MEDASSETS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 30, 2013

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Exhibit 99.1

MedAssets Reports Third Quarter and Nine-Month 2013 Financial Results

ATLANTA--(BUSINESS WIRE)--October 30, 2013--MedAssets, Inc. (NASDAQ: MDAS) today announced results for its third quarter and nine-month periods ended September 30, 2013. Third quarter results are summarized in the table below:

 

($ in millions, except per share)

   

3Q’13

   

3Q’12

   

% Change

 

Net Revenue:
Spend and Clinical Resource Mgmt (SCM) $ 103.2 $ 99.1 4.2 %
Revenue Cycle Management (RCM)   63.1   64.3 (1.8 )
Total Net Revenue a 166.4 163.4 1.8
Net income 6.9 5.5 26.3
Earnings per share (EPS) – diluted 0.11 0.09 22.2
Non-GAAP adjusted EBITDA 53.9 57.0 (5.4 )
Non-GAAP adjusted EPS - diluted $ 0.31 $ 0.32 (3.1 )
Weighted average shares - diluted 61.5 59.5 3.3 %
 
 

(a) Column amounts may not add to total due to rounding.

Net Revenue

Third Quarter

Total net revenue for the third quarter of 2013 increased 1.8% to $166.4 million from $163.4 million for the third quarter of 2012. Net revenue in the SCM segment increased 4.2% to $103.2 million from net revenue of $99.1 million for the third quarter of 2012, due to growth in consulting and other service fees as well as group purchasing net administrative fees, partially offset by an expected year-over-year decrease in performance-related fees. Net revenue in the RCM segment decreased 1.8% to $63.1 million from $64.3 million for the third quarter of 2012 as technology-related revenue increased 5.3% while services-related revenue declined 15.8%.

Nine-Month Period

Total net revenue for the first nine months of 2013 increased 7.1% to $510.0 million from $476.3 million for the first nine months of 2012. Net revenue in the SCM segment grew 8.0% to $318.0 million from net revenue of $294.5 million for the first nine months of 2012. Net revenue in the RCM segment increased 5.5% to $191.9 million from $181.8 million for the first nine months of 2012 as technology-related revenue grew 6.6% and services-related revenue increased 3.1%.

Non-GAAP Adjusted EBITDA

Third Quarter

Total non-GAAP adjusted EBITDA was $53.9 million, or 32.4% of total net revenue, for the third quarter of 2013, a 5.4% decrease from total non-GAAP adjusted EBITDA of $57.0 million, or 34.9% of total net revenue, for the third quarter of 2012. This decline was due to an expected year-over-year decrease in performance-related fees, a higher proportion of revenue from SCM consulting and other service fees, as well as higher one-time or non-recurring revenue in the RCM segment in the third quarter last year.

Nine-Month Period

For the first nine months of 2013, total non-GAAP adjusted EBITDA was $168.1 million, or 33.0% of total net revenue, a 10.3% increase over total non-GAAP adjusted EBITDA of $152.4 million, or 32.0% of total net revenue, for the first nine months of 2012.

Net Income and Non-GAAP Adjusted Earnings Per Share (EPS)

Third Quarter

Net income for the third quarter of 2013 was $6.9 million, or $0.11 per share, a 26.3% increase when compared with net income of $5.5 million, or $0.09 per share, for the third quarter of 2012.

Non-GAAP adjusted EPS (defined as EPS excluding non-cash acquisition-related intangible amortization and depreciation, non-cash share-based compensation, certain acquisition and integration-related expenses and non-recurring items on a tax-adjusted basis) was $0.31 per share for the third quarter of 2013, a 3.1% decrease when compared with non-GAAP adjusted EPS of $0.32 per share for the third quarter of 2012.

Nine-Month Period

Net income for the first nine months of 2013 was $19.7 million, or $0.32 per share, versus net income of $7.5 million, or $0.13 per share, for the first nine months of 2012. Non-GAAP adjusted EPS was $1.02 per share for the first nine months of 2013, a 21.4% increase over non-GAAP adjusted EPS of $0.84 per share for the first nine months of 2012.

