EX-99.1 2 g21185exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(EMDEON LOGO)
FOR IMMEDIATE RELEASE
Emdeon Reports Third Quarter 2009 Results
  •   10.6% Revenue Growth Over Third Quarter 2008
 
  •   16.0% Increase in Adjusted EBITDA Over Third Quarter 2008
NASHVILLE, Tenn. (November 10, 2009) — Emdeon (NYSE: EM), a leading provider of healthcare revenue and payment cycle management solutions, today announced financial results for the third quarter of 2009.
Third quarter revenue was $235.5 million, an increase of 10.6%, compared to $212.8 million for the same period in the prior year. GAAP operating income for the third quarter of 2009 was $18.0 million compared to $23.1 million for the same period last year. Excluding equity compensation expense of $12.6 million for the third quarter of 2009, primarily related to Emdeon’s August 2009 public offering, and $0.7 million for the third quarter of 2008, operating income for the third quarter of 2009 would have been $30.6 million compared to $23.8 million for the prior year period.
Third quarter Adjusted EBITDA grew 16.0%, to $60.2 million, or 25.6% of revenue, from Adjusted EBITDA of $51.9 million, or 24.4% of revenue, in the comparable period last year. GAAP net income (loss) per diluted share for the third quarter of 2009 was $(0.09) as compared to $(0.02) in the same period last year, primarily as a result of the equity compensation expense associated with the public offering and income tax expense primarily related to Emdeon’s capital structure and valuation allowances reflected in the current year period. Adjusted Net Income per fully diluted share for the third quarter of 2009 was $0.21 compared to $0.17 for the same period last year using pro forma adjusted fully diluted shares outstanding.
“We are pleased with Emdeon’s financial performance for our initial quarter as a public company,” said George Lazenby, Emdeon’s chief executive officer. “During the period, we continued to execute on our strategies to expand the breadth and scope of our product and service offerings, including significant progress on integration efforts related to our recent acquisitions. We are particularly encouraged by the positive sales momentum generated in our key strategic areas of enhanced revenue cycle management, payment integrity and ePrescribing solutions.”
At September 30, 2009, Emdeon’s cash and cash equivalents totaled $195 million. Total long-term debt under Emdeon’s credit facilities was $858 million, before unamortized debt discount of $56 million.
“We posted solid financial results in the third quarter. In addition, the proceeds from our public offering and our continued strong cash flow from operations have further strengthened Emdeon’s financial position,” said Bob Newport, Emdeon’s chief financial officer. “We continue to streamline our operations and improve our efficiencies while making the appropriate investments to enhance our long-term success.”

 

 

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 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 currently anticipates its annual revenue, Adjusted EBITDA and Adjusted Net Income per fully diluted share for 2009 to be as follows:
  •   2009 revenue to be between $915 to $925 million
 
  •   2009 Adjusted EBITDA to be between $234 to $239 million
 
  •   2009 Adjusted Net Income per fully diluted share to be between $0.80 to $0.86
Notice of Conference Call and Webcast
Emdeon will conduct a conference call/webcast for investors and institutional analysts on Tuesday, November 10, 2009 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 800-561-2601 (617-614-3518 for international calls) using conference code 12408553 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, 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 32630077. A webcast replay will also be archived on Emdeon’s website for at least 30 days following the conference call.
About Emdeon
Emdeon (NYSE: EM) 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 develop and successfully deploy 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 Registration Statement on Form S-1 and the accompanying Prospectus thereto, as filed with the Securities and Exchange Commission (the “SEC”), as well as Emdeon’s periodic reports filed with the SEC and other public filings of Emdeon.
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.
# # #
Contacts:
Investor Relations
Tommy Lewis
615.932.3235
tlewis@emdeon.com

 

 

Emdeon Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except share and per share amounts)
                                 
    For the Three Months   For the Nine Months
    Ended September 30,   Ended September 30,
    2008   2009   2008   2009
         
Revenue
   $ 212,808     $ 235,462     $ 635,666     $ 679,888  
Costs and expenses:
                                
Cost of operations (exclusive of depreciation and amortization below)
     134,451       146,471       405,423       418,079  
Development and engineering
     7,312       10,045       21,029       24,425  
Sales, marketing, general and administrative
     22,220       33,823       69,309       85,146  
Depreciation and amortization
     25,710       26,667       71,979       77,051  
Loss on abandonment of leased properties
     —       482       —        742  
         
Operating income
     23,115       17,974       67,926       74,445  
Interest income
     (328 )     (27 )     (931 )     (81 )
Interest expense
     20,410       17,219       49,899       52,330  
         
Income before income tax provision
     3,033       782       18,958       22,196  
Income tax provision
     3,512       9,245       11,202       12,885  
         
