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Emdeon Reports Third Quarter 2011 Results
Date:11/9/2011

NASHVILLE, Tenn., Nov. 9, 2011 /PRNewswire/ --

  • Revenue of $282.1 million, increased 14.7% over third quarter 2010
  • Non-GAAP Adjusted EBITDA of $76.7 million, increased 15.3% over third quarter 2010

  • 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, 2011, as summarized below: (In millions, except per share amts)

    3Q 113Q 10% ChangeRevenue

    $
    282.1$
    245.914.7%Net Income

    $
    .3$
    .6-5.3%Earnings per share (diluted)

    $
    .04$
    .040.0%Non-GAAP Adjusted EBITDA

    $
    76.7$
    .515.3%Non-GAAP Adjusted EPS

    $
    .26$
    .2313.0%Non-GAAP fully diluted shares

    124.2122.61.3%"We are pleased with our financial results for the third quarter.  Our initiatives to address emerging areas of opportunity in payment integrity, clinical information exchange and the government space are resonating with our customer base," said George Lazenby, Emdeon's chief executive officer.  "We are also excited about moving our business strategy forward with Blackstone and Hellman & Friedman, whose in-depth understanding of our business and industry will be beneficial as we continue to evolve our solutions to make healthcare more efficient."

    Third quarter revenue was $282.1 million, an increase of 14.7%, compared to $245.9 million for the same period in 2010, as a result of recent acquisitions and organic growth.  GAAP operating income for the third quarter of 2011 was $23.0 million compared to $27.9 million for the same period in 2010, a decrease of 17.6%.  This decrease was primarily due to higher depreciation and amortization expense from 2010 acquisitions and capital expenditures, as well as higher equity compensation expense.  Third quarter Non-GAAP Adjusted EBITDA grew 15.3% to $76.7 million, or 27.2% of revenue, from Non-GAAP Adjusted EBITDA of $66.5 million, or 27.0% of revenue, in the comparable period in 2010.  

    GAAP net income (before noncontrolling interest) for the third quarter of 2011 was $6.3 million compared to GAAP net income of $6.6 million for the same period in 2010.  GAAP net income per diluted share for the third quarter of 2011 was $0.04 for both the third quarter of 2011 and 2010.  Non-GAAP Adjusted Net Income per fully diluted share for the third quarter of 2011 was $0.26, using a weighted average fully diluted share count of 124.2 million, compared to $0.23, using a weighted average fully diluted share count of 122.6 million, for the same period in 2010.

    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."

    Conference Call and WebcastAs noted in an earlier release, a fund managed by Blackstone on behalf of its private equity investors has completed its acquisition of Emdeon on November 2, 2011.  As a result, Emdeon will not host a conference call to discuss financial results for the third quarter of 2011.  

    About EmdeonEmdeon 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 StatementsStatements 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.  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 on Form 10-K for the year ended December 31, 2010, 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.  

    Emdeon Inc.Condensed Consolidated Statements of Operations(unaudited and amounts in thousands, except share and per share amounts)For the Three MonthsFor the Nine MonthsEnded September 30, Ended September 30, 2011201020112010Revenue

    $
    282,149

    $
    245,923$
    835,758

    $
    726,490Costs and expenses:Cost of operations (exclusive of depreciation and amortization below) 

    174,907

    150,918518,917

    443,349Development and engineering

    9,530

    8,59627,790

    25,845Sales, marketing, general and administrative

    34,833

    28,49497,980

    80,856Depreciation and amortization

    39,830

    30,001116,786

    87,054Operating income

    23,049

    27,91474,285

    89,386Interest income

    (4)

    (4)(10)

    (12)Interest expense

    12,577

    16,16337,858

    47,747Other

    (4,398)

    (2,370)(8,036)

    (4,140)Income before income tax provision

    14,874

    14,12544,473

    45,791Income tax provision

    8,601

    7,49821,696

    27,650Net income

    6,273

    6,62722,777

    18,141Net income attributable to noncontrolling interest

    2,906

    2,8909,214

    8,289Net income attributable to Emdeon Inc.

