EPOCRATES INC - FORM 8-K - EX-99.1 - Q2 2012 EARNINGS RELEASE - August 7, 2012

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CONTACT INFORMATION:

INVESTORS & MEDIA:
Erica Sniad Morgenstern
Senior Director, Public Relations and Communications
Epocrates, Inc.
(650) 227-6907
ir@epocrates.com


Epocrates Announces Second Quarter 2012 Results
Reaffirms 2012 Revenue and Earnings Guidance

SAN MATEO, Calif. – August 7, 2012 – Epocrates, Inc. (NASDAQ: EPOC), a leading physician platform for clinical content, practice tools and health industry engagement, today reported its second quarter 2012 results.

“We are pleased to report another solid quarter, giving us a strong first half of the year and positioning us well to meet our guidance for the full year,” said Andy Hurd, president and chief executive officer of Epocrates. “Our network remains unparalleled, with half of the nation’s physicians using Epocrates at the point of care to improve the quality and safety of patient care. This unique and powerful connection with these physicians enables us to deliver significant value to our clients and partners.”

Second Quarter 2012 Results
•
Revenue for the quarter ended June 30, 2012 was $26.8 million, a decrease of $1.0 million from the quarter ended June 30, 2011.

•
Net loss was $0.4 million for the quarter ended June 30, 2012 versus net income of $3.4 million for the quarter ended June 30, 2011. Net loss per share was $0.02 for the second quarter of 2012 compared to net income per diluted share of $0.13 for the second quarter of 2011.

•
Loss from continuing operations was $1.3 million in the second quarter of 2012 versus income from continuing operations of $4.2 million for the second quarter of 2011, with such decrease primarily attributable to a $6.4 million gain on settlement of contingent consideration recognized in the second quarter of 2011. Loss from continuing operations per share was $0.05 for the second quarter of 2012 compared to income from continuing operations per diluted share of $0.17 for the second quarter of 2011. On a non-GAAP basis, income from continuing operations per diluted share was $0.03 and $0.10 for the quarters ended June 30, 2012 and 2011, respectively.

•
Earnings before interest, taxes, non-cash and other items ("adjusted EBITDA"), as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $2.2 million for the three months ended June 30, 2012 compared to adjusted EBITDA of $5.3 million for the same period in the prior year. The decrease in adjusted EBITDA for the second quarter of 2012 was primarily attributable to decreased revenue coupled with an increase in cost of


revenue compared to the second quarter of 2011.

Balance Sheet Highlight
•
Cash, cash equivalents and short-term investments totaled $81.9 million as of June 30, 2012.

Outlook for Full Year 2012
•
Revenue is reaffirmed to be in the range of $105 to $115 million. 

•
Adjusted EBITDA is reaffirmed to be $9.0 to $12.0 million, or 9% to 10% of revenue. 

•
Net loss is reaffirmed to be in the range of $2.3 to $4.3 million, and net loss per share is reaffirmed to be between $0.09 and $0.16 based on approximately 26.0 million shares outstanding.

Earnings Call Information
Epocrates will host a conference call today beginning at 5:00 p.m. ET to discuss its second quarter 2012 results, followed by a question and answer session.

To participate in Epocrates’ live conference call and webcast, please dial (877) 398-9481 (domestic) or (760) 298-5095 (international) using conference code 99496189, or visit http://investor.epocrates.com. A replay of the call will be available at the same address.
About Epocrates, Inc.
Epocrates, Inc. (Nasdaq: EPOC) is recognized for developing the top medical application among U.S. physicians for clinical content, practice tools and health industry engagement at the point of care. Epocrates has established a loyal network of more than one million healthcare professionals, including 50 percent of U.S. physicians, who routinely use its intuitive solutions to help streamline workflow and improve patient care. The company also facilitates the delivery of valuable content and tools between partnering organizations and its members. For more information, please visit www.epocrates.com/company. 

Epocrates is a trademark of Epocrates, Inc., registered in the U.S. and other countries.

All statements contained in this press release, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on Epocrates' current plans and expectations and involve risks and uncertainties, including those described in our SEC filings.










EPOCRATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - UNAUDITED
(in thousands, except per share data)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 Subscription revenues
$
4,751

 
$
6,094

 
$
9,427

 
$
12,303

 Interactive services revenues
22,073

 
21,766

 
44,928

 
44,734

    Total revenues, net
26,824

 
27,860

 
54,355

 
57,037

 Cost of subscription revenues
1,749

 
1,800

 
3,698

 
3,843

 Cost of interactive services revenues
9,200

 
7,968

 
17,538

 
15,315

    Total cost of revenues
10,949

 
9,768

 
21,236

 
19,158

 
 
 
 
 
 
 
 
 Gross profit
15,875

 
18,092

 
33,119

 
37,879

 
 
 
 
 
 
 
 
 Operating expenses:
 
 
 
 
 
 
 
 Sales and marketing
6,711

 
6,482

 
12,793

 
13,602

 Research and development
5,364

 
5,055

 
10,285

 
10,075

 General and administrative
5,234

 
5,908

 
10,220

 
12,165

 Facilities exit costs
—

 
58

 
—

 
618

 Gain on settlement and change in fair value of contingent consideration
—

 
(6,439
)
 
—

 
(5,933
)
    Total operating expenses
17,309

 
11,064

 
33,298

 
30,527

 (Loss) income from operations
(1,434
)
 
7,028

 
(179
)
 
7,352

 Interest income
5

 
23

 
11

 
51

 Other (expense) income, net
(2
)
 
177

 
(1
)
 
179

 (Loss) income before income taxes
(1,431
)
 
7,228

 
(169
)
 
7,582

 Benefit from (provision for) income taxes
147

 
(2,998
)
 
288

 
(3,150
)
 (Loss) income from continuing operations
(1,284
)
 
4,230

 
119

 
4,432

 Gain (loss) from discontinued operations, net of tax
885

 
(837
)
 
(1,956
)
 
(2,165
)
 Net (loss) income
(399
)
 
3,393

 
(1,837
)
 
2,267

 Unrealized losses on available-for-sale securities, net
(2
)
 
—

 
(3
)
 
—

 Comprehensive (loss) income
(401
)
 
3,393

 
(1,840
)
 
2,267

 Less: 8% dividend on preferred stock
—

 
—

 
—

 
294

 Net (loss) income attributable to common stockholders - basic and diluted
$
(399
)
 
$
3,393

 
$
(1,837
)
 
$
1,973

 
 
 
 
 
 
 
 
 Net (loss) income per share - basic
 
 
 
 
 
 
 
    Continuing operations
$
(0.05
)
 
$
0.18

 
$
—

 
$
0.20

    Discontinued operations, net of tax
0.03

 
(0.04
)
 
(0.08
)
 
(0.10
)
    Net (loss) income per share attributable to common stockholders
$
(0.02
)
 
$
0.14

 
$
(0.08
)
 
$
0.10

 
 
 
 
 
 
 
 
 Net (loss) income per share - diluted
 
 
 
 
 
 
 
    Continuing operations
$
(0.05
)
 
$
0.17

 
$
—

 
$
0.19

    Discontinued operations, net of tax
0.03

 
(0.04
)
 
(0.08
)
 
(0.10
)


    Net (loss) income per share attributable to common stockholders
$
(0.02
)
 
$
0.13

 
$
(0.08
)
 
$
0.09

 
 
 
 
 
 
 
 
 Weighted average common shares outstanding - basic
24,895

 
23,411

 
25,151

 
20,641

 Weighted average common shares outstanding - diluted
25,243

 
25,838

 
25,570

 
23,006

 
 
 
 
 
 
 
 
 The accounts below include stock-based compensation of the following amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Cost of revenues
50

 
44

 
99

 
151

 Sales and marketing
189

 
370

 
391

 
1,117

 Research and development
165

 
139

 
363

 
530

 General and administrative
784

 
970

 
1,793

 
2,532

 Discontinued operations
63

 
—

 
74

 
—




EPOCRATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands)
 
June 30, 2012
 
December 31, 2011
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
72,237

 
$
75,326

Short-term investments
9,695

 
9,897

Accounts receivable, net
22,371

 
22,748

Deferred tax asset
7,390

 
7,390

Prepaid expenses and other current assets
4,719

 
3,218

Total current assets
116,412

 
118,579

 
 
 
 
Property and equipment, net
8,240

 
7,283

Deferred tax asset, long-term
631

 
1,280

Goodwill
17,959

 
17,959

Other intangible assets, net
4,762

 
6,771

Other assets
333

 
352

Total assets
$
148,337

 
$
152,224

 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
Current liabilities
 
 
 
Accounts payable
$
2,406

 
$
3,282

Deferred revenue
44,133

 
46,429

Other accrued liabilities
8,144

 
9,600

Total current liabilities
54,683

 
59,311

 
 
