Emdeon Reports Third Quarter 2009 Results
NASHVILLE, Tenn., Nov. 10 /PRNewswire-FirstCall/ — Emdeon (NYSE: EM), a leading provider of healthcare revenue and payment cycle management solutions, today announced financial results for the third quarter of 2009.
Third quarter revenue was $235.5 million, an increase of 10.6%, compared to $212.8 million for the same period in the prior year. GAAP operating income for the third quarter of 2009 was $18.0 million compared to $23.1 million for the same period last year. Excluding equity compensation expense of $12.6 million for the third quarter of 2009, primarily related to Emdeon’s August 2009 public offering, and $0.7 million for the third quarter of 2008, operating income for the third quarter of 2009 would have been $30.6 million compared to $23.8 million for the prior year period.
Third quarter Adjusted EBITDA grew 16.0%, to $60.2 million, or 25.6% of revenue, from Adjusted EBITDA of $51.9 million, or 24.4% of revenue, in the comparable period last year. GAAP net income (loss) per diluted share for the third quarter of 2009 was $(0.09) as compared to $(0.02) in the same period last year, primarily as a result of the equity compensation expense associated with the public offering and income tax expense primarily related to Emdeon’s capital structure and valuation allowances reflected in the current year period. Adjusted Net Income per fully diluted share for the third quarter of 2009 was $0.21 compared to $0.17 for the same period last year using pro forma adjusted fully diluted shares outstanding.
“We are pleased with Emdeon’s financial performance for our initial quarter as a public company,” said George Lazenby, Emdeon’s chief executive officer. “During the period, we continued to execute on our strategies to expand the breadth and scope of our product and service offerings, including significant progress on integration efforts related to our recent acquisitions. We are particularly encouraged by the positive sales momentum generated in our key strategic areas of enhanced revenue cycle management, payment integrity and ePrescribing solutions.”
At September 30, 2009, Emdeon’s cash and cash equivalents totaled $195 million. Total long-term debt under Emdeon’s credit facilities was $858 million, before unamortized debt discount of $56 million.
“We posted solid financial results in the third quarter. In addition, the proceeds from our public offering and our continued strong cash flow from operations have further strengthened Emdeon’s financial position,” said Bob Newport, Emdeon’s chief financial officer. “We continue to streamline our operations and improve our efficiencies while making the appropriate investments to enhance our long-term success.”
A reconciliation of Emdeon’s financial results determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) to certain non-GAAP financial measures has been provided in the financial statement tables included in this release to supplement its consolidated financial statements presented on a GAAP basis. An explanation of these non-GAAP measures is also included below under the heading “Explanation of Non-GAAP Financial Measures.”
Financial Outlook
Emdeon currently anticipates its annual revenue, Adjusted EBITDA and Adjusted Net Income per fully diluted share for 2009 to be as follows:
- 2009 revenue to be between $915 to $925 million
- 2009 Adjusted EBITDA to be between $234 to $239 million
- 2009 Adjusted Net Income per fully diluted share to be between $0.80 to $0.86
Notice of Conference Call and Webcast
Emdeon will conduct a conference call/webcast for investors and institutional analysts on Tuesday, November 10, 2009 at 5:00 pm Eastern Time/4:00 pm Central Time to discuss Emdeon’s financial results.
To access Emdeon’s live conference call and webcast, dial 800-561-2601 (617-614-3518 for international calls) using conference code 12408553 or visit the Investors section of Emdeon’s website: www.emdeon.com. Please go to the website at least 15 minutes prior to the event to register, download and install any necessary audio/video software to access the webcast. For those unable to listen to the live broadcast, conference call replay will be available for one week following the conference call by calling 888-286-8010 (617-801-6888 for international calls) using conference code 32630077. A webcast replay will also be archived on Emdeon’s website for at least 30 days following the conference call.
About Emdeon
Emdeon (NYSE: EM) is a leading provider of revenue and payment cycle management solutions, connecting payers, providers and patients in the U.S. healthcare system. Emdeon’s product and service offerings integrate and automate key business and administrative functions of its payer and provider customers throughout the patient encounter. Through the use of Emdeon’s comprehensive suite of products and services, which are designed to easily integrate with existing technology infrastructures, customers are able to improve efficiency, reduce costs, increase cash flow and more efficiently manage the complex revenue and payment cycle process. For more information, visit www.emdeon.com.