    $
    3,367

    $
    3,737$
    3,563

    $
    9,852Net income per share Class A common stock:Basic

    $
    .04

    $
    .04$
    .15

    $
    .11Diluted

    $
    .04

    $
    .04$
    .15

    $
    .11Weighted average common shares outstanding:Basic

    91,141,215

    90,271,21691,062,517

    90,011,783Diluted

    92,081,976

    90,989,31391,557,147

    90,740,909Emdeon Inc.Condensed Consolidated Balance Sheets(unaudited and amounts in thousands, except share and per share amounts)September 30,December 31,20112010AssetsCurrent assets:Cash and cash equivalents

    $
    85,068$
    99,188Accounts receivable, net of allowance for doubtful accounts of $5,852 and $5,394

    at September 30, 2011 and December 31, 2010, respectively

    183,214174,191Deferred income tax assets

    9,0127,913Prepaid expenses and other current assets

    17,28825,020Total current assets

    394,582306,312Property and equipment, net

    230,090231,307Goodwill

    925,564908,310Intangible assets, net

    983,5651,035,886Other assets, net

    8,3689,750Total assets

    $
    2,542,169$
    2,491,565Liabilities and equityCurrent liabilities:Accounts payable

    $
    8,263$
    4,732Accrued expenses

    116,881112,245Deferred revenues

    12,71012,130Current portion of long-term debt

    12,49112,494Total current liabilities

    150,345141,601Long-term debt, excluding current portion

    937,510933,749Deferred income tax liabilities

    204,131200,357Tax receivable agreement obligations to related parties

    138,509138,533Other long-term liabilities

    12,60222,037Commitments and contingenciesEquity: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

    91,252,352 and 91,064,486 shares outstanding at September 30, 2011 and

    December 31, 2010, respectively

    11Class B common stock, exchangeable (par value, $0.00001), 52,000,000 shares

    authorized and 24,689,142 shares outstanding at September 30, 2011 and

    December 31, 2010

    --Additional paid-in capital

    754,121738,888Contingent consideration

    1,9551,955Accumulated other comprehensive loss

    (528)(2,569)Retained earnings

    66,81353,250Emdeon Inc. equity

    822,362791,525Noncontrolling interest

    276,710263,763Total equity

    1,099,0721,055,288Total liabilities and equity

    $
    2,542,169$
    2,491,565Emdeon Inc.Condensed Consolidated Statements of Cash Flows(unaudited and amounts in thousands)For the Nine MonthsEnded September 30,20112010Operating activitiesNet income

    $
    22,777$
    8,141Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization

    116,78687,054Equity compensation expense

    17,61012,691Deferred income tax expense

    2,6117,870Amortization of debt discount and issuance costs

    10,4709,536Amortization of discontinued cash flow hedge from other comprehensive loss

    2,8434,395Change in contingent consideration

    (8,036)(4,140)Change in fair value of interest rate swap (not subject to hedge accounting)

    (7,983)-Other

    3651Changes in operating assets and liabilities:Accounts receivable

    (7,040)(8,418)Prepaid expenses and other

    10,843(5,691)Accounts payable

    5,888(3,444)Accrued expenses and other liabilities

    15,7485,158Deferred revenues

    581(2,045)Tax receivable agreement obligations to related parties

    (2,593)(318)Net cash provided by operating activities

    180,541120,840Investing activitiesPurchases of property and equipment

    (48,207)(63,835)Payments for acquisitions, net of cash acquired

    (39,422)(42,477)Other

    -(3,000)Net cash used in investing activities

    (87,629)(109,312)Financing activitiesDebt principal payments

    (6,412)(5,663)Other

    (620)(868)Net cash used in financing activities

    (7,032)(6,531)Net increase in cash and cash equivalents

    85,8804,997Cash and cash equivalents at beginning of period

    99,188211,999Cash and cash equivalents at end of period

    $
    85,068$
    216,996Segment Information(unaudited and amounts in thousands)For the Three Months Ended September 30, 2011For the Three Months Ended September 30, 2010Corporate &Corporate &PayerProviderPharmacyEliminationsConsolidatedPayerProviderPharmacyEliminationsConsolidatedRevenue from external customers Claims management$
    53,153

