Despite the challenging economic landscape, Netgain continued its streak of strong growth and continued profitability. In 2009, Netgain continued to reinvest in their future: its technology, its employees, and its strategic investments.
Responsible growth is a key principle that Netgain management continues to subscribe to. Continued reinvestment of profits into technology, people and key investment opportunities will ensure the long term viability and competitiveness of the company. Total assets grew 34% year over year, with technology CapEx being 85% of EBITDA. With the expectation of continual investment and development of technology, Netgain responsibly manages the cash implications of such conviction. Cash generated from operations is used to both pay for a portion of capital investments and pay down its debt structure aggressively. Such actions has resulted in favorable leverage ratios (FCCR = 1.35, and Debt to Equity of 2.54).
Aside from technology investments, Netgain also spent a substantial portion of its profits investing in people. FTE increased 20% year over year. Coupled with a robust training program, Netgain allotted training funds for employees to utilize for personal development.
In addition, on November 2009, Netgain announced the completion of its strategic acquisition of Netmark, Inc., a technology outsourcing firm located in Minneapolis, MN. The synergistic combination allowed Netgain to gain more market share in the healthcare vertical while adding 10% to the run rate.
Netgain has built a solid foundation of recurring revenues based on loyal, satisfied clients. In previous years, organic growth within Netgain’s customer base accounted for as much as 10-15% of revenue growth year over year in any given year. In 2009, slow spending in the local and national markets resulted in net 0% organic growth from current customers.
Netgain operated effectively and profitably during FY2009. The legislation set forth in 2009 by the passing of the HITECH Act, proved to be positive for Netgain. In the healthcare vertical, (now 39% of total revenue vs. 30% last year), the run rate for recurring revenues increased 34% year over year due to deployment of new healthcare clients. Though the non-recurring billable services shrank 20% from last year, top line revenues still increased 19% year over year. With diligent financial and operational management, COGS and SGA only increased 13% and 23% respectively. This led to an EBITDA increase of about 40% year over year.
Netgain also understands that with success comes responsibility. As such, they continue to give back and take a leadership role in their community. Netgain actively supports organizations such as United Way, American Cancer Society and Habitat for Humanity, and are fortunate to have generous employees that volunteer time and talent to local community organizations. In 2009, Netgain continued to donate more than 6% of its profitability, a 28% increase year over year.
Entering 2010, and their tenth year of business, Netgain looks forward to serving their current clients, who have contributed to their success, growing their presence in the healthcare vertical with the help of strong channel partners, and continuing to invest in passionate technologists.