ATLANTA, Feb. 17, 2015 (GLOBE NEWSWIRE) -- MedAssets, Inc. (Nasdaq:MDAS) today announced results for its fourth quarter and twelve-month period ended December 31, 2014.
Fourth Quarter
| (In millions, except per share) | 4Q'14 | 4Q'13 | % Change |
| Net Revenue: | |||
| Spend and Clinical Resource Mgmt (SCM) | $125.3 | $106.4 | 17.7% |
| Revenue Cycle Management (RCM) | 73.0 | 64.0 | 13.9 |
| Total Net Revenue a | 198.2 | 170.5 | 16.3% |
| Net (loss) income | (42.4) | 7.8 | nm |
| (Loss) earnings per share (EPS) - diluted | (0.71) | 0.13 | nm |
| Non-GAAP adjusted EBITDA | 63.5 | 52.8 | 20.4% |
| Non-GAAP adjusted EPS - diluted | $0.39 | $0.30 | 30.0% |
| (a) Column amounts may not add to total due to rounding. | |||
Net Revenue
Total net revenue for the fourth quarter of 2014 increased 16.3% to $198.2 million from $170.5 million for the fourth quarter of 2013. Excluding the contribution from Sg2 (acquired on September 22, 2014), fourth quarter total net revenue growth was 10.0% on a year-over-year basis.
Net revenue in the SCM segment increased 17.7% to $125.3 million from $106.4 million for the fourth quarter of 2013 due to the addition of Sg2 and growth in other service fees and performance-related fees. Excluding the contribution from Sg2, fourth quarter SCM net revenue growth was 7.7%. Net revenue in the RCM segment increased 13.9% to $73.0 million from $64.0 million for the fourth quarter of 2013 as technology-related revenue (68.6% of RCM segment revenue) increased 7.0%, while services-related revenue rose 32.5%.
Non-GAAP Adjusted EBITDA
Total non-GAAP adjusted EBITDA for the fourth quarter of 2014 increased 20.4% to $63.5 million, or 32.0% of total net revenue, from total non-GAAP adjusted EBITDA of $52.8 million, or 30.9% of total net revenue, for the fourth quarter of 2013.
Net (Loss) Income and Non-GAAP Adjusted (Loss) Earnings Per Share (EPS)
Net loss for the fourth quarter of 2014 was $42.4 million, or a loss of $0.71 per share, compared with net income of $7.8 million, or $0.13 per share, for the fourth quarter of 2013. The net loss in the fourth quarter of 2014 was due to a $52.5 million impairment charge to write off goodwill associated with the company's Revenue Cycle Services business unit, which is described in more detail below.
Non-GAAP adjusted EPS (defined as EPS excluding non-cash acquisition-related intangible amortization and depreciation, non-cash share-based compensation, certain restructuring, acquisition and integration-related expenses and other non-recurring items on a tax-adjusted basis) rose 30.0% to $0.39 per share for the fourth quarter of 2014, compared with $0.30 per share for the fourth quarter of 2013.
Twelve-Month Period
| (In millions, except per share) | FY'14 | FY'13 | % Change |
| Net Revenue: | |||
| Spend and Clinical Resource Mgmt (SCM) | $ 445.6 | $ 424.5 | 5.0% |
| Revenue Cycle Management (RCM) | 274.6 | 256.0 | 7.3 |
| Total Net Revenue b | 720.2 | 680.4 | 5.9% |
| Net (loss) income | (20.4) | 27.4 | nm |
| (Loss) earnings per share (EPS) - diluted | (0.34) | 0.45 | nm |
| Non-GAAP adjusted EBITDA | 234.0 | 220.8 | 6.0% |
| Non-GAAP adjusted EPS - diluted | $1.35 | $1.32 | 2.3% |
| (b) Column amounts may not add to total due to rounding. | |||
Net Revenue
Total net revenue for the twelve months ended December 31, 2014 increased 5.9% to $720.2 million from $680.4 million for full-year 2013. Excluding the contribution from Sg2, full-year total net revenue growth was 4.1% when compared with 2013. Net revenue in the SCM segment grew 5.0% to $445.6 million from $424.5 million for 2013. Excluding the contribution from Sg2, full-year SCM net revenue growth was 2.2%. Net revenue in the RCM segment rose 7.3% to $274.6 million from $256.0 million for full-year 2013 as technology-related revenue (68.8% of RCM segment revenue) increased 4.8% while services-related revenue increased 13.3%.
