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August 08, 2013 at 16:05 PM EDT
Emdeon Reports Second Quarter 2013 Results
- Revenue of $311.5 million for Second Quarter 2013

NASHVILLE, Tenn., Aug. 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 second quarter ended June 30, 2013 as summarized below:


(In millions)


2Q 2013



2Q 2012



% Change


Revenue

$

311.5


$

294.5



5.8%


Net Income (Loss)

$

(28.3)


$

(35.4)



20.1%


Non-GAAP Adjusted EBITDA

$

77.2


$

80.1



-3.7%

"During the second quarter, we continued to see solid operating results throughout Emdeon's business, especially in our key growth areas of payment integrity and revenue cycle technology," said George Lazenby, chief executive officer for Emdeon. "We also significantly advanced our strategic growth initiatives through our acquisition of Goold Health Systems to expand our position in the government pharmacy benefit administration market, as well as our recent announcement of several new initiatives to further enhance the Emdeon Payment Network."

Second quarter revenue was $311.5 million, an increase of 5.8%, compared to $294.5 for the same period in 2012. Net loss for the second quarter of 2013 was $28.3 million compared to $35.4 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. The improvement in net loss compared to the same period in 2012 was primarily due to the impact of business growth and lower interest expense as a result of the repricing of Emdeon's term debt in April 2012 and April 2013.

Second quarter 2013 Non-GAAP Adjusted EBITDA decreased 3.7% to $77.2 million, or 24.8% of revenue, from Non-GAAP Adjusted EBITDA of $80.1 million, or 27.2% of revenue, for the comparable period in 2012.  This decline in Adjusted EBITDA as compared to the same period in 2012 is primarily due to increased investments related to sales and other strategic growth initiatives, as well as increased labor costs in our government eligibility and enrollment services in advance of the related revenues, partially offset by business growth.

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


Six Months



Six Months





Ended



Ended


Ended



Ended





June 30,



June 30,


June 30,



June 30,





2013



2012


2013



2012



















Revenue


$

311,485



$

294,467


$

617,187



$

580,503


Costs and expenses:

















Cost of operations (exclusive of depreciation and

















amortization below)



193,816




180,090



383,122




353,236



Development and engineering



7,644




8,590



15,366




17,676



Sales, marketing, general and administrative



42,945




39,040



82,056




75,169



Depreciation and amortization



43,946




46,626



90,762




91,782



Accretion



7,459




8,579



11,599




12,346


Operating income



15,675




11,542



34,282




30,294


Interest expense, net



37,974




42,902



79,389




88,641


Loss on extinguishment of debt



23,160




21,853



23,160




21,853


Income (loss) before income tax provision (benefit)



(45,459)




(53,213)



(68,267)




(80,200)


Income tax provision (benefit)



(17,191)




(17,820)



(26,547)




(27,272)


Net income (loss)


$

(28,268)



$

(35,393)


$

(41,720)



$

(52,928)


 


Emdeon Inc


Condensed Consolidated Balance Sheets


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


















June 30,


December 31,







2013


2012


ASSETS


Current assets:









Cash and cash equivalents


$

52,919


$

31,763



Accounts receivable, net of allowance for doubtful accounts of $4,399










and $3,585 at June 30, 2013 and December 31, 2012, respectively



203,734



190,021



Deferred income tax assets



5,043



4,184



Prepaid expenses and other current assets



30,322



28,160


Total current assets



292,018



254,128


Property and equipment, net



276,685



264,852


Goodwill



1,502,531



1,488,134


Intangible assets, net



1,683,019



1,730,089


Other assets, net



25,129



29,694


Total assets


$

3,779,382


$

3,766,897











LIABILITIES AND EQUITY


Current liabilities:









Accounts payable


$

12,244


$

6,223



Accrued expenses



125,792



101,805



Deferred revenues



9,656



9,342



Current portion of long-term debt



22,094



17,595


Total current liabilities



169,786



134,965


Long-term debt, excluding current portion



2,017,744



1,999,414


Deferred income tax liabilities



447,394



466,921


Tax receivable agreement obligations to related parties



136,602



125,003


Other long-term liabilities



10,651



8,443


Commitments and contingencies








Equity:









