Selected highlights for the third quarter include:
Rated one of the top 10 telehealth vendors worldwide in IHS World Market for Telehealth 2014 Edition study.
Improved operating margins and reduced operating and net losses compared to the prior year periods.
Announced new commercial market customers for our telehealth products and services.
Strengthened the company's balance sheet with the sale of certain non-core assets for net proceeds of approximately $851,000 and a gain on the sale of approximately $101,000.
Following the end of the quarter, the company announced that the Department of Veterans Affairs (VA) has exercised its third option to extend the term of our contract for Home Telehealth Devices and Services. The term of this option year begins May 15, 2014 and extends the contract to May 14, 2015. The base contract also includes one additional option to extend the contract for one year beyond this term. The company also announced that Yankee Alliance, a leading healthcare group purchasing organization, has awarded the company two contracts for our telehealth products and services and our automated hospital discharge solution. The new contracts enable the company to provide Yankee Alliance members with solutions to help them reduce hospital readmissions, reduce operating costs and improve patient outcomes.
Ben Benjamin, Chief Executive Officer of Authentidate, stated, "We continued to make solid progress with our business during the quarter as evidenced by the improvement in our operating margins and the decrease in our operating and net losses for the period. Although the recovery in our telehealth revenues for the quarter from our VA project was slower than we had expected, we believe we are back on track with this project and we expect the pace of our revenue growth to accelerate for the remainder of our fiscal year and beyond. The VA has continued to expand the size and scope of their telehealth program to cover additional diseases, behavioral health conditions and wellness programs and we believe that we are well positioned to serve these growing needs with our innovative telehealth solutions. We believe the extension of our contract with the VA reflects positively on our progress with this important customer and we will continue to focus on increasing the number of Veterans that we serve. As previously reported, market consolidation and the competitive bidding process for healthcare products has continued to impact several of our hosted software services customers and revenues for our referral and order management solution were down compared to the prior quarter and year-to-date periods. While these trends are impacting our results in the short-term, we are starting to see a turn-around in our hosted software services revenues as healthcare reforms and industry trends to lower costs and automate healthcare processes take hold. We believe we will continue to benefit from these ongoing reforms and industry trends and we believe that we are well positioned for growth as we help customers address these emerging market needs."
Mr. Benjamin continued, "We are also seeing an increasing interest in our products and services from commercial organizations that are searching for ways to address these ongoing regulatory reforms and healthcare industry trends. New customers like Florida Hospital Memorial Medical Center and Canton-Potsdam Hospital are using our telehealth solutions and Yankee Alliance selected us to provide our telehealth and automated hospital discharge solutions to their member organizations. These are positive developments for our business as we focus on growing and diversifying our revenue base and they help to demonstrate that we have the right products and services to address these emerging healthcare market needs. Our pipeline remains solid and we believe demand for our product and service offerings will continue to increase as the Affordable Care Act and other healthcare reforms are implemented."
Third Quarter Fiscal 2014 Financial Results
Revenues for the quarter ended March 31, 2014 decreased approximately 13% to $1.2 million compared to $1.4 million for the prior year period. The decrease in revenues for the quarter is due primarily to lower transaction volumes for our hosted software services and, to a lesser extent, lower revenues from sales of our telehealth products. Revenues for the third quarter decreased approximately 16% compared to the second quarter of fiscal 2014 due primarily to lower revenues from our telehealth products and services and, to a lesser extent, lower transaction volumes for our hosted software services.
Operating loss for the quarter ended March 31, 2014 was $1.7 million compared to $1.9 million for the prior year period. This decrease is due primarily to lower legal and investor relation expenses, a state payroll tax credit and an improvement in gross margin for the period which offset higher selling and stock option expenses. Net loss for the quarter was $1.6 million, or $0.04 per share, compared to $2.7 million, or $0.11 per share for the prior year period. The decrease in net loss for the quarter is due to the improvement in operating results discussed above, a decrease in the non-cash amortization of debt discount and a gain of approximately $101,000 on the sale of non-core assets.
Year-to-Date Financial Results
Revenues for the nine months ended March 31, 2014 increased approximately 33% to $4.5 million compared to $3.4 million for the prior year period. The increase in revenues for the period reflects an increase in revenues from our telehealth products and services which offset lower revenues from our hosted software services.
Operating loss for the nine months ended March 31, 2014 was $5.0 million compared to $5.7 million for the prior year period. This decrease is due primarily to the increase in revenues, an improvement in gross margin for the period, lower legal expenses and state payroll tax credits that offset higher selling and stock option expenses. Net loss for the nine month period was $5.0 million, or $0.20 per share, compared to $7.9 million, or $0.33 per share, for the prior year period. The decrease in net loss for the period is due primarily to the improvement in operating results discussed above, a decrease in the non-cash amortization of debt discount and the gain on the sale of non-core assets.
As of March 31, 2014 unrestricted cash, cash equivalents and marketable securities were $2.6 million and the company had working capital of $4.1 million.
Mr. Benjamin concluded, "The fundamental value proposition of healthcare information technology services remains strong and we believe our company is well positioned to benefit from ongoing healthcare reforms to reduce costs, shorten hospital stays, reduce hospital readmissions, shift patient care towards wellness and preventative care programs and automate healthcare records and processes. Short-term delays with our revenue growth have not changed the intermediate or long-term opportunity for the company and we continue to be confident that we are uniquely situated with proven technology to address today's healthcare challenges."