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| 8-K - MMODAL INC. FORM 8-K - MModal Inc. | d290038d8k.htm |
 Investor Marketing
January 2012
1
©
2012
MModal
IP
LLC,
All
rights
reserved
–
Confidential
Information |
 Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
2
Information provided and statements contained in this presentation that are not
purely historical, such as statements regarding the Company’s strategic
priorities, 2011 and 2012 financial and operating performance and M*Modal
transaction benefits, are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements only speak as of the date of this presentation and MModal Inc.
assumes no
obligation
to
update
the
information
included
in
this
presentation.
Statements made in this presentation that are forward-looking in nature may
involve risks and uncertainties. Accordingly, readers are cautioned that any
such forward-looking statements are not guarantees of future performance
and are subject to certain risks, uncertainties and assumptions that are difficult to predict,
including,
without
limitation,
specific
factors
discussed
herein
and
in
other
disclosures
and
public
filings
made
by
MModal Inc., including filings with the SEC. Although M*Modal believes that the
expectations reflected in such forward-looking statements are reasonable
as of the date made, expectations may prove to have been materially
different from the results expressed or implied by such forward-looking statements.
In addition
to
the
US
GAAP
results,
M*Modal
has
provided
certain
non-GAAP
financial
measures
in
this
presentation such as Adjusted EBITDA and Adjusted Net Income. The tables in the
appendix to this presentation include a reconciliation of the historical
non-GAAP financial measures to the most directly comparable
GAAP
financial
measures.
The
Company
does
not
present
in
the
presentation
the
comparable
GAAP financial measure and the related reconciliation for the forward looking
non-GAAP financial measures included in this presentation because
management cannot predict with sufficient reliability certain contingencies
required to estimate the comparable GAAP financial measures.
Safe Harbor Language and
Reconciliation of Non-GAAP Measures |
 3
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Transcription & Technology Leader
165,000 physicians
enabled
2,400 hospitals, clinics
and practices served
850 physician practices
Value-added ecosystem of
leading business partners
MTSOs
Radiology systems
EHR vendors
Healthcare providers
3.9B-4B total billed
equivalent line counts in
2011
Unique ability to support
large, complex providers
Core research &
development in Speech
& Natural Language
Understanding
On demand Collaborative
Intelligence platform
End-to-end workflow and
EHR integration
Extensive global delivery
network
Strong 9-month
performance
Revenues of $328M
Adj. EBITDA of $84M
Adj. Net Inc. per share
of $0.96
14,000+ employees;
global, scalable workforce
Flexible SaaS and service
deployment models
140+ patent licenses in
speech recognition and
understanding
Clients
Capabilities
Scale |
 4
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Clinical Documentation Marketplace
M*Modal is the market leader for transcription
services and the science behind it
Market share over 50% for hospitals with 300-499 licensed beds
and 500+ licensed beds
Own our platform and speech and language understanding
technologies
Large captive domestic and global labor capabilities
Highly fragmented market populated with local & regional MTSOs
Market consolidation
Market changing from labor-intensive, domestic-only service model
More editing & less typing
Increased utilization of speech recognition and offshore resources
EHR implementations leading to near-term product substitution
Local & regional MTSOs increasingly unable to compete in this
environment
Majority of hospitals still insource transcription yet face continued
cost and space utilization pressures
Overall transcription market is mature |
 5
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
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rights
reserved.
