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Emdeon Reports Second Quarter Results
Solutions Revenue of $263.8 million, Increased 5.9% for the Quarter and 7.6% Year-to-Date
Adjusted EBITDA of $97.9 million, Increased 8.4% for the Quarter and 10.0% Year-to-Date

NASHVILLE, Tenn., July 24, 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 second quarter and six months ended June 30, 2015, as summarized below:
































Three Months Ended June 30,


Six Months Ended June 30,

(In millions)



2015


2014


% Change


2015


2014


% Change

Solutions Revenue (exclusive of postage)



$263.8


$249.1


5.9%


$522.2


$485.2


7.6%

Net Income (Loss)



$7.9


($59.5)


113.3%


$2.2


($62.5)


103.5%

Adjusted EBITDA



$97.9


$90.3


8.4%


$185.5


$168.6


10.0%

 

Highlights include:

  • Solutions revenue increased 5.9% and 7.6% for the three and six month periods, respectively, compared to the prior year periods led by volume gains within network solutions and the continued acceleration of Emdeon's software and analytics suite of solutions.
  • Adjusted EBITDA increased 8.4% and 10.0% for the three and six month periods, respectively, compared to the prior year periods as a result of revenue growth, operational efficiencies and other productivity improvements.
  • In July, Emdeon entered into a definitive agreement to acquire Altegra Health, a cloud-based analytics platform and related healthcare consumer engagement provider that combines data aggregation and analytics with unique member engagement and reporting capabilities to achieve actionable insights and improved management for value-based healthcare.  The transaction is subject to customary closing conditions and expected to close in the third quarter.

"We are pleased with our financial performance, which resulted in 10.0% Adjusted EBITDA growth for the year-to-date period. During the second quarter, we continued to experience positive sales momentum and network volume gains throughout our platform," commented Neil de Crescenzo, president and chief executive officer for Emdeon. "Going forward, the strong strategic fit of our pending acquisition of Altegra Health will further position Emdeon for success by helping our customers address the needs of value-based healthcare. The combination of Altegra Health's data and analytic solutions and our Intelligent Healthcare Network will accelerate growth in our software and analytics segment and allow us to further expand our suite of solutions to create new, innovative platforms and deliver actionable insights to our customers."

Operating Performance
Second quarter solutions revenue was $263.8 million, an increase of 5.9%, compared to $249.1 million for the same period in 2014. Year-to-date solutions revenue was $522.2 million, an increase of 7.6%, compared to $485.2 million for the same period in 2014. This increase in solutions revenue as compared to the prior year periods was primarily due to 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 and growth in recently developed and acquired solutions.

Second quarter net income was $7.9 million compared to a net loss of $59.5 million for the same period in 2014. Year-to-date net income was $2.2 million compared to a net loss of $62.5 million for the same period in 2014. This increase in net income as compared to the prior year periods was primarily due to the absence of an impairment charge related to the partial loss of a customer contract recognized in the prior year periods and a recent change to state tax laws impacting the current year periods.

Second quarter Non-GAAP Adjusted EBITDA increased 8.4% to $97.9 million, or 37.1% of solutions revenue, from $90.3 million, or 36.3% of solutions revenue, for the comparable period in 2014. Year-to-date 2015 Non-GAAP Adjusted EBITDA increased 10.0% to $185.5 million, or 35.5% of solutions revenue, from $168.6 million, or 34.8% of solutions revenue, for the comparable period in 2014. This increase in Adjusted EBITDA and as a percentage of solutions revenue compared to the prior year periods is primarily due to business growth and productivity improvements throughout the business.

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."

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 one of the largest financial and administrative networks 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.

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 the pending acquisition of 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 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)


















Three Months


Three Months



Six Months



Six Months




Ended


Ended



Ended



Ended




June 30,


June 30,



June 30,



June 30,




2015


2014



2015



2014


Revenue:














Solutions revenue


$

263,805


$

249,077


$

522,216


$

485,211


Postage revenue



90,996



87,081



178,280



170,154


Total revenue



354,801



336,158



700,496



655,365


Costs and expenses:














Cost of operations (exclusive of depreciation and
amortization below)



121,288



115,499



242,474



227,832


Development and engineering



10,123



7,062



20,949



15,968


Sales, marketing, general and administrative



46,973



52,738



95,237



103,911


Customer postage



90,996



87,081



178,280



170,154


Depreciation and amortization



49,515



46,630



97,629



93,093


Accretion



3,818



4,844



8,797



4,768


Impairment of long-lived assets



122



76,508



961



79,576


Operating income (loss)



31,966



(54,204)



56,169



(39,937)


Interest expense, net



38,135



36,543



76,143



73,106


Contingent consideration



1,850



(290)



(165)



1,670


Other





(3,971)





(3,971)


Income (loss) before income tax provision (benefit)



(8,019)



(86,486)



(19,809)



(110,742)


Income tax provision (benefit)



(15,947)



(26,959)



(21,987)



(48,226)


Net income (loss)


$

7,928


$

(59,527)


$

2,178


$

(62,516)


 


Emdeon Inc.

