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8-K - FORM 8-K - Change Healthcare Holdings, Inc.d890317d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Emdeon Reports Fourth Quarter and Full Year 2014 Results

 

    Fourth Quarter Revenue of $353.4 million and Adjusted EBITDA of $101.7 million

 

    Full Year 2014 Revenue of $1,350.4 million and Adjusted EBITDA of $364.3 million

NASHVILLE, Tenn. (March 16, 2014) – Emdeon Inc., a leading provider of healthcare revenue and payment cycle management and clinical information exchange solutions, today announced financial results for the fourth quarter and year ended December 31, 2014, as summarized below:

 

(In millions)    4Q 2014      4Q 2013      % Change     FY 2014      FY 2013      % Change  

Revenue

   $ 353.4       $ 320.1         10.4   $ 1,350.4       $ 1,242.6         8.7

Net Loss

   $ 0.3       $ 16.5         97.9   $ 75.9       $ 74.5         -1.9

Non-GAAP Adjusted EBITDA

   $ 101.7       $ 85.5         18.8   $ 364.3       $ 324.0         12.5

“We are very pleased with our strong fourth quarter and full year 2014 financial results. The 12.5% increase in Adjusted EBITDA and expansion of Adjusted EBITDA margin over the prior year was largely due to revenue growth and continued productivity improvements throughout our business. Our revenue growth in 2014 was driven by increased sales of our solutions and volume gains due to the increase in the number of insured lives of our customers,” said Neil de Crescenzo, president and chief executive officer for Emdeon. “Throughout 2014, we also made important progress in positioning Emdeon for future success. During the fourth quarter, we completed two strategic acquisitions - Change Healthcare, a leader in healthcare consumer engagement, and Adminisource, a leading provider of healthcare payment and communication solutions. In connection with these acquisitions, we also closed a $160 million incremental secured loan on favorable terms under our existing senior credit facility. Together with the acquisition of Capario earlier in the year, these transactions significantly strengthened our overall portfolio of solutions to better serve our customers entering 2015.”

Fourth quarter revenue was $353.4 million, an increase of 10.4%, compared to $320.1 million for the same period in 2013. This increase in revenue was primarily due to business growth. Net loss for the fourth quarter of 2014 was $0.3 million compared to $16.5 million for the same period in 2013. This improvement in net loss was primarily due to business growth and the absence of a charge related to cancelling a product development project in the prior year period.

Fourth quarter 2014 Non-GAAP Adjusted EBITDA increased 18.8% to $101.7 million, or 28.8% of revenue, from Non-GAAP Adjusted EBITDA of $85.5 million, or 26.7% of revenue, for the comparable period in 2013. This increase in Adjusted EBITDA and as a percentage of revenue compared to the same period in 2013 is primarily due to business growth and productivity improvements throughout the business.

For the year ended December 31, 2014, revenue was $1,350.4 million compared to $1,242.6 million for 2013, an increase of 8.7%. This increase in revenue was primarily due to business growth, accelerated by the impact of healthcare utilization, new solutions and acquisitions. Net loss for 2014 was $75.9 million compared to $74.5 million in 2013.

Full year 2014 Non-GAAP Adjusted EBITDA increased 12.5% to $364.3 million, or 27.0% of revenue, from Non-GAAP Adjusted EBITDA of $324.0 million, or 26.1% of revenue, for the comparable period in 2013. This increase was primarily due to the impact of business growth in higher margin businesses and productivity improvements.

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 revenue and payment cycle management and clinical information exchange solutions, connecting payers, providers, pharmacies and patients in the U.S. healthcare system. Emdeon’s offerings integrate and automate key business and administrative functions of its payer, provider and pharmacy customers throughout the patient encounter. Through the use of 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 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. 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; 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 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.

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.

# # #

Contacts:

Investor Relations

Bob East

Westwicke Partners

443.213.0502

bob.east@westwicke.com or

Emdeon@westwicke.com


Emdeon Inc.

Condensed Consolidated Statements of Operations

(unaudited and amounts in thousands)

 

     Three Months
Ended
December 31,
2014
    Three Months
Ended
December 31,
2013
             
         Year Ended
December 31,
2014
    Year Ended
December 31,
2013
 
          
          

Revenue

   $ 353,440      $ 320,115      $ 1,350,413      $ 1,242,567   

Costs and expenses:

        

Cost of operations (exclusive of depreciation and amortization below)

     205,747        196,264        803,590        759,409   

Development and engineering

     8,793        9,337        33,564        32,538   

Sales, marketing, general and administrative

     49,238        45,239        199,977        168,708   

Depreciation and amortization

     47,678        45,896        189,218        183,839   

Accretion

     5,226        7,759        14,446        26,470   

Impairment of long-lived assets

     479        8,732        83,169        10,619   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

  36,279      6,888      26,449      60,984   

Interest expense, net

  37,088      36,779      146,829      153,169   

Loss on extinguishment of debt

  —        —        —        23,160   

Contingent consideration

  (2,339   (1,948   1,307      (69

Other

  —        (1,208   (3,968   (4,133
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

  1,530      (26,735   (117,719   (111,143

Income tax provision (benefit)

  1,868      (10,262   (41,865   (36,685
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

$ (338 $ (16,473 $ (75,854 $ (74,458
  

 

 

   

 

 

   

 

 

   

 

 

 


Emdeon Inc.