    $
    -

    $
    -

    $
    -

    $
    53,153$
    48,927

    $
    -

    $
    -

    $
    -

    $
    48,927Payment services61,770

    -

    -

    -

    61,77058,369

    -

    -

    -

    58,369Patient statements-

    64,273

    -

    -

    64,273-

    65,920

    -

    -

    65,920Revenue cycle management-

    73,439

    -

    -

    73,439-

    44,575

    -

    -

    44,575Dental-

    7,860

    -

    -

    7,860-

    7,925

    -

    -

    7,925Pharmacy services-

    -

    21,654

    -

    21,654-

    -

    20,207

    -

    20,207Inter-segment revenue 852

    151

    -

    (1,003)

    -758

    83

    -

    (841)

    -Net revenue 115,775

    145,723

    21,654

    (1,003)

    282,149108,054

    118,503

    20,207

    (841)

    245,923Costs and expenses:Cost of operations 77,979

    88,958

    8,909

    (939)

    174,90770,876

    73,040

    7,811

    (809)

    150,918Development and engineering 3,077

    4,705

    1,748

    -

    9,5302,812

    4,004

    1,780

    -

    8,596Sales, marketing, general and administrative 6,986

    7,810

    1,537

    18,500

    34,8336,576

    7,626

    1,459

    12,833

    28,494Segment contribution (1)$
    27,733

    $
    44,250

    $
    9,460

    $
    (18,564)

    62,879$
    27,790

    $
    33,833

    $
    9,157

    $
    (12,865)

    57,915Depreciation and amortization 39,83030,001Interest income (4)(4)Interest expense 12,57716,163Other(4,398)(2,370)Income before income tax provision $
    4,874$
    4,125For the Nine Months Ended September 30, 2011For the Nine Months Ended September 30, 2010Corporate &Corporate &PayerProviderPharmacyEliminationsConsolidatedPayerProviderPharmacyEliminationsConsolidatedRevenue from external customers Claims management$
    53,679

    $
    -

    $
    -

    $
    -

    $
    53,679$
    43,770

    $
    -

    $
    -

    $
    -

    $
    43,770Payment services186,512

    -

    -

    -

    186,512171,693

    -

    -

    -

    171,693Patient statements-

    192,813

    -

    -

    192,813-

    198,214

    -

    -

    198,214Revenue cycle management-

    216,238

    -

    -

    216,238-

    129,175

    -

    -

    129,175Dental-

    23,464

    -

    -

    23,464-

    23,808

    -

    -

    23,808Pharmacy services-

    -

    63,052

    -

    63,052-

    -

    59,830

    -

    59,830Inter-segment revenue 2,572

    391

    -

    (2,963)

    -2,311

    241

    -

    (2,552)

    -Net revenue 342,763

    432,906

    63,052

    (2,963)

    835,758317,774

    351,438

    59,830

    (2,552)

    726,490Costs and expenses:Cost of operations 230,851

    264,396

    26,444

    (2,774)

    518,917207,455

    216,561

    21,790

    (2,457)

    443,349Development and engineering 8,804

    13,737

    5,249

    -

    27,7908,779

    11,766

    5,300

    -

    25,845Sales, marketing, general and administrative 20,857

    27,766

    4,126

    45,231

    97,98019,742

    21,326

    4,520

    35,268

    80,856Segment contribution (1)$
    82,251

    $
    27,007

    $
    27,233

    $
    (45,420)

