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Emdeon Reports Third Quarter Results
Solutions Revenue of $287.9 million, Increased 12.9% for the Quarter and 9.4% Year-to-Date
Adjusted EBITDA of $101.8 million, Increased 8.2% for the Quarter and 9.3% Year-to-Date

NASHVILLE, Tenn., Nov. 6, 2015 /PRNewswire/ -- Emdeon Inc., a leading provider of software and analytics, network solutions and technology-enabled services that optimize communications, payments and actionable insights by leveraging its intelligent healthcare platform, today announced financial results for the third quarter and nine months ended September 30, 2015, as summarized below:

 





























Three Months Ended September 30,


Nine Months Ended September 30,

(In millions)


2015


2014


% Change


2015


2014


% Change

Solutions Revenue (exclusive of postage)


$287.9


$255.0


12.9%


$810.2


$740.2


9.4%

Net Income (Loss)


($32.9)


($13.0)


-153.1%


($30.7)


($75.5)


59.3%

Adjusted EBITDA


$101.8


$94.1


8.2%


$287.2


$262.7


9.3%

 

Highlights include:

  • In August, closed the previously announced acquisition of Altegra Health.
  • In August, shareholders contributed $166.1 million of equity and the Company borrowed an additional $395.0 million under incremental term loan facilities and issued $250.0 million of 6% senior notes due 2021 to fund the acquisition of Altegra Health.
  • In September, announced plans to rebrand to Change Healthcare™ beginning in the fourth quarter of 2015.  The Company accelerated amortization of its existing tradename asset and recognized approximately $31.5 million of amortization expense ($18.5 million net of tax) during the third quarter.  Excluding the amortization of the existing trade name, net loss in the third quarter would have been approximately $14.4 million.

"We continue to make progress toward our strategic goals by improving existing capabilities and adding new solutions to better serve our customers," commented Neil de Crescenzo, president and chief executive officer for Emdeon. "During the quarter, we successfully completed the previously announced acquisition of Altegra Health. This acquisition further expands the breadth and quality of our solutions by adding risk analytics and quality reporting capabilities, as well as enhancing our consumer engagement solutions. Additionally, we announced the plan to rebrand our company as Change Healthcare to better reflect our diverse capabilities and solutions as well as our integral position within the U.S. healthcare system."

Solutions Revenue

Third quarter solutions revenue was $287.9 million, an increase of 12.9%, compared to $255.0 million for the same period in 2014. This increase in solutions revenue as compared to the prior year period was primarily due to recently acquired and developed solutions, including the Altegra Health acquisition, and continued volume gains in network solutions as a result of increases in the number of insured lives of customers from the ongoing expansion of Medicaid, Medicare Advantage and federal and state exchanges.

Year-to-date solutions revenue was $810.2 million, an increase of 9.4%, compared to $740.2 million for the same period in 2014.

Net Income/Loss

Third quarter net loss was $32.9 million compared to $13.0 million for the same period in 2014. Net loss was negatively impacted by the Company's plan to rebrand as Change Healthcare beginning in the fourth quarter of 2015.   The Company accelerated amortization of its existing tradename asset and recognized $31.5 million of amortization expense ($18.5 million net of taxes) during the three months ended September 30, 2015.  Excluding the amortization of the existing trade name asset, net loss in the third quarter would have been approximately $14.4 million.

Year-to-date net loss was $30.7 million compared to $75.5 million for the same period in 2014.

Non-GAAP Adjusted EBITDA

Third quarter Non-GAAP Adjusted EBITDA increased 8.2% to $101.8 million, or 35.3% of solutions revenue, from $94.1 million, or 36.9% of solutions revenue, for the comparable period in 2014. This increase in Adjusted EBITDA compared to the prior year period is primarily due to business growth, including the impact of acquisitions. Non-GAAP Adjusted EBITDA decreased as a percentage of solutions revenue due to changes in revenue mix.

Year-to-date 2015 Non-GAAP Adjusted EBITDA increased 9.3% to $287.2 million, or 35.5% of solutions revenue, from $262.7 million, or 35.5% of solutions revenue, for the comparable period in 2014.

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."

Balance Sheet

As of September 30, 2015, cash and cash equivalents were $84.9 million compared to $82.3 million as of December 31, 2014. 

In August, shareholders contributed $166.1 million of equity in conjunction with the Altegra acquisition.