 
 
Deferred revenue, less current portion
7,399

 
8,088

Other liabilities
1,521

 
1,893

Total liabilities
63,603

 
69,292

 
 
 
 
Stockholders' equity
 
 
 
Common stock at par
25

 
24

Additional paid-in capital
132,879

 
129,238

Accumulated other comprehensive loss
(5
)
 
(2
)
Accumulated deficit
(48,165
)
 
(46,328
)
Total stockholders' equity
84,734

 
82,932

Total liabilities and stockholders' equity
$
148,337

 
$
152,224







EPOCRATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
 
 Six Months Ended June 30,
 
 
2012
 
2011
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(1,837
)
 
$
2,267

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
Stock-based compensation
2,720

 
4,330

Depreciation and amortization
1,954

 
2,024

Amortization of intangible assets
2,009

 
2,059

Loss on write-off of property and equipment
—

 
99

Allowance for doubtful accounts and sales returns reserve
(14
)
 
270

Facilities exit costs
—

 
618

Gain on settlement and change in fair value of contingent consideration
—

 
(6,074
)
Changes in assets and liabilities, net of effect of acquisitions:
 
 
 
Accounts receivable
391

 
1,796

Deferred tax asset, current and noncurrent
238

 
—

Prepaid expenses and other assets
(1,482
)
 
695

Accounts payable
(1,074
)
 
(1,627
)
Deferred revenue
(2,985
)
 
716

Other accrued liabilities and other payables
(2,088
)
 
(2,606
)
Net cash (used in) provided by operating activities
(2,168
)
 
4,567

Cash flows from investing activities:
 
 
 
Purchase of property and equipment
(2,401
)
 
(6,028
)
Purchase of short-term investments
(5,149
)
 
(13,727
)
Sale of short-term investments
(2
)
 
500

Maturity of short-term investments
5,350

 
13,400

Net cash used in investing activities
(2,202
)
 
(5,855
)
Cash flows from financing activities:
 
 
 
Net cash proceeds from issuance of common stock
—

 
64,189

Payment and settlement of contingent consideration
—

 
(6,871
)
Payment of accrued dividends on Series B mandatorily
 
 
 
redeemable convertible preferred stock
—

 
(29,586
)
Proceeds from exercise of common stock options
1,281

 
489

Net cash provided by financing activities
1,281

 
28,221

Net (decrease) increase in cash and cash equivalents
(3,089
)
 
26,933

Cash and cash equivalents at beginning of period
75,326

 
35,987

Cash and cash equivalents at end of period
$
72,237

 
$
62,920


Use of non-­‐GAAP Financial Measures

To supplement Epocrates’ consolidated financial statements presented on a U.S. generally accepted accounting principles (“GAAP”) basis, Epocrates uses non-­‐GAAP measures of adjusted EBITDA, gross profit, gross margin, net income (loss) and net income (loss) per share, which are adjusted to exclude certain costs, expenses, gains and losses Epocrates believes are


appropriate to enhance an overall understanding of its past and future financial performance. These adjustments to current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Epocrates’ underlying operational results and trends and its marketplace performance. In addition, these adjusted non-­‐GAAP results are among the information management uses as a basis for planning and forecasting for future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Adjusted EBITDA is not a measure of liquidity calculated in accordance with GAAP, and should be viewed as a supplement to—not a substitute for—results of operations presented on a GAAP basis. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by GAAP. Epocrates’ Condensed Consolidated Statements of Cash Flows presents its cash flow activity in accordance with GAAP. Furthermore, adjusted EBITDA is not necessarily comparable to similarly-­‐titled measures reported by other companies.

Epocrates believes adjusted EBITDA, adjusted net income, adjusted net income per share, adjusted gross profit and adjusted gross margin are used by and are useful to investors and other users of its financial statements in evaluating its operating performance because it provides them with additional tools to compare business performance across companies and across periods. Epocrates believes that:
•
EBITDA is widely used by investors to measure a company’s operating performance without regard to such items as non-­‐recurring items, interest (income) expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired;
•
investors commonly adjust EBITDA information to eliminate the effect of stock-­‐based compensation expenses and other charges, which can vary widely from company to company and impair comparability; and
•
adjustednet income, adjusted net income per share and adjusted gross profit/gross margin eliminate the effect of non-­‐recurring and non-­‐cash charges, which can vary widely from company to company and impair comparability year over year and across companies.

