•

Revenues increased by 9.3% to $151.9 million compared to revenues of $138.9 million for the second quarter of 2017. 

•

Income from continuing operations increased by 31.6% to $22.7 million, compared to $17.2 million for the second quarter of 2017. Adjusted income from continuing operations increased by 32.3% to $22.8 million, compared to $17.2 million for the second quarter of 2017. Adjusted income from continuing operations is a non-GAAP financial measure.  See pages 9-11 for a reconciliation of non-GAAP financial measures.

•

Income from continuing operations per diluted share increased by 26.8% to $0.52, compared to $0.41 for the second quarter of 2017. Adjusted income from continuing operations per diluted share increased by 29.3% to $0.53 compared to $0.41 for the second quarter of 2017. Adjusted income from continuing operations per diluted share is a non-GAAP financial measure.  See pages 9-11 for a reconciliation of non-GAAP financial measures.

•

EBITDA was $35.0 million, or 23.0% of revenues, compared to $31.7 million, or 22.8% of revenues, for the second quarter of 2017.  Adjusted EBITDA was $35.1 million compared to $31.7 million for the second quarter of 2017, both of which exclude restructuring charges. See pages 9-11 for a reconciliation of non-GAAP financial measures.

•

Cash flow from operations was $28.9 million and free cash flow totaled $27.2 million. See pages 9-11 for a reconciliation of non-GAAP financial measures.

Three Months Ended

June 30,

2018

2017

Revenues

$

151.9

138.9

Per diluted share:

Income from continuing operations, GAAP basis

$

0.52

0.41

Restructuring charges

0.00

(0.00

)

Adjusted income from continuing operations, non-GAAP
basis ⁽¹⁾

$

0.53

0.41

Weighted average diluted common shares outstanding
(in thousands)

43,284

42,369

⁽¹⁾

Figures may not add due to rounding.

•

Revenues in a range of $607 million to $625 million;  

•

EBITDA in a range of $139 million to $144 million; and

•

Earnings per diluted share in a range of $2.12 to $2.20.

•

Depreciation expense of approximately $4 million;

•

Interest expense of approximately $8 million, of which approximately $6 million is non-cash expense;

•

An effective tax rate of approximately 27%;

•

Weighted average diluted shares outstanding in a range of 43.5 million to 44.0 million;

•

Free cash flow in excess of $100 million (defined as cash flows from operations less capital expenditures); and

•

Capital expenditures of approximately $10 million.

•

the Company’s ability to sign and implement new contracts for its solutions;

•

the Company’s ability to accurately forecast the costs required to successfully implement new contracts;

•

the Company’s ability to anticipate change and respond to emerging trends for healthcare and the impact of the same on demand for the Company’s services;

•

the Company’s ability to develop new products;

•

the Company’s ability to anticipate and respond to strategic changes, opportunities and emerging trends in the Company’s industry and/or business and to accurately forecast the related impact on the Company’s revenues and earnings;

•

the Company’s ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company’s results of operations;

•

the Company’s ability to accurately forecast the Company’s revenues, margins, earnings and net income, as well as any potential charges that the Company may incur as a result of changes in its business and leadership;

•

the Company’s ability and/or the ability of its customers to enroll participants and to accurately forecast their level of enrollment and participation in the Company’s programs in a manner and within the timeframe anticipated by the Company;

•

the risks associated with deriving a significant concentration of revenues from a limited number of customers;

•

the risks associated with changes in macroeconomic conditions;

•

the risks associated with data privacy or security breaches, computer hacking, network penetration and other illegal intrusions of our information systems or those of third-party vendors or other service providers, which may result in unauthorized access by third parties to customer, employee or Company information or protected health information and lead to enforcement actions, fines and other litigation against the Company;

•

the Company’s ability to effectively compete against other entities, whose financial, research, staff, and marketing resources may exceed the Company’s resources;

•

the impact of severe or adverse weather conditions on member participation in the Company’s programs;

•

the ability of the Company’s customers to maintain the number of covered lives enrolled in the plans during the terms of its agreements;

•

the impact of any new or proposed legislation, regulations and interpretations relating to Medicare or Medicare Advantage;

•

the impact of litigation involving the Company and/or its subsidiaries;

•

the impact on the Company’s operations and/or demand for its services of future state and federal legislation and regulations applicable to the Company’s business, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010;

•

current geopolitical turmoil, the continuing threat of domestic or international terrorism, and the potential emergence of a health pandemic or infectious disease outbreak; and

•

other risks detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and other filings with the Securities and Exchange Commission 

June 30, 2018

December 31, 2017

Current assets:

Cash and cash equivalents

$

66,995

$

28,440

Accounts receivable, net

68,762

55,113

Prepaid expenses

4,249

3,444

Other current assets

4,746

2,180

Cash convertible notes hedges

141,246

134,079

Income taxes receivable

636

39

Total current assets

286,634

223,295

Property and equipment:

