·

Revenue was $80.7 million compared to $71.7 million for the same period in the prior year, an increase of 12.6%.  Revenue growth consisted of 11.6% organic growth and 1.0% acquired growth. 

·

Adjusted EBITDA was $30.9 million compared to $26.5 million for the same period in the prior year, an increase of 17%.

·

Net Income was $7.4 million compared to $4.8 million for the same period in the prior year.  Adjusted net income was $13.0 million compared to $9.8 million for the same period in the prior year, an increase of 33%.

·

Diluted net income per share was $0.14 compared to $0.11 for the same period in the prior year.  Adjusted diluted net income per share was $0.25 compared to $0.23 for the same period in the prior year, an increase of 9%. 

·

Revenue for the nine months ended September 30, 2015 was $233.1 million compared to $205.5 million for the same period in the prior year, an increase of 13.4%. Revenue growth consisted of 10.7% organic growth and 2.7% acquired growth.

·

Adjusted EBITDA was $87.4 million compared to $75.6 million for the same period in the prior year, an increase of 16%.

·

Net loss was $(40.4) million compared to net income of $10.5 million for the same period in the prior year.  Adjusted net income was $33.7 million compared to $26.5 million for the same period in the prior year, an increase of 27%.

·

Diluted net loss per share was $(0.85) compared to diluted net income per share of $0.24 for the same period in the prior year.  Adjusted diluted net income per share was $0.71 compared to $0.61 for the same period in the prior year, an increase of 16%. 

·

Because our clients are concentrated in the healthcare industry, our revenue and operating results may be adversely affected by changes in regulations, a business downturn or consolidation in the healthcare industry.

·

If our clients do not continue to purchase our products and solutions, or we are unable to attract new clients, our business and operating results could be materially and adversely affected.

·

The loss of several of our large clients or a significant reduction in business from such clients would adversely affect our operating results.

·

We may not maintain our current rate of revenue growth.

·

We may be unable to effectively execute our growth strategy which could have an adverse effect on our business and competitive position in the industry.

·

We may not be able to develop new products and solutions, or enhancements to our existing products and solutions, or be able to achieve widespread acceptance of new products or solutions.

·

Technological developments could render our products and solutions obsolete or uncompetitive.

·

We may be unable to effectively identify, complete or integrate the operations of future acquisitions, joint ventures, collaborative arrangements or other growth investments.

·

We cannot assure you that we will be able to manage our growth effectively, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

·

We operate in an increasingly competitive market, which could adversely affect our revenue and market share.

·

If we fail to promote and maintain awareness of our brand in a cost-effective manner, our business might suffer.

·

We may not be able to maintain our certification to conduct CMS mandated surveys, and this could adversely affect our business.

·

We depend on our senior management, and we may be materially harmed if we lose any member of our senior management.

·

Data security and integrity are critically important to our business, and actual or attempted breaches of security, unauthorized disclosure of information, denial of service attacks or the perception that personal and/or other sensitive or confidential information in our possession is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

·

Our business and operating results could be adversely affected if we experience business interruptions, errors or failure in connection with our or third-party information technology and communication systems and other software and hardware products used in connection with our business.

·

We may be liable to our clients and may lose clients if we are unable to collect and maintain client data or if we lose client data.

·

Protection of our intellectual property may be difficult and costly, and our inability to protect our intellectual property could reduce the value of our products and solutions.

·

The agreements governing our 2015 Credit Agreement impose significant operating and financial restrictions on our company and our subsidiaries, which may prevent us from capitalizing on business opportunities, and we have pledged substantially all of our assets to secure indebtedness under our 2015 Credit Agreement.

·

Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Revenue

$

$

$

$

Operating expenses:

Cost of revenue

General and administrative

Depreciation and amortization

Loss (gain) on disposal of property and equipment

Total operating expenses

Income (loss) from operations

Other income (expense):

Interest expense, net

Extinguishment of debt

Management fee of related party

 —

Total other income (expense), net

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

$

$

$

$

Earnings (net loss) per share:

Basic

$

$

$

$

Diluted

$

$

$

$

Weighted average shares of common stock outstanding:

Basic

Diluted

September 30,

December 31,

2015

2014

(Unaudited)

ASSETS

Current assets:

Cash

$

$

Accounts receivable, net of allowances of $749 and $531 at September 30, 2015 and December 31, 2014, respectively

Other receivables

Prepaid expenses and other assets

Income taxes receivable

Total current assets

Property and equipment, net

Deferred financing fees, net

Intangible assets, net

Goodwill

Total assets

$

$

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

$

Current portion of capital lease obligations

Accounts payable

Accrued payroll and related liabilities

Accrued expenses and other liabilities

Deferred income taxes

Deferred revenue

Total current liabilities

Long-term debt, less current portion

Capital lease obligations, less current portion

Equity-based compensation liability

 —

Deferred income taxes

Total liabilities

Commitments and contingencies

 —

 —

SHAREHOLDERS' EQUITY

Common stock, $0.01 par value; 350,000,000 and 44,800,000 shares authorized, and 52,661,538 and 43,313,200 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively

Additional paid-in capital

Retained earnings (accumulated deficit)

Total shareholders' equity

Total liabilities and shareholders' equity

$

$

Nine Months Ended

September 30,

2015

2014

Operating activities

Net income (loss)

$

$

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

Depreciation and amortization

Amortization of deferred financing costs and debt discount

Equity-based compensation

Extinguishment of debt

Provision for doubtful accounts

Loss (gain) on disposal of property and equipment

Deferred income taxes

Changes in assets and liabilities:

