The company has amassed a comprehensive line of software applications, outsourcing services, and consulting services focused primarily on the health-care payer market. TriZetto has about 400 customers, including biggies such as Blue Cross and Blue Shield plans, PacifiCare Health Systems
Late last week, TriZetto announced its fourth-quarter results. Revenues were $74.3 million, up from $67 million in the same period in 2003. The growth came from $5.3 million in additional consulting services and $1.7 million in maintenance fees. The company also posted net income of $6.4 million, compared with a $24.1 million loss in the same period a year ago. What's more, for the year, the company posted a profit of $0.18 per share. Its free cash flow, which TriZetto calculates as earnings before interest, taxes, depreciation, and amortization, minus interest expense, taxes, and capital expenditures, was $16.8 million, compared with a loss of $5.3 million in 2003.
TriZetto has taken some tough medicine in the past year. Cost reductions amounted to $20 million in 2004, with cost savings expected to continue into 2005. To get there, the sales force was reconstructed, and less profitable lines of business were discontinued. The company also rethought its business model and is de-emphasizing large licensing deals, which often result in revenue volatility. Instead, TriZetto has moved toward smaller, component-type applications, which are easier to install and sell.
Growth should continue at TriZetto, as the sales pipeline looks particularly strong. In the fourth quarter, the company signed 228 new customer contracts. Its total revenue backlog is $585 million, and it expects roughly $280 million in revenues for 2005, with $43 million to $45 million in EBITDA, $20 to $24 million in FCF, and $0.26 to $0.32 in earnings per share. It's also encouraging that TriZetto recently bought back 5.5 million of its shares from IMS Health. ValueAct Capital, which focuses on small-cap company prospects, bought the rest of the 6.6 million from IMS.
Fool contributor Tom Taulli does not own shares mentioned in this article.