Cash Flow and Capital Resources

Cash provided by operating activities in the first nine months of 2013 was $109.8 million versus $107.7 million for the same period of 2012. Non-GAAP free cash flow (defined as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs) decreased 2.3% to $63.4 million versus $64.9 million for the first nine months of 2012. The Company prepaid an additional $25.0 million of its Term Loan B in the third quarter of 2013 along with its scheduled principal payments. Its balance sheet at September 30, 2013 included $793.4 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to leverage of approximately 3.6 times non-GAAP adjusted EBITDA for the trailing twelve-month period.

Non-GAAP Contracted Revenue

At September 30, 2013, MedAssets rolling 12-month non-GAAP contracted revenue estimate was $625.1 million (SCM segment - $391.0 million; RCM segment - $234.1 million), a year-over-year increase of 3.6%. Non-GAAP contracted revenue is the Company’s estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period.

2013 Financial Guidance

MedAssets updated its full-year 2013 financial guidance ranges, as follows:

($ in millions, except per share)

 

FY 2013

 

Y-Y % change

Net Revenue:
SCM segment $417.0 - 421.0 6.0 - 7.0%
RCM segment 253.0 - 257.0 2.6 - 4.2
Total Net Revenue 671.0 - 677.0 4.8 - 5.8
Non-GAAP adjusted EBITDA 216.0 - 222.0 4.2 - 7.1%
GAAP EPS – diluted 0.39 - 0.43 nm
Non-GAAP adjusted EPS – diluted $1.27 - 1.31 12.4 -15.9%
 
 

Conference Call Information

Time/Date:

  5:00 p.m. ET today, Wednesday, October 30, 2013

Phone:

800-774-6070 (or 630-691-2753 for international/local callers), PIN code 9449943

Webcast:

http://ir.medassets.com, “Events & Presentations” page; Archive will be available for at least 30 days

Replay:

Call 888-843-7419 or 630-652-3042 (PIN code 9449943)
 

Note: The live webcast will include a slide presentation, a copy of which is available on http://ir.medassets.com in the “Events & Presentations” section in conjunction with today’s event.

About MedAssets

MedAssets (NASDAQ: MDAS) is a healthcare performance improvement company focused on helping providers realize financial and operational gains so that they can sustainably serve the needs of their community. More than 4,200 hospitals and 122,000 non-acute healthcare providers currently use the company’s evidence-based solutions, best practice processes and analytics to help reduce the total cost of care, enhance operational efficiency, align clinical delivery, and improve revenue performance across the care continuum. For more information, please visit www.medassets.com.

Use of Non-GAAP Financial Information

In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the Company supplements its condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; diluted adjusted EPS; free cash flow; and contracted revenue. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures, where possible, are included in the accompanying financial schedules. Also, see "Use of Non-GAAP Financial Measures" following the financial schedules for more information.

Safe Harbor Statement

This Press Release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, and include the intent, belief or current expectations of the Company and its management team with respect to the Company’s future business operations that include, but are not limited to: 2013 financial guidance, revenue growth and other financial projections and forecasts; and the Company’s ability to successfully integrate and capitalize on synergies associated with acquisitions. Any forward-looking statements are not guarantees of future performance, involve risks and uncertainties, and actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to: failure to realize improvements in performance, efficiency and profitability; failure to complete anticipated sales under negotiations; failure to successfully implement revenue backlog; lack of revenue growth; customer losses; and adverse developments with respect to the operation or performance of the Company’s business units or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can also be found in the Company’s Risk Factor disclosures in its Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission and available at http://ir.medassets.com. The Company disclaims any responsibility to update any forward-looking statements.

mdas/F

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
         
In 000s, except per share data Three Months Ended Nine Months Ended
September 30, September 30,
  2013     2012   % Change     2013     2012   % Change  
Revenue:
Administrative fees, net $ 69,426 $ 68,641 1.1 % $ 216,447 $ 200,752 7.8 %
Other service fees   96,945     94,800   2.3 %   293,503     275,589   6.5 %
 