Forward-Looking Statements
Statements made in this press release that express Emdeon’s or management’s intentions, plans, beliefs, expectations or predictions of future events are forward-looking statements, which Emdeon intends to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. Forward-looking statements may include information concerning Emdeon’s possible or assumed future results of operations, including descriptions of Emdeon’s revenues, profitability, outlook and overall business strategy. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to Emdeon’s operations and business environment, all of which are difficult to predict and many of which are beyond Emdeon’s control. Although Emdeon believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Emdeon’s actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements, including but not limited to: effects of competition, including competition from entities that are customers for certain of Emdeon’s products and services; Emdeon’s ability to maintain relationships with its customers and channel partners; Emdeon’s ability to effectively cross-sell its products and services to existing customers and to develop and successfully deploy new or updated products and services; pricing pressures on Emdeon’s products and services; the anticipated benefits from acquisitions not being fully realized or not being realized within the expected time frames; and general economic, business or regulatory conditions affecting the healthcare information technology and services industries; as well as the other risks discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in Emdeon’s Registration Statement on Form S-1 and the accompanying Prospectus thereto, as filed with the Securities and Exchange Commission (the “SEC”), as well as Emdeon’s periodic reports filed with the SEC and other public filings of Emdeon.
You should keep in mind that any forward-looking statement made by Emdeon herein, or elsewhere, speaks only as of the date on which made. Emdeon expressly disclaims any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in Emdeon’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.
Emdeon Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except share and per share
amounts)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
---- ---- ---- ----
Revenue $212,808 $235,462 $635,666 $679,888
Costs and expenses:
Cost of operations
(exclusive
of depreciation and
amortization below) 134,451 146,471 405,423 418,079
Development and
engineering 7,312 10,045 21,029 24,425
Sales, marketing,
general
and administrative 22,220 33,823 69,309 85,146
Depreciation and
amortization 25,710 26,667 71,979 77,051
Loss on abandonment
of leased properties - 482 - 742
--- --- --- ---
Operating income 23,115 17,974 67,926 74,445
Interest income (328) (27) (931) (81)
Interest expense 20,410 17,219 49,899 52,330
------ ------ ------ ------
Income before income
tax provision 3,033 782 18,958 22,196
Income tax provision 3,512 9,245 11,202 12,885
----- ----- ------ ------
Net income (loss) (479) (8,463) 7,756 9,311
Net income (loss)
attributable to
noncontrolling interest 766 (1,246) 2,620 2,871
--- ------ ----- -----
Net income (loss)
attributable to Emdeon
Inc. $(1,245) $(7,217) $5,136 $6,440
======= ======= ====== ======
Net income (loss) per share
Class A common stock:
Basic $(0.02) $(0.09) $0.07 $0.08
====== ====== ===== =====
Diluted $(0.02) $(0.09) $0.07 $0.08
====== ====== ===== =====
Weighted average common
shares outstanding:
Basic 77,413,610 84,522,085 73,889,095 79,809,140
========== ========== ========== ==========
Diluted 77,413,610 84,522,085 73,889,095 79,856,588
========== ========== ========== ==========
Emdeon Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands, except share amounts)
Dec. 31, Sept. 30,
2008 2009
---- ----
Assets
Current assets:
Cash and cash equivalents $71,478 $194,989
Accounts receivable, net of allowance for
doubtful accounts of $4,576 and $4,499 at
December 31, 2008 and September 30, 2009,
respectively 144,149 152,460
Deferred income tax assets 2,285 6,233
Prepaid expenses and other current assets 21,137 17,272
------ ------
Total current assets 239,049 370,954
Property and equipment, net 136,038 144,324
Goodwill 646,851 703,008
Intangible assets, net 971,001 963,010
Other assets, net 7,340 1,526
----- -----
Total assets $2,000,279 $2,182,822
========== ==========
Liabilities and equity
Current liabilities:
Accounts payable $805 $5,623
Accrued expenses 79,513 77,808
Deferred revenues 12,056 12,795
Current portion of long-term debt 17,244 5,139
------ -----
Total current liabilities 109,618 101,365