Leasehold improvements

10,396

10,384

Computer equipment and related software

22,330

19,508

Furniture and office equipment

8,193

8,194

Capital projects in process

2,649

1,105

43,568

39,191

Less accumulated depreciation

(30,791

)

(28,533

)

12,777

10,658

Other assets

26,069

13,315

Long-term deferred tax asset

9,912

25,166

Intangible assets, net

29,049

29,049

Goodwill, net

334,680

334,680

Total assets

$

699,121

$

636,163

June 30, 2018

December 31, 2017

Current liabilities:

Accounts payable

$

26,622

$

26,804

Accrued salaries and benefits

5,993

15,018

Accrued liabilities

41,762

33,527

Other current liabilities

3,792

984

Cash conversion derivative

141,246

134,079

Current portion of debt

150,007

145,959

Current portion of long-term liabilities

2,244

2,262

Total current liabilities

371,666

358,633

Other long-term liabilities

7,595

5,577

Stockholders' equity:

Preferred stock $.001 par value, 5,000,000 shares authorized, none

   outstanding

—

—

Common stock $.001 par value, 120,000,000 shares authorized,

   39,963,683 and 39,729,580 shares outstanding, respectively

40

40

Additional paid-in capital

352,230

349,243

Accumulated deficit

(4,228

)

(49,148

)

Treasury stock, at cost, 2,254,953 shares in treasury

(28,182

)

(28,182

)

Total stockholders' equity

319,860

271,953

Total liabilities and stockholders' equity

$

699,121

$

636,163

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2017

2018

2017

Revenues

$

151,865

$

138,914

$

301,795

$

279,884

Cost of services (exclusive of depreciation and

   amortization of $995, $648, $1,970 and $1,305,

   respectively, included below)

109,022

99,071

217,299

201,470

Selling, general & administrative expenses

7,756

8,176

16,334

16,538

Depreciation and amortization

1,135

789

2,257

1,576

Restructuring and related charges

118

(52

)

124

685

Operating income

33,834

30,930

65,781

59,615

Interest expense

3,482

4,130

6,936

7,964

Income before income taxes

30,352

26,800

58,845

51,651

Income tax expense

7,669

9,560

14,826

18,931

Income from continuing operations

22,683

17,240

44,019

32,720

Income (loss) from discontinued operations, net of

   income tax

901

(3,673

)

901

(3,893

)

Net income

$

23,584

$

13,567

$

44,920

$

28,827

Earnings (loss) per share - basic:

Continuing operations

$

0.57

$

0.44

$

1.10

$

0.84

Discontinued operations

$

0.02

$

(0.09

)

$

0.02

$

(0.10

)

Net income (loss)

$

0.59

$

0.35

$

1.13

$

0.74

Earnings (loss) per share - diluted:

Continuing operations

$

0.52

$

0.41

$

1.01

$

0.79

Discontinued operations

$

0.02

$

(0.09

)

$

0.02

$

(0.09

)

Net income (loss)

$

0.54

$

0.32

$

1.03

$

0.70

Comprehensive income

$

23,584

$

17,957

$

44,920

$

33,329

Weighted average common shares and equivalents:

Basic

39,899

39,246

39,841

39,158

Diluted

43,284

42,369

43,437

41,456

Six Months Ended June 30,

2018

2017

Cash flows from operating activities:

Income from continuing operations

$

44,019

$

32,720

Income (loss) from discontinued operations

901

(3,893

)

Adjustments to reconcile net income to net cash provided by

   operating activities:

Depreciation and amortization

2,257

1,589

Amortization of deferred loan costs

1,050

1,246

Amortization of debt discount

4,140

3,911

Share-based employee compensation expense

3,250

3,362

(Gain) Loss on sale of TPHS business

(1,304

)

444

Loss on release of cumulative translation adjustment

—

3,044

Deferred income taxes

15,254

18,755

Increase in accounts receivable, net

(13,890

)

(4,398

)

Decrease in other current assets

756

869

Decrease in accounts payable

(1,869

)

(1,480

)

Decrease in accrued salaries and benefits

(9,928

)

(11,953

)

Decrease in other current liabilities

(4,563

)

(2,268

)

Other

1,227

(1,888

)

Net cash flows provided by operating activities

$

41,300

$

40,060

Cash flows from investing activities:

Acquisition of property and equipment

$

(3,673

)

$

(2,244

)

Proceeds from sale of MeYou Health

1,416

—

Net cash flows used in investing activities

$

(2,257

)

$

(2,244

)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

$

13,675

$

274,425

Payments of long-term debt

(14,216

)

(308,496

)

Payments related to tax withholding for share-based compensation

(1,398

)

(1,066

)

Exercise of stock options

1,135

2,757

Deferred loan costs

—

(2,452

)

Change in cash overdraft and other

343

1,558

Net cash flows (used in) provided by financing activities

$

(461

)

$

(33,274

)

Effect of exchange rate changes on cash

$

(27

)