Net income (loss)
     (479 )     (8,463 )     7,756       9,311  
Net income (loss) attributable to noncontrolling interest
     766       (1,246 )     2,620       2,871  
         
Net income (loss) attributable to Emdeon Inc.
   $ (1,245 )   $ (7,217 )   $ 5,136     $ 6,440  
         
Net income (loss) per share Class A common stock:
                                
Basic
   $ (0.02 )   $ (0.09 )   $ 0.07     $ 0.08  
         
Diluted
   $ (0.02 )   $ (0.09 )   $ 0.07     $ 0.08  
         
Weighted average common shares outstanding:
                                
Basic
     77,413,610       84,522,085       73,889,095       79,809,140  
         
Diluted
     77,413,610       84,522,085       73,889,095       79,856,588  
         

 

 

Emdeon Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands, except share amounts)
                 
    December 31,     September 30,  
    2008     2009  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 71,478     $ 194,989  
Accounts receivable, net of allowance for doubtful accounts of $4,576 and $4,499 at December 31, 2008 and September 30, 2009, respectively
     144,149       152,460  
Deferred income tax assets
     2,285       6,233  
Prepaid expenses and other current assets
     21,137       17,272  
 
            
Total current assets
     239,049       370,954  
Property and equipment, net
     136,038       144,324  
Goodwill
     646,851       703,008  
Intangible assets, net
     971,001       963,010  
Other assets, net
     7,340       1,526  
 
            
Total assets
   $ 2,000,279     $ 2,182,822  
 
            
Liabilities and equity
                
Current liabilities:
                
Accounts payable
   $ 805     $ 5,623  
Accrued expenses
     79,513       77,808  
Deferred revenues
     12,056       12,795  
Current portion of long- term debt
     17,244       5,139  
 
            
Total current liabilities
     109,618       101,365  
Long- term debt, excluding current portion
     807,986       796,768  
Deferred income tax liabilities
     159,811       151,869  
Tax receivable agreement obligation to related parties
     —       141,745  
Other long- term liabilities
     44,711       29,334  
Commitments and contingencies
                
Equity:
                
Preferred stock (par value $0.00001), 25,000,000 shares authorized and 0 shares issued and outstanding
     —       —  
Class A common stock (par value $0.00001), 400,000,000 shares authorized and 77,413,610 and 90,238,893 shares outstanding at December 31, 2008 and September 30, 2009, respectively
     1       1  
Class B common stock (par value $0.00001), 52,000,000 shares authorized and 22,586,390 and 24,752,955 shares outstanding at December 31, 2008 and September 30, 2009, respectively
     —       —  
Additional paid- in capital
     670,702       732,836  
Accumulated other comprehensive loss
     (23,195 )     (15,511 )
Retained earnings
     24,123       30,563  
 
            
Emdeon Inc. stockholders’ equity
     671,631       747,889  
Noncontrolling interest
     206,522       213,852  
 
            
Total equity
     878,153       961,741  
 
            
Total liabilities and equity
   $ 2,000,279     $ 2,182,822  
 
            

 

 

Emdeon Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited and amounts in thousands)
                 
    For the Nine Months  
    Ended September 30,  
    2008     2009  
Operating activities
                
Net income
   $ 7,756     $ 9,311  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     71,979       77,051  
Equity compensation expense
     5,813       21,499  
Deferred income tax expense (benefit)
     4,925       (1,360 )
Amortization of debt issuance costs
     141       143  
Amortization of debt discount
     7,066       8,699  
Amortization of discontinued cash flow hedge from other comprehensive income
     7,011       5,968  
Change in fair value of interest rate swap
     (12,714 )     —  
Loss on abandonment of leased properties
     —       742  
Loss on disposal of fixed assets
     72       56  
Changes in operating assets and liabilities:
                
Accounts receivable
     (16,968 )     (3,990 )
Prepaid expenses and other
     (9,760 )     4,911  
Accounts payable
     (3,392 )     3,515  
Accrued expenses and other liabilities
     (2,507 )     (6,199 )
Deferred revenues
     2,879       737  
 
            
Net cash provided by operating activities
     62,301       121,083  
 
            
Investing activities
                
Purchases of property and equipment
     (13,942 )     (30,563 )
Payments for acquisitions, net of cash acquired
     (19,090 )     (75,871 )
Purchase of EBS Master LLC
     (306,260 )     —  
 
            
Net cash used in investing activities
     (339,292 )     (106,434 )
 
            
Financing activities
                
Proceeds from initial public offering
     —       148,261  
Repurchase of Class A common stock
     —       (1,573 )
Repurchase of Units of EBS Master LLC
     —       (5,372 )
Debt principal payments
     (5,662 )     (21,663 )
Payments on revolver
     —       (10,201 )
Payment of loan costs
     —       (359 )
Capital contributions from stockholders
     307,451       203  
Distribution to shareholders
     (317 )     (434 )
 