Non-GAAP Adjusted EBITDA
For the full-year 2014, total non-GAAP adjusted EBITDA was $234.0 million, or 32.5% of total net revenue, a 6.0% increase from total non-GAAP adjusted EBITDA of $220.8 million, or 32.5% of total net revenue, for 2013.
Net (Loss) Income and Non-GAAP Adjusted EPS
Net loss for full-year 2014 was $20.4 million, or a loss of $0.34 per share, which was due to a $52.5 million impairment charge described in more detail below. This compared with net income of $27.4 million, or $0.45 per share, for 2013. Non-GAAP adjusted EPS was $1.35 per share for 2014, a 2.3% increase from $1.32 per share for full-year 2013.
Impairment Charge
The Company recognized an impairment charge of $52.5 million in the fourth quarter of 2014 to write off goodwill associated with its Revenue Cycle Services business unit given lower adjusted EBITDA margin expectations due to revenue growth primarily from lower-margin business office outsourcing.
Cash Flow and Capital Resources
Cash provided by operating activities in the twelve months of 2014 was $139.0 million versus $152.9 million in 2013. 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 to $75.8 million from $94.1 million in 2013. The company's balance sheet at December 31, 2014 included $868.9 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to leverage of approximately 3.7 times total non-GAAP adjusted EBITDA for the trailing twelve-month period.
Non-GAAP Contracted Revenue Estimate
At December 31, 2014, MedAssets' rolling 12-month non-GAAP contracted revenue estimate was $661.9 million (SCM segment - $423.5 million; RCM segment - $238.4 million), a year-over-year increase of 5.8%. 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.
2015 Financial Guidance
MedAssets introduced its full-year 2015 (FY'15) financial guidance ranges, as follows:
| (In millions, except per share) | FY'15 | FY'14 | Y-Y % |
| Guidance | Actual | Change | |
| Net Revenue: | |||
| SCM Segment c | $ 488.0 - 496.0 | $445.6 | 9.5 - 11.3% |
| RCM Segment d | 264.0 - 272.0 | 274.6 | (3.9) - (1.0) |
| Total Net Revenue e | 753.0 - 767.0 | 720.2 | 4.6 - 6.5 |
| Non-GAAP adjusted EBITDA | $ 227.0 - 237.0 | $234.0 | (3.0) - 1.3% |
| Adjusted EBITDA margin % | 29.9 - 31.2% | 32.5% | (263) - (131) bps |
| GAAP EPS - diluted | $ 0.26 - 0.36 | $ (0.34) | nm |
| Non-GAAP adjusted EPS - diluted | $ 1.13 - 1.23 | $1.35 | (16.3) - (8.9)% |
| (c) Assuming the company owned Sg2 on January 1, 2014, SCM segment revenue growth is expected to be 2.2 - 3.9% | |||
| (d) Excluding $28 million in revenue from Barnabas outsourcing agreement that ended December 31,2014, the RCM segment revenue growth is expected to be 7.0 - 10.3% | |||
| (e) Assuming the company owned Sg2 on January 1, 2014 and excluding $28 million in revenue from Barnabas outsourcing agreement that concluded December 31, 2014, total net revenue growth is expected to be 4.0 - 5.9% | |||
Key considerations underlying the company's FY'15 financial guidance include:
- Sg2 full-year net revenue expected to be $47-52 million in FY'15, versus $43.6 million (non-GAAP) in FY'14
- Adjusted EBITDA margin expected to be impacted by revenue growth rate, higher proportion of revenue from advisory solutions and services versus higher-margin GPO and Revenue Cycle Technology, and higher incentive compensation (employee cash bonus) expense of approximately $10 million in FY'15 due to lower SCM segment performance in FY'14
- Depreciation expense in FY'15 expected to be approximately $63 million, compared with $51.2 million in FY'14
John Bardis Retires; Halsey Wise Named Chairman and CEO
Concurrently with the announcement of fourth quarter and full-year 2014 financial results, the company announced that R. Halsey Wise has been appointed chairman of the board of directors and chief executive officer of the company, effective immediately. Mr. Wise joined MedAssets board of directors in March 2014. Mr. Wise succeeds John A. Bardis, who retired as chairman and CEO for personal reasons due to family health issues. Please refer to the press release dated February 17, 2015 with the headline "John A. Bardis to Retire; R. Halsey Wise Named Chairman and CEO of MedAssets" for additional information.
