Emdeon Reports Second Quarter 2014 Results -- Revenue of $336.2 million for Second Quarter 2014

-- Adjusted EBITDA of $90.3 million for Second Quarter 2014

NASHVILLE, Tenn., Aug. 7, 2014 /PRNewswire/ -- Emdeon Inc., a leading provider of healthcare revenue and payment cycle management and clinical information exchange solutions, today announced financial results for the second quarter ended June 30, 2014 as summarized below:

 


(In millions)


2Q 2014



2Q 2013


% Change


Revenue

$

336.2


$

305.3


10.1%


Net Loss

$

59.5


$

28.3


-110.6%


Non-GAAP Adjusted EBITDA

$

90.3


$

77.2


17.1%

 

"We are pleased with the 10.1% increase in revenue as compared to the prior year quarter and the acceleration of our revenue growth from the first quarter. Combined with the 17.1% increase in Adjusted EBITDA over the prior year period, our quarterly financial results were strong. The revenue growth was due to ongoing increased sales of our solutions and transaction volume gains due to the increase in the number of insured lives of our customers and improved general economic conditions. During the second quarter, we continued to experience positive momentum throughout our business as evidenced by a robust pipeline and a continued substantial increase in new sales over the prior year quarter," said Neil de Crescenzo, president and chief executive officer for Emdeon. "We are excited to expand our capabilities with the acquisition of Capario that closed in late July and brings a suite of innovative, cloud-based applications. Capario is expected to add to our Adjusted EBITDA in 2014 and further enhances our strategy and forward growth trajectory."

Second quarter revenue was $336.2 million, an increase of 10.1%, compared to $305.3 million for the same period in 2013. This increase in revenue was primarily due to business growth. Net loss for the second quarter of 2014 was $59.5 million compared to $28.3 million for the same period in 2013.  This increase in net loss was primarily due to a non-cash impairment charge related to the anticipated partial loss of a contract in Emdeon's pharmacy services business.

Second quarter 2014 Non-GAAP Adjusted EBITDA increased 17.1% to $90.3 million, or 26.9% of revenue, from Non-GAAP Adjusted EBITDA of $77.2 million, or 25.3% of revenue, for the comparable period in 2013. This increase in Adjusted EBITDA and as a percentage of revenue as compared to the same period in 2013 is primarily due to business growth and productivity improvements throughout the business, partially offset by increased investments related to sales and product development initiatives.

On July 21, 2014, Emdeon completed the acquisition of Capario, Inc., an innovative company providing industry-leading, cloud-based healthcare technology solutions. The acquisition of Capario extends Emdeon's ability to help healthcare providers get reimbursed quickly, accurately and cost-effectively.

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, 2013, 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.   


Emdeon Inc.

Condensed Consolidated Statements of Operations

(unaudited and amounts in thousands)
































Three Months


Three Months


Six Months


Six Months



Ended


Ended


Ended


Ended



June 30,


June 30,


June 30,


June 30,



2014


2013


2014


2013














Revenue

$

336,158


$

305,283


$

655,365


$

604,642

Costs and expenses:













Cost of operations (exclusive of depreciation and
amortization below)














201,398



188,026



395,538



371,449


Development and engineering


7,380



7,626



16,616



15,324


Sales, marketing, general and administrative


53,602



40,658



105,711



79,364


Depreciation and amortization


46,630



43,946



93,093



90,762


Accretion


4,844



7,459



4,768



11,599


Impairment of long-lived assets


76,508



1,893



79,576



1,862

Operating income


(54,204)



15,675



(39,937)



34,282

Interest expense, net


36,543



37,974



73,106



79,389

Loss on extinguishment of debt


-



23,160



-



23,160

Contingent consideration


(290)



-



1,670



-

Other


(3,971)



-



(3,971)



-

Income (loss) before income tax provision (benefit)


(86,486)



(45,459)



(110,742)



(68,267)

Income tax provision (benefit)


(26,959)



(17,191)



(48,226)



(26,547)

Net income (loss)

$

(59,527)


$

(28,268)


$

(62,516)


$

(41,720)

 

 


Emdeon Inc.