Total net revenue   166,371     163,441   1.8 %   509,950     476,341   7.1 %
 
Operating expenses:
Cost of revenue (inclusive of certain amortization expense) 38,246 34,570 10.6 % 110,010 100,583 9.4 %
Product development expenses 7,173 7,217 -0.6 % 23,649 20,777 13.8 %
Selling and marketing expenses 12,898 12,983 -0.7 % 46,925 46,709 0.5 %
General and administrative expenses 59,095 55,167 7.1 % 174,914 165,577 5.6 %
Acquisition and integration-related expenses 111 1,535 -92.8 % 9,576 4,812 99.0 %
Depreciation 10,926 7,721 41.5 % 29,979 21,416 40.0 %
Amortization of intangibles   15,341     17,840   -14.0 %   47,957     55,251   -13.2 %
 
Total operating expenses   143,790     137,033   4.9 %   443,010     415,125   6.7 %
 
Operating income 22,581 26,408 -14.5 % 66,940 61,216 9.4 %
Other income (expense):
Interest expense (11,814 ) (16,672 ) -29.1 % (35,544 ) (50,722 ) -29.9 %
Other income   118     114   3.5 %   435     449   -3.1 %
 
Income before income taxes 10,885 9,850 10.5 % 31,831 10,943 190.9 %
Income tax expense   3,983     4,386   -9.2 %   12,141     3,467   250.2 %
 
Net income 6,902 5,464 26.3 % 19,690 7,476 163.4 %
 
Basic net income per share   0.12     0.09   33.3 %   0.33     0.13   153.8 %
 
Diluted net income per share $ 0.11   $ 0.09   22.2 % $ 0.32   $ 0.13   146.2 %
 
Weighted average shares — basic 59,936 57,693 3.9 % 59,446 57,239 3.9 %
Weighted average shares — diluted 61,476 59,513 3.3 % 60,912 58,896 3.4 %
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
     
September 30, December 31,
In 000s, except share and per share amounts   2013     2012  
 
ASSETS
Current assets
Cash and cash equivalents $ - $ 13,734
Accounts receivable, net of allowances of $2,518 and $3,046 as of September 30, 2013
and December 31, 2012, respectively 91,152 96,346
Deferred tax asset, current 10,579 11,126
Prepaid expenses and other current assets   24,906     21,791  
 
Total current assets 126,637 142,997
 
Property and equipment, net 155,485 134,361
Other long term assets
Goodwill 1,027,847 1,027,847
Intangible assets, net 282,206 330,163
Other   42,431     42,869  
Other long term assets   1,352,484     1,400,879  
 
Total assets $ 1,634,606   $ 1,678,237  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 17,028 $ 25,487
Accrued revenue share obligation and rebates 78,379 74,274
Accrued payroll and benefits 32,734 40,085
Other accrued expenses 23,562 14,145
Current portion of deferred revenue 51,758 55,756
Current portion of notes payable 15,500 15,500
Current portion of finance obligation   249     233  
 
Total current liabilities 219,210 225,480
 
Notes payable, less current portion 452,875 544,500
Bonds payable 325,000 325,000
Finance obligation, less current portion 8,849 9,046
Deferred revenue, less current portion 14,960 14,393
Deferred tax liability 124,778 125,394
Other long term liabilities   10,119     801  
 
Total liabilities 1,155,791 1,244,614
 
Commitments and contingencies
 
Stockholders’ equity
Common stock, $0.01 par value, 150,000,000 shares authorized; 61,826,000 and 59,324,000
shares issued and outstanding as of September 30, 2013 and December 31, 2012,
respectively 618 593
Additional paid in capital 713,908 688,431
Accumulated deficit   (235,711 )   (255,401 )
 
Total stockholders’ equity   478,815     433,623  
 
Total liabilities and stockholders’ equity $ 1,634,606   $ 1,678,237  
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
  Nine Months Ended
In 000s September 30,     September 30,
  2013     2012  
 
Operating activities:
Net income $ 19,690 $ 7,476
 
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Bad debt expense - 485
Depreciation 31,719 22,769
Amortization of intangibles 47,957 55,668
Impairment of assets 2,403 -
(Gain) loss on sale of assets (123 ) 370
Noncash stock compensation expense 11,783 7,796
Excess tax benefit from exercise of equity awards (5,091 ) (1,191 )
Amortization of debt issuance costs 2,858 5,705
Noncash interest expense, net 349 392
Deferred income tax benefit (69 ) (441 )
 