Expansion of Share Repurchase Program
The company's board of directors authorized an extension of the existing share repurchase program to February 29, 2016 and increased the total amount available for the repurchase of shares to $100 million, subject to certain restrictions under the company's credit agreement and bond indenture. The company has repurchased $42.8 million in common stock under the program. The program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, accelerated share repurchases, 10b5-1 trading plans, privately negotiated transactions or block trades, or any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. Please refer to the press release dated February 17, 2015 with the headline "MedAssets Announces Extension of Share Repurchase Plan and Increase to $100 Million" for additional information.
Conference Call Information
Time/Date: 5:00 p.m. ET today, Tuesday, February 17, 2015
Phone: 888-517-2464 (or 630-827-6816 for international/local callers), PIN code 9160777
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 9160777)
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. Approximately 4,500 hospitals and 123,000 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 consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; 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: 2015 financial guidance, revenue growth and other financial projections and forecasts. 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, 2013 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
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
| (UNAUDITED) | ||||||
| In 000s, except per share data | Three Months Ended | Twelve Months Ended | ||||
| December 31, | December 31, | |||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |
| Revenue: | ||||||
| Administrative fees, net | $ 74,238 | $ 73,028 | 1.7% | $ 291,363 | $ 289,475 | 0.7% |
| Other service fees | 124,004 | 97,438 | 27.3% | 428,866 | 390,941 | 9.7% |
| Total net revenue | 198,242 | 170,466 | 16.3% | 720,229 | 680,416 | 5.9% |
| Operating expenses: | ||||||
| Cost of revenue (inclusive of certain amortization expense) | 51,621 | 41,940 | 23.1% | 171,852 | 151,950 | 13.1% |
| Product development expenses | 8,988 | 7,225 | 24.4% | 31,133 | 30,874 | 0.8% |
| Selling and marketing expenses | 17,239 | 14,502 | 18.9% | 67,426 | 61,427 | 9.8% |
| General and administrative expenses | 61,706 | 56,912 | 8.4% | 237,617 | 231,826 | 2.5% |
| Restructuring, acquisition and integration-related expenses | 2,805 | 494 | nm | 7,512 | 10,070 | -25.4% |
| Depreciation | 12,849 | 10,824 | 18.7% | 48,096 | 40,803 | 17.9% |
| Amortization of intangibles | 15,604 | 14,766 | 5.7% | 57,593 | 62,723 | -8.2% |
| Impairment of goodwill | 52,539 | -- | nm | 52,539 | -- | nm |
| Total operating expenses | 223,351 | 146,663 | 52.3% | 673,768 | 589,673 | 14.3% |
| Operating (loss) income | (25,109) | 23,803 | -205.5% | 46,461 | 90,743 | -48.8% |
| Other income (expense): | ||||||
| Interest expense | (11,938) | (11,363) | 5.1% | (45,563) | (46,907) | -2.9% |
| Other (expense) income | (47) | (148) | -68.2% | 315 | 287 | 9.8% |
| (Loss) income before income taxes | (37,094) | 12,292 | -401.8% | 1,213 | 44,123 | -97.3% |
| Income tax expense | 5,310 | 4,541 | 16.9% | 21,603 | 16,682 | 29.5% |
| Net (loss) income | (42,404) | 7,751 | -647.1% | (20,390) | 27,441 | -174.3% |
| Basic net (loss) income per share | (0.71) | 0.13 | -646.2% | (0.34) | 0.46 | -173.9% |
| Diluted net (loss) income per share | $ (0.71) | $ 0.13 | -646.2% | $ (0.34) | $ 0.45 | -175.6% |
| Weighted average shares — basic | 59,513 | 60,470 | -1.6% | 59,811 | 59,705 | 0.2% |