Common stock (par value, $.01), 100 shares authorized and outstanding










at June 30, 2013 and December 31, 2012, respectively



-



-



Additional paid-in capital



1,134,266



1,130,968



Accumulated other comprehensive income (loss)



(313)



(3,789)



Accumulated deficit



(136,748)



(95,028)


Total equity



997,205



1,032,151


Total liabilities and equity


$

3,779,382


$

3,766,897


 


Emdeon Inc


Condensed Consolidated Statements of Cash Flows


(unaudited and amounts in thousands)


























Six Months Ended



Six Months Ended






June 30, 2013



June 30, 2012


Operating activities










Net income (loss)


$

(41,720)



$

(52,928)



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











Depreciation and amortization



90,762




91,782




Accretion



11,599




12,346




Equity compensation



3,547




-




Deferred income tax expense (benefit)



(27,451)




(28,066)




Amortization of debt discount and issuance costs



4,717




5,073




Loss on extinguishment of debt



22,828




18,293




Other



1,861




227



Changes in operating assets and liabilities:











Accounts receivable



(10,208)




1,062




Prepaid expenses and other



(697)




(3,666)




Accounts payable



5,498




3,231




Accrued expenses, deferred revenue and other liabilities



23,539




7,138




Tax receivable agreement obligations to related parties



(103)




(114)


Net cash provided by (used in) operating activities



84,172




54,378













Investing activities










Purchases of property and equipment



(33,246)




(27,430)



Payments for acquisitions, net of cash acquired



(18,291)




(59,013)


Net cash provided by (used in) investing activities



(51,537)




(86,443)













Financing activities










Proceeds from Term Loan Facility



-




70,351



Debt principal payments



(6,472)




(6,312)



Payments on Revolving Facility



-




(15,000)



Payment of loan costs



(2,178)




(2,060)



Repayment of deferred financing arrangements



(1,844)




-



Repurchase of Parent common stock



(250)




(317)



Other



(735)




(135)


Net cash provided by (used in) financing activities



(11,479)




46,527













Net increase (decrease) in cash and cash equivalents



21,156




14,462


Cash and cash equivalents at beginning of period



31,763




37,925


Cash and cash equivalents at end of period


$

52,919



$

52,387


 

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).  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 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 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 operations.

Emdeon Inc


Reconciliation of GAAP Net Income to Adjusted EBITDA


(unaudited and amounts in thousands)

































Three Months



Three Months



Six Months



Six Months








Ended June 30,



Ended June 30,



Ended June 30,



Ended June 30,








2013



2012



2013



2012



















Net income (loss)


$

(28,268)


$

(35,393)


$

(41,720)


$

(52,928)


Interest expense, net



37,974



42,902



79,389



88,641


Income tax provision (benefit)



(17,191)



(17,820)



(26,547)



(27,272)


Depreciation and amortization



43,946



46,626



90,762



91,782


EBITDA



36,461



36,315



101,884



100,223



















EBITDA Adjustments:















Equity compensation



1,773



-



3,547



-



Acquisition accounting adjustments



216



1,496



490



3,433



Acquisition-related costs



763



2,727



1,260



3,655



Transaction-related costs and advisory fees



1,825



2,514



3,325



4,662



Strategic initiatives, duplicative and transition costs



1,308



1,627



2,468



6,243



Severance and retention costs



744



316



1,629



917



Loss on extinguishment of debt and other related costs



24,311



25,411



24,311



25,411



Accretion expense



7,459



8,579



11,599



12,346



Disposal of assets



1,934



75



1,903



51



Other



357



1,040



779



1,602



EBITDA Adjustments



40,690



43,785



51,311



58,320


Adjusted EBITDA


$

77,151


$

80,100


$

153,195


$

158,543


 

SOURCE Emdeon Inc.

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