–
Confidential
Information
Organic Growth Opportunities
Insource to outsource is largest driver of new business
Outsourcing market growing low single digits
Typical cost savings of 25% to 40% available through outsourcing
Compete, acquire and/or enable MTSOs via our platform
Many MTSOs already typing on our DEP platform
Proven ability to work with larger, competing MTSOs
Existing customers represent additional growth opportunity
No full penetration with any major IDNs
Estimated $250-$285 million market opportunity
Increase margins
Higher utilization of speech recognition and offshore resources
Improve productivity of our global transcription workforce
|
 6
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Changing clinical documentation needs
More detail in content/reporting is required
Search and discovery capabilities
Industry acceptance that structured data has limitations
Regulatory requirements create near-term challenges for customers
Meaningful Use of EHR’s –
2014 for Stage 2
ICD-10 is healthcare’s Y2K event –
October 2013
Quality reporting
Fee-based to value-based transition
Value of clinical documentation beyond capture and recording of
episodic care
Rich clinical data that’s not utilized
Move to real-time patient encounters
Business intelligence advantages (revenue cycle and demographics)
Direct impact on revenue and cash flow
Elevating the Conversation to the C-suite |
 7
Invest in expanded sales force and
segmented sales teams
Transcription, technology, radiology,
coding
Grow ecosystem of partners
New business development and
partnership focus already yielding
results
Leverage existing technology
FESR sales to MTSOs, integrated
solutions offerings
Commercialize IP and new offerings
Access to physicians and content,
contextualization capabilities, content
server as hub, apps and analytics
How We Grow –
Connecting The Dots
Collaborative Intelligence for Health
– ©
2012
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IP
LLC,
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rights
reserved.
–
Confidential
Information |
 Financial Overview
8
©
2012
MModal
IP
LLC,
All
rights
reserved
–
Confidential
Information |
 9
(1) As defined in Appendix.
(Dollars in millions, except per share data)
Strong Quarterly Results
Q3 2010
Q1 2011
Q2 2011
Q3 2011
Total Billed Equivalent Line Counts
(1)
(lines in millions)
854
875
863
1,020
Offshore Transcription Volumes
42%
41%
42%
45%
Transcription Volumes Edited Post
Speech Recognition
67%
72%
74%
76%
Net Revenues
$113.2
$111.2
$108.4
$108.0
Gross Margin
38%
41%
40%
43%
Adjusted EBITDA
(1)
$24.5
$26.7
$27.6
$29.8
Adjusted EBITDA Margin
22%
24%
25%
28%
Adjusted
Net Income per fully diluted share
(1)
$0.26
$0.30
$0.31
$0.34
Free Cash Flow
(1)
$19.2
$13.2
$16.3
$16.8
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
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rights
reserved.
–
Confidential
Information |
 10
(1)
Based on Q3 2011 Adjusted EBITDA annualized.
As of September 30, 2011
Scheduled Amortization and Maturity
(Dollars in millions)
Cash
$37
Debt
$296
Net Debt
$259
Total Net Leverage
2.2 x
(1)
Strong Balance Sheet
No principal amortization obligation until Q2 2012
Significant amount of acquisitions, including M*Modal funded with cash in Q3
2011 Full availability on $25 million revolver as of November 10, 2011
Strong balance sheet to execute on growth strategies
$145
$0
21
22
$21
$115
$87
2011
2012
2013
2014
2015
2016
$
$
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information |
 11
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
2011E (Range)
Net Revenues
$441 -
$444
Total Billed Equivalent Line Counts
(2)
(lines in billions)
3.9 –
4.0
Adjusted EBITDA
(2)
$115.5 -
$118.0
Adjusted Net Income per fully diluted share
(2)
$1.29 -
$1.31
(1)
Issued on November 9, 2011.
(2)
As defined in Appendix.
(Dollars in millions, except per share data)
Financial
Overview
–
2011
Performance
Goals
(1)
Includes benefit in fourth quarter 2011 from completed acquisitions
Acquisition and restructuring charges of $25 million to $27 million
Capital expenditures of $19 million to $22 million |
 12
Net Revenues: low-
to mid-teens percentage increase vs. midpoint of
2011 performance goals
Growth in the core business
New sales efforts: same-store and market share gains
Revenue from integration of M*Modal in transcription platforms
MTSO roll up strategy
Full year benefit from M*Modal and commercialization of its technologies
2H 2012 expected to reflect ramp up of new investments in sales force
Adjusted EBITDA: mid-
to high-single-digit percentage increase vs.
midpoint of 2011 performance goals
Timing of sales force investments and commercialization of technologies weighted
in 1H 2012
Benefits from these investments begin to be realized in 2H 2012
Free Cash Flow: continue to generate significant positive FCF
Sufficient to fund our growth strategies, including MTSO roll ups
Timing of investments to create quarter-to-quarter variability
Preliminary
Outlook
For
2012
(1)
(1)
Issued on November 9, 2011.