| Weighted average shares — diluted | 59,513 | 61,827 | -3.7% | 59,811 | 61,178 | -2.2% |
| CONSOLIDATED BALANCE SHEETS | ||
| (UNAUDITED) | ||
| December 31, | December 31, | |
| In 000s, except share and per share amounts | 2014 | 2013 |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $ 12,100 | $ 2,790 |
| Accounts receivable, net of allowances of $2,641 and $2,568 as of December 31, 2014 and December 31, 2013, respectively | 127,741 | 87,636 |
| Deferred tax asset, current | 4,224 | 4,535 |
| Prepaid expenses and other current assets | 30,557 | 24,059 |
| Total current assets | 174,622 | 119,020 |
| Property and equipment, net | 170,318 | 157,747 |
| Other long term assets | ||
| Goodwill | 1,058,414 | 1,027,847 |
| Intangible assets, net | 276,407 | 267,440 |
| Other | 37,477 | 41,695 |
| Other long term assets | 1,372,298 | 1,336,982 |
| Total assets | $ 1,717,238 | $ 1,613,749 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Accounts payable | $ 26,910 | $ 24,066 |
| Accrued revenue share obligation and rebates | 91,864 | 77,398 |
| Accrued payroll and benefits | 32,784 | 41,587 |
| Other accrued expenses | 9,040 | 12,126 |
| Current portion of deferred revenue | 76,034 | 46,523 |
| Current portion of notes payable | 29,583 | 15,500 |
| Current portion of finance obligation | 294 | 255 |
| Total current liabilities | 266,509 | 217,455 |
| Notes payable, less current portion | 526,417 | 424,000 |
| Bonds payable | 325,000 | 325,000 |
| Finance obligation, less current portion | 8,475 | 8,781 |
| Deferred revenue, less current portion | 15,418 | 16,369 |
| Deferred tax liability | 115,049 | 121,083 |
| Other long term liabilities | 13,883 | 11,272 |
| Total liabilities | 1,270,751 | 1,123,960 |
| Commitments and contingencies | ||
| Stockholders' equity | ||
| Common stock, $0.01 par value, 150,000,000 shares authorized; 60,199,000 and 61,740,000 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively | 602 | 617 |
| Additional paid in capital | 694,235 | 717,132 |
| Accumulated deficit | (248,350) | (227,960) |
| Total stockholders' equity | 446,487 | 489,789 |
| Total liabilities and stockholders' equity | $ 1,717,238 | $ 1,613,749 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (UNAUDITED) | ||
| Twelve Months Ended | ||
| In 000s | December 31, | December 31, |
| 2014 | 2013 | |
| Operating activities: | ||
| Net (loss) income | $ (20,390) | $ 27,441 |
| Adjustments to reconcile (loss) income from continuing operations to net cash provided by operating activities: | ||
| Bad debt expense | 195 | -- |
| Depreciation | 51,227 | 42,960 |
| Amortization of intangibles | 57,593 | 62,723 |
| Impairment of goodwill | 52,539 | 3,551 |
| Loss on sale of assets | 260 | 90 |
| Noncash stock compensation expense | 17,849 | 14,496 |
| Excess tax benefit from exercise of equity awards | (1,958) | (6,032) |
| Amortization of debt issuance costs | 3,805 | 3,807 |
| Noncash interest expense, net | 409 | 456 |
| Deferred income tax (benefit) expense | (5,564) | 2,013 |
| Changes in assets and liabilities | (16,950) | 1,397 |
| Cash provided by operating activities | 139,015 | 152,902 |
| Investing activities: | ||
| Purchases of property, equipment, and software | (21,034) | (17,643) |
| Capitalized software development costs | (42,224) | (41,175) |
| Acquisitions, net of cash acquired | (141,256) | -- |
| Cash used in investing activities | (204,514) | (58,818) |
| Financing activities: | ||
| Borrowings from revolving credit facility | 216,080 | -- |
| Repayment of notes payable | (25,500) | (120,500) |
| Repayment of revolving credit facility | (74,080) | -- |
| Repayment of finance obligation | (676) | (676) |
| Debt issuance costs | (615) | -- |