Epocrates management uses adjusted EBITDA, adjusted net income, adjusted net income per share, adjusted gross profit and adjusted gross margin:
•
as measures of operating performance to assist in comparing performance from period to period on a consistent basis;
•
as measures for planning and forecasting overall expectations and for evaluating actual results against such expectations; and
•
incommunications with the Board of Directors, stockholders, analysts and investors concerning Epocrates’ financial performance.

Additionally, Epocrates management uses adjusted EBITDA as a significant performance measurement included in its bonus plan.

The tables that follow set forth a reconciliation of net (loss) income to adjusted net (loss) income and adjusted EBITDA. These tables also show a reconciliation of gross profit and gross margin from a GAAP to a non-­‐GAAP basis.




EPOCRATES, INC.
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED NET INCOME AND ADJUSTED EBITDA
(dollars in thousands)

 
 
 Three Months Ended June 30,
 
 
2012
 
2011
 
 
Earnings
Gross Profit
Gross Margin
 
Earnings
Gross Profit
Gross Margin
 
 
 
 
 
 
 
 
 
Net (loss) income, as reported
 
(399
)
15,875

59.2
%
 
3,393

18,092

64.9
%
Gain (loss) from discontinued operations, net of tax
 
885

 
 
 
(837
)
 
 
Net (loss) income from continuing operations
 
(1,284
)
 
 
 
4,230

 
 
 
 
 
 
 
 
 
 
 
Add: Non-recurring and non-cash charges
 
 
 
 
 
 
 
 
    Amortization of purchased intangible assets related to core
         business *
 
1,001

1,001

 
 
1,029

1,029

 
     Stock-based compensation *
 
1,188

50

 
 
1,523

44

 
     Gain on settlement and change in fair value of contingent
          consideration *
(1
)
—

—

 
 
(6,439
)
—

 
     Other *
(2
)
476

 
 
 
1,042

 
 
 
 
 
 
 
 
 
 
 
Add: Tax adjustment
(3
)
(604
)
 
 
 
1,157

 
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations, as adjusted
 
777

16,926

63.1
%
 
2,542

19,165

68.8
%
Gain (loss) from discontinued operations, net of tax
 
885

 
 
 
(837
)
 
 
Net income, as adjusted
 
1,662

 
 
 
1,705

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income, as reported
 
(399
)
 
 
 
3,393

 
 
Gain (loss) from discontinued operations, net of tax
 
885

 
 
 
(837
)
 
 
Net (loss) income from continuing operations
 
(1,284
)
 
 
 
4,230

 
 
 
 
 
 
 
 
 
 
 


Add: (Income) expenses unrelated to core business activities
 
 
 
 
 
 
 
 
     Interest income
 
(5
)
 
 
 
(23
)
 
 
     (Benefit from) provision for income taxes
 
(147
)
 
 
 
2,998

 
 
 
 
 
 
 
 
 
 
 
Add: Non-recurring and non-cash charges (income)
 
 
 
 
 
 
 
 
     Depreciation and amortization expense (including intangible
          assets) related to core business
 
1,991

 
 
 
1,992

 
 
     Stock-based compensation
 
1,188

 
 
 
1,523

 
 
     Gain on settlement and change in fair value of contingent
          consideration
(1
)
—

 
 
 
(6,439
)
 
 
     Other
(2
)
476

 
 
 
1,042

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
2,219

 
 
 
5,323

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Represents a $6.4 million gain recognized during the second quarter of 2011 related to the settlement of the contingent consideration liability with the sellers of MedCafe, Inc., a company we acquired in 2010.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended June 30, 2012, represents severance and retention bonuses. For the three months ended June 30, 2011, represents $0.8 million in legal expenses, $0.2 million in severance and approximately $0.1 million in facilities exit costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2012 Non-GAAP net income reflects a provision for income tax rate of 37%, which is our current projected long-term rate. 2011 Non-GAAP net income reflects a provision for income tax rate of 42%, which was our projected long-term rate in fiscal year 2011.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Six Months Ended June 30,
 
 
2012
 
2011
 
 
Earnings
Gross Profit
Gross Margin
 
Earnings
Gross Profit
Gross Margin
 
 
 
 
 
 
 
 
 
Net (loss) income, as reported
 
(1,837
)
33,119

60.9
%
 
2,267

37,879

66.4
%
Loss from discontinued operations, net of tax
 
(1,956
)
 
 
 
(2,165
)
 
 
Net income from continuing operations
 
119

 
 
 
4,432

 
 


