived on the Web cast and Presentation page of the Investor Relations section of the Company�s Website. In addition, an audio replay of the call will be available through March 15, 2007 by calling toll free at 888-286-8010 and entering pass code 30754297. Non-GAAP Financial Measures This press release contains �non-GAAP financial measure(s)� as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended, including: EBITDA on a consolidated basis and for each division for the three months ended December 31, 2006, September 30, 2006 and December 31, 2005 and the twelve months ended December 31, 2006 and 2005; Days sales outstanding, or DSO, on December 31, 2006, September 30, 2006 and December 31, 2005. The Company believes these measures provide useful information to management and to investors; however, these �non-GAAP� measures should be viewed in addition to, and not as an alternative for, the Company�s reported results prepared in accordance with Generally Accepted Accounting Principles in the United States (�GAAP�). A reconciliation of EBITDA, as compared to the most directly similar GAAP financial measure, is presented for each of the Company�s three divisions in the table near the end of the press release that contains selected financial information for those divisions, and for the Company as a whole in a separate reconciliation table at the end of the press release. DSO is calculated as: net outstanding accounts and unbilled receivables at the end of the quarter divided by total revenue for the quarter, multiplied by 90. About Quovadx, Inc. Quovadx (Nasdaq: QVDX) offers software and services for system development, extension, integration and analysis to enterprise customers worldwide. Quovadx has three divisions, including the Integration Solutions division (ISD), which offers private and public healthcare organizations software infrastructure to facilitate system interoperability and leverage existing technology, the CareScience division, which provides care management and analytical solutions to hospitals and health systems, and the Rogue Wave Software division, which provides reusable software components and services for enterprise-class application development and high-performance SOA. Quovadx serves companies in the healthcare, financial services, telecommunication and public sectors. For more information, please visit http://www.quovadx.com. CARESCIENCE, and HYDRASDO are trademarks, and CLOVERLEAF, HOST ACCESS, QUOVADX, QUOVADX logo, ROGUE WAVE, SOURCEPRO and STINGRAY are registered trademarks or service marks of Quovadx, Inc. in the U.S. and/or select foreign countries. The absence of a trademark from this list does not constitute a waiver of Quovadx Inc.�s intellectual property rights concerning that trademark. All other company and product names mentioned may be trademarks of the companies with which they are associated. Cautionary Statement Certain forward-looking statements are included in this release, including statements relating to Company goals, growth strategy and future business opportunities. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Quovadx management's current expectations regarding future events and operating performance, speak only as of the date of this release and include the Company�s intention to invest in targeted growth initiatives while remaining committed to achieving sustainable profitability in 2007. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainties that could cause actual results to differ materially from those referred to in the forward-looking statements. Such risks and uncertainties include: the outcome of the Company�s review of strategic alternatives; the ability of Quovadx�s business divisions to execute growth strategies; increased market competition; market acceptance of and demand for existing products; market acceptance and demand for new solutions in the process of being introduced, including Rogue Wave Hydra, CareScience Standards of Care and ISD�s Intelligent Health Broker and related interoperability solutions; the Company�s ability to replace revenue from the MUSC contract termination; longer-than expected sales cycles; the rate at which technology is adopted within the healthcare sector; the rate at which communities adopt and fund electronic health and medical records, computerized physician order entry systems, national provider ID initiatives and community-based health information exchange initiatives; the rate at which healthcare providers, payers and communities adopt and fund pay-for-performance initiatives; the rate at which software developers move away from C++ applications in favor of Java or other program-language applications; the Company�s ability to successfully execute marketing plans and programs; the Company�s success in maintaining and expanding current relationships, winning new customers and growing internationally; the Company�s success with its partnership and channel-sales marketing strategy; the Company�s ability to hit the market window for new technologies and solutions; the outcome of the Company�s previously announced review of strategic alternatives; the Company�s ability to attract and retain personnel while it is evaluating strategic alternatives; the final outcome of the ongoing SEC investigation and class action litigation settlement agreements; the Company�s ability to manage and mitigate the liability it faces under privacy and security laws, regulations and contract requirements; and other risks. A full discussion of known risks and uncertainties is included in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the SEC, copies of which are available without charge from the Company. These filings are also available electronically through a link from the Quovadx Investor Relations Web page or from the SEC Web site at www.sec.gov under "Quovadx, Inc." If any of the events described in those filings were to occur, either alone or in combination, it is likely that the Company�s ability to reach the results described in the forward-looking statements could be impaired and the Company�s stock price could be adversely affected. Quovadx does not undertake any obligation to update or correct any forward-looking statements included in this release to reflect events or circumstances occurring after the date of this release. Quovadx, Inc. Condensed Consolidated Balance Sheets (in thousands) � � � December 31, 2006 December 31, 2005 � ASSETS Current assets: Cash and cash equivalents $ 15,810� $ 17,806� Short-term investments 14,611� 14,850� Accounts receivable, net 15,509� 14,122� Unbilled accounts receivable 1,145� 720� Prepaid and other 1,554� 1,771� Total current assets 48,629� 49,269� � Property and equipment, net 4,516� 3,220� Software, net 7,238� 7,409� Other intangible assets,net 10,057� 13,862� Goodwill 46,724� 46,724� Restricted cash 135� 175� Other assets 4,675� 484� Total assets $ 121,974� $ 121,143� � LIABILITIES AND STOCKHOLDERS� EQUITY � Current liabilities: Accounts payable $ 4,160� $ 3,383� Accrued liabilities 17,602� 11,175� Deferred revenue 17,083� 17,601� Total current liabilities 38,845� 32,159� � Long-term liabilities 4,558� 797� � Total liabilities 43,403� 32,956� � Commitments and contingencies � Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued and outstanding -� -� Common stock, $.01 par value; 100,000,000 authorized and 42,250,290 and 41,641,606 shares issued and outstanding, respectively 422� 416� Accumulated other comprehensive income (loss) 976� (199) Additional paid-in capital 274,578� 272,260� Accumulated deficit (197,405) (184,290) Total stockholders� equity 78,571� 88,187� Total liabilities and stockholders� equity $ 121,974� $ 121,143� Quovadx, Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) � � � Three Months Ended Twelve Months Ended December 31, December 31, 2006� 2005� 