| Excess tax benefit from exercise of equity awards | 1,958 | 6,032 |
| Issuance of common stock, net of offering costs | 3,610 | 10,116 |
| Purchase of treasury shares, including shares surrendered for tax withholdings | (45,968) | -- |
| Cash provided by (used in) financing activities | 74,809 | (105,028) |
| Net increase (decrease) in cash and cash equivalents | 9,310 | (10,944) |
| Cash and cash equivalents, beginning of period | 2,790 | 13,734 |
| Cash and cash equivalents, end of period | $ 12,100 | $ 2,790 |
| SUPPLEMENTAL REVENUE REPORTING | |||||
| RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE | |||||
| (UNAUDITED) | |||||
| In 000s | Three Months Ended December 31, | ||||
| 2014 | 2013 | % Change | |||
| Non-GAAP gross administrative fees | $ 127,431 | $ 120,511 | 5.7% | ||
| Other service fees | 124,004 | 97,438 | 27.3% | ||
| Non-GAAP gross fees | 251,435 | RSO % | 217,949 | RSO % | 15.4% |
| Non-GAAP revenue share obligation (RSO) | (53,193) | 41.7% | (47,483) | 39.4% | 12.0% |
| Net revenue | $ 198,242 | $ 170,466 | 16.3% | ||
| In 000s | Twelve Months Ended December 31, | ||||
| 2014 | 2013 | % Change | |||
| Non-GAAP gross administrative fees | $ 494,927 | $ 472,113 | 4.8% | ||
| Other service fees | 428,866 | 390,941 | 9.7% | ||
| Non-GAAP gross fees | 923,793 | RSO % | 863,054 | RSO % | 7.0% |
| Non-GAAP RSO | (203,564) | 41.1% | (182,638) | 38.7% | 11.5% |
| Net revenue | $ 720,229 | $ 680,416 | 5.9% | ||
| SUPPLEMENTAL SEGMENT REPORTING WITH SELECTED NON-GAAP MEASURES | |||||
| (UNAUDITED) | |||||
| In 000s | Three Months Ended December 31, | ||||
| 2014 | 2013 | % Change | |||
| Net revenue | |||||
| Spend and Clinical Resource Management (SCM) | $ 125,282 | $ 106,419 | 17.7% | ||
| Revenue Cycle Management (RCM) | 72,960 | 64,047 | 13.9% | ||
| Total net revenue | $ 198,242 | $ 170,466 | 16.3% | ||
| Non-GAAP Adjusted EBITDA | % margin | % margin | |||
| SCM | $ 54,770 | 43.7% | $ 45,352 | 42.6% | 20.8% |
| RCM | 16,512 | 22.6% | 15,490 | 24.2% | 6.6% |
| Corporate | (7,754) | (8,083) | -4.1% | ||
| Total non-GAAP Adjusted EBITDA | $ 63,528 | 32.0% | $ 52,759 | 30.9% | 20.4% |
| In 000s | Twelve Months Ended December 31, | ||||
| 2014 | 2013 | % Change | |||
| Net revenue | |||||
| SCM | $ 445,605 | $ 424,462 | 5.0% | ||
| RCM | 274,624 | 255,954 | 7.3% | ||
| Total net revenue | $ 720,229 | $ 680,416 | 5.9% | ||
| Non-GAAP Adjusted EBITDA | % margin | % margin | |||
| SCM | $ 195,003 | 43.8% | $ 189,393 | 44.6% | 3.0% |
| RCM | 67,440 | 24.6% | 62,551 | 24.4% | 7.8% |
| Corporate | (28,406) | (31,103) | -8.7% | ||
| Total non-GAAP Adjusted EBITDA | $ 234,037 | 32.5% | $ 220,841 | 32.5% | 6.0% |
| 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) | ||||
| Three Months Ended | Twelve Months Ended | |||
| In 000s | December 31, | December 31, | ||
| 2014 | 2013 | 2014 | 2013 | |
| Net (loss) income | $ (42,404) | $ 7,751 | $ (20,390) | $ 27,441 |
| Depreciation | 12,849 | 10,824 | 48,096 | 40,803 |
| Depreciation (included in cost of revenue) | 965 | 417 | 3,131 | 2,157 |
| Amortization of intangibles | 15,604 | 14,766 | 57,593 | 62,723 |
| Interest expense, net | 11,938 | 11,363 | 45,563 | 46,907 |
| Income tax expense | 5,310 | 4,541 | 21,603 | 16,682 |
| Non-GAAP EBITDA | $ 4,262 | $ 49,662 | $ 155,596 | $ 196,713 |
| Impairment of goodwill | 52,539 | -- | 52,539 | -- |
| Share-based compensation | 3,146 | 2,713 | 17,849 | 14,496 |
| Rental income from capitalized building lease | (109) | (110) | (438) | (438) |
| Purchase accounting adjustments | 885 | -- | 979 | -- |
| Restructuring, acquisition and integration-related expenses | 2,805 | 494 | 7,512 | 10,070 |
| Non-GAAP Adjusted EBITDA | $ 63,528 | $ 52,759 | $ 234,037 | $ 220,841 |
