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8-K - 8-K - Change Healthcare Holdings, Inc.d97035d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

EMDEON REPORTS THIRD QUARTER RESULTS

Solutions Revenue of $287.9 million, Increased 12.9% for the Quarter and 9.4% Year-to-Date

Adjusted EBITDA of $101.8 million, Increased 8.2% for the Quarter and 9.3% Year-to-Date

NASHVILLE, Tenn. (November 6, 2015) – 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 third quarter and nine months ended September 30, 2015, as summarized below:

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
(In millions)    2015     2014     % Change     2015     2014     % Change  

Solutions Revenue (exclusive of postage)

   $ 287.9      $ 255.0        12.9   $ 810.2      $ 740.2        9.4

Net Income (Loss)

   ($ 32.9   ($ 13.0     -153.1   ($ 30.7   ($ 75.5     59.3

Adjusted EBITDA

   $ 101.8      $ 94.1        8.2   $ 287.2      $ 262.7        9.3

Highlights include:

 

    In August, closed the previously announced acquisition of Altegra Health.

 

    In August, shareholders contributed $166.1 million of equity and the Company borrowed an additional $395.0 million under incremental term loan facilities and issued $250.0 million of 6% senior notes due 2021 to fund the acquisition of Altegra Health.

 

    In September, announced plans to rebrand to Change Healthcare™ beginning in the fourth quarter of 2015. The Company accelerated amortization of its existing tradename asset and recognized approximately $31.5 million of amortization expense ($18.5 million net of tax) during the third quarter. Excluding the amortization of the existing trade name, net loss in the third quarter would have been approximately $14.4 million.

“We continue to make progress toward our strategic goals by improving existing capabilities and adding new solutions to better serve our customers,” commented Neil de Crescenzo, president and chief executive officer for Emdeon. “During the quarter, we successfully completed the previously announced acquisition of Altegra Health. This acquisition further expands the breadth and quality of our solutions by adding risk analytics and quality reporting capabilities, as well as enhancing our consumer engagement solutions. Additionally, we announced the plan to rebrand our company as Change Healthcare to better reflect our diverse capabilities and solutions as well as our integral position within the U.S. healthcare system.”


Solutions Revenue

Third quarter solutions revenue was $287.9 million, an increase of 12.9%, compared to $255.0 million for the same period in 2014. This increase in solutions revenue as compared to the prior year period was primarily due to recently acquired and developed solutions, including the Altegra Health acquisition, and 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.

Year-to-date solutions revenue was $810.2 million, an increase of 9.4%, compared to $740.2 million for the same period in 2014.

Net Income/Loss

Third quarter net loss was $32.9 million compared to $13.0 million for the same period in 2014. Net loss was negatively impacted by the Company’s plan to rebrand as Change Healthcare beginning in the fourth quarter of 2015. The Company accelerated amortization of its existing tradename asset and recognized $31.5 million of amortization expense ($18.5 million net of taxes) during the three months ended September 30, 2015. Excluding the amortization of the existing trade name asset, net loss in the third quarter would have been approximately $14.4 million.

Year-to-date net loss was $30.7 million compared to $75.5 million for the same period in 2014.

Non-GAAP Adjusted EBITDA

Third quarter Non-GAAP Adjusted EBITDA increased 8.2% to $101.8 million, or 35.3% of solutions revenue, from $94.1 million, or 36.9% of solutions revenue, for the comparable period in 2014. This increase in Adjusted EBITDA compared to the prior year period is primarily due to business growth, including the impact of acquisitions. Non-GAAP Adjusted EBITDA decreased as a percentage of solutions revenue due to changes in revenue mix.

Year-to-date 2015 Non-GAAP Adjusted EBITDA increased 9.3% to $287.2 million, or 35.5% of solutions revenue, from $262.7 million, or 35.5% of solutions revenue, for the comparable period in 2014.

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.”