2006� 2005� � Revenue: Software licenses $ 8,780� $ 8,324� $ 30,908� $ 29,792� Professional services 3,425� 3,119� 12,652� 13,210� Recurring services 10,410� 10,199� 40,560� 40,101� Total revenue 22,615� 21,642� 84,120� 83,103� � Cost of revenue: Software licenses 1,469� 2,477� 7,112� 9,308� Professional services 2,106� 2,145� 7,477� 9,534� Recurring services 4,741� 4,486� 19,267� 18,027� Total cost of revenue 8,316� 9,108� 33,856� 36,869� � Gross profit 14,299� 12,534� 50,264� 46,234� � Operating expenses: Sales and marketing 6,568� 5,079� 21,709� 17,364� General and administrative 4,241� 4,315� 18,019� 17,498� Litigation Settlement 4,500� -� 10,375� -� Research and development 2,712� 2,122� 10,412� 10,921� Amortization of acquired intangibles 943� 961� 3,805� 3,850� Total operating expenses 18,964� 12,477� 64,320� 49,633� Income (loss) from operations (4,665) 57� (14,056) (3,399) � Other income (expense), net 7� 38� (160) 177� Interest income, net 287� 379� 1,146� 655� Income (loss) before income taxes and cumulative effect of accounting change (4,371) 474� (13,070) (2,567) Income tax (benefit) expense, net (341) 65� 56� 321� Loss before cumulative effect of accounting change (4,030) 409� (13,126) (2,888) Cumulative effect of accounting change -� -� 11� -� Net income (loss) $ (4,030) $ 409� $ (13,115) $ (2,888) � Net loss before cumulative effect of accounting change per common share � basic $ (0.10) $ 0.01� $ (0.32) $ (0.07) Cumulative effect of accounting change -� -� 0.00� -� Net income (loss) per common share � basic $ (0.10) $ 0.01� $ (0.32) $ (0.07) � Weighted average common shares outstanding 41,717� 41,291� 41,588� 40,924� � Net income (loss) before cumulative effect of accounting change per common share � diluted $ (0.10) $ 0.01� $ (0.32) $ (0.07) Cumulative effect of accounting change -� -� 0.00� -� Net income (loss) per common share � diluted $ (0.10) $ 0.01� $ (0.32) $ (0.07) � Shares used in computing net income (loss) per share � diluted 41,717� 42,432� 41,588� 40,924� Quovadx, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) � � Three Months Ended Twelve Months Ended December 31, December 31, 2006� � 2005� 2006� � 2005� Cash flows from operating activities Net income (loss) $ (4,030) $ 409� $ (13,115) $ (2,888) Adjustments to reconcile net income (loss) to net cash provided by operating activities: � Depreciation and amortization 1,284� 1,720� 6,769� 7,570� Amortization of acquired intangibles 943� 962� 3,805� 3,850� Stock based compensation 410� 150� 1,945� 472� Recovery of losses on accounts receivable (217) (22) (217) (461) Loss on retirement of fixed assets 7� -� 86� -� Change in assets and liabilities: Accounts receivable (5,416) (1,158) (875) 220� Unbilled accounts receivable (20) 130� (425) 474� Prepaid and other (1,599) 521� (3,469) 1,467� Accounts payable 653� 329� 765� (120) Accrued liabilities 8,391� 1,533� 9,691� 2,083� Deferred revenue 936� � (1,519) (788) (2,041) Net cash provided by operating activities 1,342� � 3,055� 4,172� 10,626� � Cash flows from investing activities Purchase of property and equipment (813) (401) (3,491) (1,277) Capitalized software (1,084) (970) (4,478) (1,508) Purchases of short-term investments (13,693) (29,418) (56,443) (38,240) Sales of short-term investments 13,593� � 29,415� 56,682� 29,415� Net cash used in investing activities (1,997) � (1,374) (7,730) (11,610) � Cash flows from financing activities Proceeds from issuance of common stock 143� � 486� 413� 1,275� Net cash provided by financing activities 143� � 486� 413� 1,275� � Effect of foreign exchange rate changes on cash 356� � (510) 1,149� (1,307) � Cash and cash equivalents Net (decrease) increase (156) 1,657� (1,996) (1,016) Beginning of period 15,966� � 16,149� 17,806� 18,822� End of period $ 15,810� � $ 17,806� $ 15,810� $ 17,806� � Short-term investments $ 14,611� $ 14,850� $ 14,611� $ 14,850� Restricted cash 135� � 175� 135� 175� Total