| SUPPLEMENTAL NET INCOME AND EARNINGS PER SHARE REPORTING | ||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||
| (UNAUDITED) | ||||
| Three Months Ended | Twelve Months Ended | |||
| In 000s, except per share data | December 31, | December 31, | ||
| 2014 | 2013 | 2014 | 2013 | |
| Net (loss) income | $ (42,404) | $ 7,751 | $ (20,390) | $ 27,441 |
| Pre-tax non-cash, acquisition-related intangible amortization and depreciation | 15,604 | 15,081 | 57,593 | 64,459 |
| Pre-tax non-cash, share-based compensation | 3,146 | 2,713 | 17,849 | 14,496 |
| Pre-tax restructuring, acquisition and integration-related expenses | 2,805 | 494 | 7,512 | 10,070 |
| Pre-tax non-cash, purchase accounting adjustment | 885 | -- | 979 | -- |
| Non-cash impairment of goodwill f | 52,539 | -- | 52,539 | -- |
| Tax effect on pre-tax adjustments g | (8,978) | (7,314) | (33,574) | (35,609) |
| Non-GAAP adjusted net income | $ 23,597 | $ 18,725 | $ 82,508 | $ 80,857 |
| (Loss) Income Per Share (EPS) - diluted | $ (0.71) | $ 0.13 | $ (0.34) | $ 0.45 |
| Impact of using weighted average shares — diluted h | 0.01 | -- | 0.01 | -- |
| Pre-tax non-cash, acquisition-related intangible amortization and depreciation | 0.26 | 0.24 | 0.94 | 1.05 |
| Pre-tax non-cash, share-based compensation | 0.05 | 0.04 | 0.29 | 0.24 |
| Pre-tax restructuring, acquisition and integration-related expenses | 0.05 | 0.01 | 0.12 | 0.16 |
| Pre-tax non-cash, purchase accounting adjustment | 0.02 | -- | 0.02 | -- |
| Non-cash impairment of goodwill f | 0.86 | -- | 0.86 | -- |
| Tax effect on pre-tax adjustments g | (0.15) | (0.12) | (0.55) | (0.58) |
| Non-GAAP adjusted EPS - diluted | $ 0.39 | $ 0.30 | $ 1.35 | $ 1.32 |
| Weighted average shares - diluted (in 000s) | 60,792 | 61,827 | 61,107 | 61,178 |
| (f) The impairment of goodwill was not tax effected because the Company received no tax benefit as the associated goodwill related to a non-taxable acquisition. | ||||
| (g) The Company used a tax rate of 40.0% for the three and twelve months ended December 31, 2014 and 2013 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate. | ||||
| (h) Given the Company's net loss, GAAP diluted net loss per share is the same as basic net loss per share. However, the Company uses weighted average shares - diluted in its calculation of non-GAAP adjusted EPS. | ||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||||
| SUPPLEMENTAL 2015 ADJUSTED EBITDA GUIDANCE | ||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||
| (UNAUDITED) | ||
| Guidance Range for | ||
| Twelve Months Ending | ||
| In 000s | December 31, 2015 | |
| (Low) | (High) | |
| Net Income | $ 16,400 | $ 22,400 |
| Depreciation | 59,000 | 59,000 |
| Depreciation (included in cost of revenue) | 4,000 | 4,000 |
| Amortization of intangibles | 58,800 | 58,800 |
| Interest expense, net | 47,700 | 47,700 |
| Income tax expense | 10,900 | 14,900 |
| Non-GAAP EBITDA | 196,800 | 206,800 |
| Share-based compensation | 24,600 | 24,600 |
| Restructuring, acquisition and integration-related expenses | 5,100 | 5,100 |
| Purchase accounting adjustments | 900 | 900 |
| Rental income from capitalized building lease | (400) | (400) |
| Non-GAAP adjusted EBITDA | $ 227,000 | $ 237,000 |
| SUPPLEMENTAL 2015 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, 2015 | |
| (Low) | (High) | |
| Net Income | $ 16,400 | $ 22,400 |
| EPS - diluted | 0.26 | 0.36 |
| Pre-tax non-cash, acquisition-related intangible amortization and depreciation | 0.95 | 0.95 |
| Pre-tax non-cash, share-based compensation | 0.40 | 0.40 |
| Pre-tax restructuring, acquisition and integration-related expenses | 0.08 | 0.08 |