Condensed Consolidated Balance Sheets

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
















June 30,


December 31,






2014


2013

ASSETS












Current assets:








Cash and cash equivalents


$

71,177


$

76,538


Accounts receivable, net of allowance for doubtful accounts of 
  $4,325
and $3,856 at June 30, 2014 and December 31,
  2013, respectively








239,895



214,247


Deferred income tax assets



17,809



6,317


Prepaid expenses and other current assets



33,474



27,019

Total current assets



362,355



324,121

Property and equipment, net



242,188



269,470

Goodwill



1,508,593



1,502,434

Intangible assets, net



1,513,894



1,632,688

Other assets, net



20,845



19,169

Total assets


$

3,647,875


$

3,747,882









LIABILITIES AND EQUITY












Current liabilities:








Accounts payable


$

9,245


$

8,367


Accrued expenses



126,687



131,149


Deferred revenues



10,001



10,881


Current portion of long-term debt



23,565



31,330

Total current liabilities



169,498



181,727

Long-term debt, excluding current portion



2,000,548



1,999,026

Deferred income tax liabilities



399,129



436,263

Tax receivable agreement obligations to related parties



155,264



150,496

Other long-term liabilities



13,333



11,824

Commitments and contingencies







Equity:








Common stock (par value, $.01), 100 shares authorized and
  outstanding
at June 30, 2014 and December 31, 2013,
  respectively








-



-


Additional paid-in capital



1,144,280



1,139,375


Accumulated other comprehensive income (loss)



(2,175)



(1,343)


Accumulated deficit



(232,002)



(169,486)

Total equity



910,103



968,546

Total liabilities and equity


$

3,647,875


$

3,747,882


















 

 


Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)














Six Months


Six Months





Ended June 30,


Ended June 30,





2014


2013

Operating activities








Net income (loss)


$

(62,516)


$

(41,720)


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








Depreciation and amortization



93,093



90,762



Accretion



4,768



11,599



Equity compensation



3,682



3,547



Deferred income tax expense (benefit)



(48,695)



(27,451)



Amortization of debt discount and issuance costs


3,843



4,717



Contingent consideration



1,670



-



Loss on extinguishment of debt



-



22,828



Impairment of long-lived assets



79,576



1,862



Other



(2,029)



-


Changes in operating assets and liabilities:









Accounts receivable



(25,648)



(10,208)



Prepaid expenses and other



(7,251)



(697)



Accounts payable



1,237



5,498



Accrued expenses, deferred revenue and other liabilities


(7,897)



23,539



Tax receivable agreement obligations to related parties


-



(104)

Net cash provided by (used in) operating activities



33,833



84,172










Investing activities








Purchases of property and equipment



(25,952)



(33,246)


Payments for acquisitions, net of cash acquired



(779)



(18,291)


Proceeds from sale of cost method investment



36



-

Net cash provided by (used in) investing activities



(26,695)



(51,537)










Financing activities








Debt principal payments



(7,669)



(6,472)


Payment of debt assumed from acquisition



(1,877)



-


Payment of loan costs



-



(2,178)


Repayment of deferred financing arrangements


(4,176)



(1,844)


Repurchase of Parent common stock



(869)



(250)


Capital contribution from Parent



2,092



-


Other



-



(735)

Net cash provided by (used in) financing activities


(12,499)



(11,479)










Net increase (decrease) in cash and cash equivalents


(5,361)



21,156

Cash and cash equivalents at beginning of period



76,538



31,763

Cash and cash equivalents at end of period


$

71,177


$

52,919

 

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 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 are also 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



Three Months



Six Months



Six Months



Ended June 30,



Ended June 30,



Ended June 30,



Ended June 30,



2014



2013



2014



2013













Net income (loss)

$

(59,527)


$

(28,268)


$

(62,516)


$

(41,720)

Interest expense, net


36,543



37,974



73,106



79,389

Income tax provision (benefit)


(26,959)



(17,191)



(48,226)



(26,547)

Depreciation and amortization


46,630



43,946



93,093



90,762

EBITDA


(3,313)



36,461



55,457



101,884













EBITDA Adjustments:













Equity compensation


1,790



1,773



3,682



3,547


Acquisition accounting adjustments


225



216



477



490


Acquisition-related costs


2,114



609



3,521



1,260


Transaction-related costs and advisory fees


1,615



1,825



3,115



3,325


Strategic initiatives, duplicative and transition costs


4,715



1,055



9,808



2,468


Severance and retention costs


1,051



744



3,979



1,629


Loss on extinguishment of debt and













other related costs


-



24,311



-



24,311


Accretion expense


4,844



7,459



4,768



11,599


Impairment of long-lived assets


76,508



1,893



79,576



1,862


Contingent consideration


(290)



-



1,670



-


Other non-routine


1,071



806



2,582



820


EBITDA Adjustments


93,643



40,691



113,178



51,311

Adjusted EBITDA

$

90,330


$

77,152


$

168,635


$

153,195

 

SOURCE Emdeon Inc.



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