Long-term debt, excluding current portion 807,986 796,768
Deferred income tax liabilities 159,811 151,869
Tax receivable agreement obligation to related
parties - 141,745
Other long-term liabilities 44,711 29,334
Commitments and contingencies
Equity:
Preferred stock (par value $0.00001),
25,000,000 shares authorized and 0 shares
issued and outstanding - -
Class A common stock (par value $0.00001),
400,000,000 shares authorized and 77,413,610 and
90,238,893 shares outstanding at December 31,
2008 and September 30, 2009, respectively 1 1
Class B common stock (par value $0.00001),
52,000,000 shares authorized and 22,586,390 and
24,752,955 shares outstanding at December 31,
2008 and September 30, 2009, respectively - -
Additional paid-in capital 670,702 732,836
Accumulated other comprehensive loss (23,195) (15,511)
Retained earnings 24,123 30,563
------ ------
Emdeon Inc. stockholders' equity 671,631 747,889
Noncontrolling interest 206,522 213,852
------- -------
Total equity 878,153 961,741
------- -------
Total liabilities and equity $2,000,279 $2,182,822
========== ==========
Emdeon Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited and amounts in thousands)
For the Nine Months
Ended
September 30,
--------------
2008 2009
---- ----
Operating activities
Net income $7,756 $9,311
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 71,979 77,051
Equity compensation expense 5,813 21,499
Deferred income tax expense (benefit) 4,925 (1,360)
Amortization of debt issuance costs 141 143
Amortization of debt discount 7,066 8,699
Amortization of discontinued cash flow
hedge from
other comprehensive income 7,011 5,968
Change in fair value of interest rate
swap (12,714) -
Loss on abandonment of leased properties - 742
Loss on disposal of fixed assets 72 56
Changes in operating assets and liabilities:
Accounts receivable (16,968) (3,990)
Prepaid expenses and other (9,760) 4,911
Accounts payable (3,392) 3,515
Accrued expenses and other liabilities (2,507) (6,199)
Deferred revenues 2,879 737
----- ---
Net cash provided by operating activities 62,301 121,083
------ -------
Investing activities
Purchases of property and equipment (13,942) (30,563)
Payments for acquisitions, net of cash
acquired (19,090) (75,871)
Purchase of EBS Master LLC (306,260) -
-------- ---
Net cash used in investing activities (339,292) (106,434)
-------- --------
Financing activities
Proceeds from initial public offering - 148,261
Repurchase of Class A common stock - (1,573)
Repurchase of Units of EBS Master LLC - (5,372)
Debt principal payments (5,662) (21,663)
Payments on revolver - (10,201)
Payment of loan costs - (359)
Capital contributions from stockholders 307,451 203
Distribution to shareholders (317) (434)
---- ----
Net cash provided by financing activities 301,472 108,862
------- -------
Net increase in cash and cash equivalents 24,481 123,511
Cash and cash equivalents at beginning of
period 33,687 71,478
------ ------
Cash and cash equivalents at end of period $58,168 $194,989
======= ========
Segment Information
(unaudited and amounts in thousands)
For the Three Months Ended September 30, 2008
Corporate &
Payer Provider Pharmacy Elimi- Consoli-
nations dated
Consolidated
Revenue to external
customers
Claims management $44,066 $- $- $- $44,066
Payment services 48,699 - - 48,699
Patient statements - 66,279 - - 66,279
Revenue cycle
Management - 36,256 - - 36,256
Dental - 7,939 - - 7,939
Pharmacy services - - 9,569 - 9,569
Inter-segment revenue 77 512 - (589) -
Total revenue 92,842 110,986 9,569 (589) 212,808
Costs and expenses:
Cost of operations 60,528 72,546 1,816 (439) 134,451
Development and
engineering 2,655 3,608 1,049 - 7,312
Sales, marketing,
general and
administrative 6,004 7,136 1,002 8,078 22,220
Loss on abandonment - - - - -
Segment contribution
(1) $23,655 $27,696 $5,702 $(8,228) 48,825
Depreciation and
amortization 25,710
Interest income (328)
Interest expense 20,410
Income before income
tax provision $3,033
For the Three Months Ended September 30, 2009
Corporate &
Payer Provider Pharmacy Elimi- Consoli-
nations dated
Revenue to external
customers
Claims management $46,072 $- $- $- $46,072
Payment services 53,345 - - - 53,345
Patient statements - 69,840 - - 69,840
Revenue cycle management - 39,041 - - 39,041
Dental - 7,978 - - 7,978
Pharmacy services - - 19,186 - 19,186
Inter-segment revenue 297 416 - (713) -
Total revenue 99,714 117,275 19,186 (713) 235,462
Costs and expenses:
Cost of operations 65,805 75,070 6,158 (562) 146,471
Development and
engineering 3,847 4,297 1,901 - 10,045
Sales, marketing,
general and
administrative 8,037 9,038 3,413 13,335 33,823
Loss on abandonment - - - 482 482
