Emdeon Reports Third Quarter 2010 Results

NASHVILLE, Tenn., Nov. 8, 2010 /PRNewswire-FirstCall/ -- Emdeon Inc. (NYSE: EM), a leading provider of healthcare revenue and payment cycle management solutions, today announced financial results for the third quarter ended September 30, 2010, as summarized below:

"Emdeon's central position in the U.S. healthcare system and the value-added services we provide have allowed us to continue to grow transaction volumes and market share during 2010 despite the continued challenging healthcare utilization environment," said George Lazenby, Emdeon's chief executive officer.  "During the third quarter, we experienced solid growth in payment services and revenue cycle management, and our continued efforts to drive efficiency and manage costs generated improved EBITDA margins over the prior year period."

Lazenby added, "We also have made significant progress on our strategic initiatives to make healthcare more efficient.  As previously announced, we completed the acquisition of Chamberlin Edmonds in early October, further extending our services in hospital revenue cycle management and establishing Emdeon as an integral leader in government program eligibility and enrollment.  In addition, our web-based physician solution Emdeon Clinician™ achieved Stage I Certification Criteria for Meaningful Use, which positions us to better assist our customers qualify for healthcare reform incentives.  In recognition of the growing importance of public payers, we also completed two major initiatives in the government sector:  Emdeon entered into a strategic relationship with Noridian, which includes a full complement of payment management services to Noridian and arrangements designed to enhance our business development efforts throughout the public payer market; and we renewed our long-standing CSC subcontract to provide information technology services on behalf of the U.S. Department of Defense."

Third quarter revenue was $245.9 million, an increase of 4.4%, compared to $235.5 million for the same period in the prior year.  GAAP operating income for the third quarter of 2010 was $27.9 million compared to $18.0 million for the same period last year, an increase of 55.3%, primarily due to improved operating leverage and lower equity-based compensation expense.  Third quarter Adjusted EBITDA grew 10.5% to $66.5 million, or 27.0% of revenue, from Adjusted EBITDA of $60.2 million, or 25.6% of revenue, in the comparable period last year.  

GAAP net income (before noncontrolling interest) for the third quarter of 2010 was $6.6 million compared to a GAAP net loss of $8.5 million for the same period last year.  GAAP net income per diluted share for the third quarter of 2010 was $0.04 compared to a net loss per share of $0.09 in the same period last year.  The increase in both GAAP net income and GAAP net income per diluted share was driven by improved operating leverage, lower equity-based compensation expense and fluctuations in income tax expense related to valuation allowances and the impact of Emdeon's capital structure.  Adjusted Net Income per fully diluted share for the third quarter of 2010 was $0.23, using a weighted average fully diluted share count of 122.6 million, compared to $0.21, using a weighted average fully diluted share count of 116.2 million, for the same period last year.

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."

Financial Outlook

Emdeon expects its 2010 financial results to be at the low end of its previously announced 2010 financial outlook ranges primarily due to the impact of lower healthcare utilization during the year.  Emdeon's previously announced 2010 annual financial outlook ranges were $1.0 to $1.06 billion for revenue, $266 to $278 million for Adjusted EBITDA and $0.90 to $0.94 for Adjusted Net Income per fully diluted share (using a weighted average share count of 122.4 million).

Notice of Conference Call and Webcast

Emdeon will conduct a conference call/webcast for investors and institutional analysts on Monday, November 8, 2010 at 5:00 pm Eastern Time/4:00 pm Central Time to discuss Emdeon's financial results.  

To access Emdeon's live conference call and webcast, dial 866-783-2141 (857-350-1600 for international calls) using conference code 33894175 or visit the Investors section of Emdeon's website:  www.emdeon.com.  Please go to the website at least 15 minutes prior to the event to register, download and install any necessary audio/video software to access the webcast.  For those unable to listen to the live broadcast, a conference call replay will be available for one week following the conference call by calling 888-286-8010 (617-801-6888 for international calls) using conference code 92200150.  A webcast replay will also be archived on Emdeon's website for at least 30 days following the conference call.

About Emdeon

Emdeon is a leading provider of revenue and payment cycle management solutions, connecting payers, providers and patients in the U.S. healthcare system. Emdeon's product and service offerings integrate and automate key business and administrative functions of its payer and provider customers throughout the patient encounter. Through the use of Emdeon's comprehensive suite of products and services, 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 process. 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, which Emdeon intends to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  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, including but not limited to:  effects of competition, including competition from entities that are customers for certain of Emdeon's products and services; Emdeon's ability to maintain relationships with its customers and channel partners; Emdeon's ability to effectively cross-sell its products and services to existing customers and to continue to generate revenue and maintain profitability by developing and successfully deploying new or updated products and services; pricing pressures on Emdeon's products and services; 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 on Form 10-K for the year ended December 31, 2009, as well as Emdeon's periodic and other reports, filed 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.

The Emdeon Clinician EHR Module is 2011/2012 compliant and has been certified by an ONC-ATCB in accordance with the applicable certification criteria adopted by the Secretary of Health and Human Services. This certification does not represent an endorsement by the U.S. Department of Health and Human Services or guarantee the receipt of incentive payments. Emdeon Inc., 10/22/10, Emdeon Clinician 7.4, 1014201030691, NQF0013, NQF0421/PQRI128, NQF0041/PQRI110, NQF0024, NQF0028, NQF0038, NQF0059/PQRI1, NQF0064/PQRI2, NQF0061/PQRI3.

Explanation of Non-GAAP Financial Measures

Emdeon's management team 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).  These items result from facts and circumstances that vary in frequency and/or impact continuing operations.  In addition, management uses results of operations before such excluded items to evaluate the operational performance of Emdeon as a basis for strategic planning and, in the case of Adjusted EBITDA, 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 income tax provision (benefit), net interest expense and depreciation and amortization), plus certain other non-cash or non-operating items (collectively, "EBITDA Adjustments").

In this release, Emdeon defines Adjusted Net Income as the sum of (i) GAAP net income, (ii) EBITDA Adjustments, (iii) non-cash interest expense and (iv) depreciation and amortization expense resulting from adjustments of assets to fair value in connection with acquisition accounting, less income taxes computed based on a normalized income tax rate. Emdeon defines Adjusted Net Income per fully diluted share as the quotient of Adjusted Net Income and weighted average shares outstanding, assuming all potentially dilutive securities (except those issued in connection with 2010 acquisitions that were not contemplated in the denominator of the Adjusted Net Income per fully diluted share financial outlook range) are fully dilutive and outstanding shares from their date of grant or issuance.

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 GAAP net income and GAAP net income per diluted share to the applicable non-GAAP measures of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per fully diluted share.  These non-GAAP measures, as Emdeon defines them, may not be similar to non-GAAP measures used by other companies.

Management uses Adjusted EBITDA and Adjusted Net Income per fully diluted share 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 these non-GAAP measures assist Emdeon's board of directors, management, lenders and investors in comparing Emdeon's operating performance on a consistent basis because they remove where applicable, the impact of Emdeon's capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Emdeon's operations.

Emdeon also presents Adjusted EBITDA and Adjusted Net Income per fully diluted share on a forward-looking basis as part of its Financial Outlook for 2010.  Emdeon is unable to present a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because management cannot predict, with sufficient reliability, contingent payments relating to past and possible future acquisitions, changes in the fair value of Emdeon's interest rate swap agreement and the effect on income taxes of these and other items attributable to Emdeon's capital structure, all of which are difficult to estimate and primarily dependent on future events.  

SOURCE Emdeon Inc.