Balance Sheet

As of September 30, 2015, cash and cash equivalents were $84.9 million compared to $82.3 million as of December 31, 2014.


In August, shareholders contributed $166.1 million of equity in conjunction with the Altegra acquisition.

Total debt increased during the third quarter to $2.8 billion compared to $2.1 billion at December 31, 2014. The increase in debt was due to the partial financing of the Altegra Health acquisition through $395.0 million of incremental term loans under our existing senior credit facilities and the issuance of $250.0 million of 6% senior notes due 2021.

Cash Flow

Cash flow provided by operations totaled $152.3 million for the nine months ended September 30, 2015 compared to $108.4 million for the same period in the prior year. Cash flow for the nine months ended September 30, 2015 was positively impacted by business growth, the effects of acquisitions and the timing of collections and related disbursements.

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 the single largest financial and administrative network 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.


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.


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 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 statements made by Emdeon herein, or elsewhere, speak 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
Ended
September 30,
2015
    Three Months
Ended
September 30,
2014
    Nine Months
Ended
September 30,
2015
    Nine Months
Ended
September 30,
2014
 

Revenue:

        

Solutions revenue

   $ 287,946      $ 255,015      $ 810,162      $ 740,226   

Postage revenue

     89,839        86,593        268,119        256,747   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     377,785        341,608        1,078,281        996,973   

Costs and expenses:

        

Cost of operations (exclusive of depreciation and amortization below)

     129,385        116,909        371,859        344,741   

Development and engineering

     11,651        8,117        32,600        24,084   

Sales, marketing, general and administrative

     56,719        43,873        151,955        147,781   

Customer postage

     89,839        86,593        268,119        256,747   

Depreciation and amortization

     85,817        48,448        183,446        141,541   

Accretion

     6,458        4,452        15,254        9,220   

Impairment of long-lived assets

     219        3,114        1,180        82,689   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (2,303     30,102        53,868        (9,830

Interest expense, net

     45,541        36,635        121,685        109,741   

Contingent consideration

     (4,660     1,976        (4,825     3,646   

Other

     —          —          —          (3,968
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (43,184     (8,509     (62,992     (119,249

Income tax provision (benefit)

     (10,278     4,493        (32,264     (43,733
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (32,906   $ (13,002   $ (30,728   $ (75,516
  

 

 

   

 

 

   

 

 

   

 

 

 


Emdeon Inc.

Condensed Consolidated Balance Sheets

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

 

     September 30,
2015
    December 31,
2014
 
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 84,958      $ 82,306   

Accounts receivable, net of allowance for doubtful accounts of $4,425 and $6,377 at September 30, 2015 and December 31, 2014, respectively

     278,826        233,791   

Deferred income tax assets

     15,457        18,893   

Prepaid expenses and other current assets

     34,354        29,246   
  

 

 

   

 

 

 

Total current assets

     413,595        364,236   

Property and equipment, net

     299,035        244,153   

Goodwill

     2,291,375        1,702,569   

Intangible assets, net

     1,694,838        1,539,394   

Other assets, net

     8,041        9,183   
  

 

 

   

 

 

 

Total assets

   $ 4,706,884      $ 3,859,535   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY     

Current liabilities:

    

Accounts payable

   $ 27,265      $ 16,399   

Accrued expenses

     209,104        175,206   

Deferred revenues

     12,005        10,518   

Current portion of long-term debt

     31,265        27,308   
  

 

 

   

 

 

 

Total current liabilities

     279,639        229,431   

Long-term debt, excluding current portion

     2,750,330        2,135,468   

Deferred income tax liabilities

     448,929        413,227   

Tax receivable agreement obligations to related parties

     179,237        163,983   

Other long-term liabilities

     9,044        15,361   

Commitments and contingencies

    

Equity:

    

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

     —          —     

Additional paid-in capital

     1,318,704        1,149,360   

Accumulated other comprehensive income (loss)

     (2,931     (1,955

Accumulated deficit

     (276,068     (245,340
  

 