Changes in assets and liabilities   (1,653 )   8,652  
 
Cash provided by operating activities   109,823     107,681  
 
Investing activities:
Purchases of property, equipment, and software (16,259 ) (11,779 )
Capitalized software development costs   (30,168 )   (31,045 )
 
Cash used in investing activities   (46,427 )   (42,824 )
 
Financing activities:
Borrowings from revolving credit facility - 90,000
Repayment of notes payable (91,625 ) (94,763 )
Repayment of finance obligations (507 ) (507 )
Payment of deferred purchase consideration - (120,136 )
Excess tax benefit from exercise of equity awards 5,091 1,191
Issuance of common stock, net of offering costs 9,911 5,245
Purchase of treasury shares   -     (600 )
 
Cash used in financing activities   (77,130 )   (119,570 )
 
Net decrease in cash and cash equivalents (13,734 ) (54,713 )
Cash and cash equivalents, beginning of period   13,734     62,947  
 
Cash and cash equivalents, end of period $ -   $ 8,234  
 
 
SUPPLEMENTAL REVENUE REPORTING
RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE
(UNAUDITED)
           
In 000s Three Months Ended September 30,
  2013     2012   % Change  
Non-GAAP gross administrative fees $ 115,478 $ 109,335 5.6 %
Other service fees   96,945     94,800   2.3 %
Non-GAAP gross fees 212,423 RSO % 204,135 RSO % 4.1 %
Non-GAAP revenue share obligation (RSO)   (46,052 ) 39.9 %   (40,694 ) 37.2 % 13.2 %
Net revenue $ 166,371 $ 163,441 1.8 %
 
In 000s
Nine Months Ended September 30,
  2013     2012   % Change  
Non-GAAP gross administrative fees $ 351,602 $ 321,351 9.4 %
Other service fees   293,503     275,589   6.5 %
Non-GAAP gross fees 645,105 RSO % 596,940 RSO % 8.1 %
Non-GAAP RSO   (135,155 ) 38.4 %   (120,599 ) 37.5 % 12.1 %
Net revenue $ 509,950 $ 476,341 7.1 %
 
SUPPLEMENTAL SEGMENT REPORTING
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
 
In 000s Three Months Ended September 30,
  2013     2012   % Change  
Net revenue
Spend and Clinical Resource Management (SCM) $ 103,227 $ 99,112 4.2 %
Revenue Cycle Management (RCM)   63,144     64,329   -1.8 %
Total net revenue 166,371 163,441 1.8 %
 
Non-GAAP Adjusted EBITDA % margin % margin
SCM $ 47,387 45.9 % $ 46,340 46.8 % 2.3 %
RCM 15,349 24.3 % 17,835 27.7 % -13.9 %
Corporate   (8,837 )   (7,210 ) 22.6 %
Total non-GAAP Adjusted EBITDA 53,899 32.4 % 56,965 34.9 % -5.4 %
 
In 000s Nine Months Ended September 30,
  2013     2012   % Change  
Net revenue
SCM $ 318,043 $ 294,492 8.0 %
RCM   191,907     181,849   5.5 %
Total net revenue 509,950 476,341 7.1 %
 
Non-GAAP Adjusted EBITDA % margin % margin
SCM $ 144,041 45.3 % $ 132,846 45.1 % 8.4 %
RCM 47,061 24.5 % 41,532 22.8 % 13.3 %
Corporate   (23,020 )   (22,001 ) 4.6 %
Total non-GAAP Adjusted EBITDA 168,082 33.0 % 152,377 32.0 % 10.3 %
 
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
 
 
SUPPLEMENTAL REPORTING OF ADJUSTED EBITDA
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
       
In 000s Three Months Ended September 30, Nine Months Ended September 30,
  2013     2012     2013     2012  
 
Net income $ 6,902 $ 5,464 $ 19,690 $ 7,476
 
Depreciation 10,926 7,721 29,979 21,416
Depreciation (included in cost of revenue) 571 536 1,740 1,353
Amortization of intangibles 15,341 17,840 47,957 55,251
Amortization of intangibles (included in cost of revenue) - 139 - 417
Interest expense, net 11,813 16,672 35,544 50,717
Income tax expense   3,983     4,386     12,141     3,467  
 