Condensed Consolidated Balance Sheets

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

 

     December 31,
2014
    December 31,
2013
 
      
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 82,306      $ 76,538   

Accounts receivable, net of allowance for doubtful accounts of $6,377 and $3,856 at December 31, 2014 and December 31, 2013, respectively

     233,791        214,247   

Deferred income tax assets

     18,893        6,317   

Prepaid expenses and other current assets

     29,246        27,019   
  

 

 

   

 

 

 

Total current assets

  364,236      324,121   

Property and equipment, net

  244,153      269,470   

Goodwill

  1,702,569      1,502,434   

Intangible assets, net

  1,539,394      1,632,688   

Other assets, net

  20,312      19,169   
  

 

 

   

 

 

 

Total assets

$ 3,870,664    $ 3,747,882   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY   

Current liabilities:

Accounts payable

$ 16,399    $ 8,367   

Accrued expenses

  175,206      131,149   

Deferred revenues

  10,518      10,881   

Current portion of long-term debt

  27,308      31,330   
  

 

 

   

 

 

 

Total current liabilities

  229,431      181,727   

Long-term debt, excluding current portion

  2,146,597      1,999,026   

Deferred income tax liabilities

  413,227      436,263   

Tax receivable agreement obligations to related parties

  163,983      150,496   

Other long-term liabilities

  15,361      11,824   

Commitments and contingencies

Equity:

Common stock (par value, $.01), 100 shares authorized and outstanding at December 31, 2014 and December 31, 2013, respectively

  —        —     

Additional paid-in capital

  1,149,360      1,139,375   

Accumulated other comprehensive income (loss)

  (1,955   (1,343

Accumulated deficit

  (245,340   (169,486
  

 

 

   

 

 

 

Total equity

  902,065      968,546   
  

 

 

   

 

 

 

Total liabilities and equity

$ 3,870,664    $ 3,747,882   
  

 

 

   

 

 

 


Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)

 

     Year Ended
December 31,
2014
    Year Ended
December 31,
2013
 
      
      

Operating activities

    

Net income (loss)

   $ (75,854   $ (74,458

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

    

Depreciation and amortization

     189,218       183,839  

Accretion

     14,446       26,470  

Equity compensation

     7,334       7,021  

Deferred income tax expense (benefit)

     (43,392     (39,555

Amortization of debt discount and issuance costs

     7,847       8,475  

Contingent consideration

     1,307       (69

Gain on sale of cost method investment

     (114     (2,925

Loss on extinguishment of debt

     —          22,828  

Impairment of long-lived assets

     83,169       10,619  

Other

     (2,255     (1,962

Changes in operating assets and liabilities:

    

Accounts receivable

     (6,824     (20,791

Prepaid expenses and other

     536       1,442  

Accounts payable

     4,591       1,335  

Accrued expenses, deferred revenue and other liabilities

     26,650        29,273  

Tax receivable agreement obligations to related parties

     (988     (1,142
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

  205,671      150,400  
  

 

 

   

 

 

 

Investing activities

Purchases of property and equipment

  (55,926   (71,086

Payments for acquisitions, net of cash acquired

  (252,772   (18,291

Proceeds from sale of cost method investment

  677     5,820  

Other

  (139   —     
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

  (308,160   (83,557
  

 

 

   

 

 

 

Financing activities

Proceeds from Term Loan Facility

  157,600     —     

Payments on Term Loan Facility

  (13,279   (12,912

Payment of debt assumed from acquisition

  (25,262   (218

Proceeds from Revolving Facility

  183,000     —     

Payments on Revolving Facility

  (183,000   —     

Payment of loan costs

  (2,096   (2,178

Data sublicense and deferred financing obligation payments

  (10,741   (7,564

Repurchase of Parent common stock

  (1,221   (613

Capital contribution from Parent

  3,256     1,999  

Other

  —        (582
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  108,257     (22,068
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  5,768     44,775  

Cash and cash equivalents at beginning of period

  76,538     31,763  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 82,306   $ 76,538  
  

 

 

   

 

 

 


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 our credit facilities and indentures, although the adjustments used to calculate Adjusted EBITDA as used in our 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
Ended
December 31,

2014
    Three Months
Ended
December 31,

2013
    Year
Ended
December 31,

2014
    Year
Ended
December 31,

2013
 
          
          

Net income (loss)

   $ (338   $ (16,473   $ (75,854   $ (74,458

Interest expense, net

     37,088        36,779        146,829        153,169   

Income tax provision (benefit)

     1,868        (10,262     (41,865     (36,685

Depreciation and amortization

     47,678        45,896        189,218        183,839   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  86,296      55,940      218,328      225,865   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA Adjustments:

Equity compensation

  1,420      1,385      7,334      7,021   

Acquisition accounting adjustments

  370      152      1,035      894   

Acquisition-related costs

  2,394      788      6,927      3,245   

Transaction-related costs and advisory fees

  1,650      2,122      6,448      6,948   

Strategic initiatives, duplicative and transition costs

  2,671      4,004      12,864      8,401   

Severance costs

  2,058      2,384      8,005      7,520   

Loss on extinguishment of debt and other related costs

  —        —        —        24,311   

Accretion

  5,226      7,759      14,446      26,470   

Impairment of long-lived assets

  479      8,732      83,169      10,619   

Contingent Consideration

  (2,339   (1,948   1,307      (69

Other non-routine, net

  1,436      4,230      4,484      2,765   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA Adjustments

  15,365      29,608      146,019      98,125   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ 101,661    $ 85,548    $ 364,347    $ 323,990