 

   

 

 

 

Total equity

     1,039,705        902,065   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 4,706,884      $ 3,859,535   
  

 

 

   

 

 

 


Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)

 

     Nine Months
Ended
September 30,
2015
    Nine Months
Ended
September 30,
2014
 

Operating activities

    

Net income (loss)

   $ (30,728   $ (75,516

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

    

Depreciation and amortization

     183,446        141,541   

Accretion

     15,254        9,220   

Equity compensation

     6,814        5,914   

Deferred income tax expense (benefit)

     (28,837     (44,886

Amortization of debt discount and issuance costs

     7,441        5,804   

Contingent consideration

     (4,825     3,646   

Impairment of long-lived assets

     1,180        82,689   

Other

     (1,474     (3,125

Changes in operating assets and liabilities:

    

Accounts receivable

     6,147        (12,656

Prepaid expenses and other

     (11,674     (4,490

Accounts payable

     10,517        644   

Accrued expenses, deferred revenue and other liabilities

     (918     (375
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     152,343        108,410   
  

 

 

   

 

 

 

Investing activities

    

Purchases of property and equipment

     (39,175     (37,673

Payments for acquisitions, net of cash acquired

     (717,669     (87,909

Other

     (3,676     (97
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (760,520     (125,679
  

 

 

   

 

 

 

Financing activities

    

Proceeds from Term Loan Facility

     385,411        —     

Proceeds from Senior Notes

     243,453        —     

Proceeds from Revolving Facility

     60,000        65,000   

Payments on Revolving Facility

     (60,000     (65,000

Payments on Term Loan Facility

     (11,870     (9,659

Payment of debt assumed from acquisition

     (154,469     (23,262

Deferred financing obligation payments

     (6,173     (4,717

Repurchase of Parent common stock

     (4,351     (960

Capital contribution from Parent

     166,881        3,256   

Payment of Contingent Consideration

     (5,553     —     

Other

     (2,500     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     610,829        (35,342
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     2,652        (52,611

Cash and cash equivalents at beginning of period

     82,306        76,538   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 84,958      $ 23,927   
  

 

 

   

 

 

 


Emdeon Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(unaudited and amounts in thousands)

 

     Three Months
Ended
September 30,
2015
    Three Months
Ended
September 30,
2014
    Nine Months
Ended
September 30,
2015
    Nine Months
Ended
September 30,
2014
 

Net income (loss)

   $ (32,906   $ (13,002   $ (30,728   $ (75,516

Interest expense, net

     45,541        36,635        121,685        109,741   

Income tax provision (benefit)

     (10,278     4,493        (32,264     (43,733

Depreciation and amortization

     85,817        48,448        183,446        141,541   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     88,174        76,574        242,139        132,033   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA Adjustments:

        

Equity compensation

     2,631        2,232        6,814        5,914   

Acquisition accounting adjustments

     386        189        1,384        725   

Acquisition-related costs

     3,728        1,388        6,882        4,893   

Transaction-related costs and advisory fees

     1,960        1,683        5,138        4,799   

Strategic initiatives, duplicative and transition costs

     2,089        406        5,324        9,759   

Severance costs

     847        1,836        4,964        5,556   

Accretion

     6,458        4,452        15,254        9,220   

Impairment of long-lived assets

     219        3,114        1,180        82,689   

Contingent consideration

     (4,660     1,976        (4,825     3,646   

Other non-routine, net

     (51     200        2,978        3,452   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA Adjustments

     13,607        17,476        45,093        130,653   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 101,781      $ 94,050      $ 287,232      $ 262,686   
  

 

 

   

 

 

   

 

 

   

 

 

 


# # #

Contact:

Julie Loftus Trudell

Senior Vice President, Investor Relations

3055 Lebanon Pike, Suite 1000

Nashville, TN 37214

Direct: 615.932.3445

Cell: 757-642-1995

Email: jtrudell@emdeon.com