            
Net cash provided by financing activities
     301,472       108,862  
 
            
Net increase in cash and cash equivalents
     24,481       123,511  
Cash and cash equivalents at beginning of period
     33,687       71,478  
 
            
Cash and cash equivalents at end of period
   $ 58,168     $ 194,989  
 
            

 

 

Segment Information
(unaudited and amounts in thousands)
                                                                                   
    For the Three Months Ended September 30, 2008       For the Three Months Ended September 30, 2009  
                            Corporate &                                       Corporate &        
    Payer     Provider     Pharmacy     Eliminations     Consolidated       Payer     Provider     Pharmacy     Eliminations     Consolidated  
Revenue to external customers
                                                                                  
Claims management
   $ 44,066     $ —     $ —     $ —     $ 44,066       $ 46,072     $ —     $ —     $ —     $ 46,072  
Payment services
     48,699               —       —       48,699         53,345       —       —       —       53,345  
Patient statements
     —       66,279       —       —       66,279         —       69,840       —       —       69,840  
Revenue cycle management
     —       36,256       —       —       36,256         —       39,041       —       —       39,041  
Dental
     —       7,939       —       —       7,939         —       7,978       —       —       7,978  
Pharmacy services
     —       —       9,569       —       9,569         —       —       19,186       —       19,186  
Inter-segment revenue
     77       512       —       (589 )     —         297       416       —       (713 )     —  
           
Total revenue
     92,842       110,986       9,569       (589 )     212,808         99,714       117,275       19,186       (713 )     235,462  
Costs and expenses:
                                                                                  
Cost of operations
     60,528       72,546       1,816       (439 )     134,451         65,805       75,070       6,158       (562 )     146,471  
Development and engineering
     2,655       3,608       1,049       —       7,312         3,847       4,297       1,901       —       10,045  
Sales, marketing, general and administrative
     6,004       7,136       1,002       8,078       22,220         8,037       9,038       3,413       13,335       33,823  
Loss on abandonment
     —       —       —       —       —         —       —       —       482       482  
           
Segment contribution(1)
   $ 23,655     $ 27,696     $ 5,702     $ (8,228 )     48,825       $ 22,025     $ 28,870     $ 7,714     $ (13,968 )     44,641  
                           
Depreciation and amortization
                                     25,710                                         26,667  
Interest income
                                     (328 )                                       (27 )
Interest expense
                                     20,410                                         17,219  
 
                                                                              
Income before income tax provision
                                   $ 3,033                                       $ 782  
 
                                                                              
                                                                                   
    For the Nine Months Ended September 30, 2008       For the Nine Months Ended September 30, 2009  
                            Corporate &                                       Corporate &        
    Payer     Provider     Pharmacy     Eliminations     Consolidated       Payer     Provider     Pharmacy     Eliminations     Consolidated  
Revenue to external customers
                                                                                  
Claims management
   $ 134,621     $ —     $ —     $ —     $ 134,621       $ 137,440     $ —     $ —     $ —     $ 137,440  
Payment services
     142,522               —       —       142,522         156,433       —       —       —       156,433  
Patient statements
     —       198,500       —       —       198,500         —       207,304       —       —       207,304  
Revenue cycle management
     —       106,894       —       —       106,894         —       114,825       —       —       114,825  
Dental
     —       23,938       —       —       23,938         —       23,690       —       —       23,690  
Pharmacy services
     —       —       29,191       —       29,191         —       —       40,196       —       40,196  
Inter-segment revenue
     298       1,647       —       (1,945 )     —         434       1,388       —       (1,822 )     —  
           
Total revenue
     277,441       330,979       29,191       (1,945 )     635,666         294,307       347,207       40,196       (1,822 )     679,888  
Costs and expenses:
                                                                                  
Cost of operations
     182,838       218,311       5,687       (1,413 )     405,423         188,094       221,464       9,947       (1,426 )     418,079  
Development and engineering
     7,453       10,472       3,104       —       21,029         9,172       11,283       3,970       —       24,425  
Sales, marketing, general and administrative
     18,727       22,888       2,896       24,798       69,309         20,461       24,335       5,439       34,911       85,146  
Loss on abandonment
     —       —       —       —       —         —       —       —       742       742  
           
Segment contribution(1)
   $ 68,423     $ 79,308     $ 17,504     $ (25,330 )     139,905       $ 76,580     $ 90,125     $ 20,840     $ (36,049 )     151,496  
                           
Depreciation and amortization
                                     71,979                                         77,051  
Interest income
                                     (931 )                                       (81 )
Interest expense
                                     49,899                                         52,330  
 
                                                                              
Income before income tax provision
                                   $ 18,958                                       $ 22,196  
 
                                                                              
 
(1)   Segment contribution has been reduced by equity-based compensation expense of $749, $12,554, $5,813, and $21,499 for the three months ended September 30, 2008 and September 30, 2009 and for the nine months ended September 30, 2008 and September 30, 2009, respectively. Segment contribution without such equity-based compensation expense would have been $49,574, $57,195, $145,718 and $172,995 for the three months ended September 30, 2008 and September 30, 2009 and for the nine months ended September 30, 2008 and September 30, 2009, respectively.