Less: accrued dividend on Series B plus 8% dividend on Series A and Series C stock
 
 
 
 
 
(294
)
 
 
Net income from continuing operations attributable to common
    stockholders
 
 
 
 
 
4,138

 
 
 
 
 
 
 
 
 
 
 
Add: Non-recurring and non-cash charges
 
 
 
 
 
 
 
 
     Amortization of purchased intangible assets related to core
          business *
 
2,009

2,009

 
 
2,059

2,059

 
     Stock-based compensation *
 
2,646

99

 
 
4,330

151

 
     Gain on settlement and change in fair value of contingent
          consideration *
(1
)
—

—

 
 
(5,933
)
—

 
     Other *
(2
)
476

 
 
 
1,714

 
 
 
 
 
 
 
 
 
 
 
Add: Tax adjustment
(3
)
(2,124
)
 
 
 
(946
)
 
 
 
 
 
 
 
 
 
 
 
Net income from continuing operations, as adjusted
 
3,126

35,227

64.8
%
 
5,362

40,089

70.3
%
Loss from discontinued operations, net of tax
 
(1,956
)
 
 
 
(2,165
)
 
 
Net income, as adjusted
 
1,170

 
 
 
3,197

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income, as reported
 
(1,837
)
 
 
 
2,267

 
 
Loss from discontinued operations, net of tax
 
(1,956
)
 
 
 
(2,165
)
 
 
Net income from continuing operations
 
119

 
 
 
4,432

 
 
 
 
 
 
 
 
 
 
 
Add: (Income) expenses unrelated to core business activities
 
 
 
 
 
 
 
 
     Interest income
 
(11
)
 
 
 
(51
)
 
 
     (Benefit from) provision for income taxes
 
(288
)
 
 
 
3,150

 
 
 
 
 
 
 
 
 
 
 
Add: Non-recurring and non-cash charges (income)
 
 
 
 
 
 
 
 
     Depreciation and amortization expense (including intangible
          assets) related to core business
 
3,963

 
 
 
4,009

 
 


     Stock-based compensation
 
2,646

 
 
 
4,330

 
 
     Gain on settlement and change in fair value of contingent
          consideration
(1
)
—

 
 
 
(5,933
)
 
 
     Other
(2
)
476

 
 
 
1,714

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
6,905

 
 
 
11,651

 
 
 
 
 
 
 
 
 
 
 
Includes a $6.4 million gain recognized during the second quarter of 2011 related to the settlement of the contingent consideration liability with the sellers of MedCafe, Inc., a company we acquired in 2010.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the six months ended June 30, 2012, represents severance and retention bonuses. For the three months ended June 30, 2011, represents $0.9 million in legal expenses, $0.6 million in facilities exit costs and $0.2 million in severance.
 
 
 
 
 
 
 
 
 
2012 Non-GAAP net income reflects a provision for income tax rate of 37%, which is our current projected long-term rate. 2011 Non-GAAP net income reflects a provision for income tax rate of 42%, which was our projected long-term rate in fiscal year 2011. The calculation of these adjustments is as follows:
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2012

2011

 
 
2012

2011

 
(Loss) income before income taxes
 
(1,431
)
7,228

 
 
(169
)
7,582

 
Add: Non-GAAP adjustments (indicated by *)
 
2,665

(2,845
)
 
 
5,131

2,170

 
Non-GAAP income before income taxes
 
1,234

4,383

 
 
4,962

9,752

 
Effective income tax rate
 
37
%
42
%
 
 
37
%
42
%
 
Non-GAAP tax provision (Non-GAAP income before
     income taxes multiplied by the effective income tax rate)
 
457

1,841

 
 
1,836

4,096

 
 
 
 
 
 
 
 
 
 
(Benefit from) provision for income taxes
 
(147
)
2,998

 
 
(288
)
3,150

 
Non-GAAP tax adjustment (calculated as (benefit from) provision
     for income taxes less non-GAAP tax provision)
 
(604
)
1,157

 
 
(2,124
)
(946
)
 
 
 
 
 
 
 
 
 
 
Note: prior period amounts have been revised to conform to the current period presentation.