Segment contribution
(1) $22,025 $28,870 $7,714 $(13,968) 44,641
Depreciation and
amortization 26,667
Interest income (27)
Interest expense 17,219
Income before income tax provision $782
For the Nine Months Ended September 30, 2008
Corporate &
Payer Provider Pharmacy Elimi- Consoli-
nations dated
Consolidated
Revenue to external
customers
Claims management $134,621 $- $- $- $134,621
Payment services 142,522 - - 142,522
Patient statements - 198,500 - - 198,500
Revenue cycle management - 106,894 - - 106,894
Dental - 23,938 - - 23,938
Pharmacy services - - 29,191 - 29,191
Inter-segment revenue 298 1,647 - (1,945) -
Total revenue 277,441 330,979 29,191 (1,945) 635,666
Costs and expenses:
Cost of operations 182,838 218,311 5,687 (1,413) 405,423
Development and
engineering 7,453 10,472 3,104 - 21,029
Sales, marketing,
general and
administrative 18,727 22,888 2,896 24,798 69,309
Loss on abandonment - - - - -
Segment contribution
(1) $68,423 $79,308 $17,504 $(25,330) 139,905
Depreciation and amortization 71,979
Interest income (931)
Interest expense 49,899
Income before income tax provision $18,958
For the Nine Months Ended September 30, 2009
Corporate &
Payer Provider Pharmacy Elimi- Consoli-
nations dated
Revenue to external
customers
Claims management $137,440 $- $- $- $137,440
Payment services 156,433 - - - 156,433
Patient statements - 207,304 - - 207,304
Revenue cycle
management - 114,825 - - 114,825
Dental - 23,690 - - 23,690
Pharmacy services - - 40,196 - 40,196
Inter-segment
revenue 434 1,388 - (1,822) -
Total revenue 294,307 347,207 40,196 (1,822) 679,888
Costs and expenses:
Cost of operations 188,094 221,464 9,947 (1,426) 418,079
Development and
engineering 9,172 11,283 3,970 - 24,425
Sales, marketing,
general and
administrative 20,461 24,335 5,439 34,911 85,146
Loss on abandonment - - - 742 742
Segment contribution
(1) $76,580 $90,125 $20,840 $(36,049) 151,496
Depreciation and
amortization 77,051
Interest income (81)
Interest expense 52,330
Income before income tax provision $22,196
(1) Segment contribution has been reduced by equity-based compensation
expense of $749, $12,554, $5,813, and $21,499 for the three months
ended September 30, 2008 and September 30, 2009 and for the nine months
ended September 30, 2008 and September 30, 2009, respectively. Segment
contribution without such equity-based compensation expense would have
been $49,574, $57,195, $145,718 and $172,995 for the three months ended
September 30, 2008 and September 30, 2009 and for the nine months ended
September 30, 2008 and September 30, 2009, respectively.
Explanation of Non-GAAP Financial Measures
Emdeon’s management team believes that in order to properly understand Emdeon’s short-term and long-term financial trends, investors may wish to consider the impact of certain non-cash or non-operating items, when used as a supplement to financial performance measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These items result from facts and circumstances that vary in frequency and/or impact continuing operations. In addition, management uses results of operations before such items to evaluate the operational performance of Emdeon as a basis for strategic planning and, in the case of Adjusted EBITDA, as a performance evaluation metric in determining achievement of certain executive incentive compensation programs, as well as for incentive compensation plans for employees generally. Investors should consider these non-GAAP measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. In addition to the description provided below, reconciliations of GAAP to non-GAAP results are provided in the financial statement tables included in this release.
In this release, Emdeon defines Adjusted EBITDA as EBITDA (which is defined as net income (loss) before net interest expense, income tax provision (benefit) and depreciation and amortization), plus certain other non-cash or non-operating items (collectively, “EBITDA Adjustments”).
In this release, Emdeon defines Adjusted Net Income as the sum of (i) GAAP net income (loss), (ii) EBITDA Adjustments, (iii) non-cash interest expense and (iv) depreciation and amortization expense resulting from adjustments of assets to fair value in connection with acquisition accounting, less income taxes computed based on a normalized income tax rate which removes the income tax impact arising from Emdeon’s structure. Emdeon defines Adjusted Net Income per fully diluted share as the quotient of Adjusted Net Income and weighted average shares outstanding, assuming all potentially dilutive securities are fully outstanding shares from their date of grant or issuance.