Non-GAAP EBITDA $ 49,536 $ 52,758 $ 147,051 $ 140,097
 
Share-based compensation 4,361 2,781 11,783 7,796
Rental income from capitalized building lease (109 ) (109 ) (328 ) (328 )
Acquisition and integration-related expenses   111     1,535     9,576     4,812  
 
Non-GAAP Adjusted EBITDA $ 53,899 $ 56,965 $ 168,082 $ 152,377
 
 
SUPPLEMENTAL NET INCOME AND EARNINGS PER SHARE REPORTING
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
 
In 000s, except per share data Three Months Ended September 30, Nine Months Ended September 30,
  2013     2012     2013     2012  
 
Net income $ 6,902 $ 5,464 $ 19,690 $ 7,476
 
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 15,814 18,453 49,378 57,088
Pre-tax non-cash, share-based compensation 4,361 2,781 11,783 7,796
Pre-tax acquisition and integration-related expenses   111     1,535     9,576     4,812  
Tax effect on pre-tax adjustments b   (8,115 )   (9,108 )   (28,295 )   (27,878 )
 
Non-GAAP adjusted net income $ 19,073   $ 19,125   $ 62,132   $ 49,294  
 
Income Per Share (EPS) - diluted $ 0.11 $ 0.09 $ 0.32 $ 0.13
 
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 0.26 0.30 0.81 0.97
Pre-tax non-cash, share-based compensation 0.07 0.05 0.19 0.13
Pre-tax acquisition and integration-related expenses   -     0.03     0.16     0.08  
Tax effect on pre-tax adjustments b   (0.13 )   (0.15 )   (0.46 )   (0.47 )
 
Non-GAAP adjusted EPS - diluted $ 0.31   $ 0.32   $ 1.02   $ 0.84  
 
Weighted average shares - diluted (in 000s) 61,476 59,513 60,912 58,896
 
 
(b) The Company used a tax rate of 40.0% for the three and nine months ended September 30, 2013 and 2012 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate.
 
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
 
 
SUPPLEMENTAL 2013 ADJUSTED EBITDA GUIDANCE
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
Guidance Range for
Twelve Months Ending
In 000s December 31, 2013
(Low)   (High)
 
Net Income $ 23,900 $ 26,400
 
Depreciation 41,200 42,000
Depreciation (included in cost of revenue) 2,200 2,200
Amortization of intangibles, acquisition-related 62,700 62,700
Interest expense, net 46,600 47,600
Income tax expense   15,100     16,800  
 
Non-GAAP EBITDA 191,700 197,700
 
Share-based compensation 15,100 15,100
Acquisition and integration-related expenses 9,600 9,600
Rental income from capitalized building lease   (400 )   (400 )
 
Non-GAAP adjusted EBITDA $ 216,000   $ 222,000  
 
SUPPLEMENTAL 2013 EARNINGS PER SHARE GUIDANCE
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
Guidance Range for
Twelve Months Ending
In 000s, except per share data December 31, 2013
(Low) (High)
 
Net Income $ 23,900 $ 26,400
 
EPS - diluted 0.39 0.43
 
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 1.05 1.05
Pre-tax non-cash, share-based compensation 0.25 0.25
Pre-tax acquisition and integration-related expenses   0.16     0.16  
 
Tax effect on pre-tax adjustments c   (0.58 )   (0.58 )
 
Non-GAAP adjusted EPS - diluted $ 1.27 $ 1.31
 
Fully diluted weighted average shares outstanding 61,000 61,000
 
 
(c) The Company used a tax rate of 40.0% for the full year ending December 31, 2013 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate.
 
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
 
 
SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES
(UNAUDITED)
         
 
In Millions Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
  2013     2013     2013   2012   2012
 
SCM segment $ 391.0 $ 378.4 $ 374.0 $ 364.7 $ 370.6
RCM segment   234.1     238.4     227.7   236.0   232.8
Total $ 625.1 $ 616.8 $ 601.7 $ 600.7 $ 603.4
 
 
 
SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION
EXPENSE INCLUDED IN OPERATING EXPENSES
(UNAUDITED)
 