EPOCRATES, INC.
RECONCILIATION OF NET (LOSS) INCOME PER DILUTED COMMON SHARE TO ADJUSTED NET INCOME PER DILUTED COMMON SHARE


(in thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
GAAP net (loss) income per diluted common share
 
 
 
 
 
 
 
(Loss) income from continuing operations
(1,284
)
 
4,230

 
119

 
4,432

Gain (loss) from discontinued operations, net of tax
885

 
(837
)
 
(1,956
)
 
(2,165
)
Net (loss) income
(399
)
 
3,393

 
(1,837
)
 
2,267

Less: Accrued dividend on Series B mandatorily redeemable convertible preferred stock plus an 8% non-cumulative dividend on Series A and Series C mandatorily redeemable convertible preferred stock *
—

 
—

 
—

 
294

Net (loss) income attributable to common stockholders
(399
)
 
3,393

 
(1,837
)
 
1,973

 
 
 
 
 
 
 
 
Divided by:
 
 
 
 
 
 
 
Weighted average number of common shares outstanding - basic **
24,895

 
23,411

 
25,151

 
20,641

Weighted average number of common shares outstanding - diluted
25,243

 
25,838

 
25,570

 
23,006

 
 
 
 
 
 
 
 
Net (loss) income per share:
 
 
 
 
 
 
 
     Continuing operations
(0.05
)
 
0.17

 
—

 
0.19

     Discontinued operations, net of tax
0.03

 
(0.04
)
 
(0.08
)
 
(0.10
)
     Net (loss) income attributable to common stockholders
(0.02
)
 
0.13

 
(0.08
)
 
0.09

 
 
 
 
 
 
 
 
Non-GAAP net income (loss) per diluted common share
 
 
 
 
 
 
 
(Loss) income from continuing operations
(1,284
)
 
4,230

 
119

 
4,432

Gain (loss) from discontinued operations, net of tax
885

 
(837
)
 
(1,956
)
 
(2,165
)
Net (loss) income
(399
)
 
3,393

 
(1,837
)
 
2,267

Less: Accrued dividend on Series B mandatorily redeemable convertible preferred stock plus an 8% non-cumulative dividend on Series A and Series C mandatorily redeemable
convertible preferred stock *
—

 
—

 
—

 
294

Net (loss) income attributable to common stockholders
(399
)
 
3,393

 
(1,837
)
 
1,973

 
 
 
 
 
 
 
 
Income from continuing operations, as adjusted
777

 
2,542

 
3,126

 
5,362

Income (loss) from discontinued operations, net of tax
885

 
(837
)
 
(1,956
)
 
(2,165
)
Net income, as adjusted
1,662

 
1,705

 
1,170

 
3,197

 
 
 
 
 
 
 
 
Divided by:
 
 
 
 
 
 
 


Weighted average number of common shares outstanding - basic **
24,895

 
23,411

 
25,151

 
20,641

Weighted average number of common shares outstanding - diluted
25,243

 
25,838

 
25,570

 
23,006

 
 
 
 
 
 
 
 
Net income (loss) per share:
 
 
 
 
 
 
 
     Continuing operations
0.03

 
0.10

 
0.12

 
0.23

     Discontinued operations, net of tax
0.04

 
(0.03
)
 
(0.07
)
 
(0.09
)
     Net income per share attributable to common stockholders
0.07

 
0.07

 
0.05

 
0.14

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding
 
 
 
 
 
 
 
Weighted average number of common shares outstanding - basic
24,895

 
23,411

 
25,151

 
20,641

Add: dilutive effect of conversion of outstanding stock options, restricted stock units and
     warrants
348

 
2,427

 
419

 
2,365

Weighted average number of common shares outstanding - diluted
25,243

 
25,838

 
25,570

 
23,006

 
 
 
 
 
 
 
 
* The accrued dividend on Series B mandatorily redeemable convertible preferred stock and 8% non-cumulative dividend on Series A and Series C mandatorily redeemable convertible preferred stock is used in the calculations of income from continuing operations (GAAP and non-GAAP basis) and net (loss) income (GAAP and non-GAAP basis). Accordingly, per share calculations for continuing operations (GAAP and non-GAAP basis) and net (loss) income (GAAP and non-GAAP basis) adjust for the effect of these dividends.
 
 
 
 
 
 
 
 
** In accordance with U.S. GAAP, Epocrates does not include dilutive securities in its calculations of per share loss from discontinued operations, net of tax, net loss on a GAAP basis and net loss on a non-GAAP basis. Accordingly, the denominator used in these calculations is the weighted average number of common shares outstanding - basic.
 
 
 
 
 
 
 
 
Note: each per share calculation is computed independently for each component of net income (loss) per share presented. Accordingly, the sum of the income (loss) per share components may not agree with the calculated total net loss per share.