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information |
 Appendix
13
©
2012
MModal
IP
LLC,
All
rights
reserved
–
Confidential
Information |
 14
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
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rights
reserved.
–
Confidential
Information
Three Months Ended
Sept. 30, 2011
Sept. 30, 2010
Net income attributable to MModal Inc.
$20,553
$ 5,871
Net income attributable to non-controlling interest
361
2,737
Discontinued operations
-
(155)
Income tax provision (benefit)
(19,226)
229
Interest expense, net
7,081
4,663
Other (income) expense
4,033
(482)
Realized gain on settlement of foreign currencies
93
-
Depreciation and amortization
9,219
9,125
Acquisition and restructuring charges
6,251
1,797
Cost of legal proceedings, settlements and
accommodations
44
633
Share-based compensation and other non-cash awards
1,360
164
Equity in income of affiliated company
-
(70)
Adjusted EBITDA
$29,769
$24,512
Adjusted EBITDA as a percentage of net revenues
27.6%
21.7%
Non-GAAP Reconciliation
(Dollars in thousands)
Reconciliation of Net Income to Adjusted EBITDA (Unaudited
|
 15
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Nine Months Ended
Sept. 30, 2011
Net income attributable to MModal Inc.
$ 35,000
Net income attributable to non-controlling interest
2,138
Discontinued operations
-
Income tax provision (benefit)
(17,196)
Interest expense, net
21,079
Other (income) expense
2,560
Realized gain on settlement of foreign currencies
627
Depreciation and amortization
26,516
Acquisition and restructuring charges
17,520
Cost of legal proceedings, settlements and
accommodations
(6,888)
Share-based compensation and other non-cash awards
2,681
Equity in income of affiliated company
-
Adjusted EBITDA
$84,037
Adjusted EBITDA as a percentage of net revenues
25.6%
Non-GAAP Reconciliation
(Dollars in thousands)
Reconciliation of Net Income to Adjusted EBITDA (Unaudited)
|
 16
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Three Months Ended
June 30, 2011
March 31, 2011
Net income attributable to MModal Inc.
$5,135
$9,312
Net income attributable to non-controlling interest
271
1,506
Income tax provision (benefit)
886
1,144
Interest expense, net
6,961
7,037
Other (income) expense
(530)
(943)
Realized gain on settlement of foreign currencies
377
157
Depreciation and amortization
8,879
8,418
Acquisition and restructuring charges
4,391
6,878
Cost (benefit) of legal proceedings, settlements and
accommodations
581
(7,513)
Share-based compensation and other non-cash awards
611
710
Adjusted EBITDA
$27,562
$26,706
Adjusted EBITDA as a percentage of net revenues
25.4%
24.0%
Non-GAAP Reconciliation
(Dollars in thousands)
Reconciliation of Net Income to Adjusted EBITDA (Unaudited
|
 17
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Three Months Ended
Sept. 30, 2011
Sept. 30, 2010
Adjusted EBITDA
$29,769
$24,512
Consolidated interest expense
(7,081)
(4,663)
Non-cash interest
774
1,482
Capital expenditures
(5,959)
(2,907)
Tax (provision) benefit
19,226
(229)
Deferred tax provision (benefit)
(19,933)
964
Free Cash Flow
$16,796
$19,159
Adjusted Net Income (Unaudited)
Adjusted EBITDA
$29,769
$24,512
Less:
Amortization (excluding acquired intangibles)
4,116
4,894
Cash interest (total expenses less non-cash)
6,307
3,181
Current tax provision (benefit)
707
(735)
Adjusted Net Income
$18,639
$17,172
Adjusted Net Income per share:
Basic
$0.35
$0.34
Diluted
$0.34
$0.26
Non-GAAP Reconciliation
(Dollars in thousands)
Free Cash Flow (Unaudited) |
 18
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
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rights
reserved.
