Emdeon Reports Second Quarter 2011 Results
NASHVILLE, Tenn., Aug. 8, 2011 /PRNewswire/ –
- Revenue of $282.1 million, increased 16.0% over second quarter 2010
- Non-GAAP Adjusted EBITDA of $74.7 million, increased 14.7% over second quarter 2010
Emdeon Inc. (NYSE: EM), a leading provider of healthcare revenue and payment cycle management and clinical information exchange solutions, today announced financial results for the second quarter ended June 30, 2011, as summarized below:
(In millions, except per
share amts) 2Q 11 2Q 10 % Change
----- ----- --------
Revenue $282.1 $243.3 16.0%
Net Income $9.2 $7.3 27.2%
Earnings per share
(diluted) $0.06 $0.05 20.0%
Non-GAAP Adjusted EBITDA $74.7 $65.2 14.7%
Non-GAAP Adjusted EPS $0.26 $0.22 18.2%
Non-GAAP fully diluted
shares 124.2 122.6 1.3%
“We are pleased with our financial results for the second quarter. Our new initiatives in clinical information exchange and recently acquired solutions are resonating with our customer base. Emdeon’s revenue cycle management and payment distribution solutions also continued to contribute solid organic growth,” said George Lazenby, Emdeon’s chief executive officer. “We are especially pleased with the performance of our newest acquisition, EquiClaim. Interest in this payment integrity solution has been strong among our customers and is performing well against our internal targets.”
Second quarter revenue was $282.1 million, an increase of 16.0%, compared to $243.3 million for the same period in 2010, as a result of recent acquisitions and organic growth. GAAP operating income for the second quarter of 2011 was $27.6 million compared to $30.6 million for the same period in 2010, a decrease of 10.0%. This decrease was primarily due to higher depreciation and amortization expense from 2010 acquisitions and capital expenditures, as well as higher equity compensation expense. Second quarter Non-GAAP Adjusted EBITDA grew 14.7% to $74.7 million, or 26.5% of revenue, from Non-GAAP Adjusted EBITDA of $65.2 million, or 26.8% of revenue, in the comparable period in 2010. The slight decrease in Non-GAAP Adjusted EBITDA as a percentage of revenue was primarily due to increased investment in new solutions combined with revenue mix changes, including the impact of recent acquisitions.
GAAP net income (before noncontrolling interest) for the second quarter of 2011 was $9.2 million compared to GAAP net income of $7.3 million for the same period in 2010. GAAP net income per diluted share for the second quarter of 2011 was $0.06 compared to $0.05 for the same period in 2010. Non-GAAP Adjusted Net Income per fully diluted share for the second quarter of 2011 was $0.26, using a weighted average fully diluted share count of 124.2 million, compared to $0.22, using a weighted average fully diluted share count of 122.6 million, for the same period in 2010.
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 unaudited condensed 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 maintained its previously announced 2011 annual financial outlook ranges of $1.105 to $1.135 billion for revenue, $300 to $310 million for Non-GAAP Adjusted EBITDA and $1.00 to $1.06 for Non-GAAP Adjusted Net Income per fully diluted share (using a weighted average share count of 124.0 million).
Cancellation of Conference Call and Webcast
As noted in an earlier release, Emdeon entered into a definitive merger agreement on August 3, 2011 with Blackstone Capital Partners VI L.P. under which this Blackstone fund will acquire a controlling interest in Emdeon. With the proposed transaction, Emdeon will not host a conference call to discuss financial results for the second quarter of 2011. The Company expects to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 on or about August 9, 2011.
About Emdeon
Emdeon is a leading provider of revenue and payment cycle management and clinical information exchange 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 and clinical information exchange processes. 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 the proposed merger transaction and 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 the proposed merger transaction and 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. Such factors related to the proposed merger transaction include unexpected costs or liabilities, delays due to regulatory review, certain closing conditions (including the committed financing) may not be timely satisfied or waived, litigation may be commenced and general economic and business conditions may change. Such factors related to Emdeon’s actual financial results or results of operations include: effects of competition, including competition from entities that are customers for certain of Emdeon’s solutions; Emdeon’s ability to maintain relationships with its customers and channel partners; Emdeon’s ability to effectively cross-sell its solutions to existing customers and to continue to generate revenue and maintain profitability by developing or acquiring and successfully deploying new or updated solutions; pricing pressures on Emdeon’s solutions; 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 Annual Report on Form 10-K for the year ended December 31, 2010, as well as Emdeon’s periodic and other reports, filed with the Securities and Exchange Commission.
