Software IPO: Highlights from MEDecision's S-1 Filing

On August 11th, MEDecision filed for an IPO with the SEC. Below are highlights excerpted from the company's S-1:

Proposed Ticker: (MEDE)

Underwriters: Cowen & Co., Wachovia Securities, CIBC World Markets, Pacific Growth Equities,

Maximum Offering: $94.875 million

Business Overview (from S1):

We are a leading provider of software, services and clinical content to healthcare payers that allow them to improve the quality and affordability of healthcare provided to their members and increase their administrative efficiency. Our Collaborative Care Management solution analyzes data, automates payer workflow processes and electronically connects payers, providers and patients, providing them with a common view of the patient’s health that helps to foster better clinical decision making. Our solution is built around a suite of modular and easily configurable software applications and utilizes the Internet to link our payer customers to their members and their members’ chosen healthcare providers.

Financial Highlights: Revenue for 2005 was $38.6 million, up over 2004's $28 million revenue. Revenue is split between term licenses ($9.7 million in 05), subscription and transaction fees ($17.2 million) and professional services ($11.7 million). For the first quarter of 2006, revenues grew 47% over Q1 05 to $8.8 million. The company's net income for 2005 was $5 million (note that this includes a $6 million income tax benefit). In Q1 06, net loss was $456k, compared with a $500 k for q1 05.

Customer Base: The company counts 56 regional and national managed care organizations as its customers. According to the S-1, "In the aggregate, our customers insure or manage care for approximately one out of every six insured persons in the United States."

Employees: 207 employees, 84 of which are in R&D and 39 in S&M. The remainder are G&A and delivery/support employees.

Use of Proceeds: $9.3 million will return to Series B and C preferred shareholders for accrued and unpaid dividends; the rest is for general corporate purposes.

Key Competitors: Landacorp (private), McKesson (MCK), TriZetto Group (TZIX)

Management: The founder of the company has remained as Chairman and CEO:

David St. Clair founded MEDecision in 1988 and has served as the Chairman of our board of directors and Chief Executive Officer since 1988. From 1985 until 1988, Mr. St. Clair served as the Vice President of GMIS, Inc., which was subsequently acquired by McKesson Corporation. From 1981 until 1985, Mr. St. Clair served as a Principal for Hay Associates in its Strategic Management Group. Mr. St. Clair received a B.A.S. in Mechanical Engineering from the University of Pennsylvania and a M.B.A. from Harvard University.

Major Shareholders: Grotech Capital currently holds 27.1% of the company; additional funds invested in MEDecision include Stockwell Fund (17.8%), Liberty Ventures (14.8%), DWS Investment (8.3%) and Britannia Holdings (6.7%).