In 000s Three Months Ended Nine Months Ended
September 30, September 30,
  2013     2012     2013   2012
Amount of share-based compensation included in:
Cost of revenue $ 864 $ 672 $ 3,040 $ 1,535
Product development expense 130 34 473 123
Selling & marketing expense 975 282 1,944 1,069
General & administrative expense   2,392     1,793     6,326   5,069
 
Total $ 4,361 $ 2,781 $ 11,783 $ 7,796
 
 
SUPPLEMENTAL REPORTING OF FREE CASH FLOW
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
 
In 000s Nine Months Ended
September 30,
  2013     2012  
 
Cash provided by operating activities $ 109,823 $ 107,681
Purchases of property, equipment and software (16,259 ) (11,779 )
Capitalized software development costs   (30,168 )   (31,045 )
 
Non-GAAP free cash flow $ 63,396 $ 64,857
 
 
 
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
 
 
Use of Non-GAAP Financial Measures
In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the Company supplements its condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; diluted adjusted EPS; free cash flow; and contracted revenue.
 
These non-GAAP financial measures may have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. The Company compensates for such limitations by relying primarily on the Company’s GAAP results and using non-GAAP financial measures only supplementally. Where possible, the Company provides reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. Investors are encouraged to carefully review those reconciliations. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by the Company, may differ from and may not be comparable to similarly titled measures used by other companies.
 
Gross fees include gross administrative fees the Company receives pursuant to its vendor contracts and all other fees the Company receives from clients. The Company's revenue share obligation represents the portion of the gross administrative fees the Company is contractually obligated to share with certain of its GPO clients. Net administrative fees (a GAAP measure) are the Company's gross administrative fees net of its revenue share obligation. Total net revenue (a GAAP measure) reflects the Company's gross fees net of its revenue share obligation. These non-GAAP measures assist management and the board of directors and may be helpful to investors in analyzing the Company's growth in its Spend and Clinical Resource Management segment given that administrative fees constitute a material portion of the Company's revenue and are paid to the Company by approximately 1,150 suppliers and other vendors contracted by its GPO, and that the Company's revenue share obligation constitutes a significant outlay to certain of its GPO clients.
 
The Company defines: EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization; and adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and other non-recurring, non-cash or non-operating items. EBITDA and adjusted EBITDA are used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period and provides for a more complete understanding of factors and trends affecting our business. These measures assist management and the board of directors and may be useful to investors in comparing the Company's operating performance consistently over time as it removes the impact of its capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of the management team (taxes), as well as other non-cash (purchase accounting adjustments and imputed rental income) and non-recurring items, from the Company’s operational results. Adjusted EBITDA also removes the impact of non-cash share-based compensation expense and certain acquisition-related charges. EBITDA and adjusted EBITDA are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities.
 
The Company defines adjusted net income as earnings excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain acquisition and integration-related expenses on a tax-adjusted basis and diluted adjusted EPS as earnings per share excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain acquisition and integration-related expenses on a tax-adjusted basis. Adjusted net income and diluted adjusted EPS are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities. Use of this measure for this purpose allows management and the board of directors to analyze the Company’s operating performance on a consistent basis by removing the impact of certain non-cash and non-recurring items from our operations, and by rewarding organic growth and accretive business transactions. As a significant portion of senior management’s incentive based compensation has historically been based on the achievement of certain diluted adjusted EPS growth over time, investors may find such information useful.
 
The Company defines free cash flow as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs. Management believes free cash flow is an important measure because it represents the cash that the Company is able to generate after spending capital on infrastructure to maintain its business and investing in new and upgraded products and services to support future growth. Free cash flow is important because it allows the Company to pursue opportunities that are intended to enhance shareholder value, which could include debt reduction, share repurchases, partnerships, alliances and acquisitions, and/or dividend payments. The Company's definition of free cash flow does not consider non-discretionary cash payments, such as debt.
 
Contracted revenue is a forward-looking operating measure used by management and the board of directors to better understand revenue growth trends within the Company's business segments as it reflects the Company’s current estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period. Such information may be useful to investors in their analysis of the Company's revenue growth trends. A reconciliation to the most directly comparable GAAP measure cannot be performed without unreasonable effort.

CONTACT:
MedAssets
Robert Borchert, 678-248-8194
rborchert@medassets.com

MEDASSETS INC Reports