Change Healthcare Reports Fourth Quarter and Full Year 2015 Results

NASHVILLE, Tenn., March 14, 2016 /PRNewswire/ -- Change Healthcare Holdings, Inc., a leading provider of software and analytics, network solutions and technology-enabled services designed to enable smarter healthcare, today announced financial results for the fourth quarter and year ended December 31, 2015, as summarized below:

"We are pleased with the progress made during 2015 in achieving our long-term financial and strategic goals," commented Neil de Crescenzo, president and chief executive officer for Change Healthcare. "During the year, we completed the acquisition of Altegra Health and related financing to expand our capabilities and better support the healthcare industry's transition to value-based care. We also successfully rebranded as Change Healthcare during the fourth quarter. In today's ever-changing healthcare environment, our diverse portfolio of customers seek partners who can deliver actionable insights and solutions that lead to better business decisions. With our expanded capabilities, Change Healthcare now provides a broad and deep set of value-based healthcare solutions for our customers and better enables smarter healthcare."

Solutions Revenue
Fourth quarter solutions revenue was $314.0 million, an increase of 17.7%, compared to $266.7 million for the same period in 2014. This increase in solutions revenue as compared to the prior year period was primarily due to recently acquired and developed solutions, including the Altegra Health acquisition, and continued volume gains in network solutions as a result of increases in the number of insured lives of customers from the ongoing expansion of Medicaid, Medicare Advantage and federal and state exchanges.

Full year solutions revenue was $1,124.2 million, an increase of 11.6%, compared to $1,006.9 million for 2014.

Net Income/Loss
Fourth quarter net loss was $65.3 million compared to $0.3 million for the same period in 2014. Net loss was impacted by the accelerated amortization of the Company's previous tradename asset and higher interest expense related to the Altegra Health acquisition financing. Excluding the accelerated amortization of the previous trade name asset and increased interest expense (collectively, approximately $62.0 million net of taxes), net loss in the fourth quarter would have been approximately $3.3 million.

Net loss for 2015 was $96.1 million compared to $75.9 million for the same period in 2014. Net loss for both 2015 and 2014 was impacted by significant charges. 2015 net loss was impacted by the accelerated amortization of the previous tradename asset (approximately $71.1 million net of taxes) and 2014 net loss was impacted by a non-cash impairment charge related to the partial loss of a customer contract (approximately $47.2 million net of taxes). Excluding these charges, net loss would have been approximately $25.0 million in 2015 and $28.7 million in 2014.

Non-GAAP Adjusted EBITDA
Fourth quarter Non-GAAP Adjusted EBITDA increased 14.5% to $116.4 million, or 37.1% of solutions revenue, from $101.7 million, or 38.1% of solutions revenue, for the comparable period in 2014. This increase in Adjusted EBITDA compared to the prior year period is primarily due to business growth, including the impact of acquisitions. Non-GAAP Adjusted EBITDA decreased as a percentage of solutions revenue compared to the prior year period due to changes in revenue mix primarily as a result of the Altegra Health acquisition.

2015 Non-GAAP Adjusted EBITDA increased 10.8% to $403.6 million, or 35.9% of solutions revenue, from $364.3 million, or 36.2% of solutions revenue, in 2014.

A reconciliation of Change Healthcare'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."

Balance Sheet
As of December 31, 2015, cash and cash equivalents were $66.7 million compared to $82.3 million as of December 31, 2014. 

Total debt increased to $2.8 billion at December 31, 2015 compared to $2.2 billion at December 31, 2014 due to the partial financing of the Altegra Health acquisition. In August 2015, the Company borrowed an additional $395.0 million of incremental term loans under its existing senior credit facilities and issued $250.0 million of 6% senior notes due 2021. 

Cash Flow
Cash flow provided by operations totaled $166.8 million for the year ended December 31, 2015 compared to $205.7 million for the same period in the prior year.  Cash flow from operations for the year ended December 31, 2015 was impacted by liabilities of Altegra Health that were assumed in connection with the acquisition and paid at closing, the transition of recently acquired payments solutions to the Company's payments platform and higher interest expense related to the Altegra Health financing, partially offset by business growth.

About Change Healthcare
Change Healthcare is a leading provider of software and analytics, network solutions and technology-enabled services that optimize communications, payments and actionable insights designed to enable smarter healthcare. By leveraging its Intelligent Healthcare Network™, which includes the single largest financial and administrative network in the United States healthcare system, payers, providers and pharmacies are able to increase revenue, improve efficiency, reduce costs, increase cash flow and more effectively manage complex workflows. Learn more at www.changehealthcare.com.

Explanation of Non-GAAP Financial Measures

Change Healthcare's management believes that, in order to properly understand Change Healthcare'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 Change Healthcare 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, Change Healthcare defines Adjusted EBITDA as EBITDA (which is defined as net income (loss) 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 Change Healthcare's business, Change Healthcare encourages investors to review the GAAP financial information included in this release, and not rely on any single financial measure to evaluate Change Healthcare's business.  Change Healthcare also strongly encourages investors to review the reconciliation of net income (loss) to the Non-GAAP measure of Adjusted EBITDA.  Adjusted EBITDA, as Change Healthcare 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 also are used in Change Healthcare's credit facilities and indentures, although the adjustments used to calculate Adjusted EBITDA as used in Change Healthcare's 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 Change Healthcare's operating performance on a consistent basis from period to period that, when viewed in combination with Change Healthcare's GAAP results, management believes provides a more complete understanding of factors and trends affecting Change Healthcare's business than GAAP measures alone.  Management believes this Non-GAAP measure assists Change Healthcare's board of directors, management, lenders and investors in comparing Change Healthcare's operating performance on a consistent basis because it removes where applicable, the impact of Change Healthcare's capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from Change Healthcare's operating performance.

Forward-Looking Statements
Statements made in this press release that express Change Healthcare'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 Change Healthcare's possible or assumed future results of operations, including descriptions of Change Healthcare'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 Change Healthcare's operations and business environment, all of which are difficult to predict and many of which are beyond Change Healthcare's control.  Although Change Healthcare believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Change Healthcare'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 Change Healthcare's actual financial results or results of operations include:  effects of competition, including competition from entities that are customers for certain of Change Healthcare's solutions; Change Healthcare's ability to maintain relationships with its customers and channel partners; Change Healthcare'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; the anticipated benefits from acquisitions (including Altegra Health) 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 Change Healthcare's Annual Report filed on Form 10-K for the year ended December 31, 2015, as well as other reports filed by Change Healthcare with the Securities and Exchange Commission.

Forward-looking statements made by Change Healthcare herein, or elsewhere, speak only as of the date on which made. Change Healthcare expressly disclaims any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in Change Healthcare's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.   

SOURCE Change Healthcare