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 Three Months For the Six Months
Ended June 30, Ended June 30,
2011 2010 2011 2010
---- ---- ---- ----
Revenue $282,110 $243,289 $553,608 $480,568
Costs and expenses:
Cost of operations
(exclusive of
depreciation and
amortization below) 174,757 148,444 344,011 292,430
Development and
engineering 9,358 8,695 18,260 17,248
Sales, marketing, general
and administrative 31,498 26,243 63,145 52,362
Depreciation and
amortization 38,934 29,278 76,956 57,053
------ ------ ------ ------
Operating income 27,563 30,629 51,236 61,475
Interest income (3) (5) (6) (8)
Interest expense 12,653 15,919 25,282 31,584
Other (2,235) (2,060) (3,638) (1,770)
------ ------ ------ ------
Income before income tax
provision 17,148 16,775 29,598 31,669
Income tax provision 7,920 9,520 13,095 20,152
----- ----- ------ ------
Net income 9,228 7,255 16,503 11,517
Net income attributable
to noncontrolling
interest 3,427 3,026 6,309 5,399
Net income attributable
to Emdeon Inc. $5,801 $4,229 $10,194 $6,118
====== ====== ======= ======
Net income per share
Class A common stock:
Basic $0.06 $0.05 $0.11 $0.07
===== ===== ===== =====
Diluted $0.06 $0.05 $0.11 $0.07
===== ===== ===== =====
Weighted average common
shares outstanding:
Basic 91,057,293 90,061,975 91,022,516 89,879,916
========== ========== ========== ==========
Diluted 91,341,309 90,759,030 91,294,114 90,648,401
========== ========== ========== ==========
Emdeon Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands, except share and per share amounts)
June 30, December 31,
2011 2010
---- ----
Assets
Current assets:
Cash and cash equivalents $122,460 $99,188
Accounts receivable, net of allowance for
doubtful accounts of $5,523 and $5,394
at June 30, 2011 and December 31, 2010,
respectively 184,992 174,191
Deferred income tax assets 7,811 7,913
Prepaid expenses and other current assets 25,410 25,020
------ ------
Total current assets 340,673 306,312
Property and equipment, net 230,979 231,307
Goodwill 926,164 908,310
Intangible assets, net 1,007,194 1,035,886
Other assets, net 8,825 9,750
Total assets $2,513,835 $2,491,565
========== ==========
Liabilities and equity
Current liabilities:
Accounts payable $6,379 $4,732
Accrued expenses 105,429 112,245
Deferred revenues 12,547 12,130
Current portion of long-term debt 12,492 12,494
------ ------
Total current liabilities 136,847 141,601
Long-term debt, excluding current portion 936,222 933,749
Deferred income tax liabilities 201,528 200,357
Tax receivable agreement obligations to
related parties 137,964 138,533
Other long-term liabilities 15,165 22,037
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 91,208,582 and 91,064,486
shares outstanding at June 30, 2011 and
December 31, 2010, respectively 1 1
Class B common stock, exchangeable (par
value, $0.00001), 52,000,000 shares
authorized and 24,689,142 shares
outstanding at June 30, 2011 and
December 31, 2010 - -
Additional paid-in capital 749,536 738,888
Contingent consideration 1,955 1,955
Accumulated other comprehensive loss (1,280) (2,569)
Retained earnings 63,444 53,250
------ ------
Emdeon Inc. equity 813,656 791,525
Noncontrolling interest 272,453 263,763
------- -------
Total equity 1,086,109 1,055,288
Total liabilities and equity $2,513,835 $2,491,565
========== ==========
Emdeon Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited and amounts in thousands)
For the Six Months
Ended June 30,
2011 2010
---- ----
Operating activities
Net income $16,503 $11,517
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 76,956 57,053
Equity compensation expense 11,483 7,847
Deferred income tax expense 2,058 7,250
Amortization of debt discount and issuance
costs 6,945 6,300
Amortization of discontinued cash flow hedge
from other comprehensive loss 1,879 2,918
Change in contingent consideration (3,638) (1,770)
Change in fair value of interest rate swap
(not subject to hedge accounting) (5,163) -
Other 16 (50)
Changes in operating assets and liabilities:
Accounts receivable (8,819) 814
Prepaid expenses and other 2,360 1,909
Accounts payable 3,925 (1,550)
Accrued expenses and other liabilities 399 (456)
Deferred revenues 417 (1,190)
Tax receivable agreement obligations to
related parties (2,913) (1,480)
Net cash provided by operating activities 102,408 89,112
------- ------