    191,071$
    81,798

    $
    ,785

    $
    28,220

    $
    (35,363)

    176,440Depreciation and amortization 116,78687,054Interest income (10)(12)Interest expense 37,85847,747Other(8,036)(4,140)Income before income tax provision $
    44,473$
    45,791(1) Segment contribution has been reduced by equity-based compensation expense of $6,126, $4,844, $17,610 and $12,691 for the three months and nine months ended September 30, 2011 and 2010, respectively. Segment contribution without such equity-based compensation expense would have been $69,005, $62,759, $208,681 and $189,131 for the three and nine months ended September 30, 2011 and 2010, respectively.Explanation of Non-GAAP Financial MeasuresEmdeon'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).  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 for contingently issuable shares subject to performance conditions and shares or other potentially dilutive securities not otherwise contemplated in the share denominator utilized in the applicable year's 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 Inc.Reconciliation of GAAP Net Income to Adjusted EBITDA(unaudited and amounts in thousands)For the Three MonthsFor the Nine Months Ended September 30, Ended September 30, 2011201020112010Net income $
    ,273$
    ,627$
    22,777$
    8,141Interest expense, net12,57316,15937,84847,735Income tax provision8,6017,49821,69627,650Depreciation and amortization39,83030,001116,78687,054EBITDA67,27760,285199,107180,580Equity-based compensation6,1264,84417,61012,691Acquisition accounting adjustments-12-205Transaction costs5,689-6,024-Facilities consolidation costs1981,1487111,551Acquisition-related costs1,4481,4164,2373,442Tax receivable agreements change in estimate3211,162547(318)Contingent consideration adjustments(4,398)(2,370)(8,036)(4,140)EBITDA Adjustments9,3846,21221,09313,431Adjusted EBITDA$
    76,661$
    ,497$
    220,200$
    94,011Emdeon Inc.Reconciliation of GAAP Net Income to Adjusted Net Income(unaudited and amounts in thousands)For the Three MonthsFor the Nine MonthsEnded September 30, Ended September 30, 2011201020112010Net income $
    ,273$
    ,627$
    22,777$
    8,141Income tax provision8,6017,49821,69627,650EBITDA Adjustments9,3846,21221,09313,431Non-cash interest expense2,4165,5317,57014,749Depreciation and amortization resulting from acquisition method adjustments27,33620,31880,21259,458Adjusted net income before income taxes54,01046,186153,348133,429Normalized income tax provision21,33418,24360,57252,704Adjusted Net Income$
    32,676$
    27,943$
    92,776$
    80,725Emdeon Inc.Reconciliation of GAAP Net Income Per Diluted Share of Class A Common Stock to Adjusted Net Income Per Fully Diluted Share(1)(unaudited)For the Three MonthsFor the Nine MonthsEnded September 30, Ended September 30, 2011201020112010Net income per diluted share of Class A common stock$
    .04$
    .04$
    .15$
    .11Impact of assuming full dilution of all outstanding equity instruments for the period0.000.010.030.03Adjustments on a per share basis:Income tax provision0.070.060.180.23EBITDA Adjustments0.080.050.170.11Non-cash interest expense0.020.050.060.12Depreciation and amortization resulting from acquisition method adjustments0.220.170.650.49Adjusted net income before income taxes0.430.381.241.09Normalized income tax provision0.170.150.490.43Adjusted Net Income per fully diluted share0.26$
    .23$
    .75$
    .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:(shares in thousands)For the Three MonthsFor the Nine MonthsEnded September 30, Ended September 30, Weighted average of:2011201020112010Class A shares outstanding91,14190,65691,06390,584Class B shares outstanding24,48324,68924,48324,701Restricted stock units outstanding859744851694Options to purchase Class A shares outstanding7,7156,5177,4626,184Shares assumed in Adjusted Net Income per fully diluted share calculation124,198122,606123,859122,163
    '/>"/>

    SOURCE Emdeon Inc.
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