Condensed Consolidated Balance Sheets

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











June 30,


December 31,



2015


2014








ASSETS

Current assets:







Cash and cash equivalents


$

160,376


$

82,306

Accounts receivable, net of allowance for doubtful accounts of $3,470 and
$6,377  at June 30, 2015 and December 31, 2014, respectively



234,140



233,791

Deferred income tax assets



14,055



18,893

Prepaid expenses and other current assets



29,939



29,246

Total current assets



438,510



364,236

Property and equipment, net



222,392



244,153

Goodwill



1,697,891



1,702,569

Intangible assets, net



1,484,772



1,539,394

Other assets, net



18,849



20,312

Total assets


$

3,862,414


$

3,870,664

LIABILITIES AND EQUITY

Current liabilities:







Accounts payable


$

21,896


$

16,399

Accrued expenses



196,494



175,206

Deferred revenues



10,636



10,518

Current portion of long-term debt



27,133



27,308

Total current liabilities



256,159



229,431

Long-term debt, excluding current portion



2,137,214



2,146,597

Deferred income tax liabilities



378,488



413,227

Tax receivable agreement obligations to related parties



172,780



163,983

Other long-term liabilities



12,858



15,361

Commitments and contingencies







Equity:







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





Additional paid-in capital



1,150,667



1,149,360

Accumulated other comprehensive income (loss)



(2,590)



(1,955)

Accumulated deficit



(243,162)



(245,340)

Total equity



904,915



902,065

Total liabilities and equity


$

3,862,414


$

3,870,664

 

Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)












Six Months


Six Months




Ended


Ended




June 30,


June 30,




2015


2014


Operating activities








Net income (loss)


$

2,178


$

(62,516)


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








Depreciation and amortization



97,629



93,093


Accretion



8,797



4,768


Equity compensation



4,183



3,682


Deferred income tax expense (benefit)



(23,213)



(48,695)


Amortization of debt discount and issuance costs



4,579



3,843


Contingent consideration



(165)



1,670


Impairment of long-lived assets



961



79,576


Other



-



(2,029)


Changes in operating assets and liabilities:








Accounts receivable



(1,420)



(25,648)


Prepaid expenses and other



(1,084)



(7,251)


Accounts payable



6,293



1,237


Accrued expenses, deferred revenue and other liabilities



24,860



(7,897)


Net cash provided by (used in) operating activities



123,598



33,833


Investing activities








Purchases of property and equipment



(24,654)



(25,952)


Proceeds/(payments) for acquisitions, net of cash acquired



824



(779)


Other



(90)



36


Net cash provided by (used in) investing activities



(23,920)



(26,695)


Financing activities








Payments on Term Loan Facility



(7,240)



(7,669)


Payment of debt assumed from acquisition



-



(1,877)


Deferred financing obligation payments



(5,939)



(4,176)


Repurchase of Parent common stock



(3,681)



(869)


Capital contribution from Parent



805



2,092


Payment of Contingent Consideration



(5,553)



-


Net cash provided by (used in) financing activities



(21,608)



(12,499)


Net increase (decrease) in cash and cash equivalents



78,070



(5,361)


Cash and cash equivalents at beginning of period



82,306



76,538


Cash and cash equivalents at end of period


$

160,376


$

71,177










 

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.


















Emdeon Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(unaudited and amounts in thousands)







































Three Months



Three Months



Six
Months



Six
Months







Ended



Ended



Ended



Ended







June 30,



June 30,



June 30,



June 30,







2015



2014



2015



2014

















Net income (loss)


$

7,928


$

(59,527)


$

2,178


$

(62,516)

Interest expense, net



38,135



36,543



76,143



73,106

Income tax provision (benefit)



(15,947)



(26,959)



(21,987)



(48,226)

Depreciation and amortization



49,515



46,630



97,629



93,093

EBITDA



79,631



(3,313)



153,963



55,457

















EBITDA Adjustments:














Equity compensation



1,998



1,790



4,183



3,682


Acquisition accounting adjustments



484



224



926



535


Acquisition-related costs



2,385



1,689



3,154



3,554


Transaction-related costs and advisory fees



1,662



1,615



3,179



3,115


Strategic initiatives, duplicative and transition costs



2,278



4,307



3,235



9,353


Severance costs



2,014



973



4,118



3,721


Accretion



3,818



4,844



8,797



4,768


Impairment of long-lived assets



122



76,508



961



79,576


Contingent consideration



1,850



(290)



(165)



1,670


Other non-routine, net



1,648



1,984



3,100



3,205


EBITDA Adjustments



18,259



93,644



31,488



113,179

Adjusted EBITDA


$

97,890


$

90,331


$

185,451


$

168,636

 

SOURCE Emdeon Inc.


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