Investing activities
Purchases of property and equipment (34,088) (35,772)
Payments for acquisitions, net of cash
acquired (39,758) (41,991)
Other - (3,000)
Net cash used in investing activities (73,846) (80,763)
------- -------
Financing activities
Debt principal payments (4,275) (3,775)
Other (1,015) (104)
Net cash used in financing activities (5,290) (3,879)
------ ------
Net increase in cash and cash equivalents 23,272 4,470
Cash and cash equivalents at beginning of
period 99,188 211,999
Cash and cash equivalents at end of period $122,460 $216,469
======== ========
Segment Information
(unaudited and amounts in thousands)
For the Three Months Ended June 30, 2011 For the Three Months Ended June 30, 2010
---------------------------------------- ----------------------------------------
Corporate & Corporate &
Payer Provider Pharmacy Eliminations Consolidated Payer Provider Pharmacy Eliminations Consolidated
----- -------- -------- ------------ ------------ ----- -------- -------- ------------ ------------
Revenue from external
customers
Claims management $52,972 $- $- $- $52,972 $49,695 $- $- $- $49,695
Payment services 62,507 - - - 62,507 56,504 - - - 56,504
Patient statements - 65,022 - - 65,022 - 65,705 - - 65,705
Revenue cycle
management - 72,945 - - 72,945 - 43,511 - - 43,511
Dental - 7,871 - - 7,871 - 7,947 - - 7,947
Pharmacy services - - 20,793 - 20,793 - - 19,927 - 19,927
Inter-segment revenue 864 124 - (988) - 680 72 - (752) -
--- --- --- ---- --- --- --- --- ---- ---
Net revenue 116,343 145,962 20,793 (988) 282,110 106,879 117,235 19,927 (752) 243,289
Costs and expenses:
Cost of operations 77,545 89,268 8,872 (928) 174,757 69,947 71,963 7,254 (720) 148,444
Development and
engineering 2,869 4,713 1,776 - 9,358 2,992 3,898 1,805 - 8,695
Sales, marketing,
general and
administrative 7,058 9,439 1,287 13,714 31,498 6,206 6,810 1,503 11,724 26,243
------ ------
Segment contribution
(1) $28,871 $42,542 $8,858 $(13,774) 66,497 $27,734 $34,564 $9,365 $(11,756) 59,907
======= ======= ====== ======== ======= ======= ====== ========
Depreciation and
amortization 38,934 29,278
Interest income (3) (5)
Interest expense 12,653 15,919
Other (2,235) (2,060)
Income before income
tax provision $17,148 $16,775
======= =======
For the Six Months Ended June 30, 2011 For the Six Months Ended June 30, 2010
-------------------------------------- --------------------------------------
Corporate & Corporate &
Payer Provider Pharmacy Eliminations Consolidated Payer Provider Pharmacy Eliminations Consolidated
----- -------- -------- ------------ ------------ ----- -------- -------- ------------ ------------
Revenue from external
customers
Claims management $100,526 $- $- $- $100,526 $94,843 $- $- $- $94,843
Payment services 124,742 - - - 124,742 113,324 - - - 113,324
Patient statements - 128,539 - - 128,539 - 132,294 - - 132,294
Revenue cycle
management - 142,799 - - 142,799 - 84,600 - - 84,600
Dental - 15,604 - - 15,604 - 15,884 - - 15,884
Pharmacy services - - 41,398 - 41,398 - - 39,623 - 39,623
Inter-segment revenue 1,720 240 - (1,960) - 1,554 158 - (1,712) -
----- --- --- ------ --- ----- --- --- ------ ---
Net revenue 226,988 287,182 41,398 (1,960) 553,608 209,721 232,936 39,623 (1,712) 480,568
Costs and expenses:
Cost of operations 152,872 175,439 17,535 (1,835) 344,011 136,578 143,521 13,979 (1,648) 292,430
Development and
engineering 5,727 9,032 3,501 - 18,260 5,966 7,762 3,520 - 17,248
Sales, marketing,
general and
administrative 13,871 19,955 2,589 26,730 63,145 13,166 13,700 3,061 22,435 52,362
------ ------
Segment contribution
(1) $54,518 $82,756 $17,773 $(26,855) 128,192 $54,011 $67,953 $19,063 $(22,499) 118,528
======= ======= ======= ======== ======= ======= ======= ========
Depreciation and
amortization 76,956 57,053
Interest income (6) (8)
Interest expense 25,282 31,584
Other (3,638) (1,770)
Income before income
tax provision $29,598 $31,669
======= =======
(1) Segment contribution has been reduced by equity-based
compensation expense of $5,910, $4,172, $11,483 and $7,847 for the
three months and six months ended June 30, 2011 and 2010,
respectively. Segment contribution without such equity-based
compensation expense would have been $72,407, $64,079, $139,675 and
$126,375 for the three and six months ended June 30, 2011 and 2010,
respectively.
