2014

Emdeon Reports Third Quarter 2013 Results - Revenue of $323.9 million for Third Quarter 2013

- Adjusted EBITDA of $85.2 million for Third Quarter 2013

NASHVILLE, Tenn., Nov. 8, 2013 /PRNewswire/ -- Emdeon Inc., a leading provider of healthcare revenue and payment cycle management and clinical information exchange solutions, today announced financial results for the third quarter ended September 30, 2013 as summarized below:


(In millions)


3Q 2013



3Q 2012



% Change


Revenue

$

323.9


$

297.1



9.0%


Net Income (Loss)

$

(16.3)


$

(15.2)



-7.3%


Non-GAAP Adjusted EBITDA

$

85.2


$

79.2



7.7%

"In my first few weeks at Emdeon, I am pleased to find so many opportunities to accelerate our growth trajectory," said Neil de Crescenzo, president and chief executive officer for Emdeon. "During the third quarter, we continued to see positive momentum as a result of our strategic growth initiatives in sales across all of our lines of business, and in key growth areas such as payment integrity and revenue cycle solutions."

Third quarter revenue was $323.9 million, an increase of 9.0%, compared to $297.1 for the same period in 2012. Net loss for the third quarter of 2013 was $16.3 million compared to $15.2 million for the same period in 2012.  The increase in revenue as compared to the prior year period was primarily due to the impact of business growth, including the June 2013 acquisition of Goold Health Systems. The increase in net loss compared to the same period in 2012 was primarily due to a change in the company's estimated effective tax rate, partially offset by the impact of business growth and lower interest expense as a result of the repricing of Emdeon's term debt in April 2013.

Third quarter 2013 Non-GAAP Adjusted EBITDA increased 7.7% to $85.2 million, or 26.3% of revenue, from Non-GAAP Adjusted EBITDA of $79.2 million, or 26.7% of revenue, for the comparable period in 2012.  This increase in Adjusted EBITDA as compared to the same period in 2012 is primarily due to business growth, partially offset by increased investments related to sales and other strategic growth initiatives.

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 and patients in the U.S. healthcare system. Emdeon's 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 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, 2012, 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


Nine Months


Nine Months



Ended


Ended


Ended


Ended



September 30,


September 30,


September 30,


September 30,



2013


2012


2013


2012














Revenue

$

323,906


$

297,075


$

941,093


$

877,577

Costs and expenses:













Cost of operations (exclusive of depreciation and amortization below)


197,378



181,818



580,501



534,463


Development and engineering


7,896



8,644



23,263



26,320


Sales, marketing, general and administrative


44,524



37,634



126,580



113,395


Depreciation and amortization


47,181



48,572



137,943



140,354


Accretion


7,112



2,758



18,712



15,104

Operating income


19,815



17,649



54,094



47,941

Interest expense, net


37,000



41,898



116,390



130,539

Loss on extinguishment of debt


-



-



23,160



21,853

Other


(1,046)



-



(1,046)



-

Income (loss) before income tax provision (benefit)


(16,139)



(24,249)



(84,410)



(104,451)

Income tax provision (benefit)


126



(9,093)



(26,422)



(36,364)

Net income (loss)

$

(16,265)


$

(15,156)


$

(57,988)


$

(68,087)

 


Emdeon Inc.

Condensed Consolidated Balance Sheets

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














September 30,


December 31,





2013


2012

ASSETS

Current assets:







Cash and cash equivalents

$

61,563


$

31,763


Accounts receivable, net of allowance for doubtful accounts of $4,624and $3,585 at September 30, 2013 and December 31, 2012, respectively


209,039



190,021


Deferred income tax assets


5,578



4,184


Prepaid expenses and other current assets


29,339



28,160

Total current assets


305,519



254,128

Property and equipment, net


279,195



264,852

Goodwill


1,502,361



1,488,134

Intangible assets, net


1,658,049



1,730,089

Other assets, net


19,538



29,694

Total assets

$

3,764,662


$

3,766,897








LIABILITIES AND EQUITY

Current liabilities:







Accounts payable

$

8,495


$

6,223


Accrued expenses


118,414



101,805


Deferred revenues


10,222



9,342


Current portion of long-term debt


22,031



17,595

Total current liabilities


159,162



134,965

Long-term debt, excluding current portion


2,015,743



1,999,414

Deferred income tax liabilities


447,217



466,921

Tax receivable agreement obligations to related parties


143,697



125,003

Other long-term liabilities


16,847



8,443

Commitments and contingencies






Equity:







Common stock (par value, $.01), 100 shares authorized and outstanding at September 30, 2013 and December 31, 2012, respectively


-



-


Additional paid-in capital


1,136,355



1,130,968


Accumulated other comprehensive income (loss)


(1,343)



(3,789)


Accumulated deficit


(153,016)



(95,028)

Total equity


981,996



1,032,151

Total liabilities and equity

$

3,764,662


$

3,766,897

 


Emdeon Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)




















Nine Months Ended



Nine Months Ended




September 30, 2013



September 30, 2012

Operating activities








Net income (loss)

$

(57,988)



$

(68,087)


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









Depreciation and amortization


137,943




140,354



Accretion


18,712




15,104



Equity compensation


5,637




3,969



Deferred income tax expense (benefit)


(27,884)




(37,369)



Amortization of debt discount and issuance costs


6,585




7,613



Change in contingent consideration


1,879




-



Gain on sale of cost method investment


(2,925)




-



Loss on extinguishment of debt


22,828




18,293



Other


1,068




1,927


Changes in operating assets and liabilities:









Accounts receivable


(15,582)




(5,547)



Prepaid expenses and other


(1,804)




(3,686)



Accounts payable


685




5,153



Accrued expenses, deferred revenue and other liabilities


20,985




(8,444)



Tax receivable agreement obligations to related parties


(103)




(114)

Net cash provided by (used in) operating activities


110,036




69,166










Investing activities








Purchases of property and equipment


(52,806)




(40,949)


Payments for acquisitions, net of cash acquired


(18,291)




(59,011)


Proceeds from sale of cost method investment


5,820




-

Net cash provided by (used in) investing activities


(65,277)




(99,960)










Financing activities








Proceeds from Term Loan Facility


-




70,351


Debt principal payments


(9,692)




(9,565)


Payments on Revolving Facility


-




(15,000)


Payment of loan costs


(2,178)




(2,060)


Repayment of deferred financing arrangements


(2,103)




-


Repurchase of Parent common stock


(250)




(317)


Other


(736)




(203)

Net cash provided by (used in) financing activities


(14,959)




43,206










Net increase (decrease) in cash and cash equivalents


29,800




12,412

Cash and cash equivalents at beginning of period


31,763




37,925

Cash and cash equivalents at end of period

$

61,563



$

50,337

 

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 income tax provision (benefit), net interest expense 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



Nine Months



Nine Months






Ended
September 30,



Ended
September 30,



Ended
September 30,



Ended
September 30,






2013



2012



2013



2012
















Net income (loss)

$

(16,265)


$

(15,156)


$

(57,988)


$

(68,087)

Interest expense, net


37,000



41,898



116,390



130,539

Income tax provision (benefit)


126



(9,093)



(26,422)



(36,364)

Depreciation and amortization


47,181



48,572



137,943



140,354

EBITDA


68,042



66,221



169,923



166,442
















EBITDA Adjustments:













Equity compensation


2,089



3,969



5,637



3,969


Acquisition accounting adjustments


251



937



741



4,369


Acquisition-related costs


1,198



609



2,457



4,264


Transaction-related costs and advisory fees


1,500



2,237



4,825



6,899


Strategic initiatives, duplicative and transition costs


1,888



2,059



4,355



8,302


Severance and retention costs


3,507



163



5,136



1,080


Accretion expense


7,112



2,758



18,712



15,104


(Gain) loss on disposal of assets


(2,900)



-



(997)



52


Contingent consideration


1,879



-



1,879



-


Loss on extinguishment of debt and other related costs


-



-



24,311



25,411


Other


682



227



1,460



1,828


EBITDA Adjustments


17,206



12,959



68,516



71,278

Adjusted EBITDA

$

85,248


$

79,180


$

238,439


$

237,720

 

SOURCE Emdeon Inc.



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