Accounts receivable

Other receivables

Prepaid expenses and other assets

Accounts payable

Accrued payroll and related liabilities

Accrued expenses and other liabilities

Deferred revenue

Income taxes receivable

Net cash provided by operating activities

Investing activities

Acquisitions of businesses, net of cash acquired

Purchases of property and equipment

Net cash used in investing activities

Financing activities

Proceeds from the issuance of long-term debt

Payments on long-term debt

Deferred financing payments

Payments on capital lease obligations

Proceeds from sale of equity interests

Purchases of equity interests

Taxes paid for net settlements of restricted stock vesting

 —

Distribution payments

 —

Proceeds from the issuance of common stock in initial public offering, net of fees

 —

Net cash used in financing activities

Net increase (decrease) in cash

Cash at beginning of period

Cash at end of period

$

$

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

% Change

2015

2014

% Change

Adjusted revenue (1)

$

$

%  

$

$

%

Adjusted operating expenses:

Cost of revenue (2)

%  

%

General and administrative (3)

%  

%

Depreciation and amortization (4)

%  

%

Loss (gain) on disposal of property and equipment (5)

 —

 —

 —

%  

 —

 —

 —

%

Total adjusted operating expenses

%  

%

Adjusted income from operations

%  

%

Adjusted other income (expense):

Interest expense, net

%  

%

Extinguishment of debt (6)

 —

 —

 —

%  

 —

 —

 —

%

Management fee of related party (7)

 —

 —

 —

%  

 —

 —

 —

%

Total adjusted other income (expense), net

%  

%

Adjusted income before income taxes

%  

%

Provision for income taxes (8)

%  

%

Adjusted net income

$

$

%  

$

$

%

Sum of Non-GAAP adjustments in Footnotes 1-7

Net tax impact of adjustments in Footnotes 1-7 (8)

GAAP net income (loss)

$

$

$

$

Adjusted earnings per share:

Basic

$

$

%  

$

$

%

Diluted

$

$

%  

$

$

%

Weighted average shares of common stock outstanding:

Basic

%  

%

Diluted

%  

%

Adjusted percentages of revenue

Cost of revenue

%  

%  

%  

%  

General and administrative

%  

%  

%  

%  

Income from operations

%  

%  

%  

%  

Net income

%  

%  

%  

%  

Three Months Ended

Nine Months Ended

September 30,

September 30,

Excluded items:

2015

2014

2015

2014

Revenue credits provided to clients as a result of the discontinuance of certain clinical solutions and software applications.

Other non-comparable items

$

 —

$

$

 —

$

Equity-based compensation expense associated with (i) the modification of existing equity awards and forgiveness of loans associated with certain equity awards in connection with the Company’s initial public offering (“IPO”) and liquidating distribution of PG Holdco, LLC, and (ii) equity awards at the time of the Company’s IPO and subsequent equity awards granted to attract and retain employees; expense associated with executive separation agreements and targeted employee headcount reductions; and expenses related to the discontinuance of certain clinical solutions and software applications.

Equity-based compensation, IPO related

$

 —

$

 —

$

$

 —

Equity-based compensation, non-IPO related

Severance

 —

 —

Other non-comparable items

 —

 —

$

$

$

$

Equity-based compensation charges (noted above), transaction costs incurred in connection with completed and potential acquisitions, and other non-comparable expenses which include costs incurred in connection with the Company’s IPO and capital structure and strategic corporate planning.

Equity-based compensation, IPO related

$

 —

$

 —

$

$

 —

Equity-based compensation, non-IPO related

Acquisition expenses

Other non-comparable items

 —

$

$

$

$

Amortization expense associated with acquired intangible assets from business combinations.

Amortization of intangibles

$

$

$

$

Loss (gain) on disposal of property and equipment

$

$

$

$

Write-off of unamortized deferred financing fees, loss on original issuance discount and lender fees in connection with debt refinancings.

Extinguishment of debt

$

$

$

$

Fees paid to the Company’s majority owner under a management agreement prior to the Company’s IPO.  The management agreement was terminated upon the closing of the IPO.

Management fee of related party

$

 —

$

$

$

Provision for income taxes based on the Company’s state and federal effective tax rates, including usual non-deductible expenses.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Net income (loss)

$

$

$

$

Interest expense, net

Provision for income taxes

Depreciation and amortization

EBITDA

Adjustments:

Equity-based compensation (1)

Extinguishment of debt (2)

Management fee of related party (3)

 —

Acquisition expenses (4)

Severance (5)

 —

 —

Loss on disposal of property & equipment

Other non-comparable items (6)

Adjusted EBITDA

$

$

$

$

Adjusted EBITDA Margin

%  

%  

%

(1)

Equity-based compensation expense associated with (i) the modification of existing equity awards and forgiveness of loans associated with certain equity awards in connection with the Company’s initial public offering (“IPO”) and liquidating distribution of PG Holdco, LLC,  and (ii) equity awards at the time of the Company’s IPO and subsequent equity awards granted to attract and retain employees.

(2)

Write-off of unamortized deferred financing fees, loss on original issuance discount and lender fees in connection with debt refinancings.

(3)

Fees paid to the Company’s majority owner under a management agreement prior to the Company’s IPO.  The management agreement was terminated upon the closing of the IPO.

(4)

Transaction costs incurred in connection with completed and potential acquisitions.

(5)

Expense associated with executive separation agreements and targeted employee headcount reductions.

(6)

Other non-comparable expenses related to the discontinuance of certain clinical solutions and software applications, costs incurred in connection with the Company's IPO and capital structure and strategic corporate planning.

Press Ganey Holdings, Inc.

Aria Marketing

Balaji Gandhi (Investors)

Kristen Berry (Media)

781-295-0390

617-332-9999 x238

IR@pressganey.com

kberry@ariamarketing.com