$

1,652

Net increase in cash and cash equivalents

$

38,555

$

6,194

Cash and cash equivalents, beginning of period

$

28,440

$

1,602

Cash and cash equivalents, end of period

$

66,995

$

7,796

Three Months

Ended

June 30, 2018

Three Months

Ended

June 30, 2017

Adjusted EBITDA from continuing operations, non-GAAP basis ⁽¹⁾

$

35,087

$

31,667

Restructuring charges ⁽²⁾

(118

)

52

EBITDA from continuing operations, non-GAAP
basis ⁽³⁾

$

34,969

$

31,719

Depreciation and amortization

(1,135

)

(789

)

Interest expense

(3,482

)

(4,130

)

Income tax expense

(7,669

)

(9,560

)

Income from continuing operations, GAAP basis

$

22,683

$

17,240

(1)

Adjusted EBITDA from continuing operations is a non-GAAP financial measure.  The Company excludes restructuring charges from this measure because of its comparability to the Company's historical operating results.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider adjusted EBITDA from continuing operations in isolation or as a substitute for income from continuing operations determined in accordance with accounting principles generally accepted in the United States.

(2)

Restructuring charges consists of pre-tax charges of $118,000 for the three months ended June 30, 2018 primarily due to additional costs incurred related to a prior restructuring.  Restructuring charges for the three months ended June 30, 2017 consists of adjustments of ($52,000) primarily due to actual employee tax and benefit amounts differing from previous estimates related to a restructuring of our corporate support infrastructure.

(3)

EBITDA from continuing operations is a non-GAAP financial measure.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider adjusted EBITDA from continuing operations in isolation or as a substitute for net income from continuing operations determined in accordance with accounting principles generally accepted in the United States.

Three Months Ended

June 30,

2018

2017

Adjusted income from continuing operations, non-GAAP basis ⁽⁴⁾

$

22,770

$

17,209

Net income (loss) attributable to restructuring
charges ⁽⁵⁾

(87

)

31

Income from continuing operations, GAAP basis

$

22,683

$

17,240

(4)

Adjusted income from continuing operations is a non-GAAP financial measure.  The Company excludes net income (loss) attributable to restructuring charges from this measure because of its comparability to the Company's historical operating results.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider adjusted income from continuing operations as a substitute for income from continuing operations determined in accordance with accounting principles generally accepted in the United States.

(5)

Net income (loss) attributable to restructuring charges consists of pre-tax charges of $118,000 for the three months ended June 30, 2018 and adjustments of ($52,000) for the three months ended June 30, 2017.  See footnote 3 for further explanation.  The tax rates applied to these restructuring charges for the three months ended June 30, 2018 and 2017 were 26.53% and 39.55%, respectively, which represented the combined estimated U.S. federal and state statutory tax rate.

Three Months Ended

June 30,

2018

2017

Adjusted EPS, non-GAAP basis ⁽⁶⁾

$

0.53

$

0.41

EPS (loss) attributable to restructuring charges ⁽⁷⁾

(0.00

)

0.00

EPS, GAAP basis ⁽⁸⁾

$

0.52

$

0.41

(6)

Adjusted EPS is a non-GAAP financial measure.  The Company excludes EPS (loss) attributable to restructuring charges from this measure because of its comparability to the Company's historical operating results.  The Company believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management.  You should not consider adjusted EPS in isolation or as a substitute for EPS determined in accordance with accounting principles generally accepted in the United States.

(7)

EPS (loss) attributable to restructuring charges consists of pre-tax charges of $118,000 for the three months ended June 30, 2018 and adjustments of ($52,000) for the three months ended June 30, 2017.  See footnote 3 for further explanation.  The tax rates applied to these restructuring charges for the three months ended June 30, 2018 and 2017 were 26.53% and 39.55%, respectively, which represented the combined estimated U.S. federal and state statutory tax rate.

(8)

Figures may not add due to rounding.

Three Months

Ended

June 30, 2018

Three Months

Ended

June 30, 2017

Free cash flow, non-GAAP basis ⁽⁹⁾

$

27,207

$

36,026

Acquisition of property and equipment

1,727

1,010

Net cash flows provided by operating activities,
GAAP basis

$

28,934

$

37,036

(9)

Free cash flow is a non-GAAP financial measure and is defined by the Company as net cash flows provided by operating activities less acquisition of property and equipment.  The Company believes free cash flow is a useful measure of performance and an indication of the strength of the Company and its ability to generate cash.  The Company believes it is useful to investors to provide disclosures of its results on the same basis as that used by management.  You should not consider free cash flow in isolation or as a substitute for net cash flows provided by operating activities determined in accordance with U.S. GAAP.

Year Ending

December 31, 2018

EBITDA guidance, non-GAAP basis ⁽¹⁰⁾

$

139 - $144

Depreciation and amortization

(4

)

Interest expense

(8

)

Income tax expense

(34 - 36

)

Net income guidance, GAAP basis

$

93 - 96

(10)

EBITDA guidance is a non-GAAP financial measure.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider EBITDA guidance in isolation or as a substitute for net income guidance determined in accordance with U.S. GAAP.