–
Confidential
Information
Three Months Ended
June 30, 2011
March 31, 2011
Adjusted EBITDA
$27,562
$26,706
Consolidated interest expense
(6,961)
(7,037)
Non-cash interest
831
858
Capital expenditures
(4,360)
(6,688)
Tax provision (benefit)
(886)
(1,144)
Deferred tax provision (benefit)
159
546
Free Cash Flow
$16,345
$13,241
Adjusted Net Income (Unaudited)
Adjusted EBITDA
$27,562
$26,706
Less:
Amortization (excluding acquired intangibles)
4,362
3,903
Cash interest (total expenses less non-cash)
6,130
6,179
Current tax provision
727
598
Adjusted Net Income
$16,343
$16,026
Adjusted Net Income per share:
Basic
$0.32
$0.31
Diluted
$0.31
$0.30
(Dollars in thousands)
Free Cash Flow (Unaudited)
Non-GAAP Reconciliation |
 19
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
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rights
reserved.
–
Confidential
Information
Nine Months Ended
Sept. 30, 2011
Adjusted EBITDA
$84,037
Less:
Amortization (excluding acquired intangibles)
12,381
Cash interest (total expenses less non-cash)
18,616
Current tax provision
2,032
Adjusted Net Income
$51,008
Adjusted Net Income per share:
Basic
$0.99
Diluted
$0.96
(Dollars in thousands)
Adjusted Net Income (Unaudited)
Non-GAAP Reconciliation |
 20
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
All
rights
reserved.
–
Confidential
Information
Three Months Ended
Sept. 30, 2011
Sept. 30, 2010
MModal Inc. Shares
Basic outstanding
51,195
35,158
Effect of dilutive options
1,283
13,963
Diluted shares
52,478
49,121
Proforma impact of fully dilutive shares
(1)
Basic
1,814
15,775
Diluted
2,023
16,005
Proforma Shares
Basic
53,009
50,933
Diluted
54,501
65,126
(1)
Fully dilutive shares includes common stock equivalents which consists of stock
options, restricted stock issuable to certain key employees, shares issued to former
principal stockholders, shares issued to former principal stockholders and shares
issued in our initial public offering, our private exchange offer, our public exchange
offer and our short-form merger with MedQuist Inc.
Non-GAAP Reconciliation |
 21
Collaborative Intelligence for Health
– ©
2012
MModal
IP
LLC,
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rights
reserved.
–
Confidential
Information
Three Months Ended
June 30, 2011
March 31, 2011
MModal Inc. Shares
Basic outstanding
49,168
40,933
Effect of dilutive options
1,391
1,047
Diluted shares
50,559
41,980
Proforma impact of fully dilutive shares
(1)
Basic
1,929
10,683
Diluted
2,176
10,913
Proforma Shares
Basic
51,097
51,616
Diluted
52,735
52,893
(1)
Fully dilutive shares includes common stock equivalents which consists of stock
options, restricted stock issuable to certain key employees, shares issued to former
principal stockholders, shares issued to former principal stockholders and shares
issued in our initial public offering, our private exchange offer, our public exchange
offer and our short-form merger with MedQuist Inc.
Non-GAAP Reconciliation |
 22
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IP
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Confidential
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Non-GAAP Financial Measures
We
have
provided
the
Company's
Adjusted
EBITDA
and
Adjusted
Net
Income,
each
a
non-GAAP
financial
measure,
on
a
forward-looking
basis
in
this document.
We are unable to present a quantitative reconciliation of these
forward-looking non-GAAP financial measures to the most directly
comparable
forward-looking
GAAP
financial
measure
because
management
cannot
predict,
with
sufficient
reliability,
contingencies
relating
to
potential
changes
in
tax
valuation
allowances,
potential
changes
to
customer
accommodation
accruals,
potential
restructuring
impacts,
contingencies related to past and future acquisitions, and changes in fair values
of our derivative instruments, all of which are difficult to estimate
primarily due to dependencies on future events.
Adjusted Net Income
Adjusted Net Income, a non-GAAP financial measure, is defined by the Company as
Adjusted EBITDA less amortization expense for capitalized intangible assets
(excluding acquired intangibles), less interest expense (net of non-cash interest), and less current tax provision. We measure
Adjusted Net Income based on Proforma Shares Outstanding (see below). Management
believes that utilization of Adjusted Net Income is an important
non-GAAP financial measure of our normalized operating results. Proforma
Shares Outstanding For purposes of evaluating our results on per-share
metrics, many of our computations utilize proforma share computations. Our measure of
proforma shares includes our Basic and Diluted share computations utilized for GAAP
purposes, plus our estimate of the impacts of common stock equivalents which
consist of stock options, restrictive stock issuable to certain key employees, shares issued to former principal stockholders,
shares
issued
to
former
principal
stockholders
and
shares
issued
in
our
initial
public
offering,
our
private
exchange
offer,
our
public
exchange
offer
and our short-form merger with MedQuist Inc..