To properly and prudently evaluate Emdeon’s business, Emdeon encourages investors to review the GAAP financial information included in this release, and not rely on any single financial measure to evaluate Emdeon’s business. Emdeon also strongly encourages investors to review the reconciliation of GAAP net income (loss) and GAAP net income (loss) per diluted share to the applicable non-GAAP measures of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per fully diluted share. These non-GAAP measures, as Emdeon defines them, may not be similar to non-GAAP measures used by other companies.
Management uses Adjusted EBITDA and Adjusted Net Income per fully diluted share to facilitate a comparison of Emdeon’s operating performance on a consistent basis from period to period that, when viewed in combination with Emdeon’s GAAP results, management believes provides a more complete understanding of factors and trends affecting Emdeon’s business than GAAP measures alone. Management believes these non-GAAP measures assist Emdeon’s board of directors, management, lenders and investors in comparing Emdeon’s operating performance on a consistent basis because they remove where applicable, the impact of Emdeon’s capital and organizational structure, asset base, acquisition accounting, non-cash charges and non-recurring items from Emdeon’s operations.
Emdeon Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
Unaudited (000s)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2009 2008 2009
Net income (loss) $(479) $(8,463) $7,756 $9,311
Interest expense
(income), net 20,082 17,192 48,968 52,249
Income tax
provision (benefit) 3,512 9,245 11,202 12,885
Operating income 23,115 17,974 - 67,926 74,445
Depreciation and
amortization 25,710 26,667 71,979 77,051
EBITDA 48,825 44,641 139,905 151,496
Equity-based compensation 749 12,554 5,813 21,499
Purchase accounting
adjustments 1,278 311 4,745 1,189
IPO-related transaction
costs 300 1,263 300 1,513
Facilities consolidation
costs 758 955 774 1,215
Acquisition related costs - 476 95 772
EBITDA Adjustments 3,085 15,559 11,727 26,188
Adjusted EBITDA $51,910 $60,200 $151,632 $177,684
Emdeon Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
Unaudited (000s)
----------------
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2009 2008 2009
---- ---- ---- ----
Net income (loss) $(479) $(8,463) $7,756 $9,311
EBITDA Adjustments 3,085 15,559 11,727 26,188
Non-cash interest expense 4,638 5,073 1,793 14,810
Depreciation and amortization
resulting from
acquisition method adjustments 18,580 19,454 51,960 56,986
Adjustment to normalize income
tax provision (benefit) (8,076) (6,898) (22,151) (34,586)
------ ------ ------- -------
Adjusted Net Income $17,748 $24,725 $51,085 $72,709
======= ======= ======= =======
Emdeon Inc.
Reconciliation of Diluted Net Income (Loss) Per Diluted Share of
Class A Common Stock to
Adjusted Net Income Per Fully Diluted Share(1)
Unaudited
---------
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2008 2009 2008 2009
---- ---- ---- ----
Diluted net income (loss) per
share Class A
common stock $(0.02) $(0.09) $0.07 $0.08
Impact of assuming full dilution
of all
outstanding equity instruments
for the period 0.02 0.02 0.01 0.00
Adjustments on a per share basis:
EBITDA Adjustments 0.03 0.13 0.11 0.24
Non-cash interest expense 0.04 0.04 0.02 0.13
Depreciation and amortization
resulting from
acquisition method adjustments 0.18 0.17 0.49 0.52
Adjustment to normalize income
tax
provision (benefit) (0.08) (0.06) (0.21) (0.31)
----- ----- ----- -----
Adjusted Net Income per fully
diluted share $0.17 $0.21 $0.49 $0.66
===== ===== ===== =====
(1) The calculation of Adjusted Net Income per fully diluted share assumes
the following equity-based instruments were fully converted into Class
A common stock on their date of issuance:
Unaudited (shares in 000s)
--------------------------
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
Weighted average of: 2008 2009 2008 2009
---- ---- ---- ----
Class A shares outstanding 77,414 84,522 73,889 79,809
Class B shares outstanding 24,707 25,746 28,126 25,135
Restricted stock units outstanding 919 889 899 933
Options to purchase Class A
shares outstanding 2,835 5,023 2,346 3,932
----- ----- ----- -----
Shares assumed in Adjusted Net Income
per fully diluted share calculation 105,875 116,180 105,260 109,809
======= ======= ======= =======
SOURCE Emdeon