Explanation of Non-GAAP Financial Measures
Emdeon’s management 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 excluded 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 and management incentive compensation programs. 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 before income tax provision (benefit), net interest expense 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, (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. 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 (except for contingently issuable shares subject to performance conditions and shares or other potentially dilutive securities not otherwise contemplated in the share denominator utilized in the applicable year’s financial outlook range) are fully dilutive and outstanding shares from their date of grant or issuance.
To properly 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 and GAAP net income 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 structure, asset base, acquisition accounting, non-cash charges and non-operating items from Emdeon’s operations.
Emdeon also presents Adjusted EBITDA and Adjusted Net Income per fully diluted share on a forward-looking basis as part of its Financial Outlook for 2011. Emdeon is unable to present a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because management cannot predict, with sufficient reliability, contingent payments relating to past and possible future acquisitions, changes in the fair value of Emdeon’s interest rate swap agreement and the effect on income taxes of these and other items attributable to Emdeon’s capital structure, all of which are difficult to estimate and primarily dependent on future events.
Emdeon Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited and amounts in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2011 2010 2011 2010
---- ---- ---- ----
Net income $9,228 $7,255 $16,503 $11,517
Interest
expense, net 12,650 15,914 25,276 31,576
Income tax
provision 7,920 9,520 13,095 20,152
Depreciation
and
amortization 38,934 29,278 76,956 57,053
------ ------ ------ ------
EBITDA 68,732 61,967 131,830 120,298
Equity-based
compensation 5,910 4,172 11,483 7,847
Acquisition
method
adjustments - 17 - 193
Facilities
consolidation
costs 417 (27) 513 403
Acquisition-
related
costs 1,521 1,087 2,735 2,026
Tax
receivable
agreements
change in
estimate 365 - 615 (1,480)
Contingent
consideration
adjustments (2,235) (2,060) (3,638) (1,770)
------ ------ ------ ------
EBITDA
Adjustments 5,978 3,189 11,708 7,219
----- ----- ------ -----
Adjusted
EBITDA $74,710 $65,156 $143,538 $127,517
======= ======= ======== ========
Emdeon Inc.
Reconciliation of GAAP Net Income to Adjusted Net Income
(unaudited and amounts in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2011 2010 2011 2010
---- ---- ---- ----
Net income $9,228 $7,255 $16,503 $11,517
Income tax provision 7,920 9,520 13,095 20,152
EBITDA Adjustments 5,978 3,189 11,708 7,219
Non-cash interest expense 2,586 4,630 5,154 9,218
Depreciation and amortization resulting from
acquisition method adjustments 26,790 19,965 52,876 39,141
------ ------ ------ ------
Adjusted net income before income taxes 52,502 44,559 99,336 87,247
Normalized income tax provision 20,738 17,601 39,238 34,463
------ ------ ------ ------
Adjusted Net Income $31,764 $26,958 $60,098 $52,784
======= ======= ======= =======
Emdeon Inc.
Reconciliation of GAAP Net Income Per Diluted Share of Class A Common
Stock to
Adjusted Net Income Per Fully Diluted Share(1)
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2011 2010 2011 2010
---- ---- ---- ----
Net income per diluted share of Class A common
stock $0.06 $0.05 $0.11 $0.07
Impact of assuming full dilution of all
outstanding equity instruments for the period 0.02 0.00 0.03 0.01
Adjustments on a per share basis:
Income tax provision 0.06 0.08 0.11 0.17
EBITDA Adjustments 0.05 0.03 0.09 0.06
Non-cash interest expense 0.02 0.04 0.04 0.08
Depreciation and amortization resulting from
acquisition method adjustments 0.22 0.16 0.43 0.32
---- ---- ---- ----
Adjusted net income before income taxes 0.43 0.36 0.81 0.71
Normalized income tax provision 0.17 0.14 0.32 0.28
---- ---- ---- ----
Adjusted Net Income per fully diluted share 0.26 $0.22 $0.49 $0.43
==== ===== ===== =====
(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:
(shares in thousands)
---------------------
For the Three Months For the Six Months
Ended June 30, Ended June 30,
Weighted average of: 2011 2010 2011 2010
---- ---- ---- ----
Class A shares outstanding 91,148 90,633 91,114 90,548
Class B shares outstanding 24,483 24,689 24,483 24,707
Restricted stock units
outstanding 900 759 847 666
Options to purchase Class A
shares outstanding 7,662 6,488 7,241 6,015
----- ----- ----- -----
Shares assumed in Adjusted Net
Income per fully diluted
share calculation 124,193 122,569 123,685 121,936
======= ======= ======= =======
SOURCE Emdeon Inc.