 

 

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 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 incentive compensation programs, as well as for incentive compensation plans for employees generally. 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 (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”).
In this release, Emdeon defines Adjusted Net Income as the sum of (i) GAAP net income (loss), (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 which removes the income tax impact arising from Emdeon’s structure. 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 are fully outstanding shares from their date of grant or issuance.
To properly and prudently 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 (loss) and GAAP net income (loss) 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 and organizational structure, asset base, acquisition accounting, non-cash charges and non-recurring items from Emdeon’s operations.

 

 

Emdeon Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
                                 
    Unaudited (000s)
    For the Three Months   For the Nine Months
    Ended September 30,   Ended September 30,
    2008   2009   2008   2009
         
Net income (loss)
   $ (479 )   $ (8,463 )   $ 7,756     $ 9,311  
Interest expense (income), net
     20,082       17,192       48,968       52,249  
Income tax provision (benefit)
     3,512       9,245       11,202       12,885  
         
Operating income
     23,115       17,974       67,926       74,445  
 
Depreciation and amortization
     25,710       26,667       71,979       77,051  
         
EBITDA
     48,825       44,641       139,905       151,496  
 
Equity-based compensation
     749       12,554       5,813       21,499  
Purchase accounting adjustments
     1,278       311       4,745       1,189  
IPO-related transaction costs
     300       1,263       300       1,513  
Facilities consolidation costs
     758       955       774       1,215  
Acquisition related costs
     —       476       95       772  
         
EBITDA Adjustments
     3,085       15,559       11,727       26,188  
         
 
Adjusted EBITDA
   $ 51,910     $ 60,200     $ 151,632     $ 177,684  
         
Emdeon Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
                                 
    Unaudited (000s)
    For the Three Months   For the Nine Months
    Ended September 30,   Ended September 30,
    2008   2009   2008   2009
         
 
                                
Net income (loss)
   $ (479 )   $ (8,463 )   $ 7,756     $ 9,311  
EBITDA Adjustments
     3,085       15,559       11,727       26,188  
Non-cash interest expense
     4,638       5,073       1,793       14,810  
Depreciation and amortization resulting from acquisition method adjustments
     18,580       19,454       51,960       56,986  
Adjustment to normalize income tax provision (benefit)
     (8,076 )     (6,898 )     (22,151 )     (34,586 )
         
 
Adjusted Net Income
   $ 17,748     $ 24,725     $ 51,085     $ 72,709  
         

 

 

Emdeon Inc.
Reconciliation of Diluted Net Income (Loss) Per Diluted Share of Class A Common Stock to
Adjusted Net Income Per Fully Diluted Share(1)
                                 
    Unaudited
    For the Three Months   For the Nine Months
    Ended September 30,   Ended September 30,
    2008   2009   2008   2009
         
Diluted net income (loss) per share Class A common stock
   $ (0.02 )   $ (0.09 )   $ 0.07     $ 0.08  
 
                                
Impact of assuming full dilution of all outstanding equity instruments for the period
     0.02       0.02       0.01       0.00  
Adjustments on a per share basis:
                                
EBITDA Adjustments
     0.03     0.13       0.11       0.24  
Non-cash interest expense
     0.04     0.04       0.02       0.13  
Depreciation and amortization resulting from acquisition method adjustments
     0.18     0.17       0.49       0.52  
Adjustment to normalize income tax provision (benefit)
     (0.08 )   (0.06 )     (0.21 )     (0.31 )
         
Adjusted Net Income per fully diluted share
   $ 0.17     $ 0.21     $ 0.49     $ 0.66  
         
 
(1)   The calculation of Adjusted Net Income per fully diluted share assumes the following equity-based instruments were fully converted into Class A common stock on their date of issuance:
                                 
    Unaudited (shares in 000s)
    For the Three Months   For the Nine Months
    Ended September 30,   Ended September 30,
Weighted average of:   2008   2009   2008   2009
         
Class A shares outstanding
     77,414       84,522       73,889       79,809  
Class B shares outstanding
     24,707       25,746       28,126       25,135  
Restricted stock units outstanding
     919       889       899       933  
Options to purchase Class A shares outstanding
     2,835       5,023       2,346       3,932  
         
Shares assumed in Adjusted Net Income per fully diluted share calculation
     105,875       116,180       105,260       109,809