Free Cash Flow
Free Cash Flow, a non-GAAP financial measure, is defined by the Company as
Adjusted EBITDA less consolidated interest expense (net of non-
cash
interest),
less
capital
expenditures
(including
capitalized
software
development
costs),
and
less
current
tax
provision
(net
of
deferred
tax
provision). Management believes that utilization of Free Cash Flow is an
important non-GAAP measure of the Company’s ability to convert
operating results into cash.
Total Billed Equivalent Line Counts
Total
billed
equivalent
line
counts
is
defined
by
the
Company
as
the
number
of
lines
and
line
equivalents
billed
for
the
period,
as
defined
by
a
customer’s contract, and includes volume transcribed or edited on the
Company’s transcription platforms, as well as technology volume (speech
recognition). Non-GAAP Financial Definitions
|
 23
Collaborative Intelligence for Health
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Confidential
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Adjusted EBITDA
Adjusted EBITDA is a metric used by management to measure operating performance.
Adjusted EBITDA is defined as net income attributable to MModal Inc., as
applicable, plus net income attributable to noncontrolling interests, income taxes, net interest expense, depreciation and
amortization, cost (benefit) of legal proceedings, settlements, and accommodations,
acquisition and restructuring charges, discontinued operations, equity in
income of affiliated company, share-based compensation and other non-cash awards, realized gain on settlement of foreign currency
hedges, excluding other (income) expense. The realized gain on settlement of
foreign currency hedges is a component of other (income) expense, as
reported in the Consolidated Statements of Operations. Share-based compensation and other non-cash awards represents only the portion of
such expense that is a component of selling, general and administrative expense, as
reported in the Consolidated Statements of Operations, as it excludes such
expense attributable to the Company’s restructuring actions. We
present
Adjusted
EBITDA
as
a
supplemental
performance
measure
because
we
believe
it
facilitates
operating
performance
comparisons
from
period to period and company to company by backing out the following:
•
potential
differences
caused
by
variations
in
capital
structures
(affecting
interest
expense,
net),
tax
positions
(such
as
the
impact
on
periods
or
companies for changes in effective tax rates), the age and book depreciation of
fixed assets (affecting depreciation expense); •
the impact of non-cash charges; and
•
the impact of acquisition and integration related charges, restructuring charges,
and certain unusual or nonrecurring items. Because Adjusted EBITDA
facilitates internal comparisons of operating performance on a more consistent basis, we also use Adjusted EBITDA in
measuring
our
performance
relative
to
that
of
our
competitors.
Adjusted
EBITDA
is
not
a
measurement
of
our
financial
performance
under
GAAP
and should not be considered as an alternative to net income, operating income or
any other performance measures derived in accordance with GAAP
or
as
an
alternative
to
cash
flow
from
operating
activities
as
measures
of
our
profitability
or
liquidity.
We
understand
that
although
Adjusted
EBITDA is frequently used by securities analysts, lenders and others in their
evaluation of companies, Adjusted EBITDA has limitations as an
analytical
tool,
and
you
should
not
consider
it
in
isolation,
or
as
a
substitute
for
analysis
of
our
results
as
reported
under
GAAP.
Some
of
these
limitations are:
•
Adjusted EBITDA does not reflect our cash expenditures or future requirements for
capital expenditures or contractual commitments; •
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working
capital needs; •
Although depreciation is a non-cash charge, the assets being depreciated will
often have to be replaced in the future, and Adjusted EBITDA does not reflect
any cash requirements for such replacements; and •
Other
companies
in
our
industry
may
calculate
Adjusted
EBITDA
differently
than
we
do,
limiting
its
usefulness
as
a
comparative
measure.
Non-GAAP Financial Definitions |