| Pre-tax purchase accounting adjustments | 0.02 | 0.02 |
| Tax effect on pre-tax adjustments i | (0.58) | (0.58) |
| Non-GAAP adjusted EPS - diluted j | $ 1.13 | $ 1.23 |
| Fully diluted weighted average shares outstanding | 61,900 | 61,900 |
| (i) The Company used a tax rate of 40.0% for the full year ending December 31, 2015 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate. | ||
| (j) Column amounts may not add to total due to rounding. | ||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||
| SUPPLEMENTAL REVENUE REPORTING | |||||
| RECONCILIATION OF SCM SEGMENT AND CONSOLIDATED NET REVENUE TO NON-GAAP NET REVENUE | |||||
| (UNAUDITED) | |||||
| Fourth Quarter ended | Year ended | ||||
| In Millions | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |
| 2014 | 2013 | 2014 | 2013 | ||
| SCM segment | $ 114.6 | $ 106.4 | $ 433.9 | $ 424.5 | |
| Sg2 (acquired September 22, 2014) | 10.7 | 10.0 | 43.6 | 37.3 | |
| SCM segment total non-GAAP net revenue | 125.3 | 116.4 | 477.5 | 461.8 | |
| RCM segment net revenue | 73.0 | 64.0 | 274.6 | 256.0 | |
| Total consolidated non-GAAP net revenue | $ 198.3 | $ 180.4 | $ 752.1 | $ 717.8 | |
| SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES | |||||
| (UNAUDITED) | |||||
| In Millions | Dec. 31, | Sept. 30, | June 30, | March 31, | Dec. 31, |
| 2014 | 2014 | 2014 | 2014 | 2013 | |
| Revenue Cycle Technology (RCT) | $ 177.4 | $ 177.5 | $ 177.6 | $ 174.4 | $ 173.9 |
| Revenue Cycle Services (RCS) | 61.0 | 58.4 | 66.5 | 69.5 | 65.4 |
| RCM segment Total | 238.4 | 235.9 | 244.1 | 243.9 | 239.4 |
| SCM segment k | 423.5 | 425.3 | 383.8 | 394.2 | 386.0 |
| Total l | $ 661.9 | $ 661.2 | $ 627.9 | $ 638.1 | $ 625.4 |
| SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION | |||||
| EXPENSE INCLUDED IN OPERATING EXPENSES | |||||
| (UNAUDITED) | |||||
| In 000s | Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Amount of share-based compensation included in: | |||||
| Cost of revenue | $ 1,005 | $ 826 | $ 5,510 | $ 3,866 | |
| Product development expense | 67 | 162 | 954 | 635 | |
| Selling & marketing expense | 540 | 307 | 2,622 | 2,251 | |
| General & administrative expense | 1,534 | 1,418 | 8,763 | 7,744 | |
| Total | $ 3,146 | $ 2,713 | $ 17,849 | $ 14,496 | |
| SUPPLEMENTAL REPORTING OF FREE CASH FLOW | |||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | |||||
| (UNAUDITED) | |||||
| In 000s | Twelve Months Ended | ||||
| December 31, | |||||
| 2014 | 2013 | ||||
| Cash provided by operating activities | $139,015 | $152,902 | |||
| Purchases of property, equipment and software | (21,034) | (17,643) | |||
| Capitalized software development costs | (42,224) | (41,175) | |||
| Non-GAAP free cash flow | $ 75,757 | $ 94,084 | |||
| (k) The Contracted Revenue estimate in the SCM segment for the period ended December 31, 2014 and September 30, 2014 includes $32.7 million and $33.5 million, respectively, from Sg2 following its acquisition by the company on September 22, 2014. | |||||
| (l) Column amounts may not add to total due to rounding. | |||||
| 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 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, goodwill impairment, and certain restructuring, acquisition and integration-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, certain restructuring, acquisition and integration-related expenses on a tax-adjusted basis, purchase accounting adjustments on a tax-adjusted basis and diluted adjusted EPS as earnings per share excluding non-cash acquisition-related intangible amortization, depreciation and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain restructuring, 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.