cash, cash equivalents, short-term investments and restricted cash $ 30,556� � $ 32,831� $ 30,556� $ 32,831� � Supplemental Disclosure of Non-Cash Investing Activity � Retirement of fixed assets - cost $ 809� $ -� $ 12,369� $ -� Retirement of fixed assets - accumulated depreciation (802) -� (12,283) -� Net retirements of fixed assets $ 7� $ -� $ 86� $ -� Quovadx, Inc. Selected Financial Information by Division (in thousands) (Unaudited) � � � � � � � � � � � � � � � � Integration Solutions Division (ISD) Total Year Three Months Ended Total Year Three Months Ended 2006� 12/31/06� 9/30/06� 6/30/06� 3/31/06� 2005� 12/31/05� 9/30/05� 6/30/05� 3/31/05� Revenue: Software license $ 8,393� $ 2,984� $ 1,558� $ 1,866� $ 1,985� $ 8,994� $ 3,193� $ 2,148� $ 1,641� $ 2,012� Professional services 5,125� 1,409� 1,550� 1,003� 1,163� 6,132� 1,301� 1,384� 1,511� 1,936� Recurring services 26,110� 6,745� 6,545� 6,171� 6,649� 24,140� 6,316� 5,943� 6,029� 5,852� Total revenue 39,628� 11,138� 9,653� 9,040� 9,797� 39,266� 10,810� 9,475� 9,181� 9,800� Gross profit 18,139� 6,217� 4,427� 3,677� 3,818� 14,960� 4,801� 3,053� 3,289� 3,817� Gross margin % 46% 56% 46% 41% 39% 38% 44% 32% 36% 39% Income from operations [1] $ 4,742� $ 2,736� $ 1,204� $ 424� $ 378� $ 3,519� $ 2,210� $ 338� $ 344� $ 627� � Depreciation and amortization 4,116� 572� 984� 1,308� 1,252� 5,257� 1,182� 1,259� 1,472� 1,344� EBITDA $ 8,858� $ 3,308� $ 2,188� $ 1,732� $ 1,630� $ 8,776� $ 3,392� $ 1,597� $ 1,816� $ 1,971� � Capitalized Software Additions $ 1,304� $ 248� $ 285� $ 440� $ 331� $ 1,155� $ 617� $ 239� $ 183� $ 116� � CareScience Division � Revenue: Software license $ 5,976� $ 1,354� $ 1,499� $ 1,625� $ 1,498� $ 5,354� $ 1,426� $ 1,302� $ 1,317� $ 1,309� Professional services 6,544� 1,656� 1,744� 1,518� 1,626� 6,022� 1,581� 1,403� 1,593� 1,445� Recurring services 2,955� 773� 496� 809� 877� 4,066� 939� 877� 974� 1,276� Total revenue 15,475� 3,783� 3,739� 3,952� 4,001� 15,442� 3,946� 3,582� 3,884� 4,030� Gross profit 7,153� 1,642� 1,690� 1,722� 2,099� 6,291� 1,618� 1,402� 1,601� 1,670� Gross margin % 46% 43% 45% 44% 52% 41% 41% 39% 41% 41% Income (loss) from operations [1] $ (108) $ (524) $ (32) $ (131) $ 579� $ (30) $ (158) $ (38) $ 218� $ (52) � Depreciation and amortization 1,861� 501� 472� 438� 451� 1,946� 463� 477� 496� 510� EBITDA $ 1,753� $ (23) $ 440� $ 307� $ 1,030� $ 1,916� $ 305� $ 439� $ 714� $ 458� � Capitalized Software Additions $ 944� $ 242� $ 329� $ 224� $ 149� $ -� $ -� $ -� $ -� $ -� � Rogue Wave Software Division � Revenue: Software license $ 16,539� $ 4,442� $ 4,021� $ 4,531� $ 3,545� $ 15,444� $ 3,704� $ 3,944� $ 4,131� $ 3,665� Professional services 983� 360� 273� 194� 156� 1,056� 238� 218� 343� 257� Recurring services 11,495� 2,892� 2,733� 2,992� 2,878� 11,895� 2,944� 2,967� 2,960� 3,024� Total revenue 29,017� 7,694� 7,027� 7,717� 6,579� 28,395� 6,886� 7,129� 7,434� 6,946� Gross profit 24,972� 6,440� 6,084� 6,743� 5,705� 24,983� 6,115� 6,310� 6,597� 5,961� Gross margin % 86% 84% 87% 87% 87% 88% 89% 89% 89% 86% Income from operations [1] $ 8,770� $ 1,742� $ 2,283� $ 2,506� $ 2,239� $ 9,404� $ 2,009� $ 2,631� $ 2,558� $ 2,206� � Depreciation and amortization 3,949� 988� 1,034� 1,003� 924� 3,737� 916� 928� 933� 959� EBITDA $ 12,719� $ 2,730� $ 3,317� $ 3,509� $ 3,163� $ 13,141� $ 2,925� $ 3,559� $ 3,491� $ 3,165� � Capitalized Software Additions $ 2,230� $ 594� $ 571� $ 460� $ 605� $ 353� $ 353� $ -� $ -� $ -� � [1] Does not include allocation of corporate overhead Quovadx, Inc. (in thousands) (Unaudited) � EBITDA Reconciliation Three Months Ended Twelve Months Ended December 31, Dec. 31, 2006 Sept. 30, 2006 Dec. 31, 2005 2006� 2005� Net income (loss) $ (4,030) (9) $ 409� $ (13,115) $ (2,888) Interest income (287) (237) (379) (1,146) (655) Depreciation & amortization 2,227� 2,664� 2,682� 10,574� 11,420� Income taxes (341) 202� 65� 56� 321� EBITDA $ (2,431) $ 2,620� $ 2,777� $ (3,631) $ 8,198