Total debt increased during the third quarter to $2.8 billion compared to $2.1 billion at December 31, 2014. The increase in debt was due to the partial financing of the Altegra Health acquisition through $395.0 million of incremental term loans under our existing senior credit facilities and the issuance of $250.0 million of 6% senior notes due 2021. 

Cash Flow

Cash flow provided by operations totaled $152.3 million for the nine months ended September 30, 2015 compared to $108.4 million for the same period in the prior year.  Cash flow for the nine months ended September 30, 2015 was positively impacted by business growth, the effects of acquisitions and the timing of collections and related disbursements.

About Emdeon

Emdeon is a leading provider of software and analytics, network solutions and technology-enabled services that optimize communications, payments and actionable insights by leveraging its intelligent healthcare platform, which includes the single largest financial and administrative network in the United States healthcare system. Emdeon's platform and solutions integrate and automate key functions of its payer, provider and pharmacy customers throughout the patient encounter, from consumer engagement and pre-care eligibility and enrollment through payment. By using Emdeon's comprehensive suite of solutions, 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 complex workflows. For more information, visit www.emdeon.com.

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).  Management uses results of operations before such excluded items to evaluate the operational performance of Emdeon as a basis for strategic planning and 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 (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").

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 net income (loss) to the non-GAAP measure of Adjusted EBITDA.  Adjusted EBITDA, as Emdeon defines it, may differ from and may not be comparable to similarly titled measures used by other companies, because Adjusted EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations.  Adjusted EBITDA calculations also are used in Emdeon's credit facilities and indentures, although the adjustments used to calculate Adjusted EBITDA as used in Emdeon's credit facilities and indentures may vary in certain respects among such agreements and from those presented below.

Management uses Adjusted EBITDA 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 this non-GAAP measure assists Emdeon's board of directors, management, lenders and investors in comparing Emdeon's operating performance on a consistent basis because it removes where applicable, the impact of Emdeon's capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Emdeon's operating performance.

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.  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.  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; the anticipated benefits from acquisitions (including Altegra Health) 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 filed on Form 10-K for the year ended December 31, 2014, as well as other reports filed by Emdeon with the Securities and Exchange Commission.

Forward-looking statements made by Emdeon herein, or elsewhere, speak 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)































Three Months


Three Months


Nine Months


Nine Months




Ended


Ended


Ended


Ended




September 30,


September 30,


September 30,


September 30,




2015


2014


2015


2014


Revenue:














Solutions revenue


$

287,946


$

255,015


$

810,162


$

740,226


Postage revenue



89,839



86,593



268,119



256,747


Total revenue



377,785



341,608



1,078,281



996,973


Costs and expenses:














Cost of operations (exclusive of depreciation
and amortization below)



129,385



116,909



371,859



344,741


Development and engineering



11,651



8,117



32,600



24,084


Sales, marketing, general and administrative



56,719



43,873



151,955



147,781


Customer postage



89,839



86,593



268,119



256,747


Depreciation and amortization



85,817



48,448



183,446



141,541


Accretion



6,458



4,452



15,254



9,220


Impairment of long-lived assets



219



3,114



1,180



82,689


Operating income (loss)



(2,303)



30,102



53,868



(9,830)


Interest expense, net



45,541



36,635



121,685



109,741


Contingent consideration



(4,660)



1,976



(4,825)



3,646


Other









(3,968)


Income (loss) before income tax provision (benefit)



(43,184)



(8,509)



(62,992)



(119,249)


Income tax provision (benefit)



(10,278)



4,493



(32,264)



(43,733)


Net income (loss)


$

(32,906)


$

(13,002)


$

(30,728)


$

(75,516)


 

 

Emdeon Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands, except share and per share amounts)

















September 30,


December 31,



2015


2014








ASSETS

Current assets:







Cash and cash equivalents


$

84,958


$

82,306

Accounts receivable, net of allowance for doubtful accounts of $4,425 and $6,377  at September 30, 2015 and December 31, 2014, respectively



278,826



233,791

Deferred income tax assets



15,457



18,893

Prepaid expenses and other current assets



34,354



29,246

Total current assets



413,595



364,236

Property and equipment, net



299,035



244,153

Goodwill



2,291,375



1,702,569

Intangible assets, net



1,694,838



1,539,394

Other assets, net



8,041



9,183

Total assets


$

4,706,884


$

3,859,535

LIABILITIES AND EQUITY

Current liabilities:







Accounts payable


$

27,265


$

16,399

Accrued expenses



209,104



175,206

Deferred revenues



12,005



10,518

Current portion of long-term debt



31,265



27,308

Total current liabilities



279,639



229,431

Long-term debt, excluding current portion



2,750,330



2,135,468

Deferred income tax liabilities



448,929



413,227

Tax receivable agreement obligations to related parties



179,237



163,983

Other long-term liabilities



9,044



15,361

Commitments and contingencies







Equity:







Common stock (par value, $.01), 100 shares authorized and outstanding at September 30, 2015 and December 31, 2014, respectively





Additional paid-in capital



1,318,704



1,149,360

Accumulated other comprehensive income (loss)



(2,931)



(1,955)

Accumulated deficit



(276,068)



(245,340)

Total equity



1,039,705



902,065

Total liabilities and equity


$

4,706,884


$

3,859,535

 

 


Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)



















Nine Months


Nine Months




Ended


Ended




September 30,


September 30,




2015


2014


Operating activities








Net income (loss)


$

(30,728)


$

(75,516)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:








Depreciation and amortization



183,446



141,541


Accretion



15,254



9,220


Equity compensation



6,814



5,914


Deferred income tax expense (benefit)



(28,837)



(44,886)


Amortization of debt discount and issuance costs



7,441



5,804


Contingent consideration



(4,825)



3,646


Impairment of long-lived assets



1,180



82,689


Other



(1,474)



(3,125)


Changes in operating assets and liabilities:








Accounts receivable



6,147



(12,656)


Prepaid expenses and other



(11,674)



(4,490)


Accounts payable



10,517



644


Accrued expenses, deferred revenue and other liabilities



(918)



(375)


Net cash provided by (used in) operating activities



152,343



108,410


Investing activities








Purchases of property and equipment



(39,175)



(37,673)


Payments for acquisitions, net of cash acquired



(717,669)



(87,909)


Other



(3,676)



(97)


Net cash provided by (used in) investing activities



(760,520)



(125,679)


Financing activities








Proceeds from Term Loan Facility



385,411



-


Proceeds from Senior Notes



243,453



-


Proceeds from Revolving Facility



60,000



65,000


Payments on Revolving Facility



(60,000)



(65,000)


Payments on Term Loan Facility



(11,870)



(9,659)


Payment of debt assumed from acquisition



(154,469)



(23,262)


Deferred financing obligation payments



(6,173)



(4,717)


Repurchase of Parent common stock



(4,351)



(960)


Capital contribution from Parent



166,881



3,256


Payment of Contingent Consideration



(5,553)



-


Other



(2,500)



-


Net cash provided by (used in) financing activities



610,829



(35,342)


Net increase (decrease) in cash and cash equivalents



2,652



(52,611)


Cash and cash equivalents at beginning of period



82,306



76,538


Cash and cash equivalents at end of period


$

84,958


$

23,927










 

 

















Emdeon Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(unaudited and amounts in thousands)






































Three Months


Three Months


Nine Months


Nine Months






Ended


Ended


Ended


Ended






September 30,


September 30,


September 30,


September 30,






2015


2014


2015


2014

















Net income (loss)


$

(32,906)


$

(13,002)


$

(30,728)


$

(75,516)

Interest expense, net



45,541



36,635



121,685



109,741

Income tax provision (benefit)



(10,278)



4,493



(32,264)



(43,733)

Depreciation and amortization



85,817



48,448



183,446



141,541

EBITDA



88,174



76,574



242,139



132,033

















EBITDA Adjustments:














Equity compensation



2,631



2,232



6,814



5,914


Acquisition accounting adjustments



386



189



1,384



725


Acquisition-related costs



3,728



1,388



6,882



4,893


Transaction-related costs and advisory fees



1,960



1,683



5,138



4,799


Strategic initiatives, duplicative and
transition costs



2,089



406



5,324



9,759


Severance costs



847



1,836



4,964



5,556


Accretion



6,458



4,452



15,254



9,220


Impairment of long-lived assets



219



3,114



1,180



82,689


Contingent consideration



(4,660)



1,976



(4,825)



3,646


Other non-routine, net



(51)



200



2,978



3,452


EBITDA Adjustments



13,607



17,476



45,093



130,653

Adjusted EBITDA


$

101,781


$

94,050


$

287,232


$

262,686

 

SOURCE Emdeon Inc.

For further information: Julie Loftus Trudell, Senior Vice President, Investor Relations, Direct: 615.932.3445, Cell: 757-642